1.  We have audited the attached Balance Sheet of ZF STEERING GEAR
 (INDIA) LIMITED (the `Company) as at March 31, 2011, 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 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 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 as
 amended by the Companies (Auditors Report) (Amendment) Order, 2004
 (the `Order) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, (the Act)
 we give 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 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 purpose of our
 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, 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 sub-section (3C) of Section 211 of the Act, to
 the extent applicable;
 
 (e) On the basis of written representations received from the Directors
 as on March 31, 2011, and taken on record by the Board of Directors,
 none of the Directors is disqualified as on March 31, 2011 from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 Section 274 of the Act; and
 
 (f) In our opinion, and to the best of our information and explanations
 given to us, the said accounts give the information required by the Act
 in the manner so required and 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, 2011;
 
 (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 TO THE AUDITORS REPORT
 
 With reference to the Annexure referred to in paragraph 3 of our report
 of even date to the Members of ZF Steering Gear (India) Limited on the
 accounts for the year ended March 31, 2011, we report that:
 
 On the basis of our examination of the books and records of the Company
 carried out in accordance with the auditing standards generally
 accepted in India and according to the information and explanations
 given to us, we state that:
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of its fixed
 assets.  
 
 (b) As informed to us, the management has physically verified most of
 the fixed assets during the year.  No material discrepancies were
 noticed on such verification.  In our opinion, the frequency of
 physical verification of fixed assets is reasonable having regard to
 the size of the Company and the nature of the assets.
 
 (c) In our opinion and on the basis of information and explanation
 provided to us, the company has not disposed off substantial part of
 fixed assets during the year.
 
 (ii) (a) The inventory has been physically verified by the management
 during the current year. In our opinion, the frequency of such
 verification is reasonable.
 
 (b) In our opinion, the procedures for the 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) The Company has maintained proper records of inventory.  The
 discrepancies noticed on verification between physical stock and book
 stock were not material having regard to the size of operations of the
 Company and have been properly dealt with in the books of account.
 
 (iii) The Company has neither granted nor has taken any loans, secured
 or unsecured, to or from Companies, firms or other parties covered in
 the register maintained under Section 301 of the Companies Act.
 Consequently, paragraphs iii (b), iii (c) and iii (d) of the said Order
 are not applicable.
 
 (iv) In our opinion and according to the 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. Further, on the basis of our examination of books and records
 of the company, and according to the information and explanation 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.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 referred to in Section 301 of the Act 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 such contracts or
 arrangements entered in the register maintained under Section 301 of
 the Companies Act, 1956 and aggregating during the year to Rupees Five
 Lacs or more in respect of each party, 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 not accepted any deposit from public
 within the meaning of Section 58A and Section 58AA of the Act and the
 rules framed there under.
 
 (vii) In our opinion, the Company has an internal audit system
 commensurate with the size of the Company and nature of its business.
 
 (viii) We have broadly reviewed the cost records maintained by the
 Company pursuant to the Order of the Central Government under Section
 209(1)(d) of the Act in respect of automotive spare parts and
 accessories, 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 with a view to determine
 whether they are accurate or complete.
 
 (ix) (a) According to the information and explanations given to us and
 on the basis of our examination of the books of account, the Company
 has been regular in depositing undisputed statutory dues including
 Provident Fund, Investor Education and Protection Fund, Income Tax,
 Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and
 any other material statutory dues with the appropriate authorities. At
 March 31, 2011, there are no undisputed statutory dues payable for a
 period of more than six months from the date they became payable.
 
 (b) According to the information and explanations given to us and
 records of the company examined by us the particulars of dues of Income
 Tax, Sales Tax, Service Tax, Excise Duty, Custom Duty and Wealth Tax
 that have not been deposited with the appropriate authorities on
 account of any dispute, are as follows:
 
                                       Finanical   Forum where dispute 
 Sr.  Nature of Dues     Amount (Rs.)  Year        is pending
 No.
 
                                       2000-01
 1.  Income Tax           32,631,743               CIT (Appeals), Pune
                                       2001-02
                                       2002-03
 
 2.  Service Tax           3,226,600   2000-01     CCE, Pune - III
 
                                       2002-03 
 
                                       2003-04 
 
                                       2004-05
 
 (x) The Company does not have any accumulated losses at the end of the
 financial year and has not incurred cash losses in the financial year
 covered by our audit and the immediately preceding financial year.
 
 (xi) The Company did not have any outstanding debentures. The Company
 has not defaulted in repayment of dues to financial institutions /
 banks.
 
 (xii) In our opinion and according to the information and explanations
 given to us, 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 nature of the activities of the Company does not
 attract any special statue applicable to the chit fund and nidhi /
 mutual benefit fund / societies.
 
 (xiv) The Company is not dealing or trading in shares and other
 investments except normal course of its investment activities.  In our
 opinion and according to the information and explanations given to us,
 proper records have been maintained. All the investments are held by
 the Company in its own name.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the Company has not given any guarantee for loans taken by
 others from banks or financial institutions.
 
 (xvi) The Company has no term loans outstanding during the year.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the Cash Flow Statement and Balance Sheet of
 the Company, in our opinion, the funds raised on short-term basis have,
 prima facie, not been used for long term investment.
 
 (xviii) During the year or in the recent past, the Company has not made
 any preferential allotment of shares to parties and companies covered
 in the Register maintained under Section 301 of the Act.
 
 (xix) The Company did not have any outstanding debentures during the
 year or in the recent past. Accordingly, no securities have been
 created.
 
 (xx) The Company has not raised any money by way of public issues
 during the year or in the recent past.
 
 (xxi) During the course of our examination of the books 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 neither come across any instances of
 any fraud committed on or by the Company, or has been noticed or
 reported during the year, nor have we been informed of any such case by
 the management.
 
                                                   For MGM and Company
                                                 Chartered Accountants
                                    (Firm Registration No. : 117963 W)
 
                                                     Mangesh Katariya, 
                                                               Partner
                                                 Membership No. 104633
 
 Pune
 May 26, 2011