1.  We have audited the attached balance sheet of Kirloskar Brothers
 Limited as at 31st March, 2011, the profit and loss account and also
 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.
 
 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 [as
 amended by Companies (Auditors 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 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 the written representations received from the
 directors as on 31st March, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March 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) 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, 2011;
 
 (b) in the case of the profit and loss account 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 has maintained 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 information and explanation given
 to us, no material discrepancies were noticed on such verification.
 
 (c) The fixed assets, which were disposed off during the year, do not
 form substantial part of the fixed assets owned by the company.
 
 (ii) (a) The inventory was physically verified during the year by the
 management. In our opinion, the frequency of 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. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 (iii) (a) The company has not granted any loans secured or unsecured to
 companies, firms or other parties covered in the register maintained as
 per section 301 of the Companies Act, 1956.  Accordingly, the
 provisions of clause 4 (iii) (b) (c) and (d) are not applicable to the
 company.  (e) The company has not taken any loans, secured or unsecured
 from companies, firms or other parties covered in the register
 maintained as per section 301 of the Companies Act, 1956.  Accordingly,
 the provisions of clause 4 (iii) (f) and (g) are not applicable to the
 company.
 
 (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 inventory and fixed assets and for the sale of goods and
 services. During the course of audit we have not observed any
 continuing failure to correct major weaknesses in internal control
 system.
 
 (v) (a) According to the information and explanations 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 to be
 maintained under that section.
 
 (b) According to the information and explanations 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 explanations
 given to us, the company has complied with the directives issued by the
 Reserve Bank of India and the provisions of section 58A, 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. As informed to us, 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.
 
 (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 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 with appropriate
 authorities 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.
 According to information and explanation given to us, no undisputed
 amounts payable in respect of statutory dues were in arrears, as at
 31st March, 2011 for a period of more than six months from the date
 they became payable.
 
 (b) According to 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 as at 31st March, 2011. The
 company has not incurred cash losses during the financial year and in
 the immediately preceding financial year.
 
 (xi) In our opinion and according to information and explanations given
 to us, the company has not defaulted in repayment of dues to a
 financial institution or bank. The company has no debenture holders.
 
 (xii) According to 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. Accordingly, the
 provisions of clause 4 (xii) of the Companies (Auditors Report) Order,
 2003 are not applicable to the company.
 
 (xiii) In our opinion, the company is not a chit fund or a nidhi/mutual
 benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 company.
 
 (xiv) According to information and explanation given to us, the company
 is not dealing in or trading in shares, securities, debentures and
 other investments.  Accordingly, the provisions of clause 4 (xiv) of
 the Companies (Auditors Report) Order, 2003 are not applicable to the
 company.
 
 (xv) In our opinion, the terms and conditions on which the company has
 given guarantees for loans taken by others from banks or financial
 institutions are not prejudicial to the interest of the company.
 
 (xvi) In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 (xvii) According to information and explanation given to us, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) According to information and explanation given to us, the
 company has not made any preferential allotment of any shares to
 parties and companies covered under section 301 of the Companies Act,
 1956.
 
 (xix) According to information and explanation given to us, the company
 has not issued any debentures.  Accordingly, the provisions of clause 4
 (xix) of the Companies (Auditors Report) Order, 2003 are not
 applicable to the company.
 
 (xx) According to information and explanation given to us, the company
 has not made any public issue to raise money. Accordingly, the
 provisions of clause 4 (xx) of the Companies (Auditors Report) Order,
 2003 are not applicable to the company.
 
 (xxi) According to information and explanation given to us, no fraud on
 or by the company has been noticed or reported during the course of our
 audit.
 
                                                 For M/s P. G. BHAGWAT
 
                                                 Chartered Accountants
 
                                                       Pankaja Bhagwat
 
                                                               Partner
                                                 Membership No.: 86155
                                       Firms Registration No: 101118W
 Pune : 26th April 2011