KSK Energy Ventures

We have audited the attached Balance Sheet of KSK ENERGY VENTURES
 LIMITED as at March 31, 2009, the Profit and Loss Account for the year
 ended on that date annexed thereto and the Cash Flow Statement for the
 year ended on that date. The 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 and
 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
 paragraphs 4 and 5 of the said Order.
 
 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
 such 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 of
 the Company;
 
 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 written representations received from the Directors,
 as on March 31, 2009, and taken on record by the Board of Directors, we
 report that none of the Directors is disqualified as on March 31, 2009
 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 said accounts, read with the Notes
 thereon, 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 March 31, 2009;
 
 b.  in the case of the Profit and Loss Account of the Company, of the
 profit of the Company for the year ended on that date; and,
 
 c.  in the case of Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 Annexure to Auditors Report
 
 Referred to in paragraph 1 of our report of even date
 
 In our opinion and according to the information and explanations given
 to us:
 
 1.  The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 The Company has a fixed programme of physical verification of its fixed
 assets which, in our opinion, is reasonable having regard to the size
 of the Company and the nature of its assets. The management has
 physically verified the fixed assets during the year. No material
 discrepancies were noticed on such verification.
 
 There was no disposal of a substantial part of fixed assets.
 
 2.  The Clause relating to inventories are not applicable to the
 Company, as the Company has not carried out any manufacturing activity.
 
 3.  During the year, the Company has granted loans and advances from
 time to time to companies covered in the register maintained under
 Section 301 of the Companies Act, 1956. The maximum outstanding during
 the year was Rs.603.92 crore and the year-end balance of such loans was
 Rs.159.50 crore.
 
 In our opinion, the rate of interest and other terms and conditions of
 such loans and advances made are not prima facie prejudicial to the
 interests of the Company.
 
 In the case of loans granted to companies listed in the register under
 Section 301, where stipulations have been made, the borrowers have been
 regular in repaying the principal amounts as stipulated and in the
 payment of interest.
 
 During the year, 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.
 
 4.  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. We have
 not observed any major weakness in the internal control system during
 the course of the audit.
 
 5.  According to the information and explanations given to us, we are
 of opinion that there are no contracts or arrangement referred to in
 Section 301 of the Companies Act, 1956, particulars of which are
 required to be entered in the register maintained under that section.
 
 6.  The Company has not accepted any deposits from the public.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 8.  Maintenance of cost records under Section 209 (1) (d) of the
 Companies Act, 1956 are not applicable to the Company.
 
 9.  According to the information and explanations give to us and on the
 basis of examination of books of accounts, the provident fund,
 professional tax and service tax dues have been regularly deposited by
 the Company with the appropriate authorities.
 
 According to the information and explanations given to us, no
 undisputed dues payable in respect of income tax, wealth tax and
 material statutory dues were in arrears as at March 31, 2009 for a
 period of more than six months from the date they became payable.
 
 According to the information and explanations given to us, there were
 no dues in respect of income tax, customs duty, wealth tax and service
 tax which have not been deposited with the appropriate authorities on
 account of any dispute.
 
 10.  The Clause relating to accumulated losses is not applicable to the
 Company. The Company has not incurred any cash losses during the
 financial year and in the immediate preceding financial year.
 
 11.  The Company has not defaulted in payment of dues to financial
 institutions/banks.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The Company is not a chit fund, nidhi, mutual benefit fund or a
 society.
 
 14.  As per the information and explanations given to us, the Company
 is not dealing or trading in shares, securities, debentures and other
 investments.
 
 15.  According to the information and explanations provided to us, the
 Company has not given any guarantees during the year for loans taken by
 others from banks/financial institutions.
 
 16.  In our opinion, the term loans have been applied for the purpose
 for which they were raised.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the Balance Sheet of the Company, we report
 that no funds raised on short term basis have been applied for long
 term basis.
 
 18.  The Company has not made any preferential allotment of shares to
 Companies/firms/parties covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 19.  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.
 
 20.  We have verified the end use of money raised by public issue
 during the year as disclosed in the notes to the financial statements.
 
 21.  According to the information and explanations given to us by
 management, no fraud on or by the Company has been noticed or reported
 during the year.
 
                                            for UMAMAHESWARA RAO & CO.
                                                Chartered Accountants
                                                                Sd/-
                                                         S. Venugopal
 
 Hyderabad                                                    Partner
 May 9, 2009                                    Membership No: 205565