1 We have audited the attached Balance Sheet of Lotte India Corporation
 Limited (the Company) as at December 31, 2011, 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 Company''s 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 (Auditor''s Report) Order, 2003 (as
 amended), 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 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 purpose of the
 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.
 
 e) on the basis of written representations received from the Directors,
 as on December 31, 2011 and taken on record by the Board of Directors,
 we report that none of the directors is disqualified as on December 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; and
 
 f) in our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements 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 December 31,2011; and
 
 ii. in the case of the Profit and Loss Account, of the profit for the
 year ended December 31, 2011.
 
 iii. in the case of the Cash Flow Statement, of the cash flows forthe
 year December 31,2011
 
 ANNEXURE TO AUDITORS'' REPORT (Referred to in our report of even date)
 
 (i) a. The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b. The Company has a regular programme of physical verification of its
 fixed assets by which all fixed assets are verified in a phased
 manner over a period of three years. In our opinion, this periodicity
 of physical verification is reasonable having regard to the size of the
 Company and the nature of its assets. In accordance with this
 programme, certain fixed assets were verified during the year and as
 explained to us, no material discrepancies were noticed on such
 verification.
 
 c. Fixed assets disposed off during the period were not substantial,
 and therefore, do not affect the going concern assumption.
 
 (ii) a. The inventory, except for stocks lying with third parties, have
 been physically verified by the management during the year. In our
 opinion, the frequency of such verification is reasonable. For stocks
 lying with third parties at the year-end, written confirmations have
 been obtained.
 
 b.  The procedures for the physical verification of inventories
 followed by the management are 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 and have been properly dealt with in
 the books of accounts.
 
 (iii) The Company has neither granted nor taken any loans, secured or
 unsecured, to or from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 
 (iv) In our opinion and according to the information and explanations
 given to us, and having regard to the explanation that purchases of
 certain items of inventories and fixed assets are for the Company''s
 specialised requirements and suitable alternative sources are not
 available to obtain comparable quotations, 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 inventories and
 fixed assets and with regard to the sale of goods. We have not observed
 any major weakness in the internal control system during the course of
 the audit.
 
 (v) a. In our opinion, and according to the information and
 explanations given to us, the particulars of contracts or arrangements
 referred to in section 301 of the Companies Act, 1956 have been entered
 in the register required to be maintained under that section.
 
 b. In our opinion, and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements referred to in (a) above and exceeding the value of Rs 5
 lakh with any party during the year have been made at prices which are
 reasonable having regard to the prevailing market prices at the
 relevant time except for purchases of certain items of inventories for
 the Company''s specialised requirements and for which suitable
 alternative sources are not available to obtain comparable quotations.
 However, on the basis of information and explanations provided, the
 same appear reasonable.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the nature of its business.
 
 (viii) According to the information and explanations given to us, the
 Central Government has not prescribed the maintenance of cost records
 under section 209(1) (d) of the Companies Act, 1956 for any of the
 products manufactured by the Company. Accordingly, provisions of Para 4
 (viii) of the Order relating to maintenance of cost records under
 section 209(1) (d) of the Act are presently not applicable to the
 Company.
 
 (ix) a. According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, amounts
 deducted/accrued in the books of account in respect of undisputed
 statutory dues including Provident Fund, Employees'' State Insurance,
 Income-tax, Sales-tax, Wealth tax, Service tax, Customs duty, Excise
 duty, Cess and other material statutory dues have generally been
 regularly deposited during the year by the Company with the appropriate
 authorities. As explained to us, the Company did not have any dues on
 account of Investor Education and Protection Fund.
 
 b. According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Employees''
 State Insurance, Income tax, Sales tax, Wealth tax, Service tax,
 Customs duty, Excise duty, Cess and other material statutory dues were
 in arrears as at December 31,2011 for a period of more than six months
 from the date they became payable.
 
 c.  According to the information and explanations given to us, the
 following dues in respect to Excise duty, Service Tax and Sales Tax
 which have not been deposited on account of disputes.
 
 Name of the    Nature of     Amount     Period to 
                                         which        Forum where
 statute        the dues     (Rs. in l
                              akhs)      the amount   the dispute
                                                      is pending
                             (Net of 
                              payment 
                              relates
                              under 
                              protest)
 
 Central 
 Excise Act, 
 1944           Excise duty   11.04         2007      Pending before
                                                      various forums
 
 Central Excise 
 Act, 1944      Excise duty  115.62         2008      Pending before
                                                      various forums
 
 Central 
 Excise Act, 
 1944           Excise duty   77.75         2005      Pending before 
                                                      various forums
 
 Central 
 Excise Act, 
 1944           Excise duty    0.55         2009      Commissioner of
                                                      Central Excise
                                                     (Appeals), Kochi
 Central Excise
 Act, 1944      Excise duty   12.19         2006      Pending before
                                                      various forums
 
 Sales Tax Act  Sales Tax     19.05    1999-2008      Pending before
                                                      various State
                                                      Tax Authorities 
 Income Tax 
 Act            Income tax   217.24      2005-06      Commissioner of
                                                      Income Tax 
                                                     (Appeals)
 
 (x) The Company has accumulated losses at the end of the financial year
 which does not exceed 50% of the net worth of the Company. The Company
 has not incurred cash losses in the financial year and in the
 immediately preceding financial year.
 
 (xi) The Company did not have any outstanding debentures or any
 outstanding loans from any financial institution or bank during the
 period.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities.
 
 (xiii) In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund or a nidhi/mutual benefit
 fund/society.
 
 (xiv) According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any guarantee for loans taken by others from
 banks or financial institutions.
 
 (xvi) The Company did not have any term loans outstanding during the
 period.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the company, we are of
 the opinion that the funds raised on short-term basis have not been
 used for long- term investment
 
 (xviii) 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.
 
 (xix) The Company did not have any outstanding debentures during the
 period.
 
 (xx) The Company has not raised any money by public issues.
 
 (xxi) According to the information and explanations given to us, no
 material fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
 
 
                                                 for B S R & Company
 
                                               Chartered Accountants
  
                                       Firm Registration No. 128032W
 
                                                  Vikas R Kasat
 
 Chennai                                              Partner
 
 March 30,2012                                Membership No. 105317