1.  We have audited the attached balance sheet of Kirloskar Brothers
 Limited as at 31st March, 2012, the profit and loss statement 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 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 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 by 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 paragraph 4 and 5 of the said
 Order.
 
 4.  Further to our comments in the annexure referred to in paragraph 3
 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, the profit and loss statement 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 statement 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 the written representations received from the
 directors as on 31st March, 2012, and taken on record by the board of
 directors, we report that none of the directors are disqualified as on
 31st March, 2012 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 accounts, read together with the
 notes thereon, 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 31st March, 2012 ;
 
 (b) in the case of the profit and loss statement of the profit for the
 year ended on that date;
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE Re: Kirloskar Brothers Limited
 
 Referred to in paragraph 3 of our report of even date : (i) (a) The
 company is maintaining proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) The fixed assets have been physically verified by the management at
 reasonable intervals.  According to the information and explanation
 given to us, no material discrepancies were noticed on such
 verification.
 
 (c) The company has not disposed off substantial part of its fixed
 assets during the current year.
 
 (ii) (a) Physical verification of inventory has been conducted by the
 management during the year. In our opinion, the interval of such
 verification is reasonable.
 
 (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 any
 material discrepancies noticed on physical verification have been
 properly dealt with in the books of account.
 
 (iii) (a) 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.  Accordingly, the
 provisions of clause 4 (iii) (b), (c) and (d) of the Order are not
 applicable to the company.  (e) According to the information and
 explanation 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.
 Accordingly, the provisions of clause 4 (iii) (f) and (g) of the Order
 are not applicable to the company.  (iv) In our opinion and according
 to the information and explanation given to us, 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 continuing failure or continuing
 failure to correct major weaknesses in internal control system.  (v)
 (a) According to the information and explanation given to us, the
 particulars of contracts or arrangements referred to in section 301 of
 the Companies Act, 1956 have been entered in the register required to
 be maintained under that section.  (b) In our opinion and according to
 the information and explanation given to us, the transactions made in
 pursuance of such contracts or arrangements have been made at prices
 which are reasonable having regard to the prevailing market prices at
 the relevant time.
 
 (vi) In our opinion and according to the information and explanation
 given to us, the company has complied with the directives issued by the
 Reserve Bank of India and the provisions of sections 58A, 58AA or any
 other relevant provisions of the Act and the rules framed thereunder.
 As informed to us no order has been passed by Company Law Board or
 National Company Law Tribunal or Reserve Bank of India or any Court or
 any other Tribunal.  (vii) In our opinion, the company has an internal
 audit system commensurate with its size and nature of its business.
 
 (viii) We have broadly reviewed the books of account relating to
 materials, labour and other items of cost 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 and we are of the opinion that prima facie the prescribed
 accounts and records have been made and maintained. We have not however
 made a detailed examination of records with a view to determine whether
 they are accurate and complete.
 
 (ix) (a) The company is regular in depositing undisputed statutory dues
 including Provident Fund, Investor Education and Protection Fund,
 Employees'' State Insurance, Income-tax, Sales-tax, Wealth Tax, Service
 Tax, Custom Duty, Excise Duty, cess and other material statutory dues
 applicable to it with the appropriate authorities.  According to the
 information and explanation given to us, no undisputed amounts payable
 in respect of statutory dues were in arrears, as at 31st March, 2012,
 for a period of more than six months from the date they became payable.
 
 (b) According to the information and explanation given to us, there are
 no dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty,
 Excise Duty and cess which have not been deposited on account of any
 dispute other than those mentioned in the Appendix to this report.  (x)
 The company has no accumulated losses at the end of 31st March, 2012.
 The company has not incurred cash losses in the financial year and in
 the immediately preceding financial year.
 
 (xi) Based on our audit procedures and according to the information and
 explanation given to us, we are of the opinion that the company has not
 defaulted in repayment of dues to a financial institution or bank. The
 company does not have debenture holders.
 
 (xii) According to the information and explanation given to 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, nidhi, mutual
 benefit fund or society and thus the provisions of clause 4 (xiii) (a),
 (b), (c) and (d) of the Order are not applicable to the company.
 
 (xiv) According to the information and explanation given to us the
 company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) In our opinion, the terms and conditions on which the company has
 given guarantees for loans taken by others from bank or financial
 institutions are not prejudicial to the interest of the company.
 
 (xvi) In our opinion and according to the information and explanation
 given to us, term loans were applied for the purpose for which the
 loans were obtained.
 
 (xvii) According to the information and explanation given to us, 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 and companies covered in the Register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) According to the information and explanation given to us, the
 company has not issued any debentures during the current year.
 
 (xx) According to the information and explanation given to us, the
 company has not raised money by any public issue during the current
 year.
 
 (xxi) According to the information and explanation given to us, no
 fraud on or by the company has been noticed or reported during the
 year.
 
 Appendix (Referred to in clause (ix) (b) of the annexure to the
 Auditors'' Report.)
 
 Sr. Nature of Dues          Amount in Rs.   Forum where dispute is 
                                                pending
 
 1  Central Sales Tax            240,513     Additional Commissioner
                                 244,203     Joint Commissioner of 
                                             Sales Tax (Appeals)
                               1,310,219     Assistant Commissioner
                                             (Appeals)
 
                               4,791,506     Appellate Assistant 
                                             Commissioner
 
                                 411,716     State High Court
 
                              14,424,941     Deputy Commissioner 
                                             (Appeals)
 
 2  State Sales Tax           19,240,611     Appellate Tribunal
 
                               5,537,281     High Court
 
                                 245,404     Assistant Commissioner
 
                               7,695,933     Deputy Commissioner 
                                             (Appeals)
 
 3  Excise Duty                  583,809     Assistant Commissioner
 
                              13,240,251     Commissioner
 
                              23,118,135     Appellate Tribunal
 
                                 135,539     Commissioner (Adjudication)
 
                               1,354,660     Commissioner (Appeals)
 
 4  Service Tax              170,837,723     Appellate Commissionerate
 
 
 
 For M/s P. G. BHAGWAT
 
 Chartered Accountants
 Firm''s Registration No: 101118W
 
 Abhijeet Bhagwat
 
 Partner
 Membership No.: 136835
 Pune : 25th April, 2012