NCC Ltd.

1. We have audited the attached Balance Sheet of Nagarjuna Construction Company Limited as at March 31, 2009, the Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended on that date both annexed thereto in which are incorporated the returns from Oman and Nepal branches and certain Joint Ventures (the Branches) audited by other auditors. 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 (CARO) 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: a) 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; 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 and proper returns adequate for the purposes of our audit have been received from the Branches not visited by us. The Branch Auditors Reports have been forwarded to us and appropriately dealt with; 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 and with the audited returns from the Branches; 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 Companies Act, 1956; e) 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: i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2009; 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. 5. On the basis of written representations received from the 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. Annexure to the Auditors Report (Referred to in paragraph 3 of our report of even date) i) In respect of its fixed assets: a) The Company has maintained proper records showing full particulars, including quantitative details and situation of its fixed assets. b) A major portion of the fixed assets have been physically verified during the year by the management in accordance with a programme of verification, which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, the discrepancies noticed on such verification were not material and have been properly dealt with in the books of account. c) The fixed assets disposed off during the year, in our opinion, do not constitute 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, ii) In respect of its inventories: a) According to the information and explanations given to us, the Management has physically verified the inventory during the year. In our opinion, having regard to the nature of business and location of stocks, the frequency of verification is reasonable. 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, The discrepancies noticed on verification between the physical stocks and the book records were not material and have been properly dealt in the books of account, iii) a) According to the information and explanations given to us, the Company has granted secured or unsecured loans repayable as per the terms, to seven parties covered in the Register maintained under Section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 3,120.71 million and the year end balance of the loans granted to such parties was Rs. 3,096.45 million. b) In our opinion and according to the information given to us, the terms and conditions of such loans are prima facie not prejudicial to the interests of the Company. c) The receipts of principal amounts and interest have been regular during the year, d) There is no overdue amount in respect of inter corporate loans. e) According to the information and explanations given to us, the Company has taken loans, secured or unsecured from Companies, firms or other parties covered in the Register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 3 million and the year end balance of the loans taken from such parties was Rs. NIL. f) In our opinion and according to the information given to us, the terms and conditions of such loans are prima facie not prejudicial to the interest of the Company, g) The payment of principal amounts and interest have been regular during the year. iv) 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 the nature of its business for the purchase of inventory and fixed assets and for services and we have not observed any continuing failure to correct major weaknesses in such internal controls, v) 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 in to the register, maintained under the said section have been so entered. b) In our opinion, the transactions (excluding loans reported under paragraph (iii) above) exceeding the value of Rs. 5 lakhs in respect of any party during the year have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time, where such market prices are available. vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. Accordingly, the provisions of para 4(vi) of CARO are not applicable to the Company. vii) 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. viii) In our opinion and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records for any of the products or activity of the company. ix) In respect of statutory dues: a) According to the information and explanations given to us, the Company has been generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Wealth Tax, Sales Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues applicable to it with the appropriate authorities during the year. b) According to the information and explanations given to us, details of disputed sales tax, income tax, customs duty, service tax, excise duty and cess which have not been deposited as on March 31, 2009 on account of any dispute are given below: Name of statute Nature of dues Rupees in Million APGST Act, 1957 Sales Tax 3.25 Sales Tax 17.32 Sales Tax 1.23 Sales Tax 5.93 Sales Tax 2.36 Sales Tax 2.49 Sales Tax 14.27 Uttar Pradesh Sales tax 0.52 Trade Tax Act, 1948 Tamil Nadu General Sales Tax 0.26 Sales Tax Act, 1959 Delhi Sales Tax on VAT Sales Tax 1.49 The Central Excise Act, 1944 Excise Duty 28.23 Finance Act, 1994 Service Tax 34.62 Finance Act, 1994 Service Tax 151.50 Indian Income Act, 1961 Income Tax 10.85 Income Tax 58,92 Period to which the Forum where amount relates dispute is pending 1994-95 Honble High Court of Andhra Pradesh 1998-99 Sales Tax Appellate Tribunal 1999-00 Sales Tax Appellate Tribunal 2000-01 Sales Tax Appellate Tribunal 2001 -02 Sales Tax Appellate Tribunal 2002-03 Sales Tax Appellate Tribunal 2003-04 Sales Tax Appellate Tribunal 2001-02 Joint Commissioner (Appeals) 1994-96 Sales Tax Appellate Tribunal 2005-07 Additional Commissioner of Sales Tax (Appeals) 2000-01 CESTAT, Bangalore 2005-06 Honble High Court of Andhra Pradesh 2005-07 CESTAT, Bangalore 2004-05 Commissioner of Income Tax (Appeals) 2005-06 Commissioner of Income Tax (Appeals) x) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year, xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to financial institutions and banks. xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares and debentures and other securities. Accordingly, the provisions of para 4(xii) of the CARO are not applicable to the Company, xiii) In our opinion, the Company is not a Chit Fund or a Nidhi or Mutual Benefit Fund/Society, Accordingly, the provisions of para 4(xiii) of the CARO are not applicable to the Company. xiv) In our opinion and according to the information and explanations given to us, the Company does not deal or trade in shares, securities, debentures and other investments. Accordingly, the provisions of para 4(xiv) of the CARO are not applicable to the Company. xv) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company. xvi) 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. xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet of the Company, funds raised on short-term basis have, prima facie, not been used for long-term investment. xviii)According to the information and explanations given to us, the Company has not made preferential allotment of share during the year 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, and records examined by us, securities/ charges have been created in respect of debentures issued, xx) During the year covered by our audit report, the company has not raised any money by public issues, xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the Company was noticed or reported during the year. for M. Bhaskara Rao & Co. for Deloitte Haskins & Sells Chartered Accountants Chartered Accountants M. Bhaskara Rao P. R. Ramesh Partner Partner Membership No. 5176 Membership No. 70928 Hyderabad, May 28, 2009 Mumbai, May 28, 2009