(1) We have audited the attached Balance Sheet of KSB Pumps Limited as
 at 31st December, 2011 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 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
 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:
 
 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, 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) 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 the Balance Sheet, of the state of affairs of the
 Company as at 31st December, 2011;
 
 b) in the case of the Profit and Loss Account, of the profit 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.
 
 (5) On the basis of written representations received from the
 directors, as on 31st December, 2011 and taken on record by the Board
 of Directors, we report that none of the directors is disqualified as
 on 31st December, 2011, from being appointed as a director in terms of
 clause (g) of sub-section (1) of section 274 of the Companies Act,1956.
 
 STATEMENT REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE TO THE
 MEMBERS OF KSB PUMPS LIMITED ON THE ACCOUNTS FOR THE YEAR ENDED 31st
 DECEMBER, 2011.
 
 (i) (a) The Company has maintained
 
 proper records showing full particulars including quantitative details
 and situation of fixed assets.
 
 (b) As explained to us, the management has physically verified most of
 the fixed assets during the year, other than patterns lying with third
 parties for which confirmations have been obtained from parties in most
 of the cases, and no material discrepancies were noticed on such
 verification. In our opinion, the frequency of physical verification of
 fixed assets is reasonable having regard to the size of the Company and
 the nature of the assets.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute substantial part of the fixed assets of the Company and
 such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (ii) (a) Inventories have been physically
 
 verified during the period by the management. In respect of inventories
 lying with third parties confirmation have been obtained for a major
 portion of inventories. In our opinion, the frequency of verification
 is reasonable.
 
 (b) 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. The discrepancies noticed on verification between physical
 stocks and book stocks were not material having regard to the size of
 operations of the Company and have been properly dealt with in the
 books of accounts.
 
 (iii) According to the information and explanations given to us, the
 Company has not granted or taken any loans, secured or unsecured, to or
 from companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956. Accordingly
 clauses (iii)(a) to (iii)(g) of paragraph 4 of the Companies
 (Auditor''s Report) Order, 2003 are not applicable.
 
 (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/ sold are of a special nature and comparable alternative
 quotations/ prices are not available, 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. There is no continuing failure
 to correct major weaknesses, if any, in internal controls system.
 
 (v) (a) Based upon the audit procedures applied by us and according to
 the information and explanations given to us, contracts or arrangements
 that need to be entered into the register maintained in pursuance of
 section 301 of the Companies Act, 1956 have been so entered.
 
 (b) 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 provisions of section
 58A, 58AA or any other relevant provisions of the % Companies Act, 1956
 and the rules ''framed there under, with regard to the deposits accepted
 from the public. No order has been passed by the Company Law Board.
 
 (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 maintained by the
 Company relating to the manufacture of Power Driven Pumps pursuant to
 the notification of the Central Government for the maintenance of cost
 records under Section 209(l)(d) of the Companies Act, 1956 and, on the
 basis of the information received, are of the opinion that prima facie
 the prescribed accounts and records have been maintained/ are being
 made up. We have not, however, 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
 given to us, the Central Government has not prescribed the maintenance
 of cost records under Section 209(l)(d) of the Companies Act, 1956 for
 any other products of the Company.
 
 (ix) (a) According to the records of the Company, apart from the
 certain instances of delays in depositing undisputed income tax
 deducted at source, Provident Fund and Sales tax, the Company has been
 regular in depositing undisputed statutory dues including Provident
 Fund, Employees'' State Insurance, Investor Education and Protection
 Fund, Income tax, Sales tax, Service Tax, Wealth tax, Custom Duty,
 Excise Duty, cess and other statutory dues with the appropriate
 authorities.  Based on our audit procedures and according to the
 information and explanations given to us, there are no arrears of
 statutory dues which has remained outstanding as at 31st December, 2011
 for a period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us and
 records of the company the dues of sales tax/ income tax/ customs duty/
 wealth tax/ service tax/ excise duty/ cess, which have not been
 deposited on account of any dispute are as follows:
 
 Nature of           Amount       Forum where
 Dues               (Rs.)         dispute is
                                  pending
 
 Excise Duty         310,000      Customs Excise and Service Tax
                                  Appellate Tribunal
                                 (CESTAT), Mumbai.
 
 Excise Duty         975,585*     Customs Excise and Service Tax
                                  Appellate Tribunal
                                 (CESTAT), Chennai.
 
 Excise Duty         18,750,512*  Customs Excise and Service Tax
                                  Appellate Tribunal
                                 (CESTAT), Mumbai.
 
 Service Tax         6,418,950    Commissioner (Appeals), Central
                                  Excise, Pune.
 
 * stay granted for recovery.
 
 (x) The Company does not have any accumulated losses as at 31st
 December, 2011. The Company has not incurred any cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 (xi) Based on our audit procedures and according to the information and
 explanations given to us, the Company has not defaulted in repayment of
 dues to financial institution/ bank/ debenture holders.
 
 (xii) According to the information and explanations given to us, the
 Company has not granted any 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 and
 therefore the requirements pertaining to such class of companies is not
 applicable.
 
 (xiv) The Company is not dealing or trading in shares, securities,
 debentures and other investments.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion the Company
 has not availed any term loans 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, funds
 raised on short term basis have not been used during the year for long
 term investments.
 
 (xviii) The Company has not made any preferential allotment of shares
 during the year to parties and companies covered in the Register
 maintained under section 301 of the Companies Act, 1956.
 
 (xix) The Company has not issued any debentures during the year and
 therefore the question of creating security or charge in respect
 thereof does not arise.
 
 (xx) The Company has not made any public issue during the year and
 therefore the question of disclosing the end use of money does not
 arise.
 
 (xxi) Based upon the audit procedures performed and according to the
 information and explanations given and representations made by the
 management, we report that no fraud on or by the Company has been
 noticed or reported during the year.
 
                                        For Deloitte Haskins & Sells 
                                               Chartered Accountants 
                                           Registration No.: 117366W
 
                                                        Hemant Joshi 
 
                                                             Partner
 
                                              Membership No.: 038019
 
 Pune, 22nd February, 2012