We have audited the attached Balance Sheet of Kansai Nerolac Paints
 Limited (the Company) as at 31 March 2011, the Profit and Loss
 Account and the Cash Flow Statement of the Company 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.
 
 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.
 
 As required by the Companies (Auditors Report) Order, 2003 (the
 Order) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956 (the Act),
 we enclose in the Annexure a statement on the matters specified in
 paragraphs 4 and 5 of the said Order.
 
 Further to our comments in the Annexure referred to above, we report
 that:
 
 (a) we have obtained all information and explanations which to the best
 of our knowledge and belief were necessary for the purposes of 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
 these books;
 
 (c) 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;
 
 (d) 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 Act;
 
 (e) on the basis of written representations received from the directors
 of the Company as at 31 March 2011 and taken on record by the board of
 directors, we report that none of the director is disqualified as on 31
 March 2011 from being appointed as a director of the Company under
 clause (g) of sub-section (1) of section 274 of the Act; and
 
 (f) in our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements give the
 information required by the Act, in the manner so required and give a
 true and fair view in conformity with the accounting principles
 generally accepted in India;
 
 i.  in case of the balance sheet, of the state of affairs of the
 Company as at 31 March 2011;
 
 ii.  in case of the profit and loss account, of the profit of the
 Company for the year ended on that date; and
 
 iii.  in case of the cash flow statement, of the cash flows of the
 Company for the year ended on that date.
 
 ANNEXURE TO AUDITORS REPORT – 31 MARCH 2011 TO THE MEMBERS OF KANSAI
 NEROLAC PAINTS LIMITED
 
 With reference to the Annexure referred to in our report of even date,
 we report that:
 
 i. (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular programme of physical verification of its
 fixed assets by which all fixed assets are verified in a phased manner
 over a period of three years. In our opinion, this periodicity of
 physical verification is reasonable having regard to the size of the
 Company and the nature of its assets. No material discrepancies were
 noticed in respect of assets verified during the year.
 
 (c) Fixed assets disposed off during the year were not substantial, and
 do not affect the going concern assumption.
 
 ii. (a) The inventory has been physically verified by the management
 during the year. In our opinion, the frequency of such verification is
 reasonable.
 
 (b) The procedures for the 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. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 iii. The Company has neither granted nor taken any loans, secured or
 unsecured, to or from companies, firms or other parties covered in the
 register maintained under section 301 of the Act.
 
 iv. 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 purchase of inventories and fixed assets and with regard to the sale
 of goods and services. In our opinion and according to the information
 and explanations given to us, there is no continuing failure to correct
 major weaknesses in internal control system in respect of these areas.
 
 v. (a) In our opinion and according to the information and explanations
 given to us, the particulars of contracts or arrangements referred to
 in section 301 of the Act have been entered in the register required to
 be maintained under that section.
 
 (b) In our opinion, and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements referred to in (a) above and exceeding the value of Rs. 5
 lacs with any party during the year have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time, except for transactions which are for the Companys
 specialised requirements for which suitable alternative sources are not
 available to obtain comparable quotations. However, on the basis of
 information and explanations provided, the same appear reasonable.
 
 vi. In our opinion, and according to the information and explanations
 given to us, the Company has complied with the provisions of Section
 58A, Section 58AA or other relevant provisions of the Act and the rules
 framed there under/ the directives issued by the Reserve Bank of India
 (as applicable) with regard to deposits accepted from the public.
 Accordingly, there have been no proceedings before the Company Law
 Board or National Company Law Tribunal (as applicable) or Reserve Bank
 of India or any Court or any other Tribunal in this matter and no order
 has been passed by any of the aforesaid authorities.
 
 vii. In our opinion, the Company has an internal audit system
 commensurate with the size and the nature of its business.
 
 viii. We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules prescribed by the Central Government for
 maintenance of cost records under Section 209(1)(d) of the Act and are
 of the opinion that prima facie, the prescribed accounts and records
 have been made and maintained. However, we have not made a detailed
 examination of the records.
 
 ix. (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, amounts
 deducted/accrued in the books of account in respect of undisputed
 statutory dues including Provident fund, Income-tax, Sales-tax, Wealth
 tax, Service tax, Customs duty, Investor Education and Protection Fund,
 Employees State Insurance, Cess, Excise duty and other material
 statutory dues have been generally regularly deposited during the year
 by the Company with the appropriate authorities.
 
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident fund, Employees
 State Insurance, Investor Education and Protection Fund, Income tax,
 Sales tax, Wealth tax, Service tax, Customs duty, Excise duty, Cess and
 other material statutory dues were in arrears as at 31 March 2011 for a
 period of more than six months from the date they became payable.
 
 There were no dues on account of Cess under Section 441A of the Act,
 since the date from which the aforesaid section comes into force has
 not yet been notified by the Central Government.
 
 (b) According to the information and explanations given to us, there
 are no dues of Income tax, Sales tax, Wealth tax, Service tax, Customs
 duty, Excise duty and Cess which have not been deposited with the
 appropriate authorities on account of any dispute, except as stated
 below:
 
                                                        (Rs. in lacs)
                                     Forum where dispute is pending
                        Period to which the 
 Name of the Statute /
 Nature of dues
                                           Commissio
                                           narate    Appellate   Total
                        amount relates
                                                     Authorities Amount
                                                     & Tribunal
 
 Various State Sales 
 Tax Acts and              1980-81          0.33        —        0.33
 
 Central Sales Tax Act, 
 1956 /                    1991-92          1.25        —        1.25
 
 Tax, Penalty and 
 Interest                  1995-96
                           to 2009-10      60.65      51.53    111.98
 
 The Central Excise Act, 
 1944 /                    1990-91          8.05        —        8.05
 
 Tax, Penalty and Interest 1993-94 to
                           2003-04        151.08      42.55    193.63
 
 x. The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 and in the immediately preceding financial year.
 
 xi. In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to its
 bankers and financial institutions. The Company did not have any
 outstanding dues to any debenture holders during the year.
 
 xii. The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 xiii.  The Company is not a chit fund / nidhi / mutual benefit fund /
 society.
 
 xiv.  The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 xv. In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company had given
 guarantees for loans taken by others from banks or financial
 institutions are not prejudicial to the interest of the Company.
 
 xvi.  The Company did not have any term loans outstanding during the
 year.
 
 xvii. According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we are of
 the opinion that the funds raised on short-term basis have not been
 used for long-term investment.
 
 xviii. The Company has not made any preferential allotment of shares to
 parties or companies covered in the register maintained under Section
 301 of the Act.
 
 xix.  The Company did not have any outstanding debentures during the
 year.
 
 xx.  The Company has not raised any money by public issues during the
 year.
 
 xxi. According to the information and explanations given to us, no
 material fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
 
 
                                                   For B S R & CO.
                                             Chartered Accountants
                                  Firms Registration No.: 101248W
 
                                                      VIJAY MATHUR
                                                           Partner 
                                            Membership No.: 046476 
 
 Mumbai
 Date : 28 April 2011