a)      We have audited the attached Balance sheet of Ranbaxy
 laboratories limited (‘the company’) as at 31 December 2010 and also the Profit
 and loss account and the cash Flow statement (collectively referred to as
 ‘financial statements’) of the company 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.
  
 
b)     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 statements
 presentation. We believe that our audit provides a reasonable basis for our
 opinion.
  
 
c)      As required by the companies (auditor’s report)
 Order, 2003 (‘the Order’) 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 said Order.
  
 
d)     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 act,
 to the extent applicable; (v) on the basis of written representations received
 from the directors of the company as at 31 December 2010, and taken on record
 by the Board of directors, we report that none of the directors is disqualified
 as at 31 December 2010 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 draw attention to
 note 2 of schedule 23 of the financial statements, wherein it has been stated
 that the company continues to cooperate, for an effective resolution, with:
  
 
•       The Food and Drug administration of the united
 states of America for import alert and warning letters issued primarily
 relating to Good Manufacturing Practice for some of the products manufactured
 at certain manufacturing facilities of the company in India and application
 Integrity Policy against one of its manufacturing facility in India; and
  
 
•       The Department of Justice of the united states of America regarding certain charges relating
 to possible issues with data submitted by the company in support of product
 filings.
  
 
Due to the inherent uncertainty of the outcome of the above mentioned
 matters, financial impact, if any, of the outcome cannot be reliably
 ascertained at this stage, and accordingly, no adjustment has been made to
 these financial statements.
  
 
f)       Without qualifying our report, we draw
 attention to note 14 of schedule 23 of the financial statements, wherein it is
 stated that the appointment and remuneration of Mr. Arun Sawhney
 as the Managing Director of the company with effect from 20 august 2010 has
 been approved by the Board of Directors, but the requisite regulatory approval
 from shareholders is yet to be obtained. In accordance with the remuneration
 determined by the Board of Directors, Rs. 32.91 million (including commission)
 has been accounted for as an expense in the Profit and loss account for the
 year ended 31 December 2010.
  
 
g)      In our opinion and to the best of our information and
 according to the explanations given to us, the said
 financial statements give the information required by the
 act, in the manner so required and gives 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 the affairs of the company as at 31 December 2010;
  
 
ii) In the case of the Profit and loss account, of the profit of the company
 for the year ended on that date; and
  
 
iii) In the case of the cash Flow statement, of the cash flows of the
 company for the year ended on that date.
  
 
Annexure to the Auditors’ Report (referred to in our report of even date)
  
 
(i) (a) The company has
 maintained proper records showing full particulars, including quantitative
 details and situation of its fixed assets.
  
 
(b)     The company has a regular programme
 of physical verification of its fixed assets through which all 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)     Fixed assets disposed off during the year were not
 substantial, and therefore, do not affect the going concern assumption.
  
 
(ii) (a) The inventory, except goods-in-transit,
 has been physically verified by the management during the year. In our opinion,
 the frequency of such 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)     The company is maintaining proper records of
 inventory. The discrepancies noticed on verification between the physical
 stocks and the book records were not material.
  
 
(iii) The company has neither granted nor taken any loans, secured or
 unsecured, to or from companies, firms or other parties covered in the register
 maintained under section 301 of the companies act, 1956.
  
 
(iv) In our opinion and according to the information and explanations given
 to us, and having regard to the explanation that sale of certain items of goods
 are for the specialised requirements of the buyers
 and suitable alternative sources are not available to obtain comparable
 quotations, there is an adequate internal control system commensurate with the
 size of the company and the nature of its business with regard to purchase of
 inventories and fixed assets and for sale of goods and services. Further, on
 the basis of our examination and according to information and explanations
 given to us, there has been no continuing failure to correct the weaknesses in
 the aforesaid internal control system, and adequate action is being taken by
 the management to rectify any weaknesses, as identified.
  
 
(v) In our opinion and according to the information and explanations given
 to us, there are no contracts and arrangements, the particulars of which 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) We have broadly reviewed the books of account maintained by the
 company pursuant to the rules prescribed by the central Government for
 maintenance of cost records under section 209(1)(d) of
 the companies act, 1956, in respect of its products and are of the opinion that
 prima facie, the prescribed accounts and records have been made and maintained.
 However, we have not carried out a detailed examination of the records with a
 view to determine whether these are accurate or complete.
  
 
(ix) (a) according to the information and explanations given to us, and on
 the basis of our examination of the records of the company, amounts deducted /
 accrued in the books of account in respect of 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 and other material statutory dues have generally been regularly
 deposited during the year by the company with the appropriate authorities.
  
 
There were no dues on account of cess under
 section 441a of the companies act, 1956, since the
 date, from which the aforesaid section comes into force, has not yet been
 notified by the central Government.
  
 
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, sales tax, Wealth tax, service
 tax, customs duty, excise duty and other material statutory dues were in
 arrears as at 31 December 2010 for a period of more than six months from the
 date those became payable.
  
 
(b) According to the information and explanations given to us, there are no
 dues of Income tax, Wealth tax, service tax and customs duty which have not
 been deposited with the appropriate authorities on account of any dispute. according to the information and explanations given to us,
 the following dues of sales tax and excise duty have not been deposited by the
 company on account of disputes:
  
 

  

   

   
Name of the Statute
   
   

   
Nature of the dues
   
   

   
Amount (Rs. in million) 
   
   

   
Period to which the amount relates
   
   

   
Forum where disputes are pending 
   
  
  

   

   
central excise act, 1944
   
   

   
central excise (CENVAaT, Interest and Penalty)
   
   

   
39.90
   
   

   
2001-2006
   
   

   
supreme Court / High Court/ CESTAT / commissioner
   
  
  

   

   
Punjab General sales Tax act, 1948.
   
   

   
Purchase Tax (Interest and Penalty)
   
   

   
2.25 
   
   

   
1989-90 and 1990-91
   
   

   
sales Tax Tribunal
   
  
  

   

   
U.P. sales Tax act, 1948.
   
   

   
sales Tax
   
   

   
13.73
   
   

   
2007-09
   
   

   
High court, Lucknow / Sales Tax Tribunal /
   additional commissioner
   
  
 
  
 
(x) The company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year 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 its bankers or
 debenture holders. There were no dues to financial institutions.
  
 
(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.
  
 
(xiii) In our opinion and according to the information and explanations
 given to us, the company is not a chit fund or a nidhi
 / mutual benefit fund / society.
  
 
(xiv) According to the information and explanations given to us, the company
 is not dealing or trading in shares, securities, debentures and other
 investments.
  
 
(xv) In our opinion and according to the information and explanations given
 to us, the terms and conditions on which the company has issued letters of comfort,
 in respect of loans taken by its subsidiary companies from banks, are not
 prejudicial to the interest of the company.
  
 
(xvi) In our opinion and according to the information and explanations given
 to us, the term loans taken by the company during the year are lying unutilised as at the year end.
  
 
(xvii) According to the information and explanations given to us, and on an
 overall examination of the balance sheet of the company, we are of the opinion
 that the funds raised on short-term basis have not been used for long-term
 investment.
  
 
(xviii) The company has not made any preferential allotment of shares during
 the year to companies/ firms/ parties covered in the register maintained under
 section 301 of the companies act, 1956.
  
 
(xix) The company has issued non-convertible debentures during the year
 which were redeemed before the year end. according to
 the information and explanations given to us, security was not created in
 respect of these debentures as these were redeemed before expiry of the time
 limit for creation of security as stipulated in the letters of allotment.
  
 
(xx) The company has not raised any money by public issues during the year.
  
 
(xxi) according to the information and explanations
 given to us, no material fraud on or by the company has been noticed or
 reported during the course of our audit. However, as informed to us, a case of
 misappropriation of funds through falsification of documents resulting in a
 minor fraud to the extent of approximately Rs. 3 million has been noticed
 during the year. as further informed to us, the
 company has taken adequate follow up action, including strengthening of
 systems.
  
 

  

   

   
 
   
   
   

   
For B S R & Co.
   
Chartered Accountants Membership no. 101248W
   
  
  

   

   
Place : Gurgaon
   
Dated : 22 February 2011
   
   

   
Vikram Aggarwal
   
Partner
   
Membership no. 089826