Larsen and Toubro

We have audited the attached Balance Sheet of Larsen & Toubro Limited,
 as at March 31, 2009 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 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 supportingthe 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 statements
 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 (Auditors 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 pur 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 the written representations received from 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.
 
 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 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 stateof affairs of the
 Company as at March 31, 2009;
 
 2) in the case of the Profit and Loss Account, of the profit for the
 year ended onthat 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 Auditors report
 
 (Referred to in 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 has been carried out by management
 during the year and no material discrepancies were noticed on such
 verification.
 
 (c) The Company has not disposed of 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 unsecured, 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 commensurate
 with the size of the Company and the nature of its business for
 purchase of inventory, fixed assets and for sale of goods and services.
 Further, on the basis of our examination of the books and records of
 the Company, and according to the information and explanations given to
 us, we have neither come across nor have been informed of any
 continuing failure to correct major weaknesses 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 arrangements
 that need to be entered in the register maintained under section 301 of
 the Companies Act, 1956 have been so entered.  (b) In our opinion and
 according to the-information and explanations given to us, the
 transactions made in pursuance of such contracts or arrangements
 entered in the register maintained under section 301 of the Companies
 Act, 1956 and exceeding the value of rupees five lakhs in respect of
 any party during the year, have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time.
 
 6 The Company has accepted deposits from the public and in our opinion
 and according to the information and explanations given to us, the
 directives issued by the Reserve Bank of India and the provisions of
 sections 58A, 58AA and other relevant provisions of the Companies Act,
 1956 and the rules framed thereunder, where applicable, have been
 complied with. We are informed that 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.
 
 7 In our opinion, the Company has an internal audit system commensurate
 with its size and 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 prima facie the
 prescribed accounts and records have been made and maintained. The
 contents of these accounts and records have not been 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, the Company is
 generally 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 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 state insurance, income tax, sales tax, wealth tax, service
 tax, custom duty, excise duty, cess and other statutory dues
 outstanding as at March 31, 2009 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 of sales tax,
 excise duty, service tax and income tax as at March 31, 2009 which have
 not been deposited on account of a dispute pending, are As undwer
 
 Name of the Statute        Nature of the disputed dues
 
 Central Sales Tax Act,     Non-submission of forms,
 Local Sales Tax Acts and   dispute regarding rate of
 Works Contract Tax Act     tax and other matters
 
                            Non-submission of forms,
                            classification dispute,
                            disallowance of deemed inter-state
                            sales and other matters
                            Non-submission of forms,
                            additional demand for pending
                            forms, rate of tax dispute,
                            disallowance of branch transfer,
                            and other matters
 
                            Non-submission of forms,
                            disallowance of transit sales,
                            classification dispute and other
                            matters
 
                            Non-submission of forms,
                            additional demand for pending
                            forms, disallowance of inter-state
                            sales and other matters
 
                            Non-submission of forms, dispute
                            related to sales in transit
                            and other matters
 
                            Non-submission of forms
                            inter-state sales, sub-contractors
                            turnover, rate dispute,
                            disallowance under composition
                            scheme and other matters
 
                            Inter-state sales, classification
                            dispute, and disallowance of
                            deemed sa es in course of
 
 Amount             Period to which the            Forum where disputes
 Rs.crore           amount relates                 are pending
 
 0.48           1997-1998 to 2001-2002,          Commercial Tax Officer
                2004-2005 and
                2005-2006
 
 36.85          1992-1993,                       Assistant Commissioner
                1996-1997 to 2005-2006           (Appeals)
 
 10.30          1989-1990, 1991-1992,            Deputy Commissioner
                1994-1995 to 1998-1999           (Appeals)
                and 2000-2001 to 2005-2006
 
 7.00           1991-1992 to 1994-1995,          Joint Commissioner
                and 1996-1997 to 2004-2005       (Appeals)
 
 2.99           2000-2001 to 2005-2006        Additional Commissioner
                                             (Appeals)
 
 1.71           2003-2004 and                  Commissioner (Appeals)
                2005-2006
 
 114.93        1987-1988 to /I992-1993       Sales.Tax Tribunal V
                1994-1995 to 2003-2004
                and 2005-2006
 
 144.10         1986-1987 to 2005-2006         High Court
 
 
 Name of the Statute    Nature of the disputed dues       Amount
                                                          Rs.crore
 
                        imports and taxability of
                        subcontractors turnover
                        Dispute regarding taxability of    5.57
                        declared goods, arbitrary
                        enhancement and other matters
 
 The Central Excise Act  Classification dispute,
 1944 and Service Tax    exemptions denied, valuation       8.86
 under the Finance Act, 
 1994                    disputes and other matters
 
                          Export rebate claim               0.07
 
                          Dispute on site mix concrete      0.27
                          and PSC grinders
                          Cenvat credit against service     0.10
                          tax on freight outward disallowed
 
                          Demand for service tax on        171.44
                          lumpsum turnkey projects and
                          demand for service tax treating
                          commercial or industrial
                          construction services
 
                          Service tax on commercial          4.04
                          construction services
 
 The Income Tax Act, 1961 Dispute regarding tax deducted     0.03
                          at source at lower rate on
                          maintenance charges
 
                          Difference in rate of tax         1.56
                          deducted at source
 
 Period to which the      Forum where disputes
 amount relates           are pending
 
 1991-1992, 1995-1996,    Supreme Court
 -(1997-1998)
 1999-2000to 2001-2002
 and 2003-2004
 
 1991-1992,                 CESTAT
 2001-2002 to 2003-2004
 and 2005-2006
 
 2003-2004                  High Court
 1997-1998                  Supreme Court
 
 2007-2008                  Commissioner (Appeals)
 2002-2003 to 2008-2009     CESTAT
 
 2005-2006                  High Court
 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, 2009 and it
 has not incurred any 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 others 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 AND TANNAN
                                              Chartered Accountants 
                                                     by the hand of
 
                                                         F.M. KOBLA
                                                            Partner
 Mumbai, May 28, 2009                          Membership No. 15882