JSW Steel

1.  We have audited the attached Balance Sheet of JSW Steel Limited, as
 at 31 March 2009 and also the Profit and Loss Account and 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 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:
 
 (a) 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.
 
 (b) 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.
 
 (c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account.
 
 (d) 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.
 
 (e) On the basis of written representations received from the Directors
 as on 31 March 2009 and taken on record by the Board of Directors, we
 report that none of the directors are disqualified as on 31 March 2009
 from being appointed as a director in terms of Clause (g) of
 sub-section (1) of Section 274 of the Companies Act, 1956.
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the 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 31 March 2009;
 
 (ii) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 (iii) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors Report
 
 (Referred to in paragraph 3 of our report of even date)
 
 1.  The nature of the Companys business/activities for the year are
 such that the requirements of Items (i-c), (iii), (vi), (x), (xii),
 (xiii), (xiv), (xviii) and (xx) of paragraph 4 of the Order 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.
 
 3.  In respect of its inventories:
 
 a) As explained to us, inventories were physically verified during the
 year by the management at reasonable intervals, except for inventories
 lying with third parties where confirmations have been received.
 
 b) As the Companys inventory of raw materials comprises mostly of bulk
 materials such as coal, coke, pellets etc. requiring technical
 expertise for quantification, the Company has hired an independent
 agency for physical verification of such stocks.
 
 Considering the above, in our opinion, 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) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 4. In our opinion and according to the information and explanations
 given to us, and having regard to the explanations that for some of the
 items purchased/sold suitable alternate sources for obtaining
 comparative quotations are not readily available, there are reasonable
 internal control systems commensurate with the size of the Company and
 the nature of its business for sales, purchase of inventory and fixed
 assets however that controls over sales in certain areas need to be
 enhanced. We have not observed any continuing failure to correct major
 weaknesses in such internal controls.
 
 5. In respect of contracts or arrangements entered in the register
 maintained in pursuance of Section 301 of the Companies Act, 1956 and
 according to the information and explanations given to us:
 
 a) The particulars of the contracts or arrangements referred to in
 Section 301 that needed to be entered into the register, maintained
 under the said section have been so entered.
 
 b) In our opinion and having regard to our comments in paragraph (5)
 above, the transactions made in pursuance of such contracts and
 arrangements aggregating during the year to Rs. 5 lacs or more in
 respect of each party, have been made at prices which are reasonable
 having regard to the prevailing market prices.
 
 6.  In our opinion, the Company has an adequate internal audit system
 commensurate with the size and the nature of its business.
 
 7.  We have broadly reviewed the books of account and records
 maintained by the Company relating to the manufacture of steel,
 pursuant to the order made by the Central Government for the
 maintenance of cost records under Section 209(1)(d) of the Companies
 Act, 1956 and are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have, however,
 not made a detailed examination of the records with a view to
 determining whether they are accurate or complete. To the best of our
 knowledge and according to the information and explanations given to
 us, the Central Government has not prescribed the maintenance of cost
 records for any other product of the Company.
 
 8.  In respect of its statutory dues:
 
 a) According to the information and explanations given to us, the
 Company has generally been regular in depositing undisputed statutory
 dues, including Provident Fund, Income-tax, Wealth- tax, Sales-tax,
 Service tax, Customs duty, Excise duty, Investor Education and
 Protection Fund and any other material statutory dues with the
 appropriate authorities during the year.
 
 b) According to the information and explanations given to us, the
 following demands as at 31 March 2009 have not been deposited since
 appeals are pending before the relevant Authorities:
 
 Name of Statute      Nature of the           Amount 
                      dues
 
 The Custom Act,      Customs Duty             43.81
 1962
 
 The Custom Act,      Customs Duty              7.40
 1962
 
 The Custom Act,      Customs Duty            120.82
 1962
 
 The Custom Act,      Customs Duty             38.72
 1962
 
 The Custom Act,      Customs Duty              0.46
 1962
 
 The Central          Excise                    3.83
 Excise Act, 1944     Demand
 
 The Central          Excise                   67.39
 Excise Act, 1944     Demand
 
 The Central          Excise                    0.10
 Excise Act, 1944     Demand
 
 The Central          Excise                    0.01
 Excise Act, 1944     Demand
 
 The Service Tax      Service Tax              21.53
 Act, 1994            Demand
 
 The Service Tax      Service Tax               0.34
 Act, 1994            Demand
 
 Rupees in crores
 
 Period to which             Forum where
 the amount                  dispute is
 relates                     pending
 
 2001-2002                  High Court of
                            Karnataka
 
 2000-2001                  Customs, Excise
                            and Service Tax
                            Appellate Tribunal
 
 1996-1998                  Customs, Excise
                            and Service Tax
                            Appellate Tribunal
 
 2004-2005                  The Deputy
                            Commissioner of
                            Customs, Goa
 
 2008-2009                  The
                            Commissioner
                            of Customs
                           (Appeals)
 
 2000-2001                  Supreme Court
                            of India
 2000-2008                  Customs, Excise
                            and Service Tax
                            Appellate Tribunal
 
 2004-2005                  High Court of
                            Mumbai
 2001-2002                  The
                            Commissioner of
                            Central Excise
 
 2005-2008                  Customs, Excise
                            and Service Tax
                            Appellate Tribunal
 
 2005-2006                  The
                            Commissioner of
                            Central Excise,
                            Salem
 
 Name of Statute     Nature of the       Amount
                     dues
 
 Income Tax Act,     Income Tax           34.25
 1961                Demand
 
 The Bombay          Sales Tax             0.32
 Sales Tax Act,      Demand
 1959
 
 Bellary Urban       Cess                 11.22
 Development
 Authority
 
 MIDCs               Water                 4.32
 Water Supply        Charges
 Regulation, 1973
 
 Tamilnadu Water     Water                 2.05
 Board               Charges
 
 Tarapur             Disposal of           0.64
 Environment         hazardous
 Protection Society  waste
 
 Period to which     Forum where
 the amount          dispute is
 relates             pending
 
 2003-2007           Commissioner
                     of Income Tax
                    (Appeals)
 
 1996-1997           The Joint
                     Commissioner
                     of Sales Tax
                    (Appeals), Thane
 
 2000-2001           High Court of
                     Karnataka
 
 2003-2005           Maharashtra
                     Industrial
                     Development
                     Corporation,
                     Mumbai
 
 1997-2008           Executive
                     Engineer PWD,
                     Mettur Dam,
                     Tamilnadu
 
 2003-2004           Maharashtra
                     Industrial
                     Development
                     Corporation,
                     Mumbai
 
 9.  According to the information and explanations given to us, the
 Company has not defaulted in the repayment of dues to financial
 institutions, banks and debenture holders.
 
 10.  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 subsidiaries (including step down
 subsidiaries) and others from banks are prima facie not prejudicial to
 the interests of the Company.
 
 11.  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.
 
 12.  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.
 
 13.  According to the information and explanations given to us and the
 records examined by us, securities/charges have been created in respect
 of the debentures issued, except where additional time for creation of
 security has been granted by the lender.
 
 14.  To the best of our knowledge and belief and according to the
 information and explanations given to us, no material fraud on or by
 the Company was noticed or reported during the year.
 
                                           For Deloitte Haskins & Sells
                                                  Chartered Accountants
 
                                                       P. B. Pardiwalla
                                                                Partner
                                                   Membership No. 40005
 
 Place  :  Mumbai
 Date   :  7 May 2009