Reliance Infrastructure

We have examined the attached abridged Balance Sheet of Reliance
 Infrastructure Limited (‘the Company’) as at March 31, 2009, the
 abridged Profit and Loss Account for the year ended on that date
 annexed thereto and the abridged Cash Flow Statement for the year ended
 on that date, together with the notes thereon.
 
 These abridged financial statements have been prepared by the Company
 pursuant to Rule 7A of the Companies (Central Government’s) General
 Rules and Forms, 1956 and are based on the financial statements of the
 Company for the year ended March 31, 2009 prepared in accordance with
 Schedule VI of
 
 the Companies Act, 1956 and is covered by our report of even date to
 the members of the Company which report is attached herewith.
 
 Auditors’ Report on Financial Statements
 
 To the Members of Reliance Infrastructure Limited
 
 1.  We have audited the attached Balance Sheet of Reliance
 Infrastructure Limited (‘the Company’) as at March 31, 2009 and the
 related Profit and Loss Account for the year ended on that date annexed
 thereto and the Cash Flow Statement for the year ended on that date,
 which we have signed under reference to this report. 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 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 the 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, as
 amended by the Companies (Auditor’s Report) (Amendment) Order, 2004
 (together the ‘Order’), issued by the Central Government of India in
 terms of Section 227(4A) of the Companies Act, 1956 (‘the Act’) and on
 the basis of such checks 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 to the extent applicable to the Company.
 
 4.  Further to our comments in the Annexure referred to in 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, 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 Section 211(3C) of the Act;
 
 e.  On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the director of the Company is disqualified as on March 31, 2009 from
 being appointed as a director in terms of Section 274(1)(g) 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 and attached thereto, give in the prescribed
 manner, the information required by the Act and also 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 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 referred to in paragraph 3 of Auditors’ Report of even date to
 the members of Reliance Infrastructure Limited on the Financial
 Statements for the year ended March 31, 2009
 
 1.  (a) The Company has maintained proper records to show full
 
 particulars, including quantitative details and situation, of its fixed
 assets. We have been informed that the fixed assets of the Company are
 physically verified by the management according to a phased program
 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 program, physical
 verification was carried out during the year and no material
 discrepancies were noticed. However, we are informed that distribution
 system being underground is not physically verifiable.  (b) During the
 year, a substantial part of fixed assets have not been disposed off by
 the Company.
 
 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 substantially 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.
 
 3.  (a) The Company has granted unsecured loans, to two companies
 
 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 loans is Rs 57.14 Crore and Rs 18.30 Crore respectively.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 of such loans are not prima facie prejudicial to the interest of the
 Company.
 
 (c) In respect of the aforesaid loans, the parties are repaying the
 principal amounts as stipulated and are also regular in payment of
 interest, where applicable.
 
 (d) In respect of the aforesaid loans, there is no overdue amount more
 than Rupees One Lakh.
 
 (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.
 
 4.  In our opinion and according to the information and explanations
 given to us, having regard to the explanation that certain items
 purchased 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, fixed assets
 and for the sale of energy/goods and services. Further, on the basis of
 our examination of the books 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.  According to the information and explanations given to us, there
 are no contracts or arrangements referred to in Section 301 of the Act
 that need to be entered in the register required to be maintained under
 that Section.
 
 6.  The Company has not accepted any deposits from the public within
 the meaning of Section 58A and 58AA of the Act and the rules framed
 there under.
 
 7.  In our opinion, the Company’s present internal audit system is
 commensurate with its size and nature of its business.
 
 8.  On the basis of records produced to us, we are of the opinion that,
 prima facie, the cost records prescribed by the Central Government of
 India under Section 209(1)(d) of the Act have been maintained. However,
 we are not required to and have not carried out any detailed
 examination of such accounts and records.
 
 9.  (a) According to the information and explanations given to us and
 
 books and records as produced and examined by us in accordance with
 generally accepted auditing practices in India and also based on
 Management representations, undisputed statutory dues in respect of
 Provident Fund, Employees’ State Insurance dues, Investor Education and
 Protection Fund, Income Tax, Wealth Tax, Service Tax, Custom Duty,
 Excise Duty and Cess and other material statutory dues, as applicable,
 have generally been regularly deposited, by the Company during the year
 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, the particulars of dues of
 Income-Tax, Sales-Tax, Wealth Tax, Service Tax, Customs Duty, Excise
 Duty and Cess as at March 31, 2009 which have not been deposited on
 account of a dispute, are as follows - 
 
 Name of         Nature of   Amount  Period to    Forum where
 
 the statute     the dues     (Rs    which the    pending
                             Crore)   amount 
                                      relates 
 
 Works Contract  Works      0.05      2004-05     Deputy
 
 Act, 1999       Contract                         Commissioner
 
                 Tax                              (Appeal IV) of Sales
 
                                                  Tax, New Delhi
 
 Orissa Sales 
 Tax             Sales Tax  8.32      2000-02     High Court of Orissa 
 Act, 1947
 
 Finance Act,    Service 
 1994            Tax        2.71      2004-06     Customs, Excise
                                                  and Service Tax
                                                  Appellate Tribunal, 
                                                  New Delhi
 
 10.  The Company has neither accumulated losses as at March 31, 2009,
 nor has it incurred any cash losses either during the financial year
 ended on that date or in the immediately preceding financial year.
 
 11.  According to the records of the Company examined by us and the
 information and explanation given to us, the Company has not defaulted
 in repayment of dues to any financial institution or bank or debenture
 holders 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.  In our opinion, considering the nature of activities carried on by
 the Company during the year, the provisions of any special statute
 applicable to chit fund / nidhi / mutual benefit fund / societies are
 not applicable to it.
 
 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 terms and conditions of the guarantees given by the
 Company, for loans taken by others from banks or financial institutions
 during the year, are not prejudicial to the interest of the Company.
 
 16.  On the basis of review of utilization of funds pertaining to term
 loans on overall basis and related information as made available to us,
 the term loans taken by the Company have been applied for the purposes
 for which they were obtained.
 
 17.  On the basis of an overall examination of the balance sheet of the
 Company, in our opinion and according to the information and
 explanations given to us, there are no funds raised on a short-term
 basis which have been used for long-term investment.
 
 18.  The Company has not made any preferential allotment of shares to
 parties and companies listed in the register maintained under Section
 301 of the Act during the year.
 
 19.  The Company has not created charge for securities given in respect
 of debentures amounting to Rs 850 Crore issued and outstanding as at
 the year-end.
 
 20.  The Company has not raised any money by public issue during the
 year.
 
 21.  During the course of 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 not come across any fraud on or
 by the Company, noticed or reported during the year, nor have we been
 informed of such case by the Management except in case of theft of
 electricity reported by the vigilance department of the Company, the
 amount for which is not ascertainable.
 
 For Price Waterhouse                        For Chaturvedi & Shah
 
 Chartered Accountants                       Chartered Accountants
 
 Partha Ghosh                                C D Lala
 
 Partner Partner
 
 Membership No. F55913                       Membership No. F35671
 
 Place:Mumbai                                Place:Mumbai
 
 Date : April 23, 2009                       Date : April 23, 2009