Mahindra and Mahindra

1.  We have audited the attached balance sheet of Mahindra & Mahindra
 Limited as at 31st March, 2009, the profit and loss account and also
 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.
 
 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
 (hereinafter referred to as ‘the Order) 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:
 
 i. 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;
 
 ii. 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;
 
 iii. the balance sheet and the profit and loss account dealt with by
 this report are in agreement with the books of account;
 
 iv. in our opinion, the balance sheet and the profit and loss account
 dealt with by this report comply with the accounting standards referred
 to in sub-section (3C) of Section 211 of the Companies Act, 1956;
 
 v. in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts 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:
 
 (a) in the case of the balance sheet, of the state of affairs of the
 company as at 31st March, 2009;
 
 (b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 5. On the basis of the written representations received from the
 directors, as on 31st March, 2009, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 31st March, 2009 from being appointed as a director in terms of clause
 (g) of sub-section (1) of section 274 of the Companies Act, 1956.
 
 Annexure to the Auditors Report
 
 (Referred to in paragraph (3) of the Auditors Report of even date to
 the members of Mahindra & Mahindra Limited.)
 
 (i) (a) The company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets have not been physically verified by the
 management during the year but the company has a system of verifying
 the fixed assets once in every three years. In our opinion the
 frequency of verification is at reasonable intervals.
 
 (c) During the year, in our opinion, a substantial part of fixed assets
 has not been disposed off by the company.
 
 (ii) (a) The inventory of the company has been physically verified by
 the management as at the year end. In respect of stocks lying with
 third parties, a substantial portion has been confirmed by third
 parties. In our opinion the frequency of verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the management were found reasonable and adequate in
 relation to the size of company and the nature of its business.
 
 (c) On the basis of our examination of records of inventory, in our
 opinion, the company has maintained proper records of inventory and the
 discrepancies noticed on physical verification between the physical
 stocks and the book records were not material in relation to the
 operations of the company.
 
 (iii) According to the information and explanations given to us, the
 company has neither granted nor taken any loans, secured or unsecured,
 to/from companies, firms, or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956 and accordingly
 paragraphs 4(iii) (b), (c), (d), (f) and (g) of the Companies
 (Auditors Report) Order, 2003, are not applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, having regard to the explanation that many of the items
 are of a special nature and their prices cannot be compared with
 alternative quotations, 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 the sale of
 goods and services. Further, on the basis of our examination and
 according to the information and explanations given to us we have
 neither come across nor have we been informed of any instance of major
 weakness in the aforesaid internal control system.
 
 (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, having regard to comment in (iv) above, the transactions
 made in pursuance of such contracts or arrangements 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.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the company has complied with the provisions of Section
 58A, 58AA and any other relevant provisions of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules, 1975, as applicable,
 with regard to the deposits accepted from the public. According to the
 information and explanations given to us, no order under the aforesaid
 sections 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, on the company.
 
 (vii) In our opinion, the company has an internal audit system
 commensurate with its size and nature of its business.
 
 (viii) We have broadly reviewed the books of account maintained by the
 company relating to the manufacture of motor vehicles and tractors
 pursuant to the rules made by the Central Government for the
 maintenance of cost records under section 209 (1) (d) of the Companies
 Act, 1956 and we are of the opinion that prima facie the prescribed
 accounts and records have been maintained and are being made up. We
 have not, however, made a detailed examination of the records with a
 view to determining whether they are accurate or complete. To the best
 of our knowledge and according to the information 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 other
 products of the Company.
 
 (ix) (a) According to the information and explanations given to us and
 according to the books and records as produced and examined by us, in
 our opinion, the undisputed statutory dues including provident fund,
 investor education and protection fund, income-tax, sales-tax, service
 tax, value added tax, customs duty, excise duty, cess and other
 material statutory dues as applicable have been generally regularly
 deposited by the company during the year with the appropriate
 authorities. According to the information and explanations given to us,
 there are no arrears of outstanding statutory dues as mentioned above
 as at 31st March, 2009 for a period of more than six months from the
 date they became payable.
 
 (b) As at 31st March, 2009 according to the records of the company and
 the information and explanations given to us, the following are the
 particulars of dues on account of income-tax, sales-tax, wealth tax,
 service tax, customs duty, excise duty and cess matters that have not
 been deposited on account of any dispute:
 
 Nature of the             Nature of                         Amount
 statute                    the dues                  Rs. in crores
 
 Income-Tax Laws          Income-Tax                           0.81
                                                              46.81
 Sales-Tax Laws            Sales-Tax                          15.57
                                                             184.65
                                                               1.56
 Service Tax Laws        Service Tax                           0.17
 
 Excise Duty Laws        Excise Duty                         377.88
                                                             110.51
 Custom Duty Laws        Custom Duty                           4.55
 
 
 Period to which          Forum where pending
 the amount relates
 various years
 covering the period
 
 1999                    Appellate Authority – Tribunal Level
 
 2004-2008               Appellate Authority – Commissioner
 (Appeals)
 
 1988-2009               Appellate Authority – Commissioner
 (Appeals)
 
 1987-2008               High Court
 
 1986-2006               Appellate Authority – Tribunal Level
 
 2002                    Appellate Authority – Commissioner
 
 1987-2009               Appellate Authority – Tribunal Level
 
 2007-2009               Appellate Authority – Commissioner
 
 1996-2001               Appellate Authority – Tribunal Level
 
 (x) The company does not have accumulated losses as at 31st March, 2009
 and has not incurred cash losses during the financial year ended on
 that date and in the immediately preceding financial year.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the company has not defaulted in repayment of dues to a
 financial institution, bank or to debenture holders during the year.
 
 (xii) In our opinion and according to the information and explanations
 given to us, 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) The provisions of any special statute as specified under
 paragraph 4(xiii) of the said Order are not applicable to the company.
 
 (xiv) In our opinion the company is not dealing in or trading in
 shares, securities, debentures and other investments.  Accordingly, the
 provisions of paragraph 4(xiv) of the Order are not applicable to the
 company.
 
 (xv) According to the information and explanations given to us, the
 company has not given any guarantees for loans taken by others from
 banks or financial institutions, the terms and conditions, whereof, in
 our opinion, are prejudicial to the interest of the company.
 
 (xvi) In our opinion and according to the information and explanations
 given to us, the term loans were applied for the purpose for which the
 loans were obtained.
 
 (xvii) Based on the information and explanations given to us and on an
 overall examination of the balance sheet of the company, in our
 opinion, funds raised on short term basis have not been used for long
 term investments.
 
 (xviii) 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.
 
 (xix) According to the information and explanations given to us, the
 company has created security in respect of debentures issued during the
 year.
 
 (xx) The company has not raised any money by public issue during the
 year.
 
 (xxi) 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 instance of
 significant fraud on or by the company, noticed or reported during the
 year nor have we been informed of such case by the management.
 
 
                                           For DELOITTE HASKINS & SELLS
                                                  Chartered Accountants
 
                                                            B.P. Shroff
                                                              (Partner)
                                               Membership Number: 34382
 
 Mumbai, 28th May, 2009