Ranbaxy Laboratories

1.  We have audited the attached Balance Sheet of Ranbaxy Laboratories
 Limited, (the Company) as at December 31, 2008, and also the Profit
 and Loss Account and the Cash Flow Statement for the year ended on that
 date annexed thereto (collectively referred as the financial
 statements). 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 (the
 Order) (as amended), issued by the Central Government of India in
 terms of sub-section (4A) of section 227 of the Companies Act, 1956
 (the Act), we enclose in the Annexure a statement on the matters
 specified in paragraphs 4 and 5 of the Order.
 
 4.  Further to our comments in the Annexure referred to 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 financial statements dealt with by this report are in agreement
 with the books of account;
 
 d.  On the basis of written representations received from the
 directors, as on December 31, 2008 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 December 31, 2008 from being appointed as a director in terms of clause
 (g) of sub-section (1) of Section 274 of the Act;
 
 e.  Without qualifying our opinion, we report the following:
 
 i) We draw attention to Note 32 of schedule 26 to the financial
 statements. The Company has recorded provision of Rs. 2,631.11 million
 consequent to the Food and Drug Administration, USA (FDA) import alerts
 and the FDA letter dated February 25, 2009 imposing the Application
 Integrity Policy. The basis and assumptions used by the management in
 calculating these provisions includes significant judgment and
 estimates, which due to the inherent uncertainty of the related
 situation may significantly differ from the actual amounts.
 
 ii) We draw attention to the Note 23 of schedule 26 to the financial
 statements. The Company has early adopted Accounting Standard 30 -
 Financial Instruments: Recognition and Measurement, with effect from
 October 01, 2008. Pursuant to the early adoption, the Company has
 recorded the fair value loss on derivatives as of September 30, 2008,
 aggregating to Rs. 11,780.96 million (net of taxes), through the
 opening balance of General Reserve in the Balance Sheet.
 
 / As stated in Note 24(a) of schedule 26 to the financial statements.
 The Company has paid Rs. 277.28 million as managerial remuneration to
 its directors, which is in excess of the limits under the Act. Had the
 Company accounted for the remuneration in accordance with the Act, the
 Loss after tax for the year would have been lower by Rs. 183.03 million
 and the Loans and Advances would have been higher by Rs. 2 77.28
 million.
 
 g. Subject to our comment in para (f) above, in our opinion and to the
 best of our information and according to the explanations given to us,
 the financial statements comply with the accounting standards referred
 to in sub-section (3C) of section 211 of the Act and the Rules framed
 there under and give the information required by the Act, in the manner
 so required and give a true and fair view in conformity with the
 accounting principles generally accepted in India, in the case of:
 
 i) the Balance Sheet, of the state of affairs of the Company as at
 December 31, 2008;
 
 ii) the Profit and Loss Account, of the loss for the year ended on that
 date; and
 
 in) the Cash Flow Statement, of the cash flows for the year ended on
 that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 Annexure to the Auditors Report of even date to the members of Ranbaxy
 Laboratories Limited, on the financial statements for the year ended
 December 31, 2008
 
 Based on the audit procedures performed for the purpose of reporting a
 true and fair view on the financial statements of the Company and
 taking into consideration the information and explanations given to us
 and the books of account and other records examined by us in the normal
 course of audit, we report that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular programme of physical verification of its
 fixed assets under which fixed assets are verified in a phased manner
 over a period of three years. In our opinion, this periodicity of
 physical verification is reasonable having regard to the size of the
 Company and the nature of its assets. No material discrepancies were
 noticed on such verification.
 
 (c) In our opinion, a substantial part of fixed assets has not been
 disposed off during the year.
 
 (ii) (a) The inventory has been physically verified during the year by
 the management. In our opinion, the frequency of 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) The Company has not granted any loan, secured or unsecured to
 companies, firms or other parties covered in the register maintained
 under section 301 of the Act. Accordingly, the provisions of clauses
 4(iii)(b) to (d) of the Order are not applicable.
 
 (b) 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 Act. Accordingly, the provisions of clauses
 4(iii)(f) and 4(iii)(g) of the Order are not applicable.
 
 (iv) In our opinion, 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, no major
 weakness has been noticed in the internal control system in respect of
 these areas.
 
 (v) (a) The Company has not entered into contracts or arrangements
 referred to in section 301 of the Act.  Accordingly, the provisions of
 clause 4(v) of the Order are not applicable.
 
 (vi) The Company has not accepted any deposits from the public within
 the meaning of sections 58A and 58AA of the Act and the Companies
 (Acceptance of Deposits) Rules, 1975. Accordingly, the provisions of
 clause 4(vi) of the Order are not applicable.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with its size and the 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 under
 section 209 (l)(d) of the Act for the maintenance of cost records in
 respect of Companys products and are of the opinion that, prima facie,
 the prescribed accounts and records have been made and maintained.
 However, we have not made a detailed examination of the records with a
 view to determine whether they are accurate or complete.
 
 (ix) (a) The Company is 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, custom duty, excise duty, cess and other material statutory dues,
 as applicable, with the appropriate authorities.  Further, no
 undisputed amounts payable in respect thereof were outstanding at the
 year end for a period of more than six months from the date they became
 payable.
 
 (b) There are no dues in respect of income tax, sales tax, wealth tax,
 service tax, customs duty, excise duty and cess that have not been
 deposited with the appropriate authorities on account of any dispute
 other than those mentioned below:
 
 Name of the                 Nature             Amount
 statute                     of the dues        Rs. in Million
 
 Punjab General              Purchase tax,      2.69 [of which
 Sales Tax Act, 1948/        interest &         Rs. 0.44 million
 Punjab Value Added          penalty            has been deposited
 Tax Act                     dispute            under protest]
 
 Himachal Pradesh            Sales tax          0.11 [out of which
 General Sales               demand             0.11 million
 Tax Act, 1968                                  has been deposited
                                                under protest]
 
 Himachal Pradesh            Sales tax          1.04 [out of which
 General Sales               demand             1.04 million
 Tax Act, 1968                                  has been deposited
                                                under protest]
 
 Central Excise Act,         CENVAT             68.57 [out of which
 1944                        credit, interest   31.00 million
                             & penalty          has been deposited
                             dispute            under protest]
 
 Uttar Pradesh               Sales tax          6.51 [out of which
 Sales tax Act, 1948/        demand             2.85 million
 Uttar Pradesh                                  has been deposited
 Value Added Tax Act                            under protest]
 
 Period to which            Forum where
 the amount                 dispute is
 relates                    pending
 
 1989-90,                   Sales Tax
 1990-91 &                  Tribunal/
 2004-05                    VAT Authorities
 
 1994-96                    Sales Tax Tribunal
 
 1994-1996                  Honble High
                            Court of
                            Himachal Pradesh
 
 2000-01 &                  CESTAT
 2004-05
 
 2005-06                    Sales tax authorities
 
 (x) In our opinion, the Companys accumulated losses at the end of the
 financial year are less than fifty per cent of its net worth. Further
 the Company has incurred cash losses during the financial year covered
 by our audit, however the Company did not incur cash losses in the
 immediately preceding financial year.
 
 (xi) In our opinion, the Company has not defaulted in repayment of dues
 to a financial institution or bank or debenture holders. Accordingly,
 the provisions of clause 4(xi) of the Order are not applicable.
 
 (xii) The Company has not granted any loans and advances on the basis
 of security by way of pledge of shares, debentures and other
 securities. Accordingly, the provisions of clause 4(xii) of the Order
 are not applicable.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi/
 mutual benefit fund/ society. Accordingly, the provisions of clause
 4(xiii) of the Order are not applicable.
 
 (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 Order are not applicable.
 
 (xv) In our opinion, the terms and conditions on which the Company has
 given guarantee for loans taken by others from banks or financial
 institutions are not, prima facie, prejudicial to the interest of the
 Company.
 
 (xvi) In our opinion, the Company has applied the term loans for the
 purpose for which the loans were obtained.
 
 (xvii) In our opinion, 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 Act. Accordingly, the provisions of clause 4(xviii)
 of the Order are not applicable.
 
 (xix) During the year, the Company issued certain non-convertible
 debentures on which it has not created any security.
 
 As explained to us by the management these debentures were redeemed
 prior to the expiry of the time limit for the creation of the related
 security.
 
 (xx) The Company has not raised any money by public issues during the
 year. Accordingly, the provisions of clause 4(xx) of the Order are not
 applicable.
 
 (xxi) No fraud on or by the Company has been noticed or reported during
 the period covered by our audit.
 
                                          For Walker, Chandiok & Co
                                              Chartered Accountants
 
                                                      Per B.P.Singh
                                                            Partner
                                              Membership No. 070116
 
 Place     :   Gurgaon
 Dated     :   March 27, 2009