1 We have audited the attached balance sheet of Suryachakra Power
 Corporation Limited (the Company) as at 31 March 2011, 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 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 (Auditor''s 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, 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 paragraph 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 the
 directors, as on 31 March 2011, and taken on record by the Board of
 Directors, none of the Directors is disqualified as on 31 March 2011
 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 relation to the matter set out in note 3 of the Schedule 20 of
 the financial statements, pending the final agreement with the Andaman
 & Nicobar Administration (A & N Administration), we are unable to
 comment on the extent of ultimate recoverability of Rs.59,494,972 for
 the year ended 31 March 2011 (previous year: Rs.47,835,455) and the
 total receivables as at 31 March 2011 of Rs. 85,904,780 (previous year:
 Rs.118,640,315) which are subject to confirmation by the A&N
 Administration. Furthermore, the Company has accrued interest on the
 above cumulative billings of Rs. 43,721,965 for the year ended 31 March
 2011 (previous year: Rs.28,503,384) which are subject to confirmations
 by the A&N Administration. The total interest accrued on such
 disagreements which are subject to confirmations by the A&N
 Administration is Rs. 127,574,329 (previous year: Rs.83,852,364). The
 Consequential impact of the above matter on the profit for the year
 ended 31 March 2011 and the retained earnings as at 31 March 2011 is
 indeterminable; and
 
 (vii) in our opinion and to the best of our information and according
 to the explanations given to us, subject to the matter set out at
 paragraph (vi) above, the said accounts 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 31 March 2011;
 
 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
 
 The Annexure referred to in the auditors'' report to the members of
 Suryachakra Power Corporation Limited (the Company) for the year
 ended 31 March 2011. We report that:
 
 i. (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 the fixed assets are verified every year. In
 our opinion, the periodicity of physical verification is reasonable
 having regard to the size of the Company and the nature of its assets.
 In accordance with the programme all the fixed assets were verified
 during the year and no material discrepancies were noted on such
 verification.
 
 (c) Fixed assets disposed off during the year were not substantial and
 therefore do not affect the going concern assumption.
 
 ii. (a) The inventory consisting of raw materials, stores, spares and
 consumables have been physically verified by the management during the
 year. In our opinion, the frequency of such verification is reasonable.
 
 (b) In our opinion, the procedures of 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. The
 discrepancies noticed on verification between the physical stocks and
 the book records were not material.
 
 iii. (a) The Company has granted an unsecured loan to one company
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount outstanding during the year was Rs.
 65,004 and the year-end balance of such loans was Rs. 65,004.
 
 (b) In our opinion, terms and conditions on which the above mentioned
 unsecured loan have been granted is not, prima facie, prejudicial to
 the interest of the Company.
 
 (c) In case of the above mentioned loan granted to companies listed in
 the register maintained under Section 301, the terms of arrangement do
 not stipulate any repayment schedule for principal and interest, which
 are repayable on demand.
 
 (d) There are no overdue amounts of more than Rupees one lakh in
 respect of companies, firms or other parties listed in the register
 maintained under Section 301 of the Companies Act, 1956.
 
 (e) The Company has taken interest free unsecured loan from a party
 covered in the register maintained under Section 301 of the Companies
 Act, 1956. The maximum amount outstanding during the year was Rs.
 159,400 and the year-end balance of such loan was Rs. Nil.
 
 (f) In our opinion, the terms and conditions on which such loan have
 been taken by the Company are not, prima facie, prejudicial to the
 interest of the Company.
 
 (g) The above mentioned loan was repayable on demand and was repaid
 before the year-end and accordingly the Company has been regular in
 repaying the principal.
 
 iv. 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 are for the Company''s specialised
 requirements and 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 the nature of its
 business with regard to purchase of inventories and fixed assets and
 with regard to the sale of goods. In our opinion and according to the
 information and explanation given to us, there is no continuing failure
 to correct major weaknesses in internal control system.
 
 v. (a) In our opinion and according to the information and explanations
 given to us, the particulars of contracts or arrangements referred to
 in Section 301 of the Companies Act, 1956 have been entered in the
 register required to be maintained under that Section.
 
 (b) In our opinion, and according to the information and explanations
 given to us, the transactions made in pursuance of contracts and
 arrangements referred to in point (a) above and exceeding the value of
 Rs.5 lakh with any party during the year, have been made at prices
 which are reasonable having regard to the prevailing market prices at
 the relevant time.
 
 vi.  The Company has not accepted any deposits from the public.
 
 vii. The scope and coverage of the internal audit system needs to be
 strengthened to make it commensurate with the size and nature of its
 business.
 
 viii. 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, 1956, 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.
 
 ix. (a) According to the information and explanations given to us and
 on the basis of our examination of the records of the Company, the
 Company has been generally regular in depositing amounts
 deducted/accrued in the books of account in respect of undisputed
 statutory dues including Sales tax, Service tax, Customs duty and other
 material statutory dues except that there were significant delays in
 payment of Provident fund and Income tax. As informed to us the
 provisions of Investor Education and Protection Fund, Employee'' State
 Insurance, Wealth tax and Excise duty are not applicable to the
 Company.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of Provident Fund, Income tax,
 Sales tax, Service tax, Customs duty and other material statutory dues
 were in arrears as at 31 March 2011 for a period of more than six
 months from the date they became payable. As informed to us the
 provisions of Investor Education and Protection Fund, Employee'' State
 Insurance, Wealth tax and Excise duty are not applicable to the
 Company.
 
 (c) Further, 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.
 
 (d) According to the information and explanations given to us, there
 are no dues of Income tax, Sales tax, Service tax, Customs duty and
 Cess which have not been deposited with the appropriate authorities on
 account of any dispute. As informed to us the provisions of Excise duty
 are not applicable to the Company.
 
 x. Subject to the matter specified in paragraph 4(vi) of our report
 even dated, the Company does not have any accumulated losses at the end
 of the financial year and has not incurred cash losses during the
 financial year and in the immediately preceding financial year.
 
 xi. In our opinion and according to the information and explanations
 given to us, except for the delays stated in Appendix 1 attached, the
 Company has not defaulted in repayment of dues to its bankers or to any
 financial institutions.
 
 xii. The Company has not granted loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 xiii. In our opinion and according to the information and explanations
 given to us, the Company is not a chit fund/ nidhi/ mutual fund/
 society.
 
 xiv. According to the information and explanations given to us, the
 Company is not dealing or trading in shares, securities, debentures and
 other investments. Accordingly, clause 4(xiv) of the Order is not
 applicable.
 
 xv. According to the information and explanation given to us, the
 Company has not given any guarantee for loan taken by others from banks
 and financial institutions.
 
 xvi. In our opinion and according to the information and explanations
 given to us and on the basis of our examination of the books of
 account, the term loans obtained by the Company were applied for the
 purpose for which such loans were obtained.
 
 xvii. 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 no funds raised on short-term basis have been used for
 long term investment.
 
 xviii. 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.
 
 xix.  The Company did not have any outstanding debentures during the
 year.
 
 xx. There are no unutilised amounts of money raised by public issues
 and thus paragraph 4(xx) of the Order is not applicable.
 
 xxi. 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 B S R and Co.                  for Visweswara Rao & Associates
 
 Chartered Accountants              Chartered Accountants
 
 Firm registration No. : 128901W    Firm registration No. : 005774S
 
 Zubin Shekary                      A. S.Naidu
 
 Partner                            Partner
 
 Membership No: 48814               Membership No: 208582
 
 Place : Hyderabad                  Place : Hyderabad
 
 Date : 11 July 2011                Date : 11 July 2011
 
 Details of defaults in repayment of principal on term loans to
 financial institutions.
 
 Name                  Amount    Due date     Payment date    Delay Days
 
 SREI Infrastructure
 Finance Limited     4,955,060  30-Apr-10     29-Sep-10         152
 
 SREI Infrastructure 
 Finance Limited     5,180,290  31-Jul-10     29-Dec-10         151
 
 SREI Infrastructure
 Finance Limited     4,966,210  31-Oct-10     30-Mar-11         150
 
 SREI Infrastructure 
 Finance Limited     5,123,425  31-Jan-11     31-Mar-11          59
 
 Details of defaults in payment of interest on term loans to financial
 institutions.
 
 Name                    Amount      Due date   Payment date  Delay Days
 
 SREI Infrastructure 
 Finance Limited         890,457    30-Apr-10   29-Sep-10       152
 
 SREI Infrastructure 
 Finance Limited         814,809    31-Jul-10   29-Dec-10       151
 
 SREI Infrastructure 
 Finance Limited         732,006    31-Oct-10   30-Mar-11       150
 
 SREI Infrastructure 
 Finance Limited         569,194    31-Jan-11   31-Mar-11        59
 
 Details of defaults in repayment of principal on term loans to banks.
 
 
 
 Name                    Amount   Due date  Date of payment  Delay Days
 
 State Bank of India 
 (Kolkata) Corporate 
 loan                  1,800,000  1-Jun-10  3-Jul-10            32
 
 State Bank of India 
 (Kolkata) Corporate 
 loan                  1,800,000  1-Jul-10  19-Jul-10           18
 
 State Bank of India 
 (Kolkata) Corporate 
 loan                  1,800,000  1-Aug-10   3-Aug-10            2
 
 State Bank of India 
 (Kolkata) Rupee loan  5,000,000  1-Jul-10   3-Jul-10            2
 
 
 for B S R and Co.                    for Visweswara Rao & Associates
 
 Chartered Accountants                Chartered Accountants
 
 Firm registration No. : 128901W      Firm registration No. : 005774S
 
 Zubin Shekary                        A.S.Naidu
 
 Partner                              Partner
 
 Membership No: 48814                 Membership No: 208582
 
 Place: Hyderabad                     Place: Hyderabad
 
 Date : 11 July 2011                  Date: 11 July 2011