1 We have audited the attached Balance Sheet of Reliance Communications
 Limited (''the Company'') as at March 31, 2012 and also the Statement of
 profit and loss 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 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 (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.
 
 4 Without qualifying our report, we draw your attention to Note 2.38 of
 the financial statements regarding the Scheme of Arrangement (''the
 Scheme'') sanctioned by the Hon''ble High Court of Judicature at Mumbai.
 The Scheme permits the Company to adjust expenses and/ or losses
 identified by the Board of Directors, which are required to be debited
 to the Statement of profit and loss by a corresponding withdrawal from
 General Reserve, which is considered to be an override to the relevant
 provisions of Accounting Standard 5 (AS 5) Net Profit or Loss for the
 Period, Prior Period Items and Changes in Accounting Policies''. The
 Company has identified exchange variations of Rs. 1,064 crore (including
 Rs. 775 crore in the nature of borrowing costs), provision for doubtful
 debt of Rs. 220 crore and provision for subsidy receivable of Rs. 48 crore,
 as in the opinion of the Board, such exchange loss and provisions are
 considered to be of an exceptional nature and accordingly, these
 expenses have been met by corresponding withdrawal from General
 Reserve. Pending clarification from the Institute of Chartered
 Accountants of India (ICAI), the Company has credited such withdrawal
 to the Statement of profit and loss. Had such write off of expenses and
 losses not been met from General Reserve, the Company would have
 reflected a loss after tax for the year of Rs. 1,176 crore and the
 consequential effect of this on the profit after tax for the year would
 have been of Rs. 1,332 crore.
 
 5 Further to our comments in the Annexure referred to in the paragraph
 3 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 Balance Sheet, Statement of profit and loss and Cash flow
 statement dealt with by this report are in agreement with the books of
 account;
 
 (d) in our opinion, the Balance sheet, Statement of profit and loss 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; as referred in paragraph (4) above, the
 Company has exercised the option available as per the Court Order which
 overrides the relevant provisions of Accounting Standard 5 (AS 5);
 
 (e) on the basis of written representations received from the directors
 of the Company as at March 31, 2012 and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as at
 March 31, 2012 from being appointed as a director of the Company under
 clause (g) of sub-section (1) of Section 274 of the Companies Act,
 1956; and
 
 (f) in our opinion, and to the best of our information and according to
 the explanations given to us, the financial statements 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 March 31, 2012;
 
 ii.  in the case of the Statement of profit and loss, 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.
 
 With reference to the Annexure referred to in the Auditors'' Report to
 the Members of Reliance Communications Limited (''the Company'') on the
 financial statements for the year ended March 31, 2012, we report the
 following:
 
 1.  (a) The Company is in the process of updating its fixed asset
 register including, to give effect to the assets transferred on
 demerger of the optical fibre undertaking and the passive
 infrastructure to a subsidiary company,
 
 (b) We are informed that the Company physically verifies its assets
 over a three year period, except for base trans-receiver stations. We
 are informed that these assets are under continuous operational
 surveillance at National Network Operating Centre and are therefore not
 separately physically verified. In our opinion, this periodicity of
 physical verification is reasonable having regard to the size of the
 Company and the nature of its assets. In accordance with this policy,
 the Company has physically verified certain fixed assets during the
 year,
 
 (c) Fixed assets disposed off during the year were not substantial and,
 therefore, do not affect the going concern assumption.
 
 2.  (a) The inventory has been physically verified by management during
 the current year. In our opinion, the frequency of such verification is
 reasonable.
 
 (b) The procedures for the physical verification of inventories
 followed by 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.
 Discrepancies identified on physical verification of inventories as
 compared to book records were not material.
 
 3.  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.
 Accordingly, paragraph 4(iii) of the Order is not applicable.
 
 4.  In our opinion, and according to the information and explanations
 given to us, and having regard to the explanation that purchases of
 certain items of inventories and fixed assets are for the Company''s
 specialised requirements for which 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
 nature of its business with regard to the purchase of inventories and
 fixed assets and with regard to the sale of services. In our opinion,
 activities of the Company do not involve sale of goods. In our opinion,
 and according to the information and explanations given to us, there is
 no continuing failure to correct major weaknesses in the 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 Companies Act, 1956.
 
 6.  The Company has not accepted any deposits from the public.
 
 7.  In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 8.  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, 1 956 in respect of telecommunication activities 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.
 
 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, Wealth Tax, Income Tax,
 Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees'' State
 Insurance and other material statutory dues have been generally
 regularly deposited during the year by the Company with the appropriate
 authorities. As explained to us, the Company did not have any dues on
 account of excise duty and Investor Education and Protection Fund.
 According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Wealth Tax,
 Income Tax, Service Tax, Customs Duty, Sales Tax, Entry Tax, Employees''
 State Insurance and other material statutory dues were in arrears as at
 March 31, 2012 for a period of more than six months from the date they
 became payable.
 
 (b) According to the information and explanations given to us, there
 are no dues of Provident Fund, Wealth Tax, Income Tax, Service Tax,
 Customs Duty, Employees'' State Insurance which have not been deposited
 on account of any dispute. The dues of Excise Duty, Sales Tax and Entry
 Tax as disclosed below have not been deposited by the Company on
 account of disputes.
 
 Name of the 
 Statute      Nature of 
              dues       Amount   Period to which   Forum where dispute 
                                                    is pending
                        (Rs. 
                         crore)   the amount 
                                  relates
 
 Central 
 Sales Tax,  
 West 
 Bengal       Central 
              Sales Tax    0.34   2007-08           West Bengal Tax
                                                    revision board
 
              Central 
              Sales Tax    1.73   2008-09           Joint Commissioner 
                                                   (Appeals)
 
 Central 
 Sales Tax, 
 Uttar 
 Pradesh      Central 
              Sales Tax    0.24   2003-04           UP Trade Tax Tribunal
 
                           0.93   2004-05           High Court of Uttar
                                                    Pradesh
 
                           0.07   2006-07           UP Trade Tax Tribunal
 
 Central 
 Sales Tax,   
 Orissa       Central 
              Sales Tax    0.02   Oct 06 - Mar 09   Joint Commissioner
                                                   (Appeals)
 
 Central 
 Sales Tax, 
 Maharashtra  Central 
              Sales Tax    4.79   2004-05           Joint Commissioner 
                                                   (Appeals)
 
 Central 
 Sales Tax,   
 Bihar        Central 
              Sales Tax    0.03   2005-06           Deputy Commissioner
                                                   (Appeals)
 
 Entry Tax, 
 Assam        Entry Tax    0.10   2007-08           Deputy Commissioner
                                                   (Appeals)
 
 Entry Tax, 
 Bihar        Entry Tax    0.76   2007-08           Joint Commissioner 
                                                   (Appeals)
 
                           0.20   2008-09           Joint Commissioner 
                                                   (Appeals)
 
 Entry Tax, 
 Madhya 
 Pradesh      Entry Tax    0.05   2006-07           Deputy Commissioner
                                                   (Appeals)
 
                           0.29   2002-03           MP Taxation Board
 
                           0.19   2003-04           MP Taxation Board
 
                           0.12   2005-06           MP Taxation Board
 
                           0.12   2006-07           MP Taxation Board
 
                           0.52   2007-08           Deputy Commissioner
                                                   (Appeals)
 
                           0.07   2008-09           MP Taxation Board
 
 Entry Tax, 
 Orissa       Entry Tax    0.05   Oct 06 - Mar 09   Joint Commissioner
                                                   (Appeals)
 
 Entry Tax, 
 Rajasthan    Entry Tax    0.03   2005-06           Deputy Commissioner
                                                   (Appeals)
 
                           6.64   2007-08           High Court of 
                                                    Rajasthan
 
                           6.52   2008-09           High Court of 
                                                    Rajasthan
 
                           0.96   2009-10           Supreme Court
 
 Entry Tax,
 Uttar 
 Pradesh      Entry Tax    0.13   2003-04           UP Trade Tax Tribunal
 
 Excise duty, 
 Maharashtra  Excise duty  2.08   2002-04           UP Trade Tax Tribunal
 
 VAT, Bihar   VAT          0.68   2005-06           Deputy Commissioner
                                                   (Appeals)
 
 VAT, 
 Uttarakhand  VAT          0.01   2005-06           Uttarakhand Sales 
                                                    Tax Tribunal
 
                           0.03   2007-08           Joint Commissioner 
                                                   (Appeals)
 
 VAT, West 
 Bengal       VAT          1.49   2005-06           West Bengal Tax 
                                                    revision board
 
                           1.80   2006-07           West Bengal Tax
                                                    revision board
 
                           2.34   2007-08           West Bengal Tax
                                                    revision board
 
                           2.75   2008-09           Joint Commissioner
                                                   (Appeals)
 
 10.  The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the current
 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 its
 bankers or debenture holders or to any financial institutions.
 
 12.  According to the information and explanations given 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.
 
 13.  In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund/ nidhi/ mutual benefit
 fund/ society
 
 14.  According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments.
 
 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 wholly owned subsidiaries and other
 companies with whom the Company has business dealings, 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 and the records of the Company examined by 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 the short term basis have not been
 used for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 companies/ firms/ parties covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 19.  According to the information and explanations given to us, the
 Company has created securities in respect of Debentures issued except
 for certain Debentures issued during the year as mentioned in Note
 2.03.1 for which the Company is in the process of creating the security
 
 20.  The Company has not raised any money by public issues during the
 year,
 
 21.  According to the information and explanations given to us, no
 significant fraud on or by the Company, that causes a material
 misstatement to the financial statements, has been noticed or reported
 during the year.
 
 For Chaturvedi & Shah        For B S R & Co.
 
 Chartered Accountants        Chartered Accountants
 
 Firm Reg. No.: 101720W       Firm Reg. No.: 101248W
 
 C.  D. Lala                  Bhavesh Dhupelia
 
 Partner                      Partner
 
 Membership No: 035671        Membership No: 042070
 
 Mumbai
 
 May 26, 2012