1.  We have audited the attached Balance Sheet ot JSW ISPAT Steei
 Limited (''the Company'') as at 30th June, 2011 and also the Profit &
 Loss Account and the cash flow statement for the year ended on that
 date 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.
 
 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 the 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 (Auditor''s Report) Order, 2003 (as
 amended) issued by the Centra! 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 ail 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 and proper returns adequate for the purposes of our audit
 have been received from branches/ sales depots not visited by us,
 
 iii. The Balance Sheet, Profit & 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 & 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, subject to our comment in para (vii) below.
 
 v. On the basis of the written representations received from the
 directors, as on 30th June, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 30th June, 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. Without qualifying our opinion, attention is drawn to Note No.  13
 of Schedule 23 regarding Sundry Debtors of Rs. 255.61
 
 crores, towards sale consideration of landed property along with
 interest thereon which are overdue from Peddar Realty Private Limited.
 These have been considered good of recovery by the management in view
 of the market value of the underlying assets of the said debtor.
 
 vii. Attention is also drawn to Note No. 11 of Schedule 23 regarding
 net deferred tax asset (DTA) of Rs. 1308.76 crores (including Rs.
 344.48 crores for the year) recognized upto 30th June, 2011, based on
 the future profitability projections made by the management. We are
 unable to express an opinion on the virtual certainty of achieving
 these projections as required by Accounting Standard 22, Accounting for
 Taxes on Income'', and the consequential impact, if any, of the
 recognition of such deferred tax asset. This had also caused us to
 qualify our audit opinion on the financial statements for the period
 ended 30th June, 2010.
 
 Had the impact of item stated alfpve been considered, the loss for the
 year would have been Rs. 3114.64 crores (after adjusting DTA of Rs.
 964.28 crores recognized upto 30th June, 2010) as against the reported
 loss of Rs. 1805.88 crores and the debit balance in Profit & Loss
 Account would have been Rs. 5248.87 crores as against the reported
 figure of Rs. 3940.11 crores.
 
 viii. Subject to the effect of the observation in para (vii) 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;
 
 a) in the case of Balance Sheet, of the state of affairs of the Company
 as at 30th June, 2011;
 
 b) in the case of Profit and Loss account, of the loss for the year
 ended on that date; and
 
 c) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors'' Report Referred to in our report of even date
 to the Members of JSWISPAT Steel Limited (Formerly Ispat Industries
 Limited) as at and for the year ended 30th June, 2011
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets have not been physically verified by the
 management during the year but there is a regular programme of
 verification in a phased manner to cover all the items of fixed assets
 over a period of three years which, in our opinion, is reasonable
 having regard to the size of the Company and the nature of its assets.
 As informed, no material discrepancies were noticed on such
 verification of fixed assets during the year.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (b) The procedures of physical verification of inventory 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 and no
 material discrepancies were noticed on physical verification of
 inventories during the year.
 
 (iii) (a) According to the information and explanations given to us,
 the Company has not granted any loans, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under Section 301 of the Companies Act, 1956. Therefore, the provisions
 of clauses 4(iii)(a) to (d) of the Order are not applicable to the
 Company and hence not commented upon.
 
 (b) According to the information and explanations given to us, the
 Company has not taken any loans, secured or unsecured from companies,
 firms or other parties covered in the register maintained under Section
 301 of the Companies Act, 1956. Therefore, the provisions of clauses
 4(iii)(e) to (g) of the Order are not applicable to the Company and
 hence not commented upon.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that some of the
 items purchased are of a special nature and alternative sources do not
 exist for obtaining quotations thereof, it appears that there is an
 adequate internal control system commensurate with the size of the
 Company and the nature of its business, for the purchase of inventory
 and fixed assets and for the sale of goods and services. During the
 course of our audit, we have not observed any major weakness or
 continuing failure to correct any major weakness in the internal
 control system of the Company In respect of these areas.
 
 (v) In our opinion, there are no contracts or arrangements that need to
 be entered into the register maintained under Section 301 of the
 Companies Act, 1956.
 
 (vi) The Company has not accepted any deposit from the public within
 the purview of Section 58A, 58AA or any other relevant provisions of
 the Companies Act, 1956 and the rules framed thereunder.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost records under Section 209(1 )(d) of the Companies
 Act, 1956 for the products manufactured by the Company, and are of the
 opinion that prima facie, the prescribed accounts and records have been
 made and maintained.
 
 (ix) (a) Undisputed statutory dues including provident fund, investor
 education and protection fund, income-tax, sales-tax, wealth-tax,
 service tax, custom duty, excise duty, cess and other material
 statutory dues have generally been regularly deposited with the
 appropriate authorities though there have been delays in a few cases.
 The provisions relating to employees'' state insurance are not
 applicable to the Company.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 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.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, income-tax, sales-tax, wealth-tax,
 service tax, custom duty, excise duty, cess and other undisputed
 statutory dues were outstanding, as on the Balance Sheet date for a
 period of more than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 income tax, sales tax, wealth-tax, service tax, custom duty, excise
 duty and cess on account of any dispute, are as follows :-
 
 Name of      Nature of the 
                Dues           Amount    Period to     Forum where
 the Statute                  (Rs. in    which the     dispute is
                               crores)    amount       pending
                                         relates
 
             Dispute of Cenvat  43.96    1994-1995
             credit on Inputs &          1997-1999
             Capital Goods and           2000-2011
             allied matters
             (Net of Rs. 1.08 crores
             deposited under                           Commissioner
             protest)                                  (Appeals),
 
 The Central Duty on valuation
               of               14.89    2000-2004     Customs, Excise
 Excise      inputs and Hot 
             Metal                                      & Service
 Act,1944    Duty on Freight     5.39    1996-2003     Tax Appleate
                                                       Tribunal, High
             Various matters     5.89    1998-2005     Court, Supreme
             (Net of Rs. 0.82
              crore                                    Court
             deposited under
             protest)
 
             Transfer of Cenvat  2.01    2005-2006
             Balance from one
             location to other
             Demand of Custom    7.28    1994-2005     Customs, Excise
             duty on barge and                          & Service
             stevedoring charges                       Tax Appellate
 The                                                   Tribunal
 Customs
 Act 1962    Demand of Custom   80.19    2004-2011     High Court
             Duty upon finalisation
             of Provisional
             Assessments
 
 The Finance Tax on services     0.27    1998-2003     Commissioner
 Act, 1994   relating to foreign         2005-2009     (Appeal),
             consultancy/                              Customs, Excise
             infrastructure
              support/                                 & Service
             sales commission                          Tax Appellate
             (Net of Rs. 0.44 crore                    Tribunal
             deposited under
             protest)
 
             Tax on Classifi
              -cation           26.33     1998-2001    Jt.
             of CRA3C as                  2002-2004    Commissioner
             manufacturing
             process                                  (Appeal), High
             (Net of Rs. 0.33
               crore                                     Court
             deposited under
 The Bombay  Protest-
 Sales Tax   Demand for set off  1.12     1999-2000    Sales Tax
 Act, 1959   granted on capital                        Appellate
             goods                                     Tribunal
 
             Purchase Tax on     0.36     1989-1991    Sales Tax
             Zinc (Net of Rs. 0.30        1995-1996    Appellate
             crore deposited under                     Tribunal
             protest)                      
 
 Central     C and ''F Form      1.62     2003-2004    W.B.
 Sales Tax   related matters              2005-2006    Commercial
 Act, 1956                                             Tax & Revision
                                                       Board
 
 West Bengal Purchase Tax Matters0.01     2005-2006    Sr. Joint
 Value                                                 Commissioner
 Added Tax
 Act, 2003
 
 The         Minimum Alternate   2.16     1989-1991    High Court
 Income Tax  Tax
 Act, 1961
 
 The Wealth  Demand on valuation 0.27     2001-2002    Income Tax
 Tax Act,                                              Appellate
 1957                                                  Tribunal
 
 (x) The Company''s accumulated losses at the end of the financial year
 are more than fifty percent of its net worth. The Company has incurred
 cash loss during the year but it had not incurred cash loss in the
 immediately preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, the Company has delayed in
 repayment of dues to domestic financial institutions and banks during
 the year to the extent of Rs. 2342.37 crores, which includes Rs.
 1418.81 crores towards working capital facilities (the delay in such
 repayments for more than 60 days being Rs. 654.73 crores). However,
 there is no such overdue amount as on the balance sheet date. The
 company did not have any outstanding dues of debentures during the
 year.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced before us, the Company has
 not granted loans and advances on the basis of security by way of
 pledge of shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 (xiv) In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments. Accordingly, the
 provisions of clause 4(xiv) of the Order are not applicable.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from bank
 or financial institutions.
 
 (xvi) Based on the information and explanations given to us by the
 management, term loans were applied for the purpose for which these
 loans were obtained.  
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that the Company has used short term funds to the extent of Rs. 460.32
 crores for funding of losses. Losses of the current year include
 provisions of exceptional nature aggregating to Rs. 1180.62 crores as
 disclosed in Note No. 9 on Schedule 23.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties or companies covered in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the year.
 
 For S.R. BATLIBOI & CO.
 
 Firm Registration Number: 301003E
 Chartered Accountants
 
 Per Hemal Shah
 
 Partner
 Membership No. 42650
 14th Floor,''The Ruby'',
 29 Senapati Bapat Marg,
 Dadar (W)
 Mumbai - 400 028
 
 Dated: 27th August, 2011