We report that we have audited the attached Balance Sheet of Shriram
 Investments Limited as at 31st March 2005 and the Profit and Loss
 Account of the Company for the year ended on that date annexed thereto
 and the cash flow statement for the year ended on that date, in which
 are incorporated the audited statements of Western Region and two Sub
 regions of Southern Region audited by us; and Eastern, Northern, and
 Seven Sub-regions of Southern Region as audited by the Branch Auditors,
 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.
 
 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 reasonable basis for
 our opinion.
 
 1. As required by the Companies (Auditor's Report) Order, 2003 issued
 by Government of India in terms of sub section (4A) of section 227 of
 The Companies Act 1956, and on the basis of such checks as we
 considered appropriate and according to the information and
 explanations given to us during the course of audit, we enclose in the
 annexure a statement on the matters specified in the paragraph 4 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 purposes of
 audit.
 
 (b) In our opinion, proper books of account as required by law have
 been kept by the company, so far as it appears from our examination of
 those books.
 
 (c) The Balance Sheet and Profit and Loss Account dealt with by this
 report are in agreement with the books of account.
 
 (d) In our opinion, the Balance Sheet and Profit and Loss Account are
 in compliance with the accounting standards referred to in subsection
 (3C) of Section 211 of the Companies Act, 1956 to the extent
 applicable.
 
 (e) Reports of the branch auditors of the Eastern, Northern and Seven
 Sub Regions of Southern Region have been forwarded to us and have been
 considered and relied upon by us in preparing our report.
 
 (f) According to the information and explanations given to us and on
 the basis of written representations from the directors of the company,
 taken on record by the Board of Directors, none of the directors are
 disqualified as on 31st March, 2005 from being appointed as a director
 under section 274(1)(g) of the Companies Act, 1956.
 
 (g) In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts together with the notes
 thereon give the information required by the Companies Act, 1956, in
 the manner so required and reflects the true and fair view of the state
 of affairs of the company in conformity with the accounting principles
 generally accepted in India:
 
 (i) In the case of Balance Sheet, of the state of affairs of the
 company as at 31st March 2005;
 
 (ii) in the case of Profit and Loss account, of the profit for the year
 ended on that date; and
 
 (iii) In the case of cash flow statement of the cash flow for the year
 ended on that date.
 
                                               For M/s G.D. Apte & Co.,
                                               Chartered Accountants
 
                                               (C. M. Dixit)
 Place: Chennai                                Partner.
 Date: 28th June 2005                          Membership No: 17532
 
 ANNEXURE TO THE AUDITORS' REPORT
 
 (i) (a) The Company is maintaining proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) As informed to us, the fixed assets have been physically verified
 by the Management at reasonable intervals and no material discrepancies
 have been noticed on such verification.
 
 (c) No substantial part of the fixed assets has been disposed off
 during the year.
 
 (ii) The company does not hold any inventory, and as such the clause is
 not applicable to the company.
 
 (iii) (a) In our opinion and according to information and explanations
 given to us, the company had taken unsecured loans from three companies
 covered in the register maintained under section 301 of the Companies
 Act, 1956. The maximum amount involved during the year was Rs. 3,420
 lacs and the year-end balance of loans taken from such companies were
 Nil.
 
 In our opinion and according to information and explanations given to
 us, there were two companies covered in the register maintained under
 section 301 of the Companies Act, 1956 to which the company has granted
 secured loans. The maximum amount involved during the year was
 Rs.976.76 lacs and the year-end balances of loans granted to such
 companies were Rs.888.50 lacs.
 
 In our opinion and according to information and explanations given to
 us, there were two companies covered in the register maintained under
 section 301 of the Companies Act, 1956 to which the company had granted
 unsecured loans. The maximum amount involved during the year was Rs.65
 lacs and the year-end balance of loan granted to such companies was
 Nil.
 
 (b) In our opinion, the rate of interest and other terms and conditions
 on which loans have been taken from/granted to companies, covered in
 the register maintained under section 301 of the Companies Act, 1956
 are not, prima facie, prejudicial to the interest of the company.
 
 (c) The company is regular in repaying the principal amount of loans
 taken and has been regular in the payment of interest. The recoveries
 of principal and interest on loans granted by the company has been
 regular.
 
 (d) There is no overdue amount in case of loans granted, to/taken from
 companies, covered in the register maintained under section 301 of the
 Companies Act, 1956.
 
 (iv) In our opinion and according to information and explanations given
 to us, there are adequate internal control procedures commensurate with
 the size of the company and the nature of its business for purchase of
 fixed assets, sale of goods and rendering of services. In our opinion,
 there were no major weaknesses in internal control procedures during
 the year.
 
 (v)(a) According to the information and explanations given to us, we
 are of the opinion that the transactions that need to be entered into
 the register maintained under Section 301 of the Companies Act, 1956
 have been so entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of contracts or
 arrangements entered in the register maintained under section 301 of
 the Companies Act, 1956 and exceeding the value of Rs.  5 lacs in
 respect of any party during the year have been made at prices which are
 reasonable having regard to prevailing market prices at the relevant
 time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the Non Banking Financial
 Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998
 and the provisions of Section 58A and 58AA of the Companies Act, 1956
 with regard to deposits accepted from the public.  As per the
 information and explanations given to us, the Company Law Board has not
 passed any order on the Company.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and nature of its business.
 
 (viii) According to the information and explanations given to us, the
 Central Government has not prescribed the maintenance of cost records
 under section 209(1)(d) of the Companies Act, 1956.
 
 (ix) (a) According to the information and explanations given to us and
 according to the books of account and records as produced for our
 verification and examined by us, in our opinion, the undisputed dues in
 respect of Provident Fund, Investor Education And Protection Fund,
 Employees' State Insurance, Income-Tax, Sales-Tax, Wealth Tax, Customs
 Duty, Excise Duty, Cess and other material statutory dues applicable to
 the company have generally been regularly deposited by the Company
 during the year with the appropriate authorities.
 
 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, Customs Duty, Excise Duty, Cess and other
 material statutory dues applicable to the company were in arrears, as
 at 31st March 2005 for a period of more than six months from the date
 they became payable.
 
 (b) As at 31st March 2005, according to the records of the Company, the
 following are the particulars of disputed dues on account of income tax
 and interest-tax matters that have not been deposited:
 
 Name of the    Assessment         Amount    Forum where dispute
 Status         Years         (Rs. in Lacs)  is pending
 
 Income Tax     2002-2003          299.81    CIT (Appeals)
 Interest Tax   1997-1998           16.72    DCIT
                1999-2000          123.53    ITAT
                2000-2001          143.39    ITAT
 
 (x) The Company neither has accumulated losses as at 31st March 2005
 nor it has incurred any cash losses during the financial year ended on
 that date or in the immediately-preceding financial year.
 
 (xi) Based on our audit procedures and as per the information and
 explanations given by the management, we are of the opinion that the
 Company has not made any default in repayment of its dues to any
 financial institution, bank or to debenture holders during the year
 except for repayment of its dues amounting to Rs. 57.96 lacs to a
 financial institution. As per the information given to us the said
 default has occurred due to withholding the payment, pending settlement
 of dues. The company has however paid an amount of Rs. 4.55 lacs under
 the One Time Settlement scheme offered by the Financial Institution,
 which is pending to be approved by the Board of the Institution.
 
 (xii) The Company has granted loans and advances on the basis of
 security by way of pledge of debentures, shares and other securities
 and adequate documents and records are maintained in this regard.
 
 (xiii) The company is not a chit fund/nidhi/mutual benefit fund or
 society, and as such the clause is not applicable to the company.
 
 (xiv) The company is not dealing in shares and as such the clause is
 not applicable to the company.
 
 (xv) The Company has given guarantees for loans taken by others from
 banks or financial institutions.  In our opinion, the terms and
 conditions are not prima facie, prejudicial to the interest of the
 Company.
 
 (xvi) In our opinion, the term loans have been applied for the purposes
 for which they were raised.
 
 (xvii) According to the information and explanations given to us and on
 the basis of examination of cash flow statement and other records and
 on an overall examination of the balance sheet of the Company, in our
 opinion, considering the nature of its business and activity being
 carried on, short term funds have not been utilized for long term
 purposes and vice versa.
 
 (xviii) During the year, the Company has not made any preferential
 allotment of shares to parties and Companies covered in the Register
 maintained under Section 301 of the Companies Act, 1956.
 
 (xix) According to the information and explanations given to us, the
 Company has created securities for the debentures issued.
 
 (xx) The Company has not raised any money by public issue during the
 year.
 
 (xxi) According to the information and explanations given to us and
 based on the audit procedures implemented by us no fraud on or by the
 company has been noticed or reported during the year except for
 misappropriation of cash amounting to Rs. 6 lacs by an employee.
 
                                      For M/s G.D. Apte & Co.,
                                      Chartered Accountants.
                                      (C. M. Dixit)
 Place: Chennai                       Partner
 Date : 28th June 2005                Membership No: 17532