LIC Housing Finance

1.  We have audited the attached Balance Sheet of LIC Housing Finance
 Limited as at March 31, 2009, the Profit and Loss Account and also the
 Cash Flow Statement for the year ended on that date, annexed thereto
 (in which are incorporated the accounts of 6 branches, known as back
 offices audited by other auditors). 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.
 
 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 (Auditors 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 in paragraph 3
 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 and proper returns adequate for the purposes of our audit
 have been received from the branches not visited by us. The branch
 auditors reports have been forwarded to us and have been appropriately
 dealt with;
 
 (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
 and with the audited returns from the branches;
 
 (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, in so far as they apply to the Housing Finance
 Company;
 
 (e) On the basis of the 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;
 
 (f) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read with the
 significant accounting policies and 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:
 
 (i) in the case of the Balance sheet, of the state of affairs of the
 Company as at March 31,2009;
 
 (ii) in the case of the Profit and Loss account, of the profit for the
 year ended on that date; and
 
 (iii) in the case of the Cash-flow statement, of the cash-flows for the
 year ended on that date.
 
 Annexure to the Auditors Report
 
 Annexure to the Auditors Report referred to in paragraph 3 of our
 Report of even date to the Members of LIC Housing Finance Limited on
 the accounts for the year ended March 31,2009
 
 1.  The nature of the Companys business / activities during the year
 has been such that, the clauses (ii), (viii), (xiii) and (xiv) of
 paragraph 4 of the Order are not applicable to the Company for the
 year.
 
 2.  (a) The Company has maintained proper records
 
 showing full particulars, including quantitative details and situation
 of fixed assets.
 
 (b) The fixed assets have been physically verified by the management
 during the year. In our opinion, the frequency of verification is
 reasonable.  According to the information and explanations given to us,
 no material discrepancies were noticed on such verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a 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.
 
 3.  (a) According to the information and explanations
 
 given to us, the Company has not granted any loans, secured or
 unsecured, to companies, firms or other parties covered in the register
 maintained under Section 301 of the Companies Act, 1956.  In view of
 what has been stated above, clause (iii) (b) regarding terms and
 conditions of such loans, clause (iii)(c) regarding receipt of
 principal amount and interest and clause (iii)(d) regarding steps for
 recovery of overdue amount of Para 4 of the Order are not applicable to
 the Company for the year.
 
 (b) According to the information and explanations given to us, the
 Company has taken secured and unsecured loans from four parties covered
 in the register maintained under Section 301 of the Companies Act,
 1956. At the year-end, the outstanding balances of such secured and
 unsecured loans taken aggregated to Rs.  80,903,300,419/- (three
 parties) and the maximum amount involved during the year was Rs.
 84,668,335,423/-.
 
 (c) In our opinion, the rate of interest and other terms and conditions
 of such loans taken from the parties listed in the register maintained
 under Section 301 of the Companies Act, 1956 are not, prima facie,
 prejudicial to the interest of the Company.
 
 (d) The payment of principal amount and interest in case of the
 aforesaid loans are as per stipulations.
 
 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 with regard
 to purchase of fixed assets and sale of goods and services.  During the
 course of our audit, we have not observed any major weaknesses in the
 aforesaid internal control system.
 
 5.  (a) To the best of our knowledge and belief and
 
 according to the information and explanations given to us, the
 particulars of contracts or arrangements referred to in Section 301
 that needed to be entered into the register maintained in pursuance of
 Section 301 of the Companies Act, 1956 have been so entered.
 
 (b) According to the information and explanations given to us, where
 each of such transactions (excluding loans reported under paragraph 3
 above) is in excess of Rs. 500,000/- in respect of any party, the
 transactions have been made at prices, which are prima facie
 reasonable, having regard to the prevailing market prices at the
 relevant time.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Sections
 58A and 58AA of the Companies Act, 1956, to the extent applicable to
 the Housing Finance Company and the Housing Finance Companies (NHB)
 Directions, 2001 with regard to the deposits accepted from the public.
 We are informed that no Order has been passed by the Company Law Board
 or the Reserve Bank of India or any Court or any other Tribunal.
 
 7.  In our opinion, the internal audit functions carried out during the
 year by the Companys internal audit department and by a firm of
 Chartered Accountants appointed by the management have been
 commensurate with the size of the Company and nature of its business.
 
 8.  (a) In our opinion and according to the information and
 explanations given to us, the Company has generally been regular in
 depositing undisputed statutory dues, including provident fund,
 investor education and protection fund, employees state insurance,
 income tax, wealth tax, service tax, custom duty, cess and any other
 material statutory dues where applicable, with the appropriate
 authorities during the year. There are no arrears of outstanding
 statutory dues as at the last day of the financial year 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 based
 on the records of the Company examined by us, the following are the
 particulars of disputed dues on account of income tax, wealth-tax,
 service tax, custom duty and cess which have not been deposited by the
 Company as at March 31,2009:
 
 No.     Name          Nature            Amount
        of the         of the          (Rupees)
       Statute           Dues
 
 1.     Income         Income        31,396,993
      Tax Act,            Tax
          1961
 2.     Income         Income       119,077,050
      Tax Act,            Tax
          1961
 3.     Income         Income        233,01,201
      Tax Act,            Tax
          1961
 
   Amount             Net        Period to         Forum
    Paid/         Balance        which the     where the
 adjusted      (Amount In           amount    dispute is
 (Rupees)         Rupees)     relates (FY)       pending
 
 31,396,993           -           2001-02            CIT
                                               (Appeals)
 119,077,050          -           2002-03            CIT
                                               (Appeals)
 233,801,201          -           2006-07            CIT
                                               (Appeals)
 
 9. The Company does not have accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 under report and in the immediately preceding financial year.
 
 10.  In our opinion, and according to the information and explanations
 given to us, the Company has not defaulted in the repayment of dues to
 financial institutions, banks and debenture holders.
 
 11.  In our opinion, the Company has maintained adequate records where
 it has granted loans and advances on the basis of security by way of
 pledge of shares, debentures and other securities.
 
 12.  According to the information and explanations given to us, the
 Company has not given any guarantee for the loans taken by others from
 banks or financial institutions during the year.
 
 13.  In our opinion and according to the information and explanations
 given to us, term loans availed by the Company were, prima facie,
 applied by the Company during the year for the purposes for which the
 loans were obtained, other than temporary deployment pending
 application.
 
 14.  According to the information and explanations given to us and on
 the basis of review of Asset Liability Management report prepared for
 submission to the Board of Directors of the Company, giving utilisation
 of funds on overall basis, we report that funds raised on short term
 basis have, prima facie, not been used during the year for long term
 investment.
 
 15.  During the year the Company has not raised any money by issue of
 shares. Hence, clause (xviii) regarding preferential allotment of
 shares and clause (xx) regarding utilisation of money raised by public
 issue of paragraph 4 of the Order are not applicable to the Company for
 the year.
 
 16.  According the information and explanations given to us and the
 records examined by us, in respect of debentures issued by the Company
 during the period covered by our report, security / charge have been
 created on two of the immovable properties of the Company and are
 further supplemented by a negative lien on all other assets of the
 Company.
 
 17.  During the course of our examination of the books of account
 carried out in accordance with the generally accepted auditing
 standards in India and as per the information and explanations given to
 us, we have not come across any instance of fraud, either noticed or
 reported during the year, on or by the Company, except that there have
 been instances of misappropriation of funds by way of sanction and
 disbursal of non-tenable loans or use of deception to obtain housing
 loans by some of the customers involving an aggregate amount of Rs.
 36,352,546/-. However, as informed to us, such instances are inherent
 in the nature of business of the Company and adequate provision in
 respect thereof has been made in the accounts for the year.
 
                                              For P. C. Hansotia & Co.
                                                 Chartered Accountants
                                                       R. Laxminarayan
 Place:   Mumbai                                               Partner
 Date :   April 23,2009                           Membership No. 33023