Piramal Life Sciences

1.  We have audited the attached Balance Sheet of Piramal Life Sciences
 Limited, as at March 31, 2009, and the related Profit and Loss Account
 and Cash Flow Statement for the year ended on that date annexed
 thereto, which we have signed under reference to this report. 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 statements
 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 by the Companies (Auditors Report) (Amendment) Order, 2004,
 issued by the Central Government of India in terms of sub-section (4A)
 of Section 227 of The Companies Act, 1956 of India (the Act) and on
 the basis of such checks of the books and records of the Company as we
 considered appropriate and according to the information and
 explanations given to us, we give 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) Without qualifying our report, attention is drawn to Note 3 of
 Schedule 17 regarding preparation of accounts on a going concern basis
 although the net-worth of the Company is fully eroded, taking into
 account various finance options, future projections received from the
 management and its future cash flow from development of molecules. The
 Company is also considering other options, strategic funding,
 partnership / outsourcing of development of molecules. Also, the
 Company is in process of arranging long term finance to meet its
 requirement. Accordingly, adjustment, if any, is not required to be
 made to the assets of the Company.
 
 (b) 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;
 
 (c) 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;
 
 (d) The Balance Sheet, Profit and Loss Account and Cash Flow Statement
 dealt with by this report are in agreement with the books of account;
 
 (e) 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 Act;
 
 (f) On the basis of written representations received from the
 directors, as on March 31, 2009 and taken on record by the Board of
 Directors, 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 Act;
 
 (g) In our opinion and to the best of our information and according to
 the explanations given to us, the said financial statements together
 with the notes thereon and attached thereto give in the prescribed
 manner the information required by the Act 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 March 31, 2009; (ii) in the case of the Profit and
 Loss Account, of loss for the year ended on that date; and (iii) in the
 case of the Cash Flow Statement, of the cash flows for the year ended
 on that date.
 
 ANNEXURE TO AUDITORS REPORT
 
 [Referred to in paragraph 3 of the Auditors Report of even date to the
 members of Piramal Life Sciences Limited on the financial statements
 for the year ended March 31, 2009]
 
 1.  (a) The Company is maintaining 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 has been
 physically verified by the management during the year and no material
 discrepancies between the book records and the physical inventory have
 been noticed.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of fixed assets has not been disposed
 of by the Company during the year.
 
 2.  (a) The inventory (excluding stocks with third parties) has been
 physically verified by the management during the year.  In respect of
 inventory lying with third parties, these have been confirmed by them.
 In our opinion, the frequency of verification is reasonable.
 
 (b) In our opinion, 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) On the basis of our examination of the inventory records, in our
 opinion, the Company is maintaining proper records of inventory. The
 discrepancies noticed on physical verification of inventory as compared
 to book records were not material and have been properly dealt with in
 the books of account.
 
 3.  (a) The Company has granted unsecured loan, to one Company covered
 in the register maintained under Section 301 of the Act. The maximum
 amount involved during the year and the year-end balance of such loan
 aggregates to Rs. 1000 lakhs and Rs. Nil respectively.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of such loan is not prima-facie prejudicial to the interest of the
 Company.
 
 (c) In respect of the aforesaid loan, the party is repaying the
 principal amount as stipulated and is also regular in payment of
 interest, where applicable.
 
 (d) In respect of the aforesaid loans granted, there is no overdue
 amount more than Rupees One Lakh.
 
 (e) The Company has taken unsecured loan, from one Company covered in
 the register maintained under Section 301 of the Act. The maximum
 amount involved during the year and the year end balance of such loan
 aggregates to Rs. 7,769 lakhs and Rs. Nil respectively.
 
 (f) In our opinion, the rate of interest and other terms and conditions
 of such loan is not prima facie prejudicial to the interest of the
 Company.
 
 (g) In respect of the aforesaid loans, the Company is regular in
 repaying the principal amounts as stipulated and is also regular in
 payment of interest.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased, sold and services received are of special nature for which
 suitable alternative sources do not exist for obtaining comparative
 quotations, 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 sale of goods and
 services. Further, on the basis of our examination of the books of
 account and records of the Company, and according to the information
 and explanations given to us, we have neither come across nor have been
 informed of any continuing failure to correct major weaknesses in the
 aforesaid internal control system.
 
 5.  (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 Act 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 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.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of Sections 58A and 58AA of the Act and the rules framed
 there under.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  The Central Government of India has not prescribed the maintenance
 of cost records under clause (d) of sub-section (1) of Section 209 of
 the Act for any of the products of the Company.
 
 9.  (a) According to the information and explanations given to us and
 the records of the Company examined by us, in our opinion, the Company
 is generally regular in depositing the 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
 as applicable, with the appropriate authorities in India.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, there are no dues of Income tax,
 Sales tax, Wealth tax, Service tax, Customs Duty, Excise Duty and Cess
 which have not been deposited on account of any dispute.
 
 10.  The Company has accumulated losses as at March 31, 2009 and it has
 incurred cash losses in the financial year ended on that date and in
 the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to any bank as at the balance sheet date.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of any special statute applicable to chit fund /
 nidhi / mutual benefit fund/societies are not applicable to the
 Company.
 
 14.  In our opinion, the Company is not a dealer or trader in shares,
 securities, debentures and other investments.
 
 15.  In our opinion and according to the information and explanations
 given to us, the Company has not given any guarantee for loan taken by
 others from banks or financial institutions during the year.
 
 16.  In our opinion, and according to the information and explanations
 given to us, on an overall basis, the term loans have been applied for
 the purposes for which they were obtained.
 
 17.  According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that the Company has used funds of Rs. 7,777 lakhs raised on short-term
 basis for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies covered in the register maintained under Section
 301 of the Act during the year.
 
 19.  The Company has not issued any debentures.
 
 20.  The Company has not raised any money by public issues during the
 year.
 
 21.  During the course of our examination of the books of account 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 material fraud on or by the Company, noticed or reported during the
 year, nor have we been informed of such case by the management.
 
                                             Partha Ghosh 
                                             Partner
                                             Membership Number F-55913
                                             For and on behalf of
                                             Price Waterhouse & Co.
 Mumbai, Dated: April 25, 2009               Chartered Accountants