We have audited the attached Balance Sheet of Larsen & Toubro Limited
 as at March 31, 2012 and also the Statement of Profit and Loss 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 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 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 (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 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, Statement of Profit and Loss and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance Sheet, Statement of Profit and Loss 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 Art, 1956; and
 
 (e) on the basis of written representations received from directors as
 on March 31, 2012, and taken on record by the board of directors, we
 report that none of the directors is disqualified as on March 31, 2012
 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
 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:
 
 1) in the case of the Balance Sheet, of the state of the affairs of the
 Company as at March 31, 2012;
 
 2) in the case of the Statement of Profit and Loss, 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 Auditors 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 has 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 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 the
 purchase of inventory, fixed assets and for the 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 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 had 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
 section 58A and 58AA and the relevant provisions of the Companies Act,
 1956 and 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. 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 all its manufacturing and
 construction activities 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, 2012 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, customs duty and income tax as at March 31,
 2012 which have not been deposited on account of a dispute pending are
 as under:
 
 Name of the    Nature of the disputed dues   Amount  Period to which 
                                                      the amount relates 
 stature                                      Crore   
 
 Central 
 Sales          Non-submission of forms, 
                dispute regarding rate of 
                tax and                        0.47   1997-1998 to 
                                                      1999-2000,2005-2006
                                                            and 
 
 Tax Act, 
 Local          other matters                         2007-2009
 
 Sales Tax 
 Acts           Non-submission of forms, 
                disallowance of deemed 
                inter-                       298.26   1991-1992 to 
                                                      2011-2012 
 and Works      state sales, classification 
                dispute and other matters
 
 Contract
 Tax            Non-submission of forms, 
                additional demand for 
                pending                       37.23   1989-1990,1991-1992 
                                                      and 1993-1994 to 
 Act            forms, rate of tax dispute, 
                disallowance of branch 
                transfer,                             2010-2011 
                transit sale, export claim 
                disallowance and other
                matters
 
                Non-submission of forms, 
                disallowance of transit 
                sales,                       146.22   1993-1994,
                                                      1994-1995,1996-1997 
                                                      to 2009-2010 
                classification dispute 
                and other matters 
 
                Non-submission of forms, 
                additional demand for 
                pending                       14.94   1991-1992,
                                                      1992-1993,
                                                      1996-1997 to 
                                                      2011-12
                forms, disallowance of 
                inter-state sales and other 
                matters 
 
                Non-submission of forms, 
                dispute related to sales 
                in transit                    79.39   2003-2004 to 
                                                      2008-2009 
                and other matters
 
                Non-submission of forms, 
                inter-state sales, sub-
                contractors                  162.80   1987-1988 to
                                                      2005-2006 and 
                                                      2008-2009 
 
                turnover, rate dispute, 
                disallowance under 
                composition scheme and 
                other matters
 
                Inter-state sales, 
                classification dispute 
                and disallowance of          934.83   1987-1988 to 
                                                      2008-2009,
                                                      2010-2011 and 
                deemed sales in course 
                of imports and taxability 
                of sub-                               2011-2012
                contractors turnover
 
                Taxability of sub-
                contractor turnover, 
                rate of tax for declared      6.14    1991-1992,
                                                      1995-1996,
                                                      1997-1998 and 
                                                      1999- 
                goods and inter-state 
                sales                                 2000 to 2004-
                                                      2005
 
 The Central    Demand of excise duty on 
                fabrication                    0.39   1989-1990 to
                                                      2011-2012 
 
 Excise         Demand for custom duty 
                for fuel, software and 
                on export                      0.02   2006-2007 and 
                                                      2008-2009 
 Act, 1944,     under rebate
 Service Tax    under Finance Classifi
                cation dispute, exemp
                tions denied, valuation       84.72   1991-1992,
                                                      2001-2002,
                                                      2003-2004 to 
                                                      2006-2007, 
 Act, 1994      and disputes and other 
                matters                               2008-2009 and 
                                                      2009-2010
 
 Customs Act,   Dispute on site mix 
                concrete and PSC grinder      0.27    1997-1998 
 
 1962           Valuation dispute and 
                disallowance of cenvat 
                against                     220.46    2003-2004 to 
                                                      2010-2011  
                service tax on freight
                onward
 
                Demand of service tax 
                including penalty and 
                interest on                 127.47    2002-2003 to 
                                                      2006-2007 
                lumpsum turnkey jobs 
                and demand of penalty 
                on late payment of 
                service
 
                Export rebate claim,
                service tax on commer
                cial construction            0.07     2003-2004 
                service
 
 The Income-
 tax            Dispute regarding 
                tax not deducted on 
                purchase of software         1.92     2010-2011 
 Act, 1961      Dispute regarding tax 
                deducted at source at 
                lower rate on                0.03     2005-2006 
                maintenance charges
 
                Difference in rate of 
                tax deducted at source       2.07     2007-2008 and
                                                      2008-2009 
 Name of the     Forum where disputes
 Statute         are pending
 
 Central sales   Commercial Tax Officer
 Tax Act,Local  
 Sales Tax Acts  Assistant Commissioner
 and Works       (Appeals)
 Contract Tax    Deputy Commissioner
 Act             (Appeals)
 
                 Joint Commissioner
                 (Appeals)
 
                 Additional Commissioner
                 (Appeals)
                 Commissioner (Appeals)
 
                 Sales Tax Tribunal
 
                 High court
 
                 Supreme Court
 
 The Central     Additional Commissioner
 Excise          
 Act,1944,       Commissioner (Appeals)
 Service Tax
 Under Finance   CESTAT
 Act,1994 and    Supreme Court
 Customs Act,    commissioner (Appeals)
 1962            CESTAT
                 High court
 
 The income      Assessing officer
 tax Act,1961    Commissioner (Appeals)
                 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, 2012 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. 109982W 
 
                                                      by the hand of
 
                                                          R. D. KARE
 
                                                             Partner
 
 Mumbai, May 14, 2012                            Membership no. 8820