Mundra Port and Special Economic Zone

1.  We have audited the attached Balance Sheet of Mundra Port And
 Special Economic Zone Limited (‘the Company’) as at March 31, 2009 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 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 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) (“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.  Without qualifying our opinion, we draw attention to Note No. 10 in
 Schedule 23 to the financial statements in respect of eligibility for
 income tax holiday as per provisions of Section 80-IAB of the Income
 Tax Act, 1961.
 
 5.  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, 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;
 
 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, 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 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]
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) All fixed assets were physically verified by the management in the
 previous year in accordance with a planned programme of verifying them
 once in three years, which, in our opinion, is reasonable having regard
 to the size of the Company and the nature of its assets. As informed,
 no material discrepancies were noticed on such verification.
 
 (c) There was no substantial disposal of fixed assets during the year.
 
 (ii) (a) The management has conducted physical verification of
 inventory at reasonable intervals during the year.
 
 (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) 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 Company’s 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 can not 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 services.
 During the course of our audit, no major weakness has been noticed in
 the internal control system in respect of these areas.  The Company
 does not sell any goods due the nature of its business.
 
 (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) To the best of our knowledge and as explained, the Central
 Government has not prescribed maintenance of cost records under clause
 (d) of sub-section (1) of section 209 of the Companies Act, 1956 for
 the products of the Company.
 
 (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.
 
 (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, there are no dues
 outstanding for income-tax, wealth-tax, service tax, customs duty,
 excise duty and cess on account of any dispute, except as follows:
 
 Name of the              Nature of dues            Amount
 statute                                          (Rs. lacs)
 
 Customs Act,     Show cause notice from the 
                  Custom Authorities                 26.60
 1962             for recovery of custom duty 
                  in relation to import of
                  Crude Petroleum Oil
 
 Customs Act,     Show cause notice from the 
                  Custom Authorities                 14.20
 1962             for recovery of custom duty in 
                  relation to import
                  of Acrylonitrile
 
 Customs Act,     Show cause notice from the Custom 
                  Authorities                       207.15
 1962             for recovery of custom duty, 
                  fine and penalty on
                  the import of a tug and bunkers
 
 Customs Act,     Order from Commissioner Customs, 
                  directing to                        2.62
 1962             pay differential duty and penalty 
                  for short delivery
                 of imported goods of various customers
 
 Customs Act,     Order from Dy Commissioner Customs 
                  directing to                        7.59
 1962             pay differential duty and penalty 
                  for short delivery
                  of imported goods of various customers
 
 Customs Act,     Demand Notice from Deputy 
                  Commissioner of                     4.44
 1962             Customs directing to pay education 
                  cess against
                  import of Steel Sole Plates
 
 Customs Act,     Demand Notice from Deputy 
                  Commissioner of                    25.03
 1962             Customs directing to pay duty 
                  by holding that
                  Company wrongly availed duty 
                  benefit under DFCEC Scheme on 
                  import of equipment
 
 Customs Act,     Demand Notice from Assistant 
                  Commissioner                        1.29
 1962             of Customs directing to pay duty 
                  by holding that
                  Company wrongly availed duty 
                  benefit on import
                  of equipment components
 
 Finance Act,     Show Cause Notice from 
                  Commissioner of Customs         1,121.93
 1994             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.
 
 Finance Act,     Show Cause Notice from 
                  Additional Commissioner            55.73
 1994             of 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  input services
 
 Finance Act,     Show Cause Notice from 
                  Commissioner of Customs          1,076.71
 1994             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.
 
 Finance Act,     Show Cause Notice from 
                  Commissioner of Customs          1,406.98
 1994             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.
 
 Period to which              Forum where dispute is pending
 the amount
 relates
 
 November, 2004               Customs, Excise and Service Tax
                              Appellate Tribunal, Mumbai
 
 July 3, 2003                 Assistant Commissioner of Customs,
                              Mundra
 
 June, 2005                   Customs, Excise and Service Tax
                              Appellate Tribunal, Ahmedabad
 
 March, 2007                  Commissioner of Customs (Appeals),
                              Ahmedabad
 
 February, 2007               Commissioner of Customs (Appeals),
                              Ahmedabad
 
 December, 2006               Deputy Commissioner of customs,
                              Gujarat
 
 August, 2007                 Deputy Commissioner of Customs,
                              Gujarat
 
 January, 2008                Assistant Commissioner of Customs,
                              Ahmedabad
 
 April, 2006 and              High Court of Gujarat
 April, 2007
 
 April, 2006                  Commissioner of Central Excise
                              (Appeals), Rajkot
 
 October, 2007                Commissioner of Central Excise and
                              Customs, Rajkot
 
 November, 2007               Commissioner of Central Excise and
                              Customs, Rajkot
 
 Name of the            Nature of dues                   Amount
 statute                                                (Rs. lacs)
 
 Finance Act,    Show Cause Notice from Commissioner 
                 of Customs                             1,891.50
 1994           and Central Excise disallowing and 
                recovering duty, interest and 
                 penalty holding that Company
                 wrongly availed Service Tax Credit/ 
                 Cenvat Credit
                 and Education Cess on Air conditioners, 
                 input services, steel and cement etc.
 
 Finance Act,    Show Cause Notice from Commissioner 
                 of Customs                             1,894.63
 1994            and Central Excise disallowing and 
                 recovering duty, interest and penalty 
                 holding that Company wrongly availed 
                 Service Tax Credit/ Cenvat Credit
                 and Education Cess on input services, 
                 steel and cement etc.
 
 Period to which   Forum where dispute is pending
 the amount
 relates
 
 October, 2008    Commissioner of Central Excise
                  (Appeals), Rajkot
 
 April, 2009      Commissioner of Central Excise
                  Customs, Rajkot
 
 (x) The Company has no accumulated losses at the end of the fi nancial
 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, bank 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
 4(xiii) of the Companies (Auditor’s 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 4(xiv) of the Companies (Auditor’s 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 guarantee for credit facility taken by a 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) According to the information and explanations given to us, during
 the period covered by our audit report, the Company has not issued any
 debentures. The Company has created security or charge in respect of
 debentures issued in earlier years.
 
 (xx) We have verified that the end use of money raised by public issue
 is as disclosed in the Notes to the financial statements.
 
 (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, which have
 been relied upon by us, 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 
                                              Chartered Accountants
                                                    per Sudhir Soni
 Place: Mumbai                                              Partner
 Date: 20th May, 2009                         Membership No.: 41870