Reliance Capital

We have audited the attached balance sheet of Reliance Capital Limited
 (the Company) as at March 31, 2009, the profit and loss account and
 the cash flow statement of the Company 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.
 
 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 from material misstatement. An audit also 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.
 
 1.  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 said order.
 
 2.  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 purpose of the
 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 the
 books;
 
 c) the balance sheet, profit and loss account and cash flow statement
 dealt with by this report are in agreement with the books of account;
 
 d) 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;
 
 e) on the basis of 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 are 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;
 
 f) 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, 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:
 
 (i) in the case of the balance sheet, of the state of affairs of the
 Company as at March31, 2009;
 
 (ii) in the case of the profit and loss account, of the profit 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 our report of even date)
 
 1 (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 by 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 of during the year were not substantial, and
 therefore, do not affect the going concern assumption.
 
 2.  (a) The inventory has been physically verified by the management
 during the year. In our opinion, the frequency of such verification is
 reasonable.
 
 (b) The procedures for the physical verification of inventories
 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. As
 explained to us, no material discrepancies were noticed between the
 physical stocks and the book records.
 
 3.  (a) The Company has granted unsecured demand loans to 2 companies
 covered in the register maintained under section 301 of the Act. One of
 the loans amounting to Rs.229.25 crore was interest-free. The maximum
 amount outstanding during the year was Rs.241.35 crore and the year end
 balance of such loans was Rs.241.35 crore.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 on which loans have been granted to companies, firms or other parties
 listed in the register maintained under section 301 of the Act are not,
 prima facie, prejudicial to the interest of the company.
 
 (c) The loans granted to the aforementioned 2 companies covered in the
 register under section 301 of the Act are repayable on demand.
 According to the information and explanations given to us, the
 borrowers have been regular in repaying in the payment of interest,
 where applicable.
 
 (d) There is no overdue amount of more than rupees one lakh in respect
 of loans granted to any of the companies listed in the register
 maintained under section 301 of the Act.
 
 (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 Act. Accordingly, paragraphs 4(iii)(f) and
 4(iii)(g) of the Order are not applicable to the Company.
 
 4.  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 with regard
 to purchase of fixed assets and with regard to the sale of goods and
 services. In our opinion and according to the information and
 explanations given to us, there is no continuing failure to correct
 major weaknesses in internal control system.
 
 5.  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 Act.
 
 6.  The Company has not accepted any deposits from the public.
 Accordingly, paragraph 4(vi) of the Order is not applicable.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with its size and nature of its business.
 
 8.  The Central Government has not prescribed maintenance of cost
 records under section 209(1)(d) of the Act for any of the services
 rendered by the Company. Accordingly, paragraph 4(viii) of the Order is
 not applicable.
 
 9.  (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, Cess 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 Act
 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 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 were in arrears as at March 31, 2009 for
 a period of more than six months from the date they became payable.
 
 (b) According to the information and explanation given to us, following
 dues of sales tax have not been deposited by the Company on account of
 disputes:
 
 Name of the Statute  Nature of   Amount  Period to which   Forum where
                      the Dues    (Rs.)   the amount relates dispute is
                                                                pending
 
 Gujarat Sales tax 
 Act, 1969           Sales tax   475,916     2001-02  Gujarat Sales tax
                                                               Tribunal,
                                                              Ahmedabad
 
 Madhya Pradesh 
 Sales               Sales tax   430,472     1996-97   Appellate Deputy 
 Tax Act, 1969                                             Commissioner
                                          of the Commercial Tax, Indore
                                                             Division 1
 
 10.  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.
 
 11.  In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in repayment of dues to a
 financial institution, bank or its debenture holders.
 
 12.  In our opinion, the Company has maintained adequate records in
 cases where it has granted loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 13.  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. Accordingly, paragraph 4(xiii) of the Order is not
 applicable.
 
 14.  The Company has maintained proper records of transactions and
 contracts in respect of trading in shares, debentures, and other
 investments and timely entries have been made therein.
 
 15.  In our opinion and according to the information and explanations
 given to us, the terms and conditions on which the Company has given
 guarantees for loans taken by others from banks or financial
 institutions are not prejudicial to the interest of the Company.
 
 16.  In our opinion and according to the information and explanations
 given to us, the term loans taken by the Company have been applied for
 the purpose for which they were raised.
 
 17.  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.
 
 18.  During the year, the Company has not made any preferential
 allotment of shares to companies/firms/ parties covered in the register
 maintained under Section 301 of the Act.
 
 19.  According to the information and explanations given to us, the
 Company has created security or charge in respect of debentures issued
 during the year.
 
 20.  The Company has not raised any money by public issue during the
 year. Accordingly, paragraph 4(xx) of the Order is not applicable.
 
 21.  According to the information and explanations given to us, no
 fraud on or by the Company has been noticed or reported during the
 course of our audit.
 
 For CHATURVEDI & SHAH                              For B S R & Co.
 Chartered Accountants                       Chartered Accountants
 
 C. D. Lala                                           Akeel Master
 Partner                                                   Partner
 Membership No.: 35671                      Membership No.: 046768
 Mumbai                                                     Mumbai
 Dated: April 30, 2009                       Dated: April 30, 2009