Indiabulls Financial Services

1.  We have audited the attached balance sheet of Indiabulls Financial
 Services Limited (the Company) as at March 31, 2008, the profit and
 loss Account and also the cash flow statement for the year ended on
 that date annexed thereto.  These financial statements are the
 responsibility of the Companys management. Our responsibility is to
 express an opinion on these financial statements based on our audit.
 
 2.  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 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.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 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.
 
 4.  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 purposes 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
 those 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, 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 from directors as
 on March 31,2008 and taken on record by the Board of Directors, we
 report that none of the directors is disqualified as on March 31,2008
 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:
 
 (a) in the case of the balance sheet, of the state of affairs of the
 Company as at March 31,2008;
 
 (b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors1 Report referred to in paragraph 3 of our
 report of even date]
 
 1 . In our opinion and according to the information and explanations
 given to us, the nature of the Companys business / activities during
 the year is such that clauses ii, viii, xiii, xix of the Companies
 (Auditors Report) Order, 2003 are not applicable to the Company.
 
 2.  In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) Some of the fixed assets were physically verified during the year
 by the management in accordance with a programme of verification, which
 in our opinion provides for physical verification of all the fixed
 assets at reasonable intervals. According to the information and
 explanations given to us no material discrepancies were noticed on such
 verification.
 
 (c) The company has not disposed off a substantial part of its fixed
 assets during the year. In our opinion and according to the information
 and explanations given to us, the ability of the company to continue as
 a going concern is not affected on account of such disposal of fixed
 assets.
 
 3.  In respect of loans, secured or unsecured, granted or taken by the
 Company to or from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act 1956,
 according to the information and explanations given to us:
 
 (a) The Company has granted loans to six Companies. At the year-end,
 the outstanding balances of such loans granted aggregated to Rs.
 4,248,500,000 from five Companies and the maximum amount involved
 during the year was Rs. 35,975,200,000 from six Companies.
 
 (b) The rate of interest and other terms and conditions of such loans,
 wherever stipulated, are, in our opinion, prima facie not prejudicial
 to the interest of the Company.
 
 (c) The receipt of principal amounts and interest have during the year
 been regular / as per stipulations.
 
 (d) There are no overdue amounts in excess of Rs. 1 lakh in respect of
 loans granted to Companies, firms or other parties listed in the
 register maintained under section 301 of the Companies Act, 1956.
 
 (e) The Company has taken loans from two Companies. At the year-end,
 the outstanding balance of such loan taken aggregated to Rs. Nil and
 the maximum amount involved during the year was Rs. 720,000,000 from
 two Companies.
 
 (f) The rate of interest and other terms and conditions of such loans,
 wherever stipulated, are, in our opinion, prima facie not prejudicial
 to the interest of the Company.
 
 (g) The payment of principal amount and interest in respect of such
 loans are regular / as per stipulations.
 
 4.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the Company and the nature of its business for the
 purchase of fixed assets and for the sale of services and we have not
 observed any continuing failure to correct major weaknesses in such
 internal controls. There were no transactions in respect of purchase of
 inventory and sale of goods during the year.
 
 5.  In respect of contracts or arrangements entered in the register
 maintained in pursuance of section 301 of the Companies Act 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us:
 
 (a) The particulars of contracts or arrangements referred to Section
 301 that needed to be entered into the register, maintained under the
 said section have been so entered.
 
 (b) According to the information and explanations given to us, where
 each of such transactions, (excluding loans reported in Paragraph 3
 above), is in excess of Rs. 5 lakhs in respect of any party, the
 transactions have been made at prices which are prima facie, reasonable
 having regard to the prevailing market prices at the relevant time,
 except that in respect of sale of services, no comparison of prices
 could be made as the Company informed us that there are no prevailing
 market prices / alternate sources of supply.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits from public
 within the meaning of Section 58A and 58AA or any other relevant
 provisions of the Companies Act, 1956 and the Companies (Acceptance of
 Deposits) Rules, 1975 with regard to the deposits accepted from the
 public. No order has been passed by the Company Law Board or National
 Company Law Tribunal or Reserve Bank of India or any Court or any other
 Tribunal.
 
 7.  In our opinion, the internal audit functions carried out during the
 year by a firm of Chartered Accountants appointed by the management
 have been commensurate with the size of the Company and the nature of
 its business.
 
 8.  According to the information and explanations given to us, in
 respect of Statutory dues:
 
 (a) The Company has been generally regular in depositing undisputed
 statutory dues, including Provident Fund, Employees State Insurance,
 Income-tax and Service Tax and any other material statutory dues with
 the appropriate authorities during the year. During the year there were
 no dues payable in respect of Investor Education and Protection Fund,
 Sales-tax, Wealth Tax, Custom Duty, Excise Duty and Cess. Further,
 since the Central Government has till date not prescribed the amount of
 Cess payable under section 441A 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.
 
 (b) During the year there were no disputed dues payable in respect of
 Sales tax, Income-tax, Customs Duty, Wealth- tax, Service Tax, Excise
 Duty and Cess.
 
 9.  In our opinion and according to the information and explanations
 given to us, the company does not have any accumulated losses as at the
 end of the year. The Company has not incurred cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 10.  In our opinion and according to the information and explanations
 given to us, the company has not defaulted in the repayment of dues to
 financial institutions, banks and unsecured debenture holders.
 
 11.  In our opinion the Company has maintained adequate documents and
 records where it has granted loans and advances on the basis of
 security by way of pledge of shares. The Company has not granted loans
 and advances on the basis of security by way of debentures and other
 securities.
 
 12.  Based on our examination of the records and evaluation of the
 related internal controls, the Company has maintained proper records of
 transactions and contracts in respect of its dealing in shares,
 securities, debentures and other investments and timely entries have
 been made therein. The aforesaid securities have been held by the
 Company in its own name, except to the extent of the exemption granted
 under Section 49 of the Companies Act, 1956.
 
 13.  In our opinion and according to the information and explanations
 given to us, the terms and conditions of the guarantees given by the
 Company for loans taken by others from banks and financial
 institutions, are not prima facie prejudicial to the interests of the
 Company.
 
 14.  To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes for which the loans were obtained, other than
 temporary deployment pending application.
 
 15.  According to the information and explanations given to us, and on
 an overall examination of the balance sheet of the Company, funds
 raised on short term basis have, prima facie, not been used during the
 year for long term investment.
 
 16.  According to the information and explanations given to us, the
 price at which the Company has made preferential allotment of shares to
 parties and companies covered in the Register maintained under Section
 301 of the Companies Act, 1956 is not prima facie prejudicial to the
 interests of the Company.
 
 17.  We have verified the end use of money raised by public issues as
 disclosed in the notes to the financial statements.
 
 18.  To the best of our knowledge and belief and according to the
 information and explanations given to us, no fraud on or by the Company
 was noticed or reported during the year.
 
 
                                 For Deloitte Haskins & Sells
 
                                 Chartered Accountants
 
                                 K.A.Katki
                                 Partner
 
 Mumbai: April 24,2008           Membership No. 038568