1.  We have audited the attached Balance Sheet of SUTLEJ TEXTILES AND
 INDUSTRIES LIMITED, as at 31st March, 2011 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 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 auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating, the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditors Report) Order, 2003 (as
 amended) 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 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 appears from our examination of
 those books and proper returns adequate for the purpose of our audit,
 have been received from the branches/depots not visited by us. The
 report on the account of branch audited by other auditor has been
 forwarded to us and has been appropriately dealt by us in preparing our
 report;
 
 iii. The Balance Sheet, Profit and Loss account and Cash Flow statement
 dealt with by this report are in agreement with the books of account
 and with the returns from the branches/depots;
 
 iv. 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;
 
 v. 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 directors 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 read together with
 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 of the
 Company for the year ended on that date and
 
 c) In the case of Cash Flow Statement, of the cash flows of the Company
 for the year ended on that date.
 
 Annexure referred to in paragraph 3 of our report of even date to the
 shareholders
 
 (i) a. The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 b.  Fixed Assets of the Companys units at Bhawanimandi and Daheli
 (Near Bhilad) have been physically verified by the Management during
 the year and in respect of Kathua unit, the Unit is carrying out
 physical verification of fixed assets by covering physical verification
 of all fixed assets over a period of three years, accordingly part of
 fixed assets have been physically verified by the management during the
 year. In our opinion, the frequency of physical verification is
 reasonable having regard to the size of the Company and nature of its
 assets. No material discrepancies were noticed on such verification.
 
 c.  There was no substantial disposal of fixed assets during the year.
 
 (ii) a. As explained to us inventories (except stock lying with third
 parties, confirmation for which has been obtained and in-transit) were
 physically verified during the year by the management at reasonable
 intervals.
 
 b.  In our opinion and according to the information and explanations
 given to us, the procedures of physical verification of inventory
 followed by the management are reasonable and adequate in relation to
 the size of the Company and the nature of its business.
 
 c.  In our opinion and according to the information and explanation
 given to us, the Company is maintaining proper records of inventory and
 no material discrepancies were noticed on physical verification,
 wherever done.
 
 (iii) a. The Company has granted loan to two Bodies Corporates covered
 in the register maintained under Section 301 of the Companies Act,
 1956. The maximum amount involved during the year was Rs. 4500 lakhs
 and the year- end balance of loans granted to such parties was nil.
 
 b.  In our opinion and according to the information and explanations
 given to us, the rate of interest and other terms and conditions for
 such loans are not prima facie prejudicial to the interest of the
 Company.
 
 c.  In respect of loans granted, repayment of the principal amount is
 as stipulated and payment of interest have been regular.
 
 d.  As informed, the Company has not taken any loans, secured or
 unsecured from companies, firms or other parties covered in the
 register maintained under Section 301 of the Companies Act, 1956.
 Therefore, the provisions of clause 4 (iii) (f) and (g) of the
 Companies (Auditors Report) Order, 2003 (as amended) are not
 applicable to the Company.
 
 (iv) In our opinion and according to the information and explanations
 given to us, there is adequate internal control system commensurate
 with the size of the Company and the nature of its business, for the
 purchase of inventory and fixed assets and for the sale of goods and
 services. During the course of our audit, no major weakness has been
 noticed in internal control system.
 
 (v) a. 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 Act that need to be
 entered into the register maintained under Section 301 have been so
 entered.
 
 b. In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakhs have been entered
 into during the financial year at prices which are reasonable having
 regard to the prevailing market prices at the relevant time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has complied with the directives issued by the
 Reserve Bank of India and provisions of Section 58A and 58AA of the
 Companies Act, 1956 and rules framed there under with regard to the
 deposits accepted from the public.
 
 (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 are of the 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
 generally regular in depositing undisputed statutory dues including
 provident fund, investor education and protection fund, employees
 state insurance, income-tax, sales-tax, services tax, wealth tax,
 custom duty, excise duty, cess and other statutory dues applicable to
 it with the appropriate authorities. There was no undisputed
 outstanding statutory dues as at the year end for a period of more than
 six months from the date they became payable.
 
 b. According to the records of the Company, there are no dues
 outstanding of sales tax, income tax, service tax, custom duty, wealth
 tax, excise duty and cess on account of any dispute, other than the
 following:
 
 Name of Statute   Nature of Dues   Amount    Forum where  Related Period
                                    (Rs. in 
                                    lakhs)    Dispute is
                                              Pending
 
 (A) Bhawanimandi 
 unit
 
 Central Excise 
 Act, 1944        Penalty on Serv
                  ice Tax on GTA     13.17     CESTAT,
                                               New Delhi     Jan.,05 to 
                                                             Sept., 05
 
 Central Excise 
 Act, 1944        Disallowance & 
                  Penalty for        33.80    Commissioner
                                              (Appeals)      Oct., 05 to
                                                             Mar., 06
                  Cenvat on 
                  Service Tax
 
 Central Excise 
 Act, 1944        Demand & Penalty 
                  for Service Tax    23.91    CESTAT,
                                              New Delhi      Dec.,05 to 
                                                             Oct.,06
 
 Central Excise 
 Act, 1944        Reversal of Cen
                  vat Credit, 
                  Interest &         25.50    Rajasthan 
                                              High Court, 
                                              Jaipur         May,99 to
                                                             Feb.,2002
                  Penalty on 
                  Excise Duty
 
 Rajasthan Tax on 
 Entry of Goods   Entry Tax and 
                  Interest           91.37    Rajasthan
                                              High Court,     Apr 06 to
                                                              Mar 11
 into Local Areas 
 Act, 1999 Jodhpur
 
 (B) Kathua Unit
 
 Central Excise 
 Act, 1944        Excise duty on 
                  Textile Committee  17.64   Central Excise 
                                            & Service Tax     2000-2005
                  Cess and penalty 
                  thereon Appellate          Tribunal, 
                                             New Delhi
 
 Central Excise 
 Act, 1944        Excise duty on 
                  Clearance of       23.66   Central Excise 
                                             & Service Tax    1995-1996
                   Yarn at Single 
                   Stage                     Appellate Trib
                                            unal, New Delhi
 
 (C) Daheli unit
 
 Gujarat Tax on 
 Entry of 
 Specified        Entry Tax,
                  Penalty and       626.04   Commercial Tax 
                                             Officer          Apr 06 to
                                                              Mar11 
 Goods into Local 
 Areas Act,
 2001              Interest 
                   thereon
 
 (x) The Company has no accumulated losses at the end of the financial
 year and it has not incurred any cash loss in the current year.
 
 (xi) Based on our audit procedures and on the information and
 explanations given by the management, we are of the opinion that the
 Company has not defaulted in repayment of dues to financial
 institutions and banks. We have been informed that the Company has not
 issued any debenture during the year.
 
 (xii) According to the information and explanations given to us and
 based on the documents and records produced to us, 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 4 (xiii) of
 the Companies (Auditors Report) Order,2003 (as amended), are not
 applicable to the Company.
 
 (xiv) The Company does not deal or trade in shares, securities,
 debentures and other securities except that it has investments in
 shares / units and these are held in the name of the Company.
 
 (xv) According to the information and explanations given to us, the
 Company has not given any corporate guarantees in favour of financial
 institution/bank for loans taken by others.
 
 (xvi) To the best of our knowledge and belief and according to the
 information and explanations given to us, term loans availed by the
 Company were, prima facie, applied by the Company during the year for
 the purpose for which loans were obtained.
 
 (xvii) According to the information and explanation given to us, on an
 overall examination of the balance sheet of the Company, we report that
 no funds raised on short-term basis have been used for long-term
 investment by the Company.
 
 (xviii) The Company has not made any preferential allotment of shares
 to parties or companies covered in the register maintained under
 Section 301 of the Companies Act, 1956.
 
 (xix) The Company did not have any outstanding debentures during the
 year.
 
 (xx) The Company has not raised any money through a public issue during
 the year.
 
 (xxi) Based on our examination of the books and records of the Company,
 carried out in accordance with the generally accepted auditing practice
 in India and according to the information and explanations given to us,
 no fraud on or by the Company, noticed or reported during the year.
 
 
 
                                                     For Singhi & Co.  
                                                Chartered Accountants 
                                                Firm Reg. No. 302049E
 
                                                         B. K. Sipani 
 Place: New Delhi                                             Partner
 
 Dated: May 13, 2011                             Membership No. 88926