I.  We have audited the attached Balance Sheet of HMT Limited (the
 Company) as at 31st March 2011, the Profit and Loss Account and the
 Cash Flow Statement of the Company for the year ended on that date,
 annexed thereto in which are incorporated the accounts of Corporate
 Head office audited by us and the accounts of Tractor Division, Food
 Processing Machinery Division and Common Services Division audited by
 Branch Auditors, appointed under section 619(2) of the Companies Act,
 1956.
 
 Revised Audit Report:
 
 We had given our report on the accounts of the company on July 29,
 2011. In the light of C & AG''s observations under section 619 (4) of
 The Companies Act, 1956, on the accounts of the company, the above
 report is revised by modifying Sub Paras 2 (c ); 4; 7; & 9 (ii) of Para
 V and by adding Sub Paras 11 and 12 to Para VII. This report is in
 substitution of our earlier report dated July 29, 2011.
 
 Management''s Responsibility for the Financial Statements:
 
 II.  These financial statements are the responsibility of the Company''s
 management. Our responsibility is to express an opinion on these
 financial statements based on our audit.
 
 Auditors Responsibility:
 
 III.  We conducted our audit in accordance with auditing standards
 generally accepted in India.  Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 IV.  The audit reports on the accounts of the units of the Company
 audited by the branch auditors appointed under section 619(2) of the
 Companies Act, 1956 have been considered by us in preparing our report
 and necessary adjustments in the accounts of the units have been made
 to the extent required on the basis of the information made-available
 to us.
 
 Companies (Auditor''s Report) Order. 2003 (CARO):
 
 V.  As required by the Companies (Auditor''s Report) Order, 2003 (as
 amended in 2004) issued by the Central Government of India in terms of
 sub- section (4A) of Section 227 of the Companies Act, 1956, and on the
 basis of such checks as considered appropriate and according to the
 information and explanations given to us and relying on the audit
 reports of the branch auditors in respect of units audited by them, we
 state that:
 
 Fixed Assets:
 
 1. (a) The company has maintained proper records showing full
 particulars, including quantitative details and the situation of fixed
 assets.
 
 (b) The fixed assets have been physically verified by the management
 during the year in accordance with its phased programme designed to
 cover the assets of all locations/ units by physical verification once
 in three years which, in our opinion, is reasonable having regard to
 the size of the Company and the nature of its assets. Pursuant to the
 programme, fixed assets at certain locations were physically verified
 by the management during the year and no material discrepancies between
 the book records and the physical inventory have been noticed.
 
 (c) The Company has not disposed off any substantial part of the fixed
 assets during the year, which affects the going concern status of the
 company.
 
 Inventories:
 
 2.  (a) The inventories other than those held by sub- contractors,
 ancillary units and goods stored in Custom''s warehouses have been
 physically verified during the year by the management. Confirmations in
 respect of stocks held sub-contractors, ancillary units and goods
 stored in custom''s warehouses are not received in certain cases, where
 book values are adopted. Excepting above, in our opinion the frequency
 of verification is reasonable.
 
 (b) The procedures of physical verification of inventories followed by
 the management are reasonable and adequate in relation to the size of
 the Company and the nature of its business.
 
 (c ) The Company is maintaining proper records of inventory except in
 one unit, viz., Food Processing Machinery Division, Aurangabad, where
 stock records/ Bin cards are not properly maintained / updated. The
 discrepancies between the physical stocks and the book records were not
 material and have been properly dealt with in the books of account
 except in one unit where in the absence of adequate stock records,
 discrepancies, if any, could not be ascertained.
 
 Loans borrowed or given:
 
 3.  The company has not granted or taken any loans, secured or
 unsecured to/from companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Hence, clauses (a) to (g) of the said order are not applicable.
 
 Internal control Procedures:
 
 4.  Subject to non maintenance of stock records/ Bin Cards at Food
 Processing Machinery Division, Aurangabad, in our opinion and.according
 to the information and explanations given to us, there is an adequate
 internal control system commensurate with the size of the company and
 the nature of its business with regard to purchases of inventory, fixed
 assets and with regard to the sale of goods and services. During the
 course of our audit, we have not observed any continuing failure to
 correct major weaknesses in internal control system of the company.
 
 Transactions covered u/s 301 of the Companies Act. 1956:
 
 5.  (a) In our opinion and according to the information and
 explanations given to us, there are no transactions that need to be
 entered into the register maintained under Section 301 of the Companies
 Act, 1956 having regard to the view taken that the transactions with
 the government companies need not be entered in the register as no
 personal interest of the directors is involved.
 
 (b) In our opinion and according to the information and explanations
 given to us, as there are no transactions that need to be entered in
 the register maintained under section 301 of the Companies Act, 1956,
 paragraph 4 (v) (b) of the Order is not applicable.
 
 Deposits from Public:
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of section 58A of the Companies Act, 1956 and Rules framed
 there under and accordingly the provisions of Section 58A & 58 AA of
 the Companies Act, 1956 are not applicable to the company.
 
 Internal Audit System:
 
 7.  In our opinion, the company has an internal audit system
 commensurate with the size and nature of its business..
 
 Maintenance of Cost records:
 
 8.  The Company has maintained cost records pursuant to the Rules made
 by the central government under section 209 (1) (d) of the Companies
 Act, 1956 in respect of its tractor division as reported by the
 auditors of the said division. The Branch Auditors have broadly
 reviewed such cost records and prima facie, they are of the opinion
 that the prescribed accounts and records have been made and maintained.
 
 Remittance of Statutory dues:
 
 9.  (i) The company is regular in depositing undisputed statutory dues
 including provident fund, investor education and protection fund,
 employees state insurance, income tax, sales tax, wealth tax, service
 tax, customs duty, excise duty, cess and other statutory dues
 applicable to it barring certain delay in provident fund dues
 remittances, Central Sales Tax and Central Excise.
 
 Further since the central government has till date not prescribed the
 amount of cess payable u/s 441 A of the Companies Act, 1956, we are not
 in a position to comment upon the regularity or otherwise of the
 company in depositing the same.
 
 (ii) According to the information and explanation given to us no
 undisputed amounts payable in respect of statutory dues including
 provident fund, investor education and protection fund, employees state
 insurance, income tax, sales Tax, service tax, customs duty, wealth
 tax, excise duty, cess applicable were outstanding at the year end for
 a period of more than six months from the date they became payable
 except Rs.20.32 lakhs towards Central Excise, Rs.196.27 lakhs towards
 Central Sales Tax and Rs.45.86 lakhs towards Provident Fund dues.
 
 (iii) According to the information and explanation given to us and
 records of the company, there are no dues of income tax, sales tax,
 service tax, customs duty, excise duty, cess which have not been
 deposited on account of any dispute, other than the following:
 
 Name of the                            Amount     Period to which  
                    Nature of Dues      (Rs. In       the amount
 Statute                                 Lakhs)       relates
 
 Sales Tax Act      Sales Tax            159.70         1989-90,
                                                     1999-2000 to
                                                     2001-2002 &
                                                     2003-2004 to
                                                       2004-05
 
 Sales Tax Act      Non-submission of    112.17        1990-91 to
                    Form C&D                           1996-97
 
 Central Excise     Excise Duty            2.48        1990-91 to
 Act 1944                                              1996-97
 
 Central Excise     Excise Duty           24.36        1988-89
 Act 1944
 
 Haryana General    Sales Tax A/AT       299.71        2001-02 to
 Sales Tax Act                                         2005-06
 
                    TOTAL                598.42
 
 Name of the
 Statute                      Nature of               Forum where
                                                       dispute is
                              Dispute                   pending
 
 Sales Tax Act              Applicability         Jt. Comm. (Appeal)
                             of levy                  Aurangabad
 
 Sales Tax Act             Non submission       Various States before
                             of Form C             Dy. Commissioner
                                                       (Appeals)
 
 Central Excise
 Act 1944                  Applicability                 CESTAT,
                              of levy                    Bangalore
 
 Central Excise
 Act 1944                      - do -               Excise Appellate
                                                        Tribunal
 
 Haryana General
 Sales Tax Act                 - do -               Punjab & Haryana
                                                       High Court
 
 Accumulated Cash Losses:
 
 10. The company has accumulated losses more than 50% of its net worth
 as at the end of the financial year. The company has incurred cash
 losses in the current year and also in the immediately preceding
 financial year.
 
 Dues to Financial Institutions:
 
 11. In our opinion and according to the information and explanations
 given to us the Company has defaulted in repayment of dues to the Bond
 Holders and Bank as detailed below:
 
                         Principle  Interest
 
 Particulars              (Rs. in    (Rs. in   Due since   Remarks
                          Crores)    Crores)
 
 10% Secured Bonds-        31.80      25.96   June 2004 to
 A,B,C & E Series                              August 2006
 
 12% Secured Bonds-        28.70      27.85   June 2004 to
 A,B & C Series                                August 2006
 
 8 Year 8.5% HMT                       5.20    27.11.2010   Paid on 5th
                                                            April, 2011
 Bonds 2002
 
 Term Loan from                               Re-scheduled for a further
                                                     period from
 UCO Bank                  93.98              10.8.2009 to 10.8.2010 and
                                              repaid on re-scheduled 
                                                        date.
 
 Short Term Loan from      20.00              Re-scheduled to be paid up
                                                   to 31.3.2012.
 UCO Bank
 
 Loans and Advances against Securities:
 
 12.  Based on our examination and according to the information and
 explanations given to us, the Company has not granted loans and
 advances on the basis of security by way of pledge of shares,
 debentures and other securities
 
 Provisions applicable to Nidhi and Chit Fund Companies:
 
 13.  In our opinion, the Company is not a Chit fund or a nidhi / mutual
 benefit fund / society. Therefore, clause 4 (xiii) of the Companies
 (Auditor''s Report) Order, 2003 is not applicable to the Company.
 
 Dealing in shares and securities:
 
 14.  In our opinion, the company is not dealing in or trading in
 shares, securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Companies (Auditor''s Report) Order,
 2003 are not applicable to the company.
 
 Guarantees given by the company for loans taken by others:
 
 15.  In our opinion, the terms and conditions on which the company has
 given guarantees for loans taken by others from banks or financial
 institutions are not prejudicial to the interest of the company.
 
 End use of Term Loans raised :
 
 16.  In our opinion, the term loans have been applied for the purpose
 for which they were raised.  However no term loans are obtained during
 the year under audit.
 
 Utilisation of Short Term Funds:
 
 17.  According to the information and explanations given to us and on
 an overall examination of the balance sheet of the company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 Preferential Allotment of Shares:
 
 18.  During the year, the Company has not made any preferential
 allotment of shares to parties and companies covered in the Register
 maintained under Section 301 of the Companies Act, 1956.
 
 19.  The Company has not created charge in respect of the following:
 
 a.  10% Non Convertible
 
 Bonds- T31.80 Crores
 
 b.  12% Non Convertible
 
 Bonds- TZ8.70 Crores
 
 Even though the bonds were issued as secured bonds, trust deed in
 favour of bond holders has not been executed. Moreover the above Bonds
 are over due for redemption since 1st June, 2004, being earliest date
 of redemption.
 
 Public Issues:
 
 20.  The Company has not raised any money by way of public issues
 during the year. Hence disclosure and verification of end use of money
 raised by public issue does not arise.
 
 Frauds:
 
 21.  According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 period under audit.
 
 Emphasis of Matter
 
 VI. With out qualifying our opinion, we invite attention to the
 following:
 
 1.  The company has not re-constituted the Audit Committee as required
 under Section 292 A of The companies Act, 1956, since appointment of
 independent directors by the Govt of India is pending, as explained to
 us.
 
 2.  The Authorised Share Capital was enhanced from 1000 Crores to
 Rs.1450 Crores vide resolution passed at 55th Annual General Meeting of
 the members of the company held on September 27, 2008, but the company
 has not notified the Registrar of Companies by filing Form-5 prescribed
 under the Companies General Rules and Forms.
 
 3.  Following Accounting Policies disclosed in the financial statements
 either not complete or they are not in line with the Accounting
 Standards notified under The Companies (Accounting Standards) Rules,
 2006:
 
 a) Inventories: Cost formula used in respect of Finished Goods and
 Work-in- Progress are not stated.
 
 b) Development & Commissioning
 
 Charging to revenue over four financial years is not in consonance with
 AS- 10,
 
 c) Defferred Revenue Expenditure : Amortisation of Technical Assistance
 Fee is not in consonance with AS-26.
 
 d) Foreign Currency transactions : Recognising exchange differences on
 forward contracts to P& L Account is not in consonance with AS-11.
 
 However there is no impact on the financial statements for the year
 since there are no transactions in the above areas.
 
 VII. Further to our comments in Paragraphs IV , V and VI above:
 
 Information & Explanations:
 
 1.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 Maintenance of books of accounts:
 
 2.  Subject to our comments in Paragraphs VII 6 to VII 12 below, in our
 opinion, proper books of account as required by law have been kept by
 the Company so far as appears from our examination of those books and
 proper returns adequate for the purposes of our audit have been
 received from the branches audited by branch auditors;
 
 3.  The Balance Sheet, the Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 Reporting Requirements under section 274 (11 (g):
 
 4.  In our opinion, based on the notification no. GSR 829 (E) dated
 21.10.03 issued by the Department of Company Affairs, Government of
 India, the requirements under clause (g) of sub-section (1) of section
 274 of the Companies Act, 1956 with regard to directors'' qualifications
 do not apply to the Company, being a Government Company;
 
 5.  subject to our comments at paragraphs VI 3 above and VII 6 to 12
 below, in our opinion, the Balance Sheet, the Profit and Loss Account
 and the Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in sub-section (3C) of section 211 of
 the Companies Act, 1956;
 
 Basis for Opinion:
 
 6.  The Company has made long term investments aggregating to 745.62
 Crores in subsidiary companies, viz., HMT Watches Limited, HMT Chinar
 Watches Limited and HMT Bearings Limited whose net worth has eroded and
 these companies are suffering continuous losses.  Market value of the
 assets of these companies, results and expected cash flows from these
 investments is not ascertained. In view of the above deficiencies, in
 our opinion, there is a total decline in the value of these
 investments, which is other than temporary. No provision for above
 diminution is made. This is in contravention of the requirement of AS
 13 prescribed under Companies (Accounting Standards) Rules, 2006,
 resulting in the understatement of loss for the year & cumulative loss
 and overstatement of investments to that extent.
 
 7.  The company has also given loans and advances to the subsidiaries
 stated in clause VII 6 above and the aggregate dues from them as at
 31st March, 2011 amount to 7516.18 Crores.  In view of our observations
 made in clause VII 6 above, these dues should have been considered as
 doubtful of recovery requiring provision for the same. Consequently
 loss for the year & cumulative loss is understated and loans and
 advances are overstated to that extent.
 
 8.  Five acres of lease hold land with book value of 70.03 Crores as at
 31st March, 2011 at Food Processing Unit, Aurangabad has been
 encroached for which eviction suits filed by the company before Joint
 Civil Judge, Aurangabad was dismissed vide Court''s order dated 20th
 October, 2006 and the company had not preferred any appeal before
 higher courts. The said land is continued to be shown in the books of
 the company. Consequently loss for the year & cumulative loss is under
 stated and the fixed assets are overstated by 70.03 Crores.
 
 9.  Identification of impaired assets, recognition and measurement of
 impairment loss as required by AS-28 has not been carried out.
 Consequential impact on the financial statements is indeterminate.
 
 10.  Certain balances under sundry creditors, other liabilities, sundry
 debtors, loans and advances are subject to confirmation and
 reconciliation.  These balances include certain old balances requiring
 review and reconciliation.  Consequential impact of the same on the
 loss for the year/ accumulated loss and current liabilities is not
 ascertainable.
 
 11.  During the years 2002-03 and 2003-04, the company had sold certain
 lands vested with HMT Machine Tools Limited, a subsidiary company for a
 consideration of 736.57 Crores and the profit on sale of such land
 amounting to 736.55 Crores were accounted by the company. The company
 had an understanding with the subsidiary to adjust the consideration by
 transferring land of equivalent value.  However the company is yet to
 identify equivalent land for the said value for transfer to HMT Machine
 Tools Limited. This fact has not been disclosed in the financial
 statements.
 
 12.  Fixed Assets include 839.40 acres of land at Pinjore gifted by the
 State Government to the company, in respect of which mutation of title
 in the name of the company is yet to be carried out in the revenue
 records. This fact has not been disclosed in the financial statements.
 Further, about 11.73 acres out of above land at Pinjore have been
 acquired by National Highway Authority of India (NHAI).  Pending
 mutation of title, the offer of compensation of approx. 73.20 Crores by
 NHAI is yet to be obtained by the company, which fact also not been
 disclosed in the financial statements.
 
 Opinion:
 
 VIII. We further report that, without considering our comments
 mentioned in paragraphs VII 9 to 12 above, the effect of which could
 not be determined, had the observations made by us in paragraphs VII 6,
 7 & 8 above been considered, loss for the year would have been 7641.07
 Crores ( as against reported figure of 779.24 Crores); the adverse
 balance in Profit & loss Account (Cumulative) would have been 71281.71
 Crores (as against reported figure of 7719.88 Crores), Investments
 would have been 7719.94 Crores (as against reported figure of 7765.56
 Crores),Loans and Advances would have been 733.84 Crores (as against
 reported figure of 7550.02 Crores) and Net Block of Fixed assets would
 have been 736.05 Crores (as against reported figure of 736.08 Crores)
 
 Subject to the above, in our opinion and to the best of our information
 and according to the explanations given to us, the said accounts give
 the information required by the Companies Act, 1956, in the manner so
 required and, give a true and fair view in conformity with the
 accounting principles generally accepted in India:
 
 i. in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March 2011;
 
 ii. in the case of the Profit and Loss Account, of the loss of the
 Company for the year ended on that date; and
 
 iii. in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 
                                             For Dagliya & Co.,
 
                                           Chartered Accountants
 
                                                F.R.N. 671S
 
                                             P.Manohara Gupta
 
                                                 Partner
 
                                              M. No. 16444
 
 Place : Bangalore
 
 Date : August 30, 2011