We have audited the attached Balance Sheet of Larsen & Toubro Limited
 as at March 31, 2011 and also 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
 Company''s 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 test basis, evidence supporting the amounts and
 disclosures in 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.
 
 In accordance with the provisions of section 227 of the Companies Act,
 1956, we report that:
 
 (1) As required by the Companies (Auditor''s Report) Order, 2003, issued
 by the central government of India under sub-section (4A) of section
 227 of the Companies Act, 1956, and on the basis of such checks of the
 books and records of the Company as we considered appropriate and
 according to the information and explanations given to us, we enclose
 in the Annexure a statement on the matters specified in paragraphs 4
 and 5 of the said Order.
 
 (2) Further to our comments in the Annexure referred to above, we
 report that:
 
 (a) 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;
 
 (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
 those books;
 
 (c) the Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (d) 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; and
 
 (e) on the basis of written representations received from directors as
 on March 31, 2011, and taken on record by the board of directors, we
 report that none of the directors is disqualified as on March 31, 2011
 from being appointed as a director in terms of clause (g) of
 sub-section (1) of section 274 of the Companies Act, 1956.
 
 In our opinion and to the best of our information and according to the
 explanations given to us, the said accounts read together with the
 significant accounting policies in schedule Q and the notes appearing
 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:
 
 1) in the case of the Balance Sheet, of the state of the affairs of the
 Company as at March 31, 2011;
 
 2) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 3) in the case of the Cash Flow Statement, of the cash flows for the
 year ended on that date.
 
 Annexure to the Auditors7 report {Referred to paragraph (1) of our
 report of even date)
 
 1 (a) The Company is maintaining proper records to show full
 particulars including quantitative details and situation of all fixed
 assets.
 
 (b) We are informed that the Company has formulated a programme of
 physical verification of all the fixed assets over a period of three
 years which, in our opinion, is reasonable having regard to the size of
 the Company and nature of its assets. Accordingly, the physical
 verification of the fixed assets have been carried out by management
 during the year and no material discrepancies were noticed on such
 verification.
 
 (c) The Company has not disposed off any substantial part of its fixed
 assets so as to affect its going concern status.
 
 2 (a) As explained to us, inventories have been physically verified by
 management at reasonable intervals during the year. In our opinion, the
 frequency of such verification is reasonable.
 
 (b) As per the information given to us, the procedures of physical
 verification of inventory followed by management are, in our opinion,
 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.
 
 3 (a) According to the information and explanations given to us, the
 Company has not granted any loans, secured or unsecured to companies,
 firms and other parties covered in the register maintained under
 section 301 of the Companies Act, 1956 Accordingly, paragraphs
 4(iii)(b), (c) and (d) of the Order are not applicable,
 
 (b) According to the information and explanations given to us, the
 Company has not taken any loans, secured or unsecurec from companies,
 firms and other parties covered in the register maintained under
 section 301 of the Companies Act, 1956 Accordingly, paragraphs
 4(iii)(f) and (g) of the Order are not applicable.
 
 4 In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurat*
 with the size of the Company and the nature of its business for the
 purchase of inventory, fixed assets and for the sale of goods am
 services. Further, on the basis of our examination of the books and
 records of the Company, and according to the information anc
 explanations given to us, we have neither come across nor have been
 informed of any continuing failure to correct major weaknesse in the
 aforesaid internal control systems.
 
 5 (a) According to the information and explanations given to us, we are
 of the opinion that the particulars of contracts or arrangement; that
 need to be entered in the register maintained under section 301 of the
 Companies Act, 1956 have been entered.  (b) In our opinion and
 according to the information and explanations given to us, the
 transactions made in pursuance of sucr contracts or arrangements
 entered in the register maintained under section 301 of the Companies
 Act, 1956 and exceeding th< value of rupees five lakhs in respect of
 any party during the year, have been made at prices which are
 reasonable having regarc to the prevailing market prices at the
 relevant time.
 
 6 The Company had accepted deposits from the public and in our opinion
 and according to the information and explanations giver to us, the
 directives issued by the Reserve Bank of India and the provisions of
 section 58A and 58AA and the relevant provisions o the Companies Act,
 1956 and rules framed thereunder, where applicable, have been complied
 with. We are informed that no orde has been passed by the Company Law
 Board or National Company Law Tribunal or Reserve Bank of India or any
 court or any othe tribunal. As of the date of the balance sheet, the
 Company has no fixed deposits other than unpaid matured deposits.
 
 7 In our opinion, the Company has an internal audit system commensurate
 with its size and the nature of its business.
 
 8 We have broadly reviewed the books of account and records maintained
 by the Company pursuant to the rules prescribed by the central
 government for the maintenance of cost records under section 209(1 )(d)
 of the Companies Act, 1956 in respect of electronic products viz.
 industrial electronics including all control instrumentation and
 automation equipment and are of the opinion that prim; fade the
 prescribed accounts and records have been made and maintained. The
 contents of these accounts and records have not beer examined by us.
 
 9 (a) According to the information and explanations given to us and the
 records of the Company examined by us, in our opinion, th« Company is
 generally regular in depositing undisputed statutory dues including
 provident fund, investor education and protectior fund, employees state
 insurance, income tax, sales tax, wealth tax, service tax, custom duty,
 excise duty, cess and other materia statutory dues as applicable with
 the appropriate authorities. According to the information and
 explanations given to us, there were no undisputed amounts payable in
 respect of provident fund, investor education and protection fund,
 employees stats insurance, income tax, sales tax, wealth tax, service
 tax, custom duty, excise duty, cess and other statutory dues
 outstanding a; at March 31, 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 the
 records of the Company examined by us, the particulars oi sales tax,
 excise duty, service tax, customs duty and income tax as at March 31,
 2011 which have not been deposited on accoun of a dispute pending are
 as under:
 
 Name of the      Nature of the disputed dues              Amount
 statute                                                   Rs. crore*
 
 Central Sales 
 Tax             Non-submission of forms, dispute regarding 
                 rate of tax and                             1.37
 Act, Locai 
 Sales           other matters
 Tax Acts and    Non-submission of forms, disallowance of
                 deemed inter-state                        141,51
 Works Contract  sales, classification dispute and other 
                 matte''s
 Tax Act         Non-submission of forms, additional 
                 demand for oending                         33.61
                 forms, rate of tax dispute, disallowance 
                 of branch transfer, transit sale, export 
                 claim disallowance and other matters
                 Non-suomission of forms, disallowance of 
                 transit sales,                             10.27
                 classification dispute and otner matters
 
                 Non-submission of forms, additional demand 
                 for pending                                 2.85
                 forms, disallowance of inter-state sales
                 and other matters Non-submission of forms,
                 dispute related to sales in transit and    19,95
                 other matters
 
                 Non-suomission of forms, inter-state 
                 sales, sub-contractors                     65.28
                 turnover, rate dispute, disallowance under 
                 composition scheme and other matters
                 Inter-state sales, classification dispute 
                 and disallowance of                       495.03
                 deemed sales in course of imports ano 
                 taxability of sub- contractors turnover
                 Taxability of sub-contractor turnover, 
                 rate of tax for declared                    2,35
                 goods and inter-state saies
 
 
 
 
 Name of the     Period to which the amount 
                     relates                     Forum where disputes
 Statue                                          are pending
 
 Central Saies Tax
 Act, Local Sales
 Tax Acts and
 Works Contract
 Tax Act         1996-1997 to 2005-2006         Commercial Tax Officer
 
                 1991-1992 to 1994-1995,
                 1997-1998,                     Assistant Commissioner
 
                 1999-2000 to 2007-2008
                  and 2009-2010                 (Appeals)
 
                 1989-1990 and 1993-1994 
                 to 2010-2011                   Deputy Commissioner
                                                (Appeals)
 
                 1993-1994, 1994-1995,
                 1997-1998 to                   joint Commissioner
 
                 2007-2008 and 2009-2010        (Appeals)
 
                 1991-1992, 1992-1993, 
                 1996-1997 and                  Additional Commissioner
 
                 2000-2001 to 2006-2007         (Appeals)
 
                 2003-2004 to 2007-2008         Commissioner (Appeals)
 
                 1987-1988 to 1996-1997, 
                 1998-1999 to                   Sales Tax Tribunal
                 2003-2004 and 2005-2006
 
                 1987-1988 to 2006-2007         High Court
 
                 1991-1992, 1995-1996,
                 1997-1998 and                  Supreme Court
                 1999-2000 to 2004-2005
 
 
 Name of the      Nature of the disputed dues              Amount
 statute                                                   Rs. crore*
 
 The Central Excise  Demand for custom duty for fuel, 
                     software and on export                 0.70
 Act, 1944, Service  under rebate
 
 Tax under Finance   Classification dispute, exemptions 
                     denied, valuation disputes            40.71
 Act, 1994 and       and other matters
 Customs Act,        Dispute on site mix concrete and PSC 
                     grinder                                0.27
 1962                Valuation dispute and disallowance
                     of cenvat against service            219.96
                     tax on freight onward
 
                     Demand of service tax including
                     penalty and interest on              124.19
                     lumpsum turnkey jobs and demand of
                     penalty on late payment of service tax 
                     Export rebate claim, service tax on 
                     commercial construction                0.07
                     service
 
 Income-tax Act,     Dispute regarding tax not deducted
                     on purchase of software                0.52
 1961                Dispute regarding tax deducted at 
                     source at lower rate on                0.03
                     maintenance charges
 
                     Difference in rate of tax deducted at
                     source                                 1.90
 
 
 Name of the     Period to which the amount 
                     relates                     Forum where disputes
 Statue                                          are pending
 
 
 
 
 The Central Excise
 Art, 1944, Service
 Tax under Finance
 Act, 1994 and
 Customs Act,
 1962             2006-2007 to 2008-2009         Commissioner (Appeals)
 
                  1991-1992, 2001-2002, 
                  2003-2004 to                   CESTAT
                  2006-2007, 2008-2009 and 
                  2009-2010
 
                  1997-1998                      Supreme Court
 
                  1997-1998, 2003-2004 to 
                  2010-2011                      Commissioner (Appeals)
 
                  2002-2003 to 2006-2007         CESTAT
 
                  2003-2004                      High Court
 
 Income-tax Ad,
 1961             2006-2007 to 2009-2010         Assessing Officer
                  2005-2006                      Commissioner (Appeals)
 
                  2007-2008 and 2008-2009        Director of Income Tax
                                                (International Taxation)
 
 * Net of pre-deposit paid in getting the stay/appeal admitted.
 
 10 The Company has no accumulated losses as at March 31, 2011 and it
 has not incurred cash losses in the financial year ended on that date
 or in the immediately preceding financial year.
 
 11 According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders as at the Balance Sheet date.
 
 12 According to the information and explanations 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.
 
 13 The provisions of any special statute applicable to chit
 fund/nidhi/mutual benefit fund/societies are not applicable to the
 Company.
 
 14 In our opinion and according to the information and explanations
 given to us, the Company is not a dealer or trader in securities. The
 Company has invested surplus funds in marketable securities and mutual
 funds. According to the information and explanations given to us,
 proper records have been maintained of the transactions and contracts
 and timely entries have been made therein. The investments in
 marketable securities and mutual funds have been held by the Company in
 its own name.
 
 15 In our opinion and according to the information and explanations
 given to us, the terms and conditions of guarantees given by the
 Company for loans taken by subsidiary companies from banks or financial
 institutions are not prima facie prejudicial to the interests of the
 Company.
 
 16 In our opinion and according to the information and explanations
 given to us, on an overall basis the term loans have been applied for
 the purposes for which they were obtained.
 
 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 used for long term
 investments.
 
 18 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 during the year.
 
 19 According to the information and explanations given to us and the
 records examined by us, security or charge has been created in respect
 of the debentures issued.
 
 20 The Company has not raised any money by public issues during the
 year.
 
 21 During the course of our examination of the books and records of the
 Company, carried out in accordance with the generally accepted auditing
 practices in India, and according to the information and explanations
 given to us, we have neither come across any instances of material
 fraud on or by the Company, noticed or reported during the year, nor
 have we been informed of such case by management.
 
                                              SHARP & TANNAN
 
                                       Chartered Accountants
 
                              ICAI Registration no. 109982 W
 
                                              by the hand of
 
                                                  R. D. KARE
 
                                                     Partner
 
 Mumbai, May 19, 2011                     Membership no.8820