1) We have audited the attached Balance Sheet of Magma Fincorp Limited
 (the Company) as at 31st March, 2011, and also the Profit and Loss
 Account and 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.
 
 2) We have 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 that 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, as amended (the Order) and on
 the basis of such checks as we considered appropriate and according to
 the information and explanation given to us, 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;
 
 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 31st March, 2011 and taken on record by the Board of Directors,
 we report that none of the Directors are disqualified as on 31st March,
 2011 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 financial statements, read
 together with the notes appearing on the Schedule 16, 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 Balance Sheet, of the state of affairs of the Company
 as at 31st March, 2011;
 
 ii) in the case of Profit and Loss Account, of the profit of the
 Company for the year ended on that date; and
 
 iii) in the case of Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure to the Auditors Report (Referred to in paragraph 3 of 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) As explained to us, the fixed assets of the Company are physically
 verified by the management in a phased periodical manner which, in our
 opinion, is reasonable having regard to the size of the Company and
 nature of its assets. The physical verification conducted and the
 confirmation so obtained during the year did not reveal any material
 discrepancies between the book records and the physical inventory.
 
 c) The fixed assets disposed off during the year, do not constitute
 substantial part of the fixed assets of the Company and such disposal
 in our opinion, has not affected the going concern status of the
 Company.
 
 ii) a) The inventories have been physically verified during the year by
 the management at reasonable intervals.
 
 b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and nature of its business.
 
 c) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 iii) a) The Company has granted unsecured loans to the companies, firms
 or other parties covered in the register maintained under section 301
 of the Companies Act, 1956. Such loan was granted to one party and
 amount outstanding at the end of the year is Nil. The maximum amount
 outstanding on aggregate basis during the year is Rs. 4,516.05 lacs.
 The Company has not taken unsecured loans from companies, firms and
 other parties covered in the register maintained under section 301 of
 the Companies Act, 1956.
 
 b) In our opinion, the rate of interest and other terms and conditions
 on which loans have been granted are not prima facie prejudicial to the
 interest of the Company.
 
 c) The payment of principal amounts and interest are regular.
 
 d) There is no overdue amount in respect of loans granted 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, there are adequate internal control procedures
 commensurate with the size of the Company and the nature of its
 business for the purchase of fixed assets, rendering of services and
 sale of power. During the course of our audit, no major weakness has
 been noticed in the internal control system in respect of these areas
 and accordingly the question on commenting on whether there is a
 continuing failure to correct major weakness in the internal control
 system of the company does not arise.
 
 v) a) According to the information and explanations given by the
 management, the transactions that need to be entered into the register
 maintained under section 301 of the Companies Act, 1956 have been duly
 entered therein.
 
 b) In our opinion, the transaction in respect of any such parties
 during the financial year have been made at prices, which are
 reasonable, having regard to the prevailing market price at the
 relevant time.
 
 vi) The Company does not accept any deposits from public and it has
 been categorised as Non-Banking Finance (Non- Deposit Accepting or
 Holding) Company (NBFC-ND) by the Reserve Bank of India. However, in
 respect of Deposits taken over in the financial year 2006-07 by way of
 merger, the Company has complied with directives issued by the Reserve
 Bank of India.
 
 vii) In our opinion and according to the information and explanations
 given to us, the Company has an internal audit system which is
 commensurate with the size and nature of its business.
 
 viii) We have broadly reviewed the books of account maintained by the
 Company pursuant to the rules made by the Central Government for the
 maintenance of cost record under section 209(1)(d) of the Companies
 Act, 1956 in respect of generation of electricity from wind mill to
 which the said rules are made applicable and are of the opinion that
 prima facie, the prescribed accounts and records have been made and
 maintained.
 
 ix) a) According to the records of the Company, the Company is
 generally regular in depositing undisputed statutory dues including
 Provident Fund, Investors Education and Protection Fund, Employees
 State Insurance, Income-tax, Sales-tax, VAT, Service Tax, Wealth-tax,
 Custom Duty, Cess and other statutory dues, if any, to the extent
 applicable, with appropriate authorities.
 
 b) At the last day of the financial year, there was no amount
 outstanding in respect of undisputed Income- tax, Sales-tax, VAT,
 Service Tax, Wealth-tax, and other statutory dues, if any, to the
 extent applicable, which were due for a period of more than six months
 from the date they became payable.
 
 c) According to the records of the Company, following statutory dues
 have not been deposited on account of dispute:
 
 Name of the       Nature     Amount     Financial     Forum where 
 Statute           of dues    (Rs.in     Year to       dispute is
                               lacs)     which the     pending
                                         amount
                                         relates
 
 Chapter V of      Service    300.65    2002-03     CESTAT, EZB, Kolkata
 Finance Act,      Tax                   to
 1994                                   2006-07
 
 West Bengal       VAT         20.89    2005-06     Jt. Commissioner of
 Value Added                              to        Sales Tax, Kolkata
 Tax Act, 2003                          2007-08     (South) Circle
 
 Also refer to Note 2 (xx) (a), (b) & (c), Schedule 16 to Accounts.
 
 x) The Company has no accumulated losses at the end of the financial
 year and has not incurred any cash losses in the current financial year
 covered by our audit and the immediately preceding financial year.
 
 xi) As per the information and explanations given by the management and
 as verified by us, we are of the opinion that the Company has not
 defaulted in repayment of dues to financial institution, bank or
 debenture holders.
 
 xii) Based on our examination of documents and records, the Company has
 not granted loans and advances on the basis of security by way of
 pledge of shares, debentures and other securities.
 
 xiii) In our opinion, the Company is not a Chit Fund or a Nidhi /
 Mutual Benefit Fund/Society. Therefore, the provisions of the clause
 4(xiii) of the Order are not applicable.
 
 xiv) The Company is not dealing in or trading in shares, securities,
 debentures and other investments. Accordingly, the provisions of clause
 4(xiv) of the Order are not applicable.
 
 xv) According to information and explanations given to us, the Company
 has given guarantee for loans taken by its subsidiary from banks or
 financial institutions, the terms and conditions whereof in our opinion
 are not prima facie prejudicial to the interest of the Company.
 
 xvi) In our opinion, Term Loans have been applied for the purpose for
 which they were obtained.
 
 xvii) According to the information and explanations given to us, and on
 an overall examination of the balance sheet of the Company, funds
 raised on short term basis have not been used during the year for long
 term investment and vice versa.
 
 xviii) During the year, the Company has not made any preferential
 allotment of shares to the parties and companies covered in the
 register maintained under section 301 of the Companies Act, 1956.
 However, the Company has made preferential allotment of Optionally
 Convertible Equity Warrants to one of the promoter entities covered in
 the register maintained under section 301 of the Companies Act, 1956
 and the terms of the issue are not prima facie prejudicial to the
 interest of the Company.
 
 xix) According to the information and explanations provided by the
 management, security or charge has been created in respect of
 debentures issued during the year.
 
 xx) The Company has not raised any money by way of public issue during
 the year. Therefore, the provision of clause 4(xx) of the Order is not
 applicable.
 
 xxi) To the best of our knowledge and belief and according to the
 information and explanations given to us, no material fraud on or by
 the Company was noticed or reported during the year.
 
                                           For S. S. KOTHARI & CO.  
                               ICAI Firm Registration No. 302034E 
 India Steamship House                      Chartered Accountants
 
 21, Old Court House Street
 
 Kolkata - 700 001.                                 R. N. Bardhan
 
                                                          Partner
 Dated: 18 April, 2011                        Membership No.17270