1.  We have audited the attached Balance Sheet of Tata Sponge Iron
 Limited (the Company) as at 31st March, 2011, the Profit and Loss
 Account and Cash Flow Statement of the Company for the year ended on
 that date, both annexed thereto. These financial statements are the
 responsibility of the Companys 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 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 (Auditors Report) Order, 2003, issued
 by the Central Government of India in terms of Section 227(4A) 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, to the
 extent applicable.
 
 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 it 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 are in compliance with
 the accounting standards referred to in Section 211 (3C) of the
 Companies Act 1956;
 
 (v) in our opinion and to the best of our information and according to
 the explanations given to us, 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 31st March 2011;
 
 (b) in the case of the Profit and Loss Account, of the profit of the
 Company for the year ended on that date;
 
 (c) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 5.  On the basis of written representations received from the directors
 as on 31st March 2011 and taken on record by the Board of Directors,
 none of the directors is disqualified as on 31st March 2011 from being
 appointed as a director in terms of Section 274(1)(g) of the Companies
 Act, 1956.
 
 ANNEXURE TO THE AUDITORS REPORT
 (Referred to in paragraph 3 of our report of even date)
 
 (i) Having regard to the nature of the Companys
 business/activities/result paragraphs 4(vi), (x), (xii), (xiii), (xiv),
 (xv) and (xix) of the Companies (Auditors Report) Order, 2003 are not
 applicable.
 
 (ii) In respect of its fixed assets:
 
 (a) The Company has maintained proper records showing full particulars,
 including quantitative details and situation of fixed assets.
 
 (b) The fixed assets were physically verified during the year by the
 management in accordance with a regular program of verification, which,
 in our opinion, provides for physical verification of all the fixed
 assets at regular intervals. According to the information and
 explanations given to us, no material discrepancies were noticed on
 such verification.
 
 (c) The fixed assets disposed off during the year, in our opinion, do
 not constitute a substantial part of the fixed assets of the Company
 and such disposal has, in our opinion, not affected the going concern
 status of the Company.
 
 (iii) In respect of its inventories:
 
 (a) As explained to us, inventories were physically verified during the
 year by the management at reasonable intervals.
 
 (b) In our opinion and according to the information and explanations
 given to us, 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) 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.
 
 (iv) The Company has neither granted nor taken any loans, secured or
 unsecured, to/from companies, firms or other parties listed in the
 Registermaintainedundersection301 of the Companies Act, 1956.
 
 (v) In our opinion and according to the information and explanations
 given to us, having regard to the explanation that some of the items
 purchased are of special nature and suitable alternative sources are
 not readily available for obtaining comparable 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
 and fixed assets and the sale of goods and services. During the course
 of our audit we have not observed any major weaknesses in the internal
 control system.
 
 (vi) 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:
 
 (a) The particulars of contracts or arrangements referred to in section
 301 that need to be entered into the register maintained under the said
 section have been so entered.
 
 (b) Where each of such transaction is in excess of rupees five lakhs in
 respect of any party, the transactions have been made at prices which
 are prima facie reasonable having regard to the prevailing market
 prices at the relevant time except in respect of certain purchases for
 which comparable quotations are not available and in respect of which
 we are unable to comment.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size and the nature of its business.
 
 (viii) To the best of our knowledge and according to the information
 given to us, the Central Government has not prescribed the maintenance
 of cost records under Section 209(1 )(d) of the Companies Act, 1956 for
 any product of the Company.
 
 (ix) According to the information and explanations given to us in
 respect of statutory dues:
 
 (a) The Company has generally been regular in depositing undisputed
 dues, including Provident Fund, 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
 applicable to it with the appropriate authorities.
 
 (b) there were no undisputed amounts payable in respect of Income tax,
 Sales-tax, Wealth tax, Service tax, Custom duty, Excise duty and Cess
 and other material statutory dues in arrears as at 31* March, 2011 for
 a period of more than six months from the date they became payable
 except for sales tax of Rs. 324.58 lakhs which is outstanding for more
 than six months.
 
 (c) details of dues of Income tax, Sales tax, Service tax, Customs
 duty, Wealth tax, Excise duty and Cess which have not been deposited as
 at 31st March, 2011 on account of any dispute are given below:
 
 Name of Statute Nature of dues  Amount  Period to which  Forum where
                                         the amount       dispute
                                  (Rs.   relates          is pending
                                  Lacs)
 
 Central Sales 
 Tax             Central Sales     6.74  1987-88,1992-93, Orissa Sales
 Act 1956        Tax                     1993-94,1994-95, Tax Tribunal
                                         1997-98
 
                                  66.71  2005-06          Joint 
                                                          Commissioner
                                                          of Sales Tax
 
                                1226.89  2006-07,2007-08  High Court of
                                                          Orissa
 
 Orissa Sales    Sales Tax         4.85  1987-88,1992-93, Orissa Sales
 Tax Act                                 2000-01          Tax Tribunal
 
                                   5.60  1989-90,1990-91  Commercial 
                                                          Tax Officer
 
 Orissa Entry 
 Tax Act         Entry Tax       102.62  2005-06          Assistant 
                                                          Commissioner
                                                          of Commercial
                                                          Taxes
 
                                 477.02  2006-07,2007-08  High Court of
                                                          Orissa
 
 Orissa Value 
 Added Tax       Value Added Tax   7.14  2005-06          Commissioner
 Act, 2004                                                of Commercial
                                                          Taxes
 
                                1065.82  2006-07, 2007-08 High Court of
                                                          Orissa
 
 income tax 
 Act, 1961       Income tax      257.24  2005-06          Commissioner
                                                          of Income
                                                          tax (Appeals)
 
 Income tax 
 Act, 1961       Income tax      257.60  2007-08          Commissioner
                                                          of Income 
                                                          tax (Appeals)
 
 
 (x) In our opinion and according to the information and explanations
 given to us, the Company has not defaulted in the repayment of dues to
 banks.
 
 (xi) 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.
 
 (xii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, in our
 opinion, funds raised on short term basis have not been used for long
 term investment.
 
 (xiii) According to the information and explanations given to us, 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.
 
 (xiv) The Company has not raised any money by public issue.
 
 (xv) To best of our knowledge and according to the information and
 explanations given to us, no fraud by the Company and no fraud on the
 Company was noticed or reported during the year.
 
 
 
                                           For Deloitte Haskins & Sells
                                                  Chartered Accountants 
                                              (Registration NO.302009E)
 
 
                                                  Abhijit Bandyopadhyay
                                                                Partner 
                                                  Membership No. 054785
 
 
                                              Jamshedpur, 6th May, 2011