1.  We have audited the attached Balance Sheet of KEI INDUSTRIES
 LIMITED as at 31st March, 2012 and also the Profit and Loss Account and
 the Cash Flow Statement for the year ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Company''s 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
 gener-ally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements.  An audit also includes
 assessing the accounting principles used and significant estimates made
 by the management, as well as evaluating the overall financial
 statement presentation. We believe that our audit provides a
 reasonable basis for our opinion.
 
 3.  As required by the Companies (Auditor''s 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 in Paragraph 3
 above, we report that:
 
 a) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of
 our audit;
 
 b) In our opinion, proper books of account as required by law have been
 kept by the company so far as appears from our examination of those
 books;
 
 c) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the books of
 account;
 
 d) In our opinion, the Balance Sheet, Profit & Loss Account and the
 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 and the rules framed there under;
 
 e) On the basis of written representations received from the directors
 and taken on record by the Board of Directors, we report that none of
 the directors is disqualified as on 31st March, 2012 from being
 appointed as a director in terms of clause (g) of sub-section (1) of
 Section 274 of the Companies Act, 1956;
 
 f) In our opinion and to the best of our information and according to
 the explanations given to us, they said accounts read together with the
 significant accounting policies and 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;
 
 i.  in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2012;
 
 ii.  in the case of the Profit & Loss Account, of the profit for the
 year ended on that date; and
 
 iii. in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
                                          For JAGDISH CHAND & CO.
 
                                           Chartered Accountants
 
 Place : New Delhi                          (PRAVEEN KUMAR JAIN)
 
 Dated : 29th May, 2012                                 Partner
 
                                                   M. No. 85629 
 
                              Firm Registration Number: 000129N
 
 ANNEXURE TO THE AUDITORS'' REPORT
 
 Annexure referred to in paragraph ''3'' of the Auditors'' Report to
 the Members of KEI Industries Ltd on the accounts for the year ended
 31st March, 2012
 
 (i) (a) The Company is maintaining proper records to show full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) As explained to us, the Company has a programme of physically
 verifying all its fixed assets over a period of three years, which in
 our opinion is reasonable having regard to the size of the Company and
 the nature of its fixed assets.  In accordance with this programme,
 some of the fixed assets were physically verified by the management
 during the year. The discrepancies noticed on such verification between
 the physical balances and the fixed assets records were not material
 and have been properly dealt with in the books of account.
 
 (c) In our opinion and according to the information and explanations
 given to us, a substantial part of the fixed assets has not been
 disposed off by the Company during the year.
 
 (ii) (a) During the year, the inventories have been
 
 physically verified by the management. In our opinion, the frequency of
 verification is reasonable.
 
 (b) In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventories
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 (c) On the basis of our examination of the record of inventories, we
 are of the opinion that, the Company is maintaining proper records of
 inventories. The discrepancies noticed on physical verification of
 inventories as compared to book records were not material and have been
 properly dealt with in the books of account.
 
 (iii) (a) There is one party covered in the register maintained under
 Section 301 of the Companies Act, 1956 to which Company has given
 deposit as per contractual obligations. The maximum amount involved
 during the year was Rs. 60.00 Lacs and the yearend balance of deposit
 granted to such party was Rs. 31.92 Lacs. (Refer Note No 18.1).
 
 (b) In our opinion, terms and conditions on which deposit has been
 given to such party listed in the register maintained under Section 301
 of Companies Act, 1956 are not, prima facie, prejudicial to the
 interest of the Company. No interest was charged from the party, since
 this is deposit against premises taken on rent.
 
 (c) No principal amount was due for repayment, no interest was charged
 from the party, since this was deposit against premises taken on rent.
 (Refer Note No 18.1).
 
 (d) There is no overdue amount of deposit granted to Companies, firm or
 other parties listed in the register maintained under Section 301 of
 the Companies Act, 1956.
 
 (e) The company has taken deposits from five parties covered in
 register maintained under Section 301 of the Companies Act, 1956. The
 maximum amount involved during the year was Rs. 81.61 Lacs and the year
 end balance of deposits taken from such parties was Rs. 75.60 Lacs.
 
 (f) In our opinion, the rate of interest where applicable and other
 terms and conditions on which deposits have been taken from Companies,
 firms or other parties listed in the register maintained under Section
 301 of Companies Act, 1956 are not, prima facie, prejudicial to the
 interest of the Company.
 
 (g) The Company is regular in repaying the principal amounts as
 stipulated and also in the payment of interest, where applicable, in
 case of deposits taken from Companies, firms or other parties listed 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 systems, commensurate
 with the size of the Company and the nature of its business with regard
 to the purchase of inventories, fixed assets and with regard to the
 sale of goods and services during the year. Further, on the basis of
 our examination and according to the information and explanations given
 to us, we have neither come across nor have been informed of any
 continuing failure to correct major weaknesses in internal control
 system.
 
 (v) According to the information and explanations given to us, during
 the year, there were no transactions that need to be entered into the
 register maintained under Section 301 of the Companies Act, 1956.
 Accordingly, paragraph
 
 (V) (a) and (b) of the Order are not applicable.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the provisions of Sections
 58A and 58AA or any other relevant provision of the Companies Act, 1956
 and the Companies (Acceptance of Deposits) Rules, 1975 with regard to
 the deposits accepted from the public. As per the information and
 explanations given to us, no order on the Company 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.
 
 (vii) In our opinion, the Company has an adequate internal audit system
 commensurate with its size and nature of its business.
 
 (viii) 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 209 (1)(d) of the Companies
 Act, 1956 and are of the opinion that, prime facie, the prescribed
 accounts and records have been made and maintained. We have not,
 however, made a detailed examination of the records with a view to
 determine whether they are accurate or complete.
 
 (ix) (a) According to the records of the Company and information and
 explanations given to us and the records of the Company examined by us,
 the Company has been regularly depositing the undisputed statutory dues
 including provident fund, employees state insurance, income tax,
 Investor Education and Protection Fund, sales tax, wealth tax, service
 tax, customs duty, excise duty, cess and other material statutory dues
 applicable to it with the appropriate authorities.
 
 We are informed that there are no undisputed statutory dues as of 31st
 March, 2012 outstanding for a period of more than six months from the
 date they become payable.
 
 (b) According to the information and explanations given to us and the
 records of the Company examined by us, there are no disputed dues of
 customs duty, wealth tax & cess which have not been deposited. The
 particulars of disputed dues on account of income tax, fringe benefit
 tax, sales tax, excise duty and service tax matters that have not been
 deposited by the Company are as follows:-
 
 Name of the 
 Statute       Nature of the Due   Amount   Period to 
                                            which the   Forum where 
                                                        dispute
                                   in Lacs  amount 
                                            relates     is pending
 
 Sales/ 
 Entry         Value Added Tax      1.54    2006-07     VAT Officer
 
 Tax Act       The Rajasthan 
               Entry Tax           43.48    Various 
                                            years for   Deputy
                                                        Commissioner 
                                                        of Sales
               - Goods Act, 
               2003                         2007-08 to 
                                            2009-10     Tax
 
 Central 
 Excise        Excise Duty        534.89    Various 
                                            years for   CESTAT
 Duty                                       2005-06 to 
                                            2007-08
 
               Excise Duty         71.37    Various 
                                            years for   Commissioner 
                                                       (Appeals)
                                            2007-08 to 
                                            2009-10
 
 Finance 
 Act           Service Tax         75.10    2005-06 & 
                                            2006-07     Commissioner
                                                       (Adjudication)
 
               Service Tax          0.62    Various 
                                            years for   Commissioner 
                                                        (Appeals)
                                            2005-06 to 
                                            2008-09
               Service Tax         13.44    2008-09     CESTAT
 
 (x) The Company does not have accumulated losses as at the year ended
 31st March, 2012. Further, the Company has not incurred any cash losses
 during the year ended 31st March, 2012 and in the immediately preceding
 financial year ended 31st March, 2011.
 
 (xi) According to the records of the Company examined by us and on the
 information and explanations given to us, the Company has not defaulted
 in repayment of dues to banks or debenture holders during the year.
 
 (xii) As the Company has not granted any loans and advances on the
 basis of security by way of pledge of shares, debentures and other
 securities, paragraph 4(xii) of the Order is not applicable.
 
 (xiii) As the Company is not a chit fund / nidhi / mutual benefit funds
 / society to which the provisions of special statute relating to chit
 fund are applicable, paragraph 4(xiii) of the Order is not applicable.
 
 (xiv) As the Company is not dealing or trading in shares, securities,
 debentures and other investments, paragraph 4(xiv) of the Order is not
 applicable.
 
 (xv) The Company has given guarantees for loan taken by others from
 banks. According to the information and explanations given to us, we
 are of the opinion that the terms and conditions thereof are not prima
 facie prejudicial to the interest of the company.
 
 (xvi) We are informed that the Company had obtained term loans during
 the year and term loans were applied for the purposes for which the
 loans were obtained.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that during the year short term funds have not been used to finance
 long term investments.
 
 (xviii) According to the information and explanation given to us the
 Company has not made any preferential allotment of shares to parties
 and companies covered in the registered maintained under Section 301 of
 the ''Act'' during the year.
 
 (xix) The Company has not issued any secured debentures during the
 year.
 
 (xx) The Company has not raised any money by a public issue during the
 year. Accordingly, the provisions of Clause 4(xx) of the order are not
 applicable.
 
 (xxi) Based upon the audit procedures performed and information and
 explanations given by the management, we report that, no fraud on or by
 the Company has been noticed or reported during the year.
 
                                                  For JAGDISH CHAND & CO.
 
                                                   Chartered Accountants
 
 Place : New Delhi                                  (PRAVEEN KUMAR JAIN)
 
 Dated : 29th May, 2012                                          Partner
 
                                                            M. No. 85629 
 
                                       Firm Registration Number: 000129N