AUDITORS REPORT ToThe Members, Dabur Foods Ltd.

We have audited the attached Balance Sheet of Dabur Foods Limited as at 31st March,2005 and also the Profit and Loss Account of the company 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. (1) 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. (2) As required by Companies (Auditors Report) Order,2003 [as amended by the Companies (Auditors Report) (Amendment) Order, 2004] issued by the 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 paragraph 4 and 5 of the said Order. (3) 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 have been kept as required by law so far as 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 profit and loss account, balance sheet and the cash flow statement comply with the Accounting Standards specified by the Institute of Chartered Accountants of India, referred to in Section 211 (3C) of the Companies Act, 1956,to the extent applicable. (e) On the basis of representation received from the directors as on 31st March 2005, and taken on records by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2005 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act 1956. (f) In our opinion and to the best of our information and according to the explanation given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and also give a true and fair view in conformity with the accounting principals generally accepted in India. (i) in the case of balance sheet, of the state of affairs as at 31st March,2005; (ii) in the case of the profit & 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. FOR JHALANI & CO. Chartered Accountants V.K. Jhalani Partner (Membership No.:82691) Ghaziabad 22nd April, 2005 Annexure to paragraph (2) of our report of even date on the account of Dabur Foods Limited, for the year ended 31st March 2005 1. (a). The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets. (b). The management has carried out a physical verification of most of its fixed assets during the year. In our opinion, the frequency of verification is reasonable having regard to the size of the Company and the nature of its fixed assets. The discrepancies noticed on such verification were not material and have been properly dealt with in the books of account. (c). In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed off by the Company during the year. 2. (a). During the year, the inventories have been physically verified by the management except for inventory lying with third parties which have been confirmed by the parties. In our opinion, the frequency of verification is reasonable. (b). In our opinion and according to the information and explanation given to us, the procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business. (c). On the basis of our examination of the record of inventories, we are of the opinion that, the Company is maintaining proper records of inventories. The discrepancies noticed on physical verification of inventories as compared to book records were not material and have been properly dealt with in the books of account

.3. (a). According to the information and explanations given to us, the company has granted unsecured loans to one company
covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year is Rs.875 Lacs and the amount outstanding at the year end is Rs.800 Lacs. (b). According to the information and explanation given to us, the rate of interest and the other terms & conditions are prima facie not prejudicial to the interest of the company. (c). According to the information and explanation given to us the loan granted is in the nature of the demand loan and there is no stipulation regarding repayment of loan. The interest on has been regularly received. (d). In view of comments made in subclause ( c ) above, the clause pertaining to the overdue amount being more than Rupees one lac is not applicable. (e). The company has taken unsecured loans from three companies covered in the register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year is Rs.850 lacs and the amount outstanding at the year end is Rs.800 lacs. (f) According to the information and explanation given to us, the rate of interest and the other terms & conditions are prima facie not prejudicial to the interest of the company. (g) According to the information and explanation given to us the loan taken is in the nature of demand loan and there is no stipulation regarding repayment of loan. The interest on the aforesaid loan has been regularly paid. 4. 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 with regard to the purchase of inventories and fixed assets and with regard to sale of goods. Further, on the basis of our examination and according to the information and explanations given to us, we have neither come across nor have been informed of any instance of major weaknesses in the aforesaid internal control procedures. 5. (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements that need to be entered into the register maintained under Section 301 have been so entered. (b) In our opinion and according to the information & explanations given to us aforesaid contract or arrangements exceeding the aggregate amount of Rupees five lacs in respect of each party made during the year, have been made at prices, which as informed to us by the management are not comparable as these are of specialized nature. 6. The Company has not accepted any deposit within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and the rules framed there under. 7. Companys internal audit is handled by the internal auditors appointed by the holding company and in our opinion, the same is commensurate with the size and nature of its business. 8. The company is not required to maintain cost records u/s 209(1) (d) of the Companies Act, 1956. Accordingly paragraph 4(viii) of the order is not applicable. 9. (a) According to the information and explanations given to us and the records of the Company examined by us, the Company has been regular in depositing undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Custom Duty, Service Tax, Cess with the appropriate authorities. The provisions of other statute mentioned in the clause are not applicable to the company for the year under audit. (b) According to the information and explanations given to us and the records of the Company examined by us, there are no disputed dues of Income Tax/Wealth tax/Service tax/Custom duty/excise duty/cess. The details of disputed dues of sales tax are as follows: Name of the Nature of the Forum where the Amount Period to which Statute Dues demand is Pending (Rs. in lacs) amount relates Delhi Sales Tax Sales tax Dy.Commissioner of Sales 85.52 2003-2004 Tax(Appeals) Delhi 10. At the end of the financial year March 31, 2005, the company has accumulated losses of Rs.1481.13 lacs and the same is more than the fifty percent of the net worth of the company. Further, the Company has not incurred any cash losses during the financial year ended March 31, 2005 and in the immediately preceding financial year. 11. According to the records of the Company examined by us and the information and explanations given to us, the Company during the year has not defaulted in repayment of dues to financial institutions and banks. 12. As the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities, paragraph 4 (xii) of the Order is not applicable. 13. The provisions of any special statute as specified under paragraph 4 (xiii) of the Order are not applicable to the Company. 14. As the Company is not dealing or trading in shares, securities, debentures and other investments, paragraph 4 (xiv) of the Order is not applicable. 15. In our opinion and according to the information and explanations given to us, the Company has not given any guarantees during the year for loans taken by others from banks or financial institutions. 16. In our opinion and according to the information and explanations given to us, the term loans during the year have been applied for the purpose for which they were obtained. 17. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that short term funds have not been used to finance long term investments. 18. As the Company has not made any preferential allotment of shares during the year, paragraph 4 (xviii) of the Order is not applicable. 19. During the year, since the Company has not issued any debentures, paragraph 4 (xix) of the Order is not applicable. 20. During the year, since the Company has not raised any money by way of public issue, paragraph 4 (xx) of the Order is not applicable. 21. Based upon the audit procedures performed and information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit for the year ended March 31, 2005. FOR JHALANI & CO. Chartered Accountants V.K. Jhalani Partner (Membership No.:82691) Ghaziabad,22nd April, 2005