1.  We have audited the attached balance sheet of SEL Manufacturing
 Company Limited for the year endedas at 31st March, 2012, the profit
 and loss statement and the Cash Flow Statement for the year ended on
 that date, annexed thereto, in which are incorporated the returns from
 the company''s overseas branch at Sharjah, United Arab Emirates audited
 by other auditors''. 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
 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 (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 on the basis of information & explanations received by us and
 report received by the company from the auditors of the company''s
 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 company''s overseas branch at United Arab
 Emirates audited by other auditors;
 
 (iii) 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.
 
 (iv) The balance sheet, profit and loss statement 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 statement 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, 2012 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;
 
 (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. 31 of the
 Balance Sheet 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 2012,
 
 b) In the case of the profit and loss statement, 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.
 
 (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 2012)
 
 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 not granted secured or
 
 unsecured loans to companies, firms or other parties covered in the
 register maintained under section 301 of the Companies Act, 1956.
 Therefore
 
 the provisions of paragraph 4(iii) (a) to (iii) (d) of the above said
 order are not applicable to the company.
 
 (b) 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)-(e) to
 
 (iii)-(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, 2012 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 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 not raised money by public issues during the year.
 However during the year, the funds (lying unutilized out of Global
 Depository Receipts raised in 2009-10 and 2010-11) have been utilized
 for the respective purposes for which they were raised as referred to
 note-40 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
 
 PLACE: LUDHIANA                                (RAKESH SONI)
 
 DATED: 29.05.2012                                   PARTNER
 
 M.No. 83142