1.  We have audited the attached Balance Sheet of Mundra Port and
 Special Economic Zone Limited (the Company) as at March 31, 2011 and
 also 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 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 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 (as
 amended) (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 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, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 iv. 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;
 
 v. On the basis of the written representations received from the
 directors as on March 31, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 March 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;
 
 vi. 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 March 31, 2011;
 
 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 Cash Flow Statement, of the cash flows for the year
 ended on that date.
 
 Annexure referred to in paragraph [3] of our report of even date
 Re: Mundra Port and Special Economic Zone Limited (the Company)
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The fixed assets are physically verified by the management
 according to a phased programme designed to cover all the items over a
 period of three years which in our opinion is reasonable having regard
 to the size of the Company and the nature of its assets.  Pursuant to
 the programme, a portion of the fixed assets have been physically
 verified by the management during the year and no material
 discrepancies were noticed on such verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The inventory of stores and spare parts, fuel and lubricants
 has been physically verified by management during the year. In our
 opinion, the frequency of such physical verification is reasonable.
 
 (b) The procedures of physical verification of inventory 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 and no
 material discrepancies were noticed on physical verification.
 
 (iii) (a) As informed, 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.
 Accordingly, the provisions of clause (iii) (b), (c) and (d) of the
 Companies (Auditors Report) Order, 2003 (as amended), are not
 applicable to the Company.
 
 (e) As informed, the Company has not taken any loans, secured or
 unsecured from companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Accordingly, the provisions of clause (iii) (f) and (g) of the
 Companies (Auditors Report) Order, 2003 (as amended), are not
 applicable to the Company.
 
 (iv) Part of the Companys purchases of fixed assets and sale of
 services are stated to be of unique and specialized nature, and hence,
 in such cases, the comparison of prices with the market rates or with
 purchases from/sales to other parties cannot be made. Read with the
 above, 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, for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, we have not observed any
 continuing failure to correct major weakness in internal control system
 of the company.
 
 (v) According to the information and explanations provided by the
 management, we are of the opinion that there are no particulars of
 contracts or arrangements that need to be entered into the register
 maintained under section 301 of the Companies Act, 1956.
 
 (vi) The Company has not accepted any deposits from the public.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) As the Company does not manufacture any products, the provisions
 of clause (viii) of the Companies (Auditors Report) Order, 2003 (as
 amended) regarding maintenance of cost records under clause (d) of
 sub-section (1) of section 209 of the Companies Act, 1956 are not
 applicable.
 
 (ix) (a) The Company is regular in depositing with appropriate
 authorities undisputed statutory dues including provident fund,
 investor education and protection fund, employees state insurance,
 income-tax, sales-tax, wealth-tax, service tax, customs duty, excise
 duty, cess and other material statutory dues applicable to it.
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of provident fund, investor
 education and protection fund, employees state insurance, income-tax,
 wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and
 other undisputed statutory dues were outstanding, at the year end, for
 a period of more than six months from the date they became payable.
 
 (c) According to the records of the Company, the dues outstanding of
 service tax, customs duty, excise duty and cess on account of any
 dispute, are as follows:
 
 Name of the    Nature of dues    Amount   Period to which   Forum where
                                                               dispute
                                                             is pending
 statute                        (Rs. in Lacs)  the amount 
                                               relates
 
 Customs Act,  Show cause notice 
                from the Custom 
                  Authorities       26.60   November, 2004  Customs, 
                                                            Excise and 
                                                            Service Tax
                                                            Appellate 
 1962          for recovery of 
               custom duty in 
               relation to import                           Tribunal, 
                                                            Mumbai
               of Crude Petroleum 
               Oil
 
 Customs Act,  Show cause notice 
               from the Custom 
               Authorities          14.20    July, 2003     Assistant 
                                                            Commissioner
                                                            of Customs,
 1962          for recovery of 
               custom duty in 
               relation to import                           Mundra
               of Acrylonitrile
 
 Customs Act,  Show cause notice 
               from the Custom 
               Authorities         207.15    March, 2005    Customs, 
                                                            Excise and 
                                                            Service Tax
                                                            Appellate
 1962          for recovery of 
               custom duty, fine 
               and penalty                                  Tribunal, 
                                                            Ahmedabad
               on the import of a 
               tug and bunkers
 Customs Act,  Order from Deputy 
               Commissioner Customs, 2.62    March, 2007    Commissioner
                                                            of   Customs
                                                           (Appeals),
 1962          Mundra directing to 
               pay differential 
               duty and                                     Ahmedabad
               penalty for short 
               delivery of imported 
               goods of various 
               customers
 Customs Act,  Order from  Deputy  
               Commissioner Customs  7.59   February, 2007  Commissioner
                                                            of Customs
                                                            (Appeal)
 1962          directing to pay 
               differential duty 
               and penalty                                  Ahmedabad
               for short delivery of 
               imported goods of 
               various customers
 
 Customs Act,  Demand Notice from 
               Deputy Commissioner   4.62      2005-06      Deputy
                                                            Commissioner
                                                            of customs,
 1962          of Customs directing 
               to pay education cess                        Mundra
               against import of 
               Steel Sole Plates
 
 Customs Act,  Demand Notice from 
               Deputy Commissioner  25.03    August, 2007   Deputy
                   of                                       Commissioner
                                                            of Customs,
 1962          Customs directing to 
               pay duty by holding 
                 that                                       Mundra
               Company wrongly 
               availed duty benefit 
               under DFCEC Scheme 
               on import of 
               equipment
 
 Customs Act,  Demand Notice from 
               Assistant 
               Commissioner          1.28   January, 2008  Commissioner
                                                           of Customs
                                                          (Appeals),
 1962          of Customs directing 
               to pay duty by 
               holding                                     Mumbai
               that Company wrongly 
               availed duty 
               benefit on import of 
               equipment components
 
 Finance Act,  Show Cause Notice 
               from Commissioner of  871.57    2005-06     High Court 
                                                           of Gujarat
 1994          Customs and Central 
               Excise disallowing and
               recovering duty, 
               interest and penalty 
               holding that Company 
               wrongly availed 
               Service Tax Credit/
               Cenvat Credit and 
               Education Cess on 
               steel and cement etc. 
              (Net of deposit 
                Rs. 250 Lacs)
 
 Finance Act,  Show Cause Notice from
               Commissioner of       4,608.83   April, 
                                                2006 to   Commissioner 
                                                          of Customs 
                                                          and Central
 1994          Customs and Central 
               Excise disallowing and           March, 
                                                2009      Excise, Rajkot
               recovering duty, interest 
               and penalty holding      797.90  April, 
                                                2009 to   Commissioner
                                                          of Service Tax,
               that Company wrongly 
               availed Service Tax              March, 
                                                 2010     Ahmedabad.
               Credit/ Cenvat Credit 
               and Education Cess on
               steel and cement etc.
 
 Finance Act,  Show cause notices
               received from            851.70  April, 
                                                2004 to  Customs, Excise
                                                         and Service Tax
 1994          Commissioner of 
               Customs and Central 
               Excise,                          August, 
                                                 2009     Appellate 
                                                          Tribunal, 
                                                          Ahmedabad
               Rajkot and  Commissioner 
               of Service Tax,           829.87  Sept, 
                                                2009 to   Commissioner
                                                          of Service Tax,
               Ahmedabad in respect 
               of levy of service tax            March, 
                                                 2010     Ahmedabad
               on various services 
               provided by the Company
               and wrong availment of 
               CENVAT credit by the
                Company.
 
 Customs Act,  Demand Notice from 
               Commissioner of Customs   200.00   June, 
                                                  2008   Commissioner of
                                                         Customs & 
                                                         Central
 1962          for recovery of penalty 
               in connection with                        Excise, 
                                                         Ahmedabad
               import of aircraft, owned 
               by Karnavati Aviation
               Private Limited - Sub
               sidiary of the Company.
 
 Customs Act,  Show cause notice from 
               the Custom Authorities      5.00    May, 
                                                   2010  Commissioner 
                                                         of Customs 
                                                          (Appeals),
 1962          for recovery of penalty 
               in relation to import of                  Kandla
               gas oil (HSD)
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred cash losses in the current and immediately
 preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to a financial
 institution, banks or debenture holders.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced 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.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society. Therefore, the provisions of clause
 (xiii) of the Companies (Auditors Report) Order, 2003 (as amended) 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 clause (xiv) of the Companies (Auditors Report) Order,
 2003 (as amended) are not applicable to the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has given guarantees for credit facilities taken by the body
 corporate from bank or financial institutions, the terms and conditions
 whereof in our opinion are not prima-facie prejudicial to the interest
 of the Company.
 
 (xvi) Based on information and explanations given to us by the
 management, term loans were applied for the purpose for which the loans
 were obtained.
 
 (xvii) 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
 investment.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 section 301 of the Companies Act, 1956.
 
 (xix) The Company has created security or charge in respect of
 debentures issued in earlier years and outstanding at the year end.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based upon the audit procedures performed for the purpose of
 reporting the true and fair view of the financial statements and as per
 the information and explanations given by the management, we report
 that no fraud on or by the Company has been noticed or reported during
 the course of our audit.
 
 
                                        For S.R. BATLIBOI & ASSOCIATES
 
                                         Firm Registration No: 101049W
 
                                                 Chartered Accountants
 
                                                    per Arpit K. Patel 
 
 Place: Ahmedabad                                              Partner
 
 Date: May 9, 2011                               Membership No.: 34032