Sun Pharmaceutical Industries

1.  We have audited the attached Balance Sheet of Sun Pharmaceutical
 Industries Limited (the Company) as at March 31, 2009, and also the
 Profit and Loss Account 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 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 (Auditors’ Report) Order, 2003 issued
 by the Central Government of India in terms of sub- section (4A) of
 section 227 of the Companies Act, 1956, we enclose in the Annexure, a
 statement on the matters specified in paragraphs 4 and 5 of the said
 Order.
 
 4.  Further to our comments in the Annexure referred to in Para 3
 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 Companies Act, 1956;
 
 (v) on the basis of written representations received from directors as
 on March 31, 2009 and taken on record by the Board of Directors, we
 report that none of the directors is 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 Companies Act, 1956;
 
 (vi) in our opinion and to the best of our information and according to
 the explanations given to us, the said accounts read together with
 notes thereon, give the information required by the Companies Act,
 1956, in the manner so required and give a true and fair view in
 conformity with the accounting principles generally accepted in India:
 
 (a) in the case of the balance sheet, of the state of affairs of the
 Company as at March 31, 2009
 
 (b) in the case of the profit and loss account, of the profit for the
 year ended on that date; and
 
 (c) in the case of the cash flow statement, of the cash flows for the
 year ended on that date.
 
 ANNEXURE TO THE AUDITORS REPORT
 
 (Referred to in paragraph 3 of our report of even date) Sun
 Pharmaceutical Industries Limited
 
 1.  In our opinion and according to the information and explanations
 given to us, the nature of the Company’s business / activities during
 the year is such that clauses xiii, xiv, xviii, xix and xx of paragraph
 4 of the Companies (Auditors’ Report) Order, 2003, are not applicable
 to the Company.
 
 2.  In respect of its fixed assets:
 
 (i) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (ii) As explained to us, some of the fixed assets of the Company have
 been physically verified during the year by the management in
 accordance with a phased program of verification designed to cover all
 assets 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. The discrepancies noticed on such verification were not
 material and have been properly dealt with in the books of account.
 
 (iii) Although some of the fixed assets have been disposed off during
 the year, in our opinion and according to the information and
 explanations given to us, the ability of the company to continue as a
 going concern is not affected.
 
 3.  In respect of its inventories:
 
 (i) As explained to us, inventories (excluding inventories lying with
 third parties) were physically verified by the management at reasonable
 intervals during the year. In respect of inventories lying with third
 parties, these have substantially been confirmed by them. In our
 opinion the frequency of verification is reasonable.
 
 (ii) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management were reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (iii) In our opinion and according to the information and explanations
 given to us, the Company has maintained proper records of its
 inventories and no material discrepancies were noticed on physical
 verification.
 
 4.  The Company had not granted or taken any loan, secured or
 unsecured, to or from Companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 
 5.  In our opinion and according to the information and explanations
 given to us, there are adequate internal control systems commensurate
 with the size of the company and nature of its business with regard to
 purchase of inventory and fixed assets and for sale of goods and
 services and we have not observed any continuing failure to correct
 major weaknesses in such internal control systems.
 
 6.  In respect of contracts or arrangements entered in the register
 maintained in pursuance of section 301 of the Companies Act, 1956, to
 the best of our knowledge and belief and according to the information
 and explanations given to us:
 
 (i) The particulars of contract or arrangements referred to in Section
 301 that needed to be entered into the register, maintained under the
 said section have been so entered.
 
 (ii) Where each such transaction (excluding loans reported under
 paragraph 4 above) is in excess of Rs. 5 lakhs in respect of any party,
 the transactions have been made at prices which are prima facie
 reasonable having regard to prevailing market prices at the relevant
 time, except that reasonableness could not be ascertained where
 comparable quotations are not available having regards to the
 specialized nature of some of the transactions of the company.
 
 7.  In our opinion and according to the information and explanations
 given to us the Company has not accepted any deposits within the
 meaning of Section 58A and 58AA or any other relevant provisions of the
 Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules,
 1975 with regard to deposits accepted from the public. No Order has
 been passed by the Company Law Board or National Company Law Tribunal
 or Reserve Bank of India or any Court or any other Tribunal.
 
 8.  In our opinion, the internal audit functions carried out during the
 year by firms of Chartered Accountants appointed by the management have
 been commensurate with the size of the Company and the nature of its
 business.
 
 9.  We have broadly reviewed the books of accounts and records
 maintained by the Company relating to manufacture of formulation and
 bulk drug products pursuant to the Order made by the Central Government
 for maintenance of cost records under section 209 (1)(d) of the
 Companies Act, 1956 and are of the opinion that prima facie the
 prescribed accounts and records have been made and maintained. We have,
 however, not made a detailed examination of the records with a view to
 determining whether they are accurate or complete. To the best of our
 knowledge and according to the information and explanations given to
 us, the Central Government has not prescribed the maintenance of cost
 records for any other product of the Company.
 
 10.  According to the information and explanations given to us in
 respect of statutory dues:
 
 (i) the Company has been regular in depositing undisputed statutory
 dues, including, Investor Education and Protection Fund, Employees’
 State Insurance, Income tax, Sales tax, Wealth Tax, Service Tax, Custom
 Duty, Excise Duty, cess and other material statutory dues with the
 appropriate authorities during the year. There were no undisputed dues
 that were outstanding as at March 31, 2009 for a period of more than
 six months from the date they became payable.
 
 (ii) According to the information and explanations given to us, the
 details of disputed sales tax, income tax, service tax, custom duty and
 excise duty, which have not been deposited as at March 31, 2009 on
 account of any dispute, are as under:
 
 Statute & Nature of Dues         Financial Year to which the
                                  matter pertains
  
 The Central Excise Act
 Excise Duty, Interest & Penalty   2002-03, 2004-05, 2005-06,
                                   2006-07, 2007-08, 2008-09
                                   1997-98, 1998-99, 1999-00, 2000-01,
                                   2002-03, 2003-04, 2004-05, 2005-06,
                                   2006-07, 2007-08
                                   1998-99
                                   2001-02
 
 Customs Act, 1962
 Custom Duty, Penalty & Interest   2000-01
 Sales Tax Act
 Sales Tax, Interest and Penalty   1994-95, 1998-99, 1999-00, 2000-01,
                                   2001-02, 2002-03, 2003-04
                                   1988-89 to 1991-92, 1997-98,
                                   1999-00, 2001-02
                                   1981-82 to 1985-86
 Income Tax Act
 Income tax and Interest           1995-96, 2003-04
                                   2003-04
 Service Tax
 Service tax                       2005-06
 ESI Act
 Contribution and Interest         1987 to 1992
 DPCO
 DPEA and interest                 1981-1987
 
 Forum where dispute         Amount
 is pending              Rs. in Million
 
 Commissioner                      44.4
 Tribunal                         187.3
 High Court                         0.1
 Supreme Court                      0.2
 Settlement Commission             10.7
 Assistant / Deputy /               6.0
 Joint Commissioner
 Tribunal                           4.4
 High Court                         0.7
 Tribunal                           0.9
 Commissioner                       6.6
 Commissioner                       1.9
 Appellate authority                0.2
 DPLRC                             14.0
 
 There were no unpaid disputed dues in respect of wealth tax and cess
 during the year.
 
 11.  In our opinion and according to information and explanations given
 to us, the company does not have any accumulated losses as at the end
 of the year. The Company has not incurred cash losses during the
 financial year covered by our audit and the immediately preceding
 financial year.
 
 12.  In our opinion and according to the information and explanation
 given to us, the Company has not defaulted in repayment of dues to
 financial institutions and banks. The Company has not obtained any
 borrowings by way of debentures.
 
 13.  In our opinion, the Company has maintained adequate documents and
 records where it has granted loans and advances on the basis of
 security by way of pledge of shares. The Company has not granted any
 loans and advances on the basis of security by way of pledge of
 debentures and other securities.
 
 14.  In our opinion and according to the information and explanation
 given to us, the terms and conditions of the guarantees given by the
 Company for loan taken by others from banks and financial institutions,
 are not prima facie prejudicial to the interest of the Company.
 
 15.  To the best of our knowledge and belief and according to the
 information and explanations given to us, in our opinion, term loans
 availed by the Company were, prima facie, applied by the Company during
 the year for the purposes for which the loans were obtained other than
 temporary deployment pending application.
 
 16.  According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that the funds raised on short term basis have, prima facie, not been
 used during the year for long term investment.
 
 17.  To the best of our knowledge and belief and according to the
 information and explanation given to us, no fraud on or by the Company
 was noticed or reported during the year.
 
        For Deloitte Haskins & Sells Chartered Accountants
                                              K. A. Katki
                                                  Partner
 Place: Mumbai
 Date : May 30, 2009              (Membership No. 038568)