We have audited the attached Balance Sheet of INDBANK MERCHANT BANKING
 SERVICES LIMITED as at 31st March 2011 and the Profit and Loss Account 
 for the year ended 31st March 2011 and also the Cash Flow Statement 
 for the year ended 31 st March 2011 annexed thereto. 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. 
 
 We conducted our audit in accordance with the  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 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.
 
 1.  As required by the Companies (Auditor''s Report) Order, 2003 as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004
 issued by the Central Government of India in terms of sub-section (4A)
 of section 227 of the Companies Act, 1956, we enclose in the Annexure a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 2.  Further to our comments in the Annexure referred to above, we
 report that:
 
 I.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purpose of our
 audit;
 
 II.  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
 these books;
 
 III.  The Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 IV.  In our opinion, the Balance Sheet and Profit and Loss Account and
 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.
 
 V.  On the basis of written representations received by the Directors,
 as on 31st March 2011, and taken on record by the Board of Directors,
 we report that none of the Directors is disqualified as on 31st March
 2011 from being appointed as a director in terms.of clause (g) of sub
 section (1) of section 274 of the Companies Act, 1956.
 
 VI.  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, subject to Note No.10 regarding
 non-consideration of liability towards interest claim of Rs.897.48
 lakhs under the right of recompense clause on certain settled
 borrowings by the Holding Company. Had the liability been recognized in
 the Books, the loss of Rs.992.65 lakhs would have become a loss of
 Rs.1890.13 lakhs.
 
 a) in the case of Balance Sheet, of the state of affairs of the Company
 as at 31stMarch 2011; 
 
 b) in the case of Profit and Loss Account, of the Loss for the year 
 ended 31 st March 2011; and 
 
 c) in the case of Cash Flow Statement, of the cash flows for the 
 year ended 31 st March 2011.
 
 ANNEXURE TO THE AUDITORS'' REPORT
 Referred to in paragraph 1 of our Report of even date.
 
 Re: Indbank Merchant Banking Services Ltd.
 
 (i) a. The company has maintained records showing full particulars
 including situation and quantity of fixed assets.
 
 b.  Fixed assets of the Company have been physically verified by the
 Company during the year.
 
 c.  The fixed assets that have been sold during the year do not
 constitute a substantial part of the total fixed assets of the Company.
 
 (ii) Clause (ii) of Paragraph 4 of Companies (Auditor''s Report) Order,
 2003, relating to inventory, is not applicable to the Company.
 
 (iii) The Company has not granted or taken any loans secured or
 unsecured to companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956. Accordingly
 clauses (iii)b to (iii)g of Companies (Auditors Report) Order, 2003,
 are not applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is an adequate internal control procedure
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of fixed assets and rendering of
 services. During the course of our audit, we have not observed any
 major weaknesses in internal controls.
 
 (v) In our opinion and according to the information and explanation
 given to us, there are no transactions that have been made in pursuance
 of contracts or arrangements entered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (vi) The Company has not accepted any deposits from public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii)The Central Government has not prescribed the maintenance of cost
 records under Section 209 (1) (d) of the Companies Act, 1956.
 
 (ix) a. The Company is regular in depositing with appropriate
 authorities all applicable undisputed statutory dues viz.  Provident
 Fund, Investor Education and Protection Fund, Income Tax Sales Tax,
 Service Tax, and Cess. The other statutory dues viz. ESI, Excise duty,
 Customs duty and Cess are not applicable to this organization. There
 are no arrears of outstanding undisputed statutory dues as at 31 st
 March 2011 for a period of more than six months from the date they
 become payable.
 
 b. According to the records of the Company and the information and
 explanations given to us, the following are the particulars of disputed
 dues in respect of income tax and sales tax that have not been
 deposited.
 
 Name of the Statute    Assessment    Amount    Forum where the 
                        Year         (Rs.Lak    dispute is pending
                                          hs)  
   
 Income Tax Act         2000-01       186.55    Assessing Officer
 
                        2001-02       441.11    Assessing Officer
 
                        2003-04        19.93    Assessing Officer
 
                        2004-05       392.87    Assessing Officer
 
                        2005-06       239.54    Assessing Officer
 
                        2006-07       315.89    Assessing Officer
 
                        2007-08      1027.53    Commissioner of 
                                                Income Tax (Appeals)
 
                        2008-09      1154.81    Commissioner of 
                                                Income Tax (Appeals)
 
 Sales Tax              1993-94         5.05
 
                        1994-95         8.63    Joint Commissioner 
                                                of Commercial Taxes
                        1995-96        12.05    (Appeals)
 
                        1998-99        10.64
 
 (x) The Company has no accumulated losses. The Company has incurred
 cash losses during this financial year.
 
 (xi) The Company has not defaulted in repayment of dues to its bankers.
 There are no borrowings from financial institutions. The Company has
 not issued any debentures.
 
 (xii) Adequate documents and records are maintained by the Company for
 the loans and advances granted on the basis of security by way of
 pledge of shares and other securities.
 
 (xii) The provisions of special statute applicable to chit funds /
 nidhi / mutual benefit funds / society do not apply to the Company.
 
 (xiv) In our opinion and according to the information given to us,
 proper records have been maintained by the Company for the transactions
 and contracts relating to trading in shares, securities, debentures and
 other investments and timely entries have been made therein. The
 investments of the Company are held in its own name.
 
 (xv) In our opinion and according to the explanations and information
 given to us the Company has not given guarantees for loans taken by
 others from banks and financial institutions.
 
 (xvi) The Company has not availed any term loans.
 
 (xvii) No short-term funds have been raised during the year.
 
 (xviii) 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.
 
 (xix) No debentures have been issued by the Company during the year.
 
 (xx) During the year, the Company has not raised any money by public
 issue.
 
 (xxi) According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 year.
 
 
                                                   For & on behalf of
                                                     Raman Associates
                                                Chartered Accountants
 
                                                       G Venkataraman
                                                              Partner 
                                                  Membership No.10022
 
 Place: Chennai 
 Date: 18.04.2011