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Auditor Report of SEL Manufacturing Company Ltd.

Mar 31, 2018

Report on the Standalone Ind AS Financial Statements

We have audited the accompanying standalone Ind AS financial statements of SEL Manufacturing Company Limited ("the Company"), which comprise the Balance Sheet as at 31st, March 2018, the Statement of Profit and Loss ( including other comprehensive income ), the Cash Flow Statement and the Statement of Changes in Equity for the year then ended and a summary of significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Ind AS financial statements"), in which are incorporated the returns for the year ended on that date audited by the branch auditors of the company''s overseas branch at Sharjah, United Arab Emirates.

Management''s Responsibility for the Standalone Ind AS Financial Statements

The Company''s Board of Directors is responsible for the matter stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to preparation of these standalone Ind AS financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards(Ind AS) prescribed under Section 133 of the Act read with the relevant rules issued there under.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the Standalone Ind AS financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

The Hon''ble National Company Law Tribunal, Chandigarh ("NCLT") on April 11th, 2018 admitted the Corporate Insolvency Resolution Process ("CIRP") application filed against the Company and appointed Mr. Navneet Kumar Gupta having IP Registration No. IBBI/IPA-001/IP-P00001/2016-17/10009 as Interim Resolution Professional ("IRP") in terms of the Insolvency and Bankruptcy Code, 2016 ("Code")vide order dated 25th April 2018 to manage the affairs, business and assets of the company. The company has preferred an appeal against the admission of petition and appointment of IRP with National Company Law Appellate Tribunal (NCLAT).The CIRP has since been kept in abeyance vide order date 22nd June, 2018 of Hon''ble High Court of Punjab & Haryana. In view of the above said order of Hon''ble High Court of Punjab & Haryana, the powers and responsibilities to manage the affairs, business and assets of the company is vested with the Board of Directors of the company.

Auditor''s Responsibility

Our responsibility is to express an opinion on these Standalone Ind AS financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit of standalone Ind AS Financial Statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Ind AS financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Standalone Ind AS financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the Standalone Ind AS financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the Standalone Ind AS financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the Standalone Ind AS financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Ind AS financial statements

Basis for Qualified Opinion

We refer to:

1) Note No. 38 to the Standalone Ind AS financial statements in respect of non provision of interest on borrowings from banks (classified as NPA) amounting Rs.54084 lakhs & Rs. 35901 lakhs (amount calculated after considering the rates and terms and conditions stipulated originally as per CDR package) for the year ended 31st March, 2018 & 31st March 2017respectively. The same is not in compliance with the requirements of para 27 of the Ind AS 1-Presentation of Financial Statements w.r.t. preparation of financial statements on accrual basis. Consequently, borrowings are not reflected at fair value in financial statements as required by Ind AS 109, Financial Instruments.

2) Note no. 13 (Other Financial Assets) to the Standalone Ind AS financial statements includes interest subsidy receivable amounting to Rs.26,621 Lakhs which consists of interest subsidy (i) under TUFS from Ministry of Textiles and (ii) Subsidy under Textile Policy of Government of Madhya Pradesh for the Financial years 2013-14 to 2016-17 for which no confirmation was available The company has not provided for any allowance under ECL there against.

3) The company has not provided to us for our review any working regarding impairment testing being conducted to assess recoverable amount of Capital work in progress of Rs16986 lakhs outstanding as at 31st March 2018. We are unable to comment on whether the company needs to make a provision in respect of impairment losses on above as required under Ind AS 36.

4) Note no. 40(c), to the Standalone Ind AS financial statements relating to write down of inventories of Raw materials, Work in Progress, Finished Goods identified as non-moving, slow moving, obsolete and damaged inventory to net realizable value by Rs 40710 lakhs for which the company has not provided to us any technical market/commercial evaluation for the same to justify its reasonableness. Being a technical matter we are unable to comment on the loss recognized by the company due to write down of inventories to net realizable value.

5) Note no.18, 20 and 22 to the Standalone Ind AS financial statements in respect of Borrowings(Non-Current), Short Term Borrowings and other Financial Liabilities (Current) contains secured loans from banks. There is shortfall in the carrying value of the security against the secured loans consequently the loans are not fully secured.

We further report that, had the impact of our observations made in paragraph 1 of Basis for qualified opinion paragraph been considered, the net loss for the year ended 31st March, 2018 would have been increased by Rs. 54084 lakhs and the borrowings for the year ended 31st March 2018 and 31st March 2017 would have been increased by Rs. 89985 lakhs & Rs. 35901 lakhs and Equity would have been reduced by the same amount for the years ended 31.3.2018 and 31.3.2017 respectively. The financial impact of matters stated in paragraphs 2,3,4&5 to the Basis for Qualified Opinion can''t be measured reliably.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the above para of "Basis for Qualified Opinion" of our report, that aforesaid Standalone Ind AS financial statements 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, of the state of affairs of the Company as at March 31, 2018 and its loss, its cash flows and the changes in equity for the year ended on that date.

Material Uncertainty Related to Going Concern

Note no. 37 of the Standalone Ind AS financial statements, stating thereto that the terms and conditions of the sanctioned CDR package w.r.t. interest and principal repayment were not complied with. Consequently , State Bank of India, in its capacity as financial creditor had filed a petition under Insolvency and Bankruptcy Code, 2016 (IBC) against the company with Hon''ble National Company Law Tribunal, Chandigarh Bench (NCLT) which was admitted on 11th April 2018 and Corporate Insolvency Resolution Process (CIRP) has been initiated in terms of IBC. The company has preferred an appeal against the admission of petition and appointment of IRP with nClat. The CIRP has since been kept in abeyance vide order dated 22.06.2018 of Hon''ble High Court of Punjab and Haryana. The company has incurred net loss of Rs.222643lakhs resulting into accumulated losses of Rs. 296335 lakhs leading to erosion of entire net worth and current liabilities have exceeded the current assets of the company, Further concerning the company''s ability to realize the value of inventories, trade receivables and other financial assets, meet its contractual/ financial obligations w.r.t. repayment of overdue principal and accrued interest on secured borrowings, arranging working capital for ensuring normal operations, further investments required towards ongoing projects under construction and the Corporate guarantee given on the behalf of its subsidiary namely SEL Textiles Limited. Moreover the company has derecognized Deferred Tax assets and MAT credit since availability of future taxable income is not certain. Due to financial constraints, the company has started job work operations in major spinning plants instead of pursuing its own manufacturing activities since November 2017. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the company''s ability to continue as going concern and therefore company may be unable to realize its assets and discharge its liabilities in the normal course of business.

Emphasis of Matter

We draw attention to the following matters:

(1) Note No. 37(c) of the Standalone Ind AS financial statements in respect of Contingency related to ''compensation payable in lieu of bank sacrifice,'' the outcome of which is materially uncertain and cannot be determined currently.

(2) Note No. 34 A (iv) of the Standalone Ind AS financial statements in respect of contingency related to export incentives obligation refundable amounting Rs. 3855 lakhs in respect of allowance for foreign trade receivables, which is further subject to interest and penalties. the amount of such obligation cannot be determined currently.

(3) Note No. 34 A (iii) of the Standalone Ind AS financial statements in respect of contingency related to Income Tax demands raised by the Income Tax Authorities amounting Rs. 27854 Lakhs for various matters, which is further subject to interest and penalties, the amount of such obligation cannot be measured with sufficient reliability.

(4) Note no. 39, to the Standalone Ind AS financial statements regarding the balance confirmations of Trade Receivables, Capital/Trade Advances & Trade Payables. During the course of preparation of Standalone Ind AS financial statements, e-mails/letters have been sent to various parties by the company with a request to confirm their balances as on 31st March, 2018 out of which few parties have confirmed their balances direct to us or to the company.

(5) As reported vide note 40(a) to the Standalone Ind AS financial statements, the company has provided for allowance of Rs.88093 lakhs in respect of Trade Receivables due to change in probability factor in estimating Expected credit losses (under ECL Model) as reported in para 3 to the financial statements. Further, Note No. 40(b) to the Standalone Ind AS financial statements, the company has provided for impairment loss of Rs. 3584 Lakhs in respect of long outstanding Capital/Trade Advances given to suppliers.

(6) Note No. 34(B), to the Standalone Ind AS financial statements in respect of Capital Commitments contains uncertainty regarding contracts yet to be executed, escalation costs and other additions to the reported figures, if any. Being a technical matter, we are unable to comment on the total contingent capital commitment figure reported as the same cannot be measured with sufficient reliability.

Our opinion is not modified in respect of matters reported in para (1) to (6) of Emphasis of Matter.

Other Matter

We did not audit the financial statements of Overseas branch included in the Standalone Ind AS financial statements of the Company whose financial statements reflect NIL total assets as at 31st March, 2018 and NIL revenues for the year ended on that date, as considered in the Standalone Ind AS financial statements. The financial statements of the branch has been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the branch, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure A, a statement on the matters specified in the paragraph 3 and 4 of the order.

2. As required by Section 143 (3) of the Act, we report that:

a. We have sought and 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 appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from the company''s overseas branch at United Arab Emirates not visited by us;

c. The reports on the accounts of the branch office of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

d. The Balance Sheet, the Statement of Profit and Loss (including other comprehensive income), Cash Flow Statement and the Statement of Changes in Equity dealt with by this Report are in agreement with the books of account and with the returns received from the company''s overseas branch at United Arab Emirates audited by other auditors.

e. In our opinion, the aforesaid standalone Ind AS financial statements comply with the Indian Accounting Standards specified under section 133 of the Companies Act, 2013, read with relevant rules except noncompliance of provisions of para 42(b) of Ind AS 8,Accounting Policies, Changes in Accounting Estimates and Errors, which requires disclosure of restated opening balances of assets, liabilities and equity for the earliest prior period presented which had not been made by the company in the Standalone Ind AS statement of assets and liabilities.

f. In our opinion, the matters described in the "basis of Qualified Opinion" and "emphasis of matter" paragraphs above may have an adverse impact on the functioning of the company.

g. On the basis of written representations received from the directors as on March 31, 2018 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2018, from being appointed as a director in terms of Section 164 (2) of the Companies Act, 2013;

h. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and

i. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

(I) The Company has disclosed the impact of pending litigations on its financial position in its standalone Ind AS financial statements - Refer note no. 34 to the standalone Ind AS financial statements.

(ii) The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses.

(iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the company.

Annexure-A to the Independent Auditor''s Report

The Annexure referred to the Independent Auditors'' Report to the members of the company on the Standalone Ind AS financial statements for the year ended on 31st March, 2018. We report that:

(1) (a)The Company has maintained proper records showing particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which are in the process of being compiled. As explained to us, the same will be compiled by the management in due course of time.

(b) According to the information and explanations given to us, the Company has adopted a policy of physical verification of fixed assets once in every three years. However, the Company has not physically verified any of the fixed assets during the year under audit.

(c) According to the information and explanation given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company.

(ii) In our opinion and according to the information and explanation given to us, the physical verification of inventories has been conducted at reasonable interval by the management and no material discrepancy was noticed on physical verification as compared to the book records.

(iii) In our opinion and according to the information and explanation given to us, the Company has not granted any loans secured or unsecured, to Companies, Firms and other parties covered in the register maintained section 189 of the Companies Act, 2013.

(iv) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Section 185 and 186 of the Companies Act, 2013 in respect of loans, investments, guarantees and security.

(v) The Company has not accepted deposits from the public within the meaning of provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. No order under the aforesaid sections has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal on the company.

(vi) We have broadly reviewed the books of account maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under section 148 of the Companies Act, 2013 and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have, however, not made a detailed examination of such records with a view to determine whether they are accurate or complete.

(vii) (a) According to the information and explanations given to us and the books and records examined by us, we state that the company is regular in depositing undisputed statutory dues including income tax, provident fund, employees state insurance, custom duty, Goods & services tax, excise duty, service tax, value added tax, cess and other statutory dues to the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of income tax, provident fund, employees state insurance, custom duty, Goods & services tax, excise duty, service tax, value added tax, cess and other material statutory dues in arrears, as at 31st March, 2018 for a period of more than six months from the date they became payable.

(b) According to the information and explanations given to us there are no dues of income tax, provident fund, employees state insurance, custom duty, goods & services tax, excise duty, service tax, value added tax, cess and other statutory dues, which have not been deposited on account of any dispute except disclosed as under:

Name of the statute	Nature of dues	Amount (In Lakhs)	Period to which the amount relates (Assesment Year)	Forum where the dispute is pending
Income Tax Act, 1961	Tax and Interest*	27853.69	2010-11 2011-12 & 2013-14	ITAT, Chandigarh
Income Tax Act, 1961	Tax deducted at source	3.92	2009-10 to 2015-16	CPC, Bangalore

-Interest calculated upto 31.01.2018 and subject to further interest & penalty proceedings.

(viii) In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of loans/borrowings and interest thereon to banks as given below:

Bank Name

Nature of Amount

Amount

Overdue

Since

State Bank of India

Interest

Principle

2151273757

270190825

31.07.2016

30.06.2016

Interest

Principle

2665852542

421276872

30.04.2016

Interest

Principle

1246880296

359914069

31.05.2015

31.08.2015

Interest

Principle

761825336

264594581

31.08.2015

31.10.2015

Interest

Principle

2603318721

417758097

31.01.2016

Punjab & Sind Bank

Interest

Principle

322345721

133857937

31.12.2015

Bank of Maharashtra

Interest

Principle

124760780

194762373

30.11.2015

30.09.2015

Punjab National Bank

Interest

Principle

972982306

368890523

28.02.2016

31.01.2016

Indian Bank

Interest

Principle

678847025

146193757

30.06.2015

31.07.2015

Sber Bank

Interest

242158446

31.03.2016

United Bank

Interest

Principle

178440444

321376503

30.06.2015

31.07.2015

Union Bank of India

Interest

Principle

489302126

129904929

30.04.2015

UCO Bank

Interest

Principle

608386292

272576919

30.09.2015

31.08.2015

Corporation Bank

Interest

Principle

2006917518

266474022

31.01.2016

31.03.2016

Allahabad Bank

Interest

Principle

3209358134

831217408

31.10.2015

30.11.2015

Dena Bank

Interest

Principle

177351067

237793438

31.10.2015

Indian Overseas Bank

Interest

Principle

1497875295

67620190

31.01.2016

31.03.2016

Vijaya Bank

Interest

Principle

16081796

17164076

31.03.2016

Andhra Bank

Interest

Principle

1027795009

54555840

28.02.2016

31.03.2016

EXIM Bank

Interest

Principle

8274928

6471034

31.05.2016

31.01.2016

(ix) In our opinion and according to the information and explanations given to us, no money was raised by way of initial public offer or further public offer (including debt instruments) and term loans during the year.

(x) To the best of our knowledge and belief and according to the information and explanations given to us, no material fraud on or by the Company, by its officers or employees has been noticed or reported during the year.

(xi) According to the information and explanations given to us and the audit procedures conducted by us, managerial remuneration has been paid or provided was in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of clause 3 (xii) of the Companies (Auditor''s Report) Order, 2016, are not applicable to the Company.

(xiii) According to the information and explanations given to us and based on our examination of the records of the company, all transactions with the related parties are in compliance with Section 177 and 188 of Companies Act, 2013 where applicable and the details of the transactions have been disclosed in the standalone Ind AS financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations given to us, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and therefore, the provisions of clause 3 (xiv) of the Companies (Auditor''s Report) Order, 2016, are not applicable to the Company.

(xv) According to the information and explanations given to us and based on our examination of the records of the company, the Company has not entered into any non-cash transactions with directors or persons connected with the directors and therefore, the provisions of clause 3 (xv) of the Companies (Auditor''s Report) Order, 2016, are not applicable to the Company.

(xvi) In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

(Referred to in paragraph 1(h) under the "Report on other legal and regulatory requirements" of our report of even date)

Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We were engaged to audit the Internal Financial Control over financial reporting of SEL Manufacturing Company Limited ("the Company") as of 31st March, 2018 in conjunction with our audit of the Ind AS financial statements of the Company for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(''the Guidance Note'') issued by the Institute of Chartered Accountants of India(''the ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the company''s business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the "Guidance Note") and the Standards on Auditing, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial control system over financial reporting and their operating effectiveness.

Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s Internal financial controls over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail ,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of Internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Disclaimer of Opinion

The system of internal financial controls over reporting with regard to the company were not made available to us to enable us to determine if the company has established adequate internal financial control over financial reporting and whether such internal financial controls operating effectively as on 31st March 2018.

Basis for Qualified Opinion

In our opinion and acc ort which came to our notice during the course of audit of standalone Ind AS financial statements indicates material weaknesses in the internal financial controls over financial reporting as at March 31, 2018.

A ''material weakness'' is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company''s annual or interim financial statements will not be prevented or detected on timely basis.

Qualified Opinion

In our opinion, the matters disclosed in above paragraphs under "Basis of Qualified Opinion" indicates material weaknesses in the internal financial controls over financial reporting.

We have considered the disclaimer of opinion as well as material weaknesses identified and reported in Qualified Opinion paragraph in determining the nature, timing, and extent of audit tests applied in our audit of the financial statements of the Company for the year ended March 31,2018, and the disclaimer and material weaknesses do not affect our opinion on the financial statements of the Company

FOR MALHOTRA MANIK & ASSOCIATES

CHARTERED ACCOUNTANTS

FRN. 015848N

(CA. MANIK MALHOTRA)

PLACE: LUDHIANA PROPRIETOR

DATED: 05.07.2018 M.No.:094604

Mar 31, 2016

INDEPENDENT AUDITOR''S REPORT

To the Members of SEL Manufacturing Company Limited Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of SEL Manufacturing Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2016, and the Statement of Profit and Loss, the Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, in which are incorporated the returns for the year ended on that date from the company''s overseas branch at Sharjah, United Arab Emirates audited by other auditors''. Management''s Responsibility for the Standalone Financial Statements

The Company''s Board of Directors is responsible for the matter stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with the Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company''s Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements 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, of the state of affairs of the Company as at March 31, 2016 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to the following matters:

(a) Note No. 33 of the financial statements regarding the balances of Trade Receivables, Loan and Advances, Deposits and Trade Payables which are subject to confirmation/reconciliation and subsequent adjustments if any. During the course of preparation of financial statements, e-mails have been sent to various parties by the company with a request to confirm their balances as on 31st March, 2016 out of which few parties have confirmed their balances direct to us or to the company. However the management does not expect any material changes on account of such reconciliation/non receipt of confirmation from parties.

(b) No provision has been made for Trade Receivables amounting to Rs 464.21 crores outstanding for more than 180 days from the due date. However the management claims that the said receivables are recoverable and no provision is required to be made therefore.

(c) Note No. 38 of the financial statements which describes that the Corporate Debt Restructuring Package had been approved vide Letter of Approval (LOA) dated 30th June, 2014. The company executed Master Restructuring Agreement (MRA) on 24th September, 2014. The credit facilities envisaged & sanctioned under CDR package were not fully released by the lenders which resulted in sub-optimum utilization of manufacturing facilities and the company could not complete one of its spinning project where substantial amount was already incurred. Reasons for not release of those credit facilities were not explained to us. The company has accumulated losses of Rs. 425.77 crores as at March 31, 2016 resulting net worth reduced to Rs. 755.67 crores. Also the company is facing cash flow mismatch and is not servicing debt obligations as per the terms of CDR package sanctioned earlier. These situations give rise to material uncertainty in respect of company''s ability to continue as going concern which is part dependent on successful outcome of the discussions with the CDR lenders and company''s ability to generate sufficient funds to support its operations and fulfill repayment obligations. The Company''s Management is of the view that the company is an operative Company and will be able to meet its obligations to lenders, In view of the same the financial statements have prepared on a going concern basis.

(d) The company has recognized deferred tax asset amounting to Rs. 202.43 crores and MAT Credit Entitlement of Rs. 55.34 crores up to 31st March, 2016 considering virtual certainty that sufficient taxable income will be available during specified period against which such deferred tax asset/MAT Credit Entitlement can be adjusted. However no conclusive documents/evidences are provided to support their claim. The company ability to continue as going concern is dependent on factors as discussed in para (c) above. In case the going concern status of the company is suspect, deferred tax asset/MAT Credit Entitlement recognized till date will require to be reversed.

(e) The management of the company represented to us that the recoverable amount of assets within the meaning of Accounting Standard 28 "Impairment of Assets" is more than their carrying value and as such no amount needs to be recognized in the financial statements for impairment losses, but the company has not provided any working regarding this to us for our review, we are unable to comment on whether the company needs to make a provision in respect of impairment losses on such assets and the amount of such provision.

(f) The level of inventories maintained by the company is high. This may include unidentified slow/non-moving and obsolete items of Inventories lying with the company for which no provision has been made.

g) Note No. 30(vi) of the financial statements relating to Search & Seizure action u/s 132(1) of the Income Tax Act, 1961 was carried on the Company, its promoters and some other companies/entities during the financial year 2013-14. Assessments have been completed for Assessment Year 2008 09, 2009-10, 2012-13 and 2014-15. There is no additional tax liability arises on account of completion of assessments for the said years. Pending proceedings for the remaining assessment years, no provision has been considered necessary by the Company in this regard.

(h) Note No. 38(c) of the financial statements in respect of Contingency related to ''compensation payable in lieu of bank sacrifice,'' the outcome of which is materially uncertain and can not be determined currently.

Our opinion is not modified in respect of these matters.

Other Matter

We did not audit the financial statements of Overseas branch included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs. 190.67 crores as at 31st March, 2016 and total revenues of Rs. 52.57 crores for the year ended on that date, as considered in the standalone financial statements. The financial statements of the branch has been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the branch, is based solely on the report of such branch auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

2. As required by Section 143(1)(c) of the Act, we report that :

a. the company had sold equity shares amounting Rs. 31,33,16,690/- at a price less than that at which they were purchased and incurred loss of Rs. 6,74,36,054/- on account of their sale.

3. As required by Section 143 (3) of the Act, we report that:

a. We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

overseas branch at United Arab Emirates not visited by us;

d. The Balance Sheet, the Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the company''s overseas branch at United Arab Emirates audited by other auditors.

e. In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f. On the basis of written representations received from the directors as on March 31, 2016, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2016, from being appointed as a director in terms of Section 164 (2) of the Companies Act, 2013;

g. With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in "Annexure B"; and

h. With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note 30 to the financial statements;

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses - Refer Note 36 to the financial statements;

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

The Annexure referred to in our Independent Auditors'' Report to the members of SEL Manufacturing Co. Ltd. on the standalone financial statements for the year ended on 31st March, 2016. We report that:

(I) (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which are in the process of being compiled. As explained to us, the same will be compiled by the management in due course of time.

(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

ii) According to the information and explanation given to us, the physical verification of inventories has been conducted at reasonable interval by the management. As explained to us, no material discrepancies were noticed on physical verification of inventories carried out by the management as compared to the book records.

(v) The Company has not accepted deposits from the public within the meaning of provisions of sections 73 to 76 or any other relevant provisions of the Companies Act, 2013 and the rules framed there under. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records sub-section (1) of the section 148 of the Companies Act, 2013, in respect of manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

(vii)(a) According to the records of the company, the company is regular in depositing undisputed statutory dues including income tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, value added tax, cess and other statutory dues to the appropriate authorities though there has been slight delays in few cases of income tax deducted at source, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, there were no undisputed amounts payable in respect of income tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, value added tax, cess and other material statutory dues in arrears, as at 31st March, 2016 for a period of more than six months from the date they became payable. According to the records of the Company, the details of disputed income tax dues that have not been deposited by the Company as at March 31, 2016 are as follows:

Name of the statute	Nature of dues	Amount (In Rs.)	Accounting year to which the amount relates	Forum where the dispute is pending
Income Tax Act, 1961	Tax deducted at source	36,000	2013-14	DCIT, Centralized Processing Cell (TDS)
Income Tax Act, 1961	Tax deducted at source	250,990	2014-15	DCIT, Centralized Processing Cell (TDS)
Income Tax Act, 1961	Tax deducted at source	19,840	2015-16	DCIT, Centralized Processing Cell (TDS)

(viii) In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of loans or borrowings to banks as given below:

Bank Name

Nature of Amount

Amount

Overdue

Since

Allahabad Bank

Interest

Principle

181,038,999

164,764,716

31.10.2015

30.11.2015

Andhra Bank

Interest

Principle

10,874,526

5,061,204

31.01.2016

31.03.2016

Bank of Maharashtra

Interest

Principle

32,327,197

55,434,812

30.11.2016

31.08.2016

Corporation Bank

Interest

Principle

46,507,198

41,028,591

31.12.2015

Dena Bank

Interest

Principle

38,181,322

64,787,393

31.10.2015

EXIM Bank

Interest

Principle

2,393,203

1,902,843

31.08.2015

30.11.2015

Indian Bank

Interest

Principle

40,457,445

49,888,396

30.06.2015

31.07.2015

Indian Overseas Bank

Interest

Principle

11,932,989

5,752,924

31.01.2016

31.03.2016

Kurur Vyasya Bank

Principle

345,326

31.03.2016

Punjab & Sind Bank

Interest

Principle

116,470,194

8,319,930

30.11.2015

Punjab National Bank

Interest

Principle

28,944,878

51,145,422

31.01.2016

State Bank of Mysore

Interest

Principle

358,859

564,732

30.11.2015

28.02.2016

State Bank of Bikaner & Jaipur

Interest

Principle

53,730,684

46,562,934

31.01.2016

State Bank of Hydrabad

Interest

Principle

56,837,004

64,721,846

31.08.2015

31.10.2015

State Bank of India

Interest

Principle

113,462,759

105,641,474

31.05.2015

31.08.2015

State Bank of Patiala

Interest

Principle

88,544,591

85,514,032

31.01.2016

State Bank of Travencore

Interest

Principle

62,019,643

42,390,565

31.01.2016

UCO Bank

Interest

Principle

65,372,635

53,714,554

30.09.2015

31.10.2015

Union Bank of India

Interest

Principle

49,724,797

52,323,345

30.04.2015

United Bank

Interest

Principle

71,319,059

115,057,356

30.06.2015

31.07.2015

Vijaya Bank

Interest

Principle

2,846,625

1,768,279

31.12.2015

31.01.2016

(ix) In our opinion, the term loans raised during the year were applied prima facie for the purpose for which the loans were raised except Rs. 32.31 Crores out of which Rs. 20.30 Crores are lying with Banks in the form of Fixed deposits and TRA Account pending utilization thereof and Rs. 12.01 Crores were adjusted by the banks towards payment of overdue interest. During the year, no money was raised by way of initial public offer or further public offer.

(xi) In our opinion, the managerial remuneration has been paid or provided in accordance with the requisite approvals mandated by the provisions of Section 197 read with Schedule V to the Companies Act, 2013.

(xii) In our opinion, the Company is not a Nidhi Company. Therefore, the provisions of clause 3 (xii) of the Companies (Auditor''s Report) Order, 2016, are not applicable to the Company.

(xiii) In our opinion, all transactions with the related parties are in compliance with Section 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the financial statements etc., as required by the applicable accounting standards.

(xv) In our opinion and according to the information and explanations given to us, the Company has not entered into any non-cash transactions with directors or persons connected with the directors.

(xvi) In our opinion and according to the information and explanations given to us, the Company is not required to be registered under Section 45-IA of the Reserve Bank of India Act, 1934.

(Referred to in paragraph 1(g) under "Report on other legal and regulatory requirements" of our report of even date)

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the Internal Financial Controls over financial reporting of SEL Manufacturing Company Limited ("the Company") as of 31 March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year then ended.

Management''s Responsibility for Internal Financial Controls

The Company''s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (''ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of the companyâs business, including adherence to company''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.

Auditors'' Responsibility

Our responsibility is to express an opinion on the Company''s Internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Standards on Auditing, issued by the ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of Internal financial controls over financial reporting and the Guidance Note issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate Internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system on financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company''s internal financial controls over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company''s internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company''s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.

Emphasis of Matter

We would draw attention to matters disclosed in paragraph under ''Emphasis of matters'' in our main Independent Auditor''s Report which could indicate possible lapses in internal financial controls systems at various points in time. Our opinion is not modified in respect of these matters.

FOR DASS KHANNA & CO.,

CHARTERED ACCOUNTANTS

Firm Registration No. 000402N

(CA. R.D. KHANNA)

PARTNER

PLACE: LUDHIANA M.No.: 12391

DATED: 24.05.2016

Mar 31, 2015

We have audited the accompanying standalone financial statements of SEL Manufacturing Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2015, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, in which are incorporated the returns for the year ended on that date from the company's overseas branch at Sharjah, United Arab Emirates audited by other auditors'.

Management's Responsibility for the Standalone Financial Statements The Company's Board of Directors is responsible for the matter stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with the Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.

Opinion In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements 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, of the state of affairs of the Company as at March 31, 2015 and its loss and its cash flows for the year ended on that date.

Emphasis of Matter Without qualifying our opinion, we draw attention to the followings: a) Note No. 28 vii) of the financial statements relating search & seizure action u/s. 132(1) of the Income Tax Act, 1961 on the Company, its promoters and some other companies/entities during the financial year 2013-14. The consequential assessment proceedings are in progress. Pending these proceedings, no provision has been considered necessary by the Company in this regard.

b) Note No. 37 of the financial statements which describes that during the year under review, the Corporate Debt Restructuring Package has been approved by Corporate Debt Restructuring Empowered Group (CDREG) on 28th June, 2014 and the Final Letter of Approval (LOA) was issued by CDREG on 30th June, 2014. The LOA from bank has also been received by company in the year under audit. The Company has given the complete effect of Corporate Debt Restructuring (CDR) in the year under review as the approval for the same is received by the company in the year under review.

Other Matter We did not audit the financial statements of Overseas branch included in the standalone financial statements of the Company whose financial statements reflect total assets of Rs. 169.46 crores as at 31st March, 2015 and total revenues of Rs. 160.65 crores for the year ended on that date, as considered in the standalone financial statements. The financial statements of the branch has been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of the branch, is based solely on the report of such branch auditors. Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by section 143 (3) of the Act, we report that:

a. we have sought and 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 appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from the company's overseas branch at United Arab Emirates not visited by us;

c. the reports on the accounts of the branch office of the Company audited under Section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

d. the Balance Sheet, the Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and with the returns received from the company's overseas branch at United Arab Emirates audited by other auditors.

e. in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f. on the basis of written representations received from the directors as on March 31, 2015, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2015, from being appointed as a director in terms of Section 164 (2) of the Companies Act, 2013;

g. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

I. The Company has disclosed the impact of pending litigations on its financial position in its financial statements Â Refer Note 28 to the financial statements;

ii. The Company did not have any long term contracts including derivative contracts for which there were any material foreseeable losses Refer Note 35 to the financial statements;

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

The Annexure referred to in our report to the members of SEL Manufacturing Co. Ltd. for the year ended on 31st March, 2015. We report that:

i) (a) The Company has maintained proper records showing

full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which, we are informed, are in the process of being compiled. (b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

ii) (a) As explained to us, the inventories have been physically verified during the year by the management. 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 inventories 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 records of inventories, we are of opinion that the company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) In our opinion and according to the information and explanation given to us, the Company has not granted any loans secured or unsecured, to the parties covered in the register maintained section 189of the Companies Act, 2013.

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 with regard to purchases of inventory, fixed assets and for sale of goods & services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) The Company has not accepted deposits from the public within the meaning of Sections 73 to 76 or any other relevant provisions of the Companies Act and the rules framed there under. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

vi) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under sub-section (1) of the section 148 of the Companies Act, 2013, in respect of manufacturing activities of the Company. We have broadly reviewed the accounts and records of the Company in this connection and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

vii) (a) According to the records of the company, the company is regular in depositing undisputed statutory dues including income tax, wealth, tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, value added tax, cess and other material statutory dues applicable to it though there has been slight delays in few cases of income tax deducted at source, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, there were no undisputed amounts payable in respect of income tax, wealth tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, value added tax, cess and other material statutory dues in arrears, as at 31st March, 2015 for a period of more than six months from the date they became payable. According to the records of the Company, the details of disputed income tax dues that have not been deposited by the Company as at March 31, 2015 are as follows:

Name of the Nature of Amount Accounting Forum where the statute dues (In Rs.) year to dispute is pending which the amount relates

Income Tax Tax deducted 16,11,740 2007-08 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 5,550 2008-09 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 39,600 2011-12 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 280 2012-13 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

(c) In our opinion and according to the information and explanation given to us, the Company has transferred within time the amount required to be transferred to Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and rules made there under.

viii) The accumulated losses as at the end of the financial year are less than 50% of its net worth. The company has incurred cash losses during the financial year.

xi) In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to banks as given below:

Default of principle & interest on Long Term Borrowings

Bank Name Nature of Amount Overdue Amount Since Amount State Bank of Bikaner & Jaipur Interest 18,846,509 31.03.2015

Principle 12,255,590 31.03.2015

State Bank of Patiala Interest 30,719,919 31.03.2015

Principle 19,659,517 31.03.2015

State Bank of India Interest 20,753,920 31.01.2015

Principle 23,430,038 31.01.2015

State Bank of Hyderabad Interest 1,684,077 31.03.2015

Principle 8,012,005 31.03.2015

State Bank of Travancore Interest 22,261,877 31.03.2015 Principle 14,323,660 31.03.2015

Kurur Vysya Bank Interest 3,456,218 28.02.2015

Principle 3,521,834 28.02.2015

Punjab & Sind Bank Interest 11,899,437 31.01.2015

Principle 11,549,563 31.01.2015

Bank of Maharashtra Interest 1,881,791 28.02.2015

Principle 6,895,473 31.03.2015

Punjab National Bank Inters 21,188,501 28.02.2015

Principle 14,059,943 31.03.2015

State Bank of Mysore Interest 396,419 31.03.2015

Principle 398,263 31.03.2015

Indian Bank Interest 7,073,418 31.03.2015

Principle 326,665 31.03.2015

United Bank Interest 12,535,811 31.03.2015

Principle 13,055,389 31.03.2015 Union Bank of India Interest 2,477,597 31.01.2015

Principle 2,357,453 31.03.2015

Uco Bank Interest 13,859,406 28.02.2015

Principle 8,993,107 31.03.2015

Corporation Bank Interest 16,943,420 31.03.2015

Principle 11,600,150 31.03.2015

Allahabad Bank Interest 50,133,734 31.03.2015

Principle 102,733,937 31.01.2015

Dena Bank Interest 13,958,669 31.01.2015

Principle 14,201,202 31.01.2015

Vijaya Bank Interest 1,191,472 28.02.2015

Principle 962,378 31.03.2015

Andhra Bank Interest 4,163,218 31.03.2015

EXIM Bank Interest 422,843 28.02.2015

Principle 363,347 31.03.2015

x) In our opinion, the terms and conditions on which the

Company has given guarantee for loans taken by its 100% owned subsidiary from banks are not prejudicial to the interest of the company.

xi) In our opinion and according to the information and explanations given to us, the term loans raised during the year were applied prima facie for the purpose for which the loans were obtained.

(xii) Based on the audit procedures performed and the information and explanations given by the management to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO.,

CHARTERED ACCOUNTANTS

Firm Registration No. 000402N

PATNER

M.NO.123921 PLACE: LUDHIANA

DATED: 30.05.2015

Mar 31, 2014

We have audited the accompanying financial statements of SEL Manufacturing Company Limited ("the Company"), which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, in which are incorporated the returns from the company''s overseas branch at Sharjah, United Arab Emirates audited by other auditors''.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

b) in the case of the Profit and Loss Account, of the loss 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.

Emphasis of Matter

Without qualifying our opinion, we draw attention to the followings:

a) Note No. 29 (vii) of the financial statements relating search & seizure action u/s. 132(1) of the Income Tax Act, 1961 on the Company, its promoters and some other companies/entities. The consequential assessment proceedings are in progress. Pending these proceedings, no provision has been considered necessary by the Company in this regard.

b) Note No. 31 of the financial statements relating to identification of non-moving, slow moving, obsolete and damaged inventory in finished goods during the year & write down thereof for Rs. 180.94 crores to net realizable value as at year end.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956 and sub-section (11) of Section 143 of the Companies Act, 2013, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order and report received by the company from the auditors of the company''s overseas branch at United Arab Emirates on which we have relied.

2. As required by section 227(3) of the Act, 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 appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from the company''s overseas branch at United Arab Emirates audited by other auditors;

c. the Balance Sheet, the Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and the reports on the accounts of the company''s overseas branch at United Arab Emirates audited by other auditors have been forwarded to us and have been dealt with by us in preparing this report;

d. in our opinion, the Balance Sheet, the Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards notified under the Companies Act, 1956 ("the Act") read with General Circular 15/2013 dated 13th September 2013 of the Ministry of Corporate Affairs in respect of section 133 of the Companies Act, 2013;

e. on the basis of written representations received from the directors as on March 31, 2014, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2014, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956 and sub-section (2) of Section 164 of the Companies Act, 2013;

f. since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITOR''S REPORT

(Referred to in paragraph (1) of report on Other Legal & Regulatory Requirements of our report of even date)

i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which, we are informed, are in the process of being compiled.

(b) The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets.

(c) In our opinion and according to information and explanations given to us, the company has not made any substantial disposal of fixed assets during the year and the going concern status of the Company is not affected.

ii) (a) As explained to us, the inventories have been physically verified during the year by the management. 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 inventories 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 records of inventories, we are of opinion that the company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) In respect of the loans secured or unsecured, granted or taken by the Company to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 and section 189 of the Companies Act, 2013:

(a) The Company has not granted any loan to the parties covered under section 301 of the Companies Act, 1956 and section 189 of the Companies Act, 2013.

(b) During the year, the Company has taken interest free unsecured loan from one director covered under section 301 of the Companies Act, 1956 and section 189 of the Companies Act, 2013. The balance outstanding as at 31st March, 2014 is Rs. 67.96 crores. Maximum balance outstanding is Rs. 67.96 crores. The said loan is repayable in 2018-19.

(c) In our opinion and according to the explanation given to us, any other terms and conditions of the loan taken are not prima-facie prejudicial to the interest of the Company.

(d) There is no overdue in respect of the said loan.

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 with regard to purchases of inventory, fixed assets and for sale of goods & services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 and section 189 of the Companies Act, 2013, 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 or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and section 189 of the Companies Act, 2013, and exceeding the value of rupees five lakh in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi) The Company has not accepted deposits from the public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposit) rules, 1975. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

vii) In our opinion, the Company has an in-house internal audit system commensurate with the size & nature of its business. However, it needs further improvement in terms of scope and coverage.

viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under section 209-(1) (d) of the Companies Act, 1956 and section 128 read with section 2 (13) of the Companies Act, 2013, in respect of manufacturing activities of the Company.

We have broadly reviewed the accounts and records of the Company in this connection and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, carried out a detailed examination of the same.

ix) (a) According to the records of the company, the company is regular in depositing undisputed statutory dues including income tax, wealth, tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, cess and other material statutory dues applicable to it though there has been slight delays in few cases of income tax deducted at source, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears, as at 31st March, 2014 for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the details of disputed income tax dues that have not been deposited by the Company as at March 31, 2014 are as follows:

Name of the Nature of Amount Accounting Forum where the statute dues (In Rs.) year to dispute is which the pending amount relates

Income Tax Tax deducted 736,390 2007-08 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 1,274,292 2008-09 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 410 2011-12 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 222,560 2012-13 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Tax deducted 57,230 2013-14 DCIT, Centralized Act, 1961 at source Processing Cell (TDS)

Income Tax Income Tax 2,980,390 2007-08 Commissioner of Act, 1961 Income Tax (Appeals)

x) The company has no accumulated losses as at the end of the financial year. The company has incurred cash losses during the financial year covered by our audit. However there was no cash loss in the immediately preceding financial year.

xi) In our opinion and according to the information and explanations given to us, the company has defaulted in repayment of dues to banks as given below:

Default of principle & interest on Long Term Borrowings

Bank Name Nature of Amount Overdue Amount Since

State Bank of Bikaner & Jaipur Principal 3,200,000 31.03.2014

State Bank of Bikaner & Jaipur Principal 76,550,000 31.12.2013 Interest 47,959,657

State Bank of Bikaner & Jaipur Principal 14,000,000 31.01.2014

State Bank of Bikaner & Jaipur Interest 2,386,686 28.02.2014

State Bank of Patiala Principal 2,500,000 31.03.2014

State Bank of Patiala Principal 115,578,376 31.12.2013

State Bank of Patiala Principal 43,330,799 31.01.2014

Interest 45,828,738

State Bank of Patiala Interest 13,679,108 28.02.2014

State Bank of India Principal 54,400,000 31.12.2013

State Bank of India Principal 10,800,000 30.11.2013

State Bank of India Principal 26,101,738 31.10.2013

Interest 69,478,256

Exim Bank Principal 3,864,904 31.10.2013

Interest 2,086,937

UCO Bank Principal 69,412,500 31.10.2013

Interest 55,726,039

State Bank of Hyderabad Principal 50,100,000 30.09.2013

State Bank of Hyderabad Principal 47,546,219 31.10.2013

Interest 65,206,446

State Bank of Travancore Principal 50,100,000 30.09.2013

State Bank of Travancore Principal 68,450,000 31.10.2013

Interest 99,120,283

State Bank of Mysore Principal 5,800,000 31.10.2013

Interest 3,121,136

Punjab National Bank Principal 2,392,003 31.01.2014

Interest 49,211,047

Punjab National Bank Principal 88,468,887 31.12.2013

Punjab & Sind Bank Principal 9,286,000 31.10.2013

Punjab & Sind Bank Principal 89,665,000 30.09.2013

Interest 69,988,316

Vijaya Bank Principal 1,734,329 31.01.2014

Interest 2,747,093

Allahabad Bank Principal 23,437,500 30.09.2013

Allahabad Bank Principal 180,129,412 31.10.2013

Interest 227,302,834 Andhra Bank Interest 3,238,067 31.10.2013

Indian Bank Interest 39,017,375 31.10.2013

Indian Bank Principal 20,000,000 31.12.2013

Indian Bank Principal 3,006,700 31.01.2014

Union Bank of India Interest 4,085,601 28.02.2014

Union Bank of India Principal 11,666,700 31.03.2014

United Bank of India Principal 29,100,000 30.09.2013

Interest 79,574,569

United Bank of India Principal 73,333,332 31.10.2013

Interest 18,738,188

Karur Vysya Bank Interest 8,811,088 31.01.2014

Bank of Maharashtra Principal 52,276,000 31.10.2013

Interest 7,813,777

Bank of Maharashtra Interest 53,134,065 30.09.2013

Indian Overseas Bank Interest 241,912 31.01.2014

Dena Bank Principal 73,333,332 31.10.2013

Interest 66,621,265

Corporation Bank Principal 30,000,000 31.03.2014

Corporation Bank Interest 37,700,656 31.01.2014

Default of interest on Short Term Borrowing

Bank Name Overdue Interest Overdue Since

Amount

Allahabad Bank 188,167,468 31.10.2013

Andhra Bank 46,190,642 31.10.2013

Indian Bank 32,284,841 31.10.2013

Indian Overseas Bank 62,758,247 30.11.2013

Punjab National Bank 24,204,779 31.01.2014

State Bank of Bikaner & Jaipur 70,742,104 31.12.2013

State Bank of Bikaner & Jaipur 1,918,710 31.03.2014

State Bank of Hyderabad 28,990,518 31.10.2013

State Bank of India 69,432,816 31.10.2013

State Bank of Patiala 146,682,482 31.12.2013

State Bank of Travancore 169,876,933 30.09.2013

UCO Bank 81,263,824 30.11.2013

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, the company is not a chit fund or a nidhi /mutual benefit fund/ society. Therefore, the provisions of clause (xiii) of paragraph 4 of the order are not applicable.

xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investment. The investments made in equity shares is held in its own name except six shares of a 100% owned subsidiary company SEL Textiles Ltd. held in the name of other persons in which company is beneficial holder.

xv) In our opinion, the terms and conditions on which the Company has given guarantee for loans taken by its 100% owned subsidiary from banks are not prejudicial to the interest of the company.

xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year were applied prima facie for the purpose 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, we report that the company has used the funds amounting Rs 425.99 crores raised on short term basis for long term investments.

xviii)According to the information and explanations given to us, the company has not made any preferential allotment of equity warrants to parties covered in the register maintained under section 301 of the Companies Act, 1956 and Section 189 of the Companies Act, 2013.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued debentures.

(xx) According to the information and explanations given to us, during the period covered by our audit report, the company has not raised funds by public issues.

(xxi)Based on the audit procedures performed and the information and explanations given by the management to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO., CHARTERED ACCOUNTANTS Firm Registration No.000402N

PLACE: LUDHIANA (CA. R.D. KHANNA) DATED: 29.05.2014 PARTNER M.No. 12391

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of SEL Manufacturing Company Limited ("the Company"), which comprise the Balance Sheet as at 31st March, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information, in which are incorporated the returns from the company''s overseas branch at Sharjah, United Arab Emirates audited by other auditors''.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements 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:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

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.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order and report received by the company from the auditors of the company''s overseas branch at United Arab Emirates on which we have relied.

2. As required by section 227(3) of the Act, 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 appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from the company''s overseas branch at United Arab Emirates audited by other auditors;

c. the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt with by this Report are in agreement with the books of account and the reports on the accounts of the company''s overseas branch at United Arab Emirates audited by other auditors have been forwarded to us and have been dealt with by us in preparing this report.

d. in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act, 1956;

e. on the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

f. since the Central Government has not issued any notification as to the rate at which the cess is to be paid under section 441A of the Companies Act, 1956 nor has it issued any Rules under the said section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

(Referred to in paragraph (1) of report on Other Legal & Regulatory Requirements of our report of even date)

i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which, we are informed, are in the process of being compiled.

(b) All the fixed assets have not been physically verified by the management during the year but there is a regular program of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to information and explanations given to us, the company has not made any substantial disposal of fixed assets during the year and the going concern status of the Company is not affected.

ii) (a) As explained to us, the inventories have been physically verified during the year by the management. 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 inventories 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 records of inventories, we are of opinion that the company is maintaining proper records of inventories. The discrepancies noticed on verification between the physical stocks and the book records were not material.

iii) The company has neither granted nor taken any loans, secured or unsecured, to/from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956.

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 with regard to purchases of inventory, fixed assets and for sale of goods & services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that 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 or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakh in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

vi) The Company has not accepted deposits from the public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposit) rules, 1975. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under section 209-(1) (d) of the Companies Act, 1956 and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) According to the records of the company, the company is regular in depositing undisputed statutory dues including income tax, wealth tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, cess and other material statutory dues applicable to it though there has been slight delays in few cases of income tax deducted at source, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears, as at 31st March, 2013 for a period of more than six months from the date they became payable.

x) The company has no accumulated losses as at the end of the financial year. The company has not incurred cash losses during the financial year covered by our audit and in 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 banks or 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, the company is not a chit fund or a nidhi /mutual benefit fund/ society. Therefore, the provisions of clause (xiii) of paragraph 4 of the order are not applicable.

xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investment. The investments made in equity shares is held in its own name except six shares of a 100% owned subsidiary company SEL Textiles Ltd. held in the name of other persons in which company is beneficial holder.

xv) In our opinion, the terms and conditions on which the Company has given guarantee for loans taken by its 100% owned subsidiary from banks are not prejudicial to the interest of the company.

xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year were applied prima facie for the purpose 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, we report that the company has used the funds amounting Rs.184.80 crores raised on short term basis for long term investments.

xviii)According to the information and explanations given to us, the company has made preferential allotment of equity warrants to parties covered in the register maintained under section 301 of the Act. In our opinion, the price at which equity warrants have been issued is not prejudicial to the interest of the company.

xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued debentures.

xx) The company has raised money by way of issue of Global Depository Receipts during the year and the funds have been utilized for the purpose for which they were raised.

xxi) Based on the audit procedures performed and the information and explanations given by the management to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO.

CHARTERED ACCOUNTANTS

Firm Registration No. 000402N

PLACE: LUDHIANA (CA. RAKESH SONI)

DATED: 28.05.2013 PARTNER

M.No. 83142

Mar 31, 2011

1. We have audited the attached balance sheet of SEL Manufacturing Company Limited for the year ended as at 31st March, 2011 and also the profit and loss account for the year ended on that date and the Cash Flow Statement for the year ended on that date, annexed thereto, in which are incorporated the returns from the companys overseas branch at Sharjah, United Arab Emirates 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 misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure 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 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 on the basis of information & explanations received by us and report received by the company from the auditors of the companys overseas branch at United Arab Emirates on which we have relied.

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 and proper returns adequate for the purpose of our audit have been received from the companys overseas branch at United Arab Emirates audited by other auditors;

(iii) The reports on the accounts of the companys overseas branch at United Arab Emirates audited by other auditors have been forwarded to us and have been dealt with by us in preparing this report.

(iv) 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 audited branch returns.

(v) 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.

(vi) On the basis of written representations received from the directors, as on 31st March, 2011 and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st 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;

(vii) In our opinion and to the best of our information and according to the explanations given to us, the said accounts, subject to Non confirmation of debit/credit balances as stated in note no 5 in annexure "T" and read together with other notes thereon, 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 for the year ended on that date, and

(c) In the case of Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SEL MANUFACTURING COMPANY LIMITED AS AT AND FOR THE YEAR ENDED 31ST MARCH 2011)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which, we are informed, are in the process of being compiled.

(b) All the fixed assets have not been physically verified by the management during the year but there is a regular program of verification which, in our opinion, is reasonable having regard to the size of the company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to information and explanations given to us, the company has not made any substantial disposal of fixed assets during the year and the going concern status of the Company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. 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 inventories 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 records of inventory, we are of opinion that 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 unsecured loans to company covered in register maintained under section 301 of the Companies Act, 1956. The maximum amount involved during the year was Rs. 4.53 crores and the year-end balance was nil.

(b) In our opinion the rate of interest and other terms & conditions on which loan was granted to the company covered under section 301 of the Companies Act, 1956 are not, prima facie, prejudicial to the interest of the company

(c) The receipt of the principal amount and interest are regular.

(d) There is no overdue amount of loan granted the company listed in the register maintained under section 301 of the Companies Act, 1956.

(e) The company has not taken any loans secured or unsecured from companies, firms or other parties covered in register maintained under section 301 of Companies Act, 1956. Hence, the clauses (iii)-(f) and (g) 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 with regard to purchases of inventory, fixed assets and for sale of goods & services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that 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 or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five lakh in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The Company has not accepted deposits from the public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposit) rules, 1975. No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under section 209-(1) (d) of the Companies Act, 1956 and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained.

(ix) (a) According to the records of the company, the company is regular in depositing undisputed statutory dues including income tax, wealth, tax, provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax, cess and other material statutory dues applicable to it though there has been slight delays in few cases of income tax deducted at source, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, there were no undisputed amounts payable in respect of Income Tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears, as at 31st March, 2011 for a period of more than six months from the date they became payable.

(c) According to the records of the Company, the detail of disputed statutory dues aggregating to Rs. 11,556,000/- that have not been deposited on the account of matter pending before the appellate authorities in respect of income tax is given below:

Nature of Disputed Period Forum where Dues / Amount (Rs.) to which Dispute is Name of the pending Statue amount relates

Income 1,629,768/- 2005-06 Income Tax Tax Appellate Income Tax Tribunal, Act, 1961 Chandigarh

Income 887,907/- 2006-07 Income Tax Tax Appellate Income Tax Tribunal, Act, 1961 Chandigarh.

Income 387,087/- 2007-08 Income Tax Tax Appellate Income Tax Tribunal, Act, 1961 Chandigarh.

Income 8,651,238/- 2008-09 Commissioner of Tax Income Tax Income Tax (Appeals), Act, 1961 Ludhiana

(x) The company has no accumulated losses as at the end of the financial year. The company has not incurred cash losses during the financial year covered by our audit and in 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 banks or 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, the company is not a chit fund or a nidhi /mutual benefit fund/ society. Therefore, the provisions of clause (xiii) of paragraph 4 of the order are not applicable.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investment.

(xv) In our opinion, the terms and conditions on which the Company has given guarantee for loans taken by its subsidiary from banks are not prejudicial to the interest of the company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year were applied prima facie for the purpose 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, we report that funds raised on short-term basis have prima facie not been used for long term investments.

(xviii) According to the information and explanations given to us, the company has made preferential allotment of equity warrants to parties covered in the register maintained under section 301 of the Act. In our opinion, the price at which equity warrants have been issued is not prejudicial to the interest of the company.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued debentures.

(xx) The company has raised money by way of issue of Global Depository Receipts during the year, out of which a part of the funds have been utilized for the purpose for which they were raised and remaining part of unutilized funds along-with the unutilized funds (out of GDR raised in 2009-10) is still lying with the bank in Overseas as referred to note-19 in Annexure T of the balance sheet.

(xxi) Based on the audit procedures performed and the information and explanations given by the management to us, no fraud on or by the company has been noticed or reported during the course of our audit.

For Dass Khanna & Co.

Chartered Accountants Registration No. 000402N

(Rakesh Soni) Partner M. No. 83142

PLACE : Ludhiana DATE : 19.05.2011

Mar 31, 2010

The responsibinty 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 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 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 above, we report that:

(i) We have obtained all the information and explanations, which to the best of (i) 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 ii the company so far as it appears from our examination of those books.

Reffered to in sub-section (30) of section 211 of the Companies Act, 1956.

That none of the 2010 and taken on record 31st March 2010 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 our opinion and to the best of our information and according to the explanations given to us, the said accounts, subject to Non confirmation of debit/credit balances as stated, in note no 5 in annexure "T" and read together with other notes thereon, 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 2010,

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 Cash Flow Statement, of the cash flows for the year nded on that date. ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE TO THE MEMBERS OF SEL MANUFACTURING COMPANY LIMITED AS AT AND FOR THE YEAR ENDED 31st MARCH 2010)

(i) (a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets except for certain items of fixed assets, the quantitative details of which, we are informed, are in the process of being compiled.

(b) All the fixed assets have not been physically verified by the management during the year but there is a regular program of verification which, in our opinion, is reasonable having-jegard to the size of the company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to information and explanations given to us, the company has not made any substantial disposal of fixed assets during the year and the going concern status of the Company is not affected.

(ii) (a) As explained to us, the inventory has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable.

(b) 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) On the basis of our examination of the records of inventory, we are of opinion that 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 not granted any secured/unsecured loans to company, firms or other parties covered in register maintained under section 301 of the Companies Act, 1956. Hence, clauses (iii)-(b), (c) and (d) are not applicable.

(b) The company has, during the year, taken unsecured loan from a company covered in register maintained under section 301 of Companies Act, 1956. The amount involved in the transaction is Rs. 10 crores.

(c) In our opinion and according to the information and explanations given to us, the terms and conditions in respect of such interest free loan is not, prima-facie, prejudicial to the interest of the company.

(d) The said loan has been repaid in full during the year and there is no amount payable at the close of the year.

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 with regard to purchases of inventory, fixed assets and for sale of goods & services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal controls.

(v) (a) Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the particulars of contracts or arrangements referred to in section 301 of the Companies Actr1956 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 or arrangements entered in the register maintained under section 301 of the Companies Act 1956 and exceeding the value of rupees five lakh in respect of any party during the year have been made at prices which are reasonable having regard to prevailing market prices at the relevant time.

(vi) The Company has not accepted deposits from the public within the meaning of Section 58A, Section 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposit) rules 1975 No order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any court or any other Tribunal.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of its business.

(viii) We have broadly reviewed the books of accounts maintained by the Company pursuant to the Rules made by the Central Government for the maintenance of Cost records under section 209-(1) (d) of the Companies Act, 1956 and we are of opinion that prima facie, the prescribed accounts and records have been made and maintained.

(a) According to the records of the company, the company is regular in depositing undisputed statutory dues including provident fund, employees state insurance, custom duty, sales tax, excise duty, service tax cess and other material statutory dues applicable to it though there has been slight delays in few cases of service tax, employee state insurance and provident fund which are not material.

(b) According to the information and explanations given to us, the undisputed amounts payable in respect of Employees State insurance , Employees Provident Fund & Income Tax, which are in arrears, as at 31 March, 2010 for the period of more than six months from the date they became payable are as under:

Name of Nature of the Amount Period to Due date

Statute Dues (Rs) which the

amount

relates

Employees Employers & 344,465 April 09 to 21st of

State Employees Aug. 09 Every

Insurance Act Share month

Employees Employers & 154,970 April 09 to 15th of

Provident Employees Aug. 09 Every

Fund Act, Share Month

Income Tax Income Tax 68,366,187 Asst Year 15 Sept. Act. 1961 2010-11 09

( c) According to the records of the Company, the detail of disputed statutory dues aggregating to Rs. 20,328,612/- that have not been deposited on the account of matter pending before the appellate authorities in respect of income

Nature of Dues / Disputed Amount

Name of Statue (Rs.)

Income Tax 1,629,768/-

Income Tax Act,

1961

Income Tax 887,907/-

Income Tax Act,

1961

Income Tax 17,810,937/-

Income Tax Act,

1961 ,

Period to which the Forum where amount relates Dispute is pending

2005-06 Income Tax

Appellate Tribunal,

Chandigarh.

2006-07 Income Tax

Appellate Tribunal,

Chandigarh.

2007-08 Commissioner of

Income Tax

(Appeals), Ludhiana

(x) The company has no accumulated losses as at the end of the financial

year The company has not incurred cash losses during the financial year covered by our audit and in 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 banks or 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, the company is not a chit fund or a nidhi /mutual benefit fund/ society. Therefore, the provisions of clause (xm) of paragraph 4 of the order are not applicable.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and other investment.

(xv) In our opinion the terms and conditions on which the Company has given guarantee for loans taken by its subsidiary from banks are not prejudicial to the interest of the company.

(xvi) In our opinion and according to the information and explanations given to us, the term loans raised during the year were applied prima facie for the purpose 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, we report that funds raised on short-term basis have prima facie not been used for long term investments.

(xviii) According to the information and explanations given to us, the company has made preferential allotment of equity warrants to parties covered in the register maintained under section 301 of the Act. In our opinion, the price at which equity warrants have been issued is not prejudicial to the interest of the company.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the company has not issued debentures.

(xx) The company has raised money by way of issue of Global Depository Receipts during the year and the funds raised are still unutilized and lying with the bank in overseas as referred to note-15 in Annexure T of the balance sheet.

(xxi) Based on the audit procedures performed and the information and explanations given by the management to us, no fraud on or by the company has been noticed or reported during the course of our audit.

FOR DASS KHANNA & CO., CHARTERED ACCOUNTANTS Registration No. 000402N

(RAKESH SONI) PARTNER M.No. 83142

PLACE: LUDHIANA DATED: 17.05.2010

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