SELAN EXPLORATION TECHNOLOGY LIMITED

ANNUAL REPORT 2009 – 2010

ANNUAL REPORT SELAN
Late Mr. R. N. Kapur
Founder and Former Chairman

BOARD OF DIRECTORS

Mr. R. Kapur Chairman

Mr. T. Currimbhoy • Mr. V. B. Mahajan • Mr. S. K. Singh

HEAD – STRATEGY DEVELOPMENT

Mr. Shiv Kapoor

COMPANY SECRETARY

Ms. Gunjan Jain

AUDITORS

V. Sankar Aiyar & Company, Chartered Accountants, New Delhi

BANKERS

Yes Bank • State Bank of India • Corporation Bank

REGISTERED OFFICE

J-47/1, Shyam Vihar, Dindarpur, Najafgarh, New Delhi – 110 043

REGISTRARS AND SHARE TRANSFER AGENTS

MCS Ltd., F - 65, First Floor, Okhla Industrial Area Phase – I, New Delhi – 110 020
 DIRECTORS’ REPORT SELAN

Your Directors have pleasure in presenting the Annual Report for the year ended 31 March 2010.

FINANCIAL REVIEW
The Company achieved the following results over the past three years :

(Rs. Millions) 2007-08 2008-09 2009-10

Net Sales 361 1059 733
EBIDTA 266 839 590
EBIDTA / Sales 77% 84% 83%

Total Reserves and Surplus of the Company have increased from Rs. 833.80 million to
Rs. 1280.92 million as on 31 March 2010.

OPERATIONS REVIEW
During this Financial Year, the Company has not undertaken any new drilling activities. However, 3D
seismic data acquisition, processing and interpretation (API) activity in Bakrol and Indrora oilfields is
underway. This shall give us a fair idea of the locations in which drilling campaign can be started in the
second half of the current fiscal year.
The aggregate production from our fields has been 238,140 barrels in 2009-10 as compared to 282,745
barrels in 2008-09.

We are also pleased to inform you that the Company has commenced commercial sale of Associated
Natural Gas, though on a small scale, w.e.f. F.Y. 2009-10.

FIELD DEVELOPMENT REVIEW

The developmental activities, alongwith, maybe lower crude oil prices and the natural depletion in
production from existing wells will temporarily result in somewhat lower levels of production and
profits during 2010-11. However, our cash reserves and cash generation have made it possible for us to
plan / undertake and generally complete these Seismic and testing activities in a short period of time.

As a result, we now believe that the Company will shortly be able to establish significant / additional
levels of proven and recoverable reserves in our oilfields and hopefully this, in turn, will lead to your
Company emerging with significant oil and gas volume growth within the next one to two years.

LOHAR ARBITRATION / PAYMENT OF PROFIT PETROLEUM

The Arbitration Tribunal constituted for determining the payment of Profit Petroleum to the
Government of India, has given its Award on 3 May 2010. Please refer to Note 2 of the Notes on
Accounts section of this Annual Report for more details. The amount paid to Government of India for
the period April 2007 upto December 2009, approximately USD 1,674,002, is a contingent asset, pending
refund by the Government of India.

FINAL DIVIDEND
The Directors are pleased to inform that in F.Y. 2009-10, the Company had paid an interim dividend of
15%, which shall be declared as final dividend for the year 2009-10, subject to approval by the
shareholders of the Company in the forthcoming AGM.

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 DIRECTORS’ REPORT (CONTD…) SELAN

BOARD OF DIRECTORS

Mr. S. K. Singh retires by rotation at the ensuing Annual General Meeting and being eligible, offers
himself for re-appointment.

Mr. A. Mahajan, a member of the Board of Directors, resigned as a Director of the Company, with
effect from 6 May 2010. The Directors wish to acknowledge the contribution made by him to the
Company over the years.

DIRECTORS’ RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 217(2AA) of the Companies Act, 1956, the Board of
Directors do hereby confirm that in the preparation of the Annual Accounts, the applicable Accounting
Standards have been duly followed, that the Directors have selected such accounting policies and
applied them consistently and made judgments and estimates that are reasonable and prudent so as to
give a true and fair view of the state of affairs of the Company at the end of the financial year and of the
profit or loss of the Company for that period, that the Directors have taken proper and sufficient care
for the maintenance of adequate accounting records in accordance with the provisions of Companies
Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other
irregularities, and that the Directors have prepared the annual accounts on a going concern basis.

AUDITORS AND THEIR REPORT

The Auditors, M/s V. Sankar Aiyar & Co., Chartered Accountants, retire at the ensuing Annual
General Meeting and being eligible, offer themselves for re-appointment.

CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement, Management Discussion and Analysis and a Report on
Corporate Governance alongwith certificate from Auditors regarding compliance of conditions of
Corporate Governance is annexed to Directors’ Report. A declaration by the CEO (Manager) regarding
the compliance with the Code of Conduct also forms part of this Annual Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN

EXCHANGE EARNINGS AND OUTGO

The activities undertaken by your Company do not fall under the purview of disclosure of particulars
under Section 217(1)(e) of the Companies Act, 1956, in so far as it relates to the conservation of energy
and technology absorption. Particulars with regard to foreign exchange outgo appear as point no. 15 of
the Notes forming Part of the Accounts.

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 DIRECTORS’ REPORT (CONTD…) SELAN

PERSONNEL
The Company has only two employees whose name and particulars are required to be disclosed as per
the provisions of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975, as amended.

Nature Employment
Remuneration Qualification Experience Last Position
Name Age Designation of Commenceme
Received (in years) Held
Employment nt Date
MD, Selan
Whole – Time 1 October
Mr. Rohit Kapur 55 Rs. 23 million Contractual MBA 31 Exploration
Director 2008
Technology Ltd.
Ph.D.
(Petroleum
President & Rs. 2.10 CEO, Prize
Dr. M. N. Prasad 60 Contractual Geology), 37 1 April 2008
CEO million Petroleum
M.Sc., B.Sc.

Notes : 1. Gross remuneration as above includes salary, taxable allowances, Company’s contribution to Provident Fund, Gratuity paid (but excludes Company’s
contribution to Gratuity Fund), and taxable value of perquisites. 2. Mr. Rohit Kapur was in employment for the full financial year 2009-10. Dr. Prasad was in
employment till September 2009. 3. Mr. Rohit Kapur is a Promoter of the Company. 4. Mr. Rohit Kapur holds 1,697,133 shares in the Company. Dr. M. N.
Prasad does not hold any shares in the Company.

ACKNOWLEDGEMENTS
The contribution of a dedicated and motivated team of personnel is extremely valuable in the growth of
a Company. Your Company is fortunate to have a team whose endeavors have laid a strong foundation
for the growth of the organization as a whole. Your Directors acknowledge the exemplary service
provided by the employees of the Company.

On behalf of the Company, we wish to convey our thanks to Ministry of Petroleum and Natural Gas
(MoPNG), Directorate General of Hydrocarbons (DGH), Ministry of Environment and Forests (MoEF),
Government of India and the Bankers of the Company for their continuous cooperation, support and
guidance. The Directors value the faith reposed by the shareholders in their ability to manage the
Company. We expect that with the continuous support and encouragement of our shareholders, we
shall be successful in achieving key milestones in the near future.

For and on Behalf of the Board

21 July 2010 R. KAPUR

New Delhi Chairman

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 MANAGEMENT DISCUSSION AND ANALYSIS
1. Industry Structure and Developments
Government has awarded and signed a number of Production Sharing
Contracts with Private Sector Oil Companies for Exploration Blocks
under New Exploration Licensing Policy (NELP) and Coal Bed
Methane (CBM) Projects. Further, the Government is expected to
launch new E & P blocks under Open Acreage Bidding. This could
result in expansion of the industry alongwith creation of new
employment opportunities in the oil industry. The Private Sector with
its Joint Ventures has contributed significantly in exploitation of
existing oil reserves in the country with the striking of huge
discoveries of oil and gas (onshore / offshore) within the Country. As
a result, the domestic crude oil production is continuously improving
with significant contributions of crude production from private
operators, thus reducing foreign exchange outflow on crude imports.
Oil sector, today, is one of the most prospective sectors where newer
growth avenues for business and employment are opening up,
nevertheless, crude oil still represents India’s single largest item of
import.
2. Outlook
Production Sharing Contracts (PSCs) with the Government of India
were signed by SELAN in 1995 for Bakrol, Indrora and Lohar
oilfields. Further, the Company was also awarded Contracts for the
Karjisan Gasfield and the Ognaj Oilfield with the Ministry of
Petroleum and Natural Gas (MoPNG) in 2004.
The Company is in the process of executing elaborate plans for the
development of its oil and gas fields. This is expected to increase the
production of crude oil / gas by implementation of the new
technology coupled with services of experienced professionals for
managing its oil and gas assets.
Efforts are also being made in terms of seismic data acquisition,
workover of existing wells and drilling of new wells to provide
accelerated thrust to the production of crude oil.
3. Segment-wise performance
Currently, the Compan is engaged in only one Business Segment that
is Production of Crude Oil and Natural Gas.
4. Operations and Financial Review
The operations and financial review is covered in the Directors’
Report and is to be read as a part of this report itself.
5. Risks and Concerns
(i) Business Risks
Oil sector is a high risk and high return sector. Data acquired for
seismic evaluation of oilfields & reservoir modeling involves
interpretation by advanced software technology and equipment which
is capital intensive in nature and therefore prone to obsolescence
coupled with uncertainty in results.
Industrial relations have remained cordial throughout the year.
The Drilling Activities are carried out using advanced drilling rigs and Operations went on smoothly during the year and there were no material
ancillary rig equipments. Further, necessary safety and security developments that could adversely impact the operations.
measures have to be employed prior to any drilling activity.
SELAN
However, the inherent risks of dealing with nature cannot be completely
mitigated and that is why drilling activity poses a great challenge and
risk. The fluctuation in international oil prices as well as in the dollar
value of the rupee is another factor which adds to the uncertainty of
profits in the oil industry.
(ii) Project Constraints
The Company did not undertake any new drilling activities during the
financial year 2009-10. By and large, the Company did not face any
project constraints during the year under review.
A recent notification from Ministry of Environment and Forests (MoEF)
states that any new drilling activity requires its prior clearances. The
approval process at MoEF also requires considerable time and effort.
Any unexpected delay in getting the timely clearances from MoEF and in
mobilizing the drilling rig and associated oilfield services is a potential
project constraint for the Company.
(iii) Financial, Legal and Contractual Risks
SELAN carries a minimum financial risk. Currently, the Company has
the policy of using debt financing only for short term requirements
besides using its own internal accruals.
Since 2007, arbitration proceedings for the Lohar oilfield were
underway. The Arbitral Tribunal has now declared its Award on 3 May
2010.
6. Internal Control Systems and their Adequacy
SELAN has ensured proper and adequate system of Internal Control so
that all assets are safeguarded and protected against loss from
unauthorised use / disposition and that transactions are authorized,
received and reported in a prudent manner. Internal Control System is
designed to ensure that financial and other records are reliable for
preparing financial statements and for maintaining accountability for
assets. The internal control systems are reviewed by the Audit
Committee in its quarterly meetings and suggestions are given to
strengthen the internal control measures and procedures keeping in view
the changing business scenario. Efforts are in progress to strengthen the
internal control measures and procedures on a continuous basis as per the
existing business scenario.
7. Human Resources Development / Industrial Relations
SELAN considers its employees as its key resource and the major
driving force behind the performance and success of the Company.
SELAN has a flat and lean management structure which results in quick
and efficient decision making. The number of employees of the
Company are less than 30. People are mostly employed on contractual
basis which, given the nature of the Industry, is the right approach in
view of the management.
CORPORATE GOVERNANCE
1. SELAN’s philosophy on Code of Governance
At SELAN, we believe that Corporate Governance (as envisaged in Clause 49 of the Listing
Agreement with the Stock Exchanges) is the foundation for building and sustaining growth and
achieving success. SELAN follows the mantra of serving all its shareholders, employees, creditors and
Government authorities, by way of full and fair disclosures in all its transactions, communications and
dealings. SELAN believes in promoting the highest standards of Corporate Governance in every
possible manner.
SELAN makes a concerted and conscious effort to achieve optimum utilization of resources and
funds thereby enhancing and sustaining long term shareholders’ value .
SELAN
Disclosure of Remuneration to Directors
Non-Executive Directors were not paid any remuneration except sitting fees (for attendance at each
meeting of Board of Directors or Committee thereof). The Whole-Time Director was paid
remuneration during the year as disclosed in Note 8 & 10 of Notes on Accounts. Two other Non–
Resident Directors were not paid any remuneration or sitting fees during the year.
5. Shareholders’ Committee

Ethical business conduct is the foundation for efficient Corporate Governance. SELAN has a The Board has also established a Shareholders’ / Investors Grievance Committee under the
prescribed Code of Conduct which is displayed on the website of the Company. It is mandatory for chairmanship of Mr. V. B. Mahajan with Mr. R. Kapur and Mr. S. K. Singh as Members for the
the Board of Directors and Key Management Personnel to affirm compliance with this code on an specific purpose of redressal of shareholders / investors grievances and complaints etc. The committee
annual basis. A declaration to this effect by the CEO (Manager) of the Company also forms part of met four times during the year. All the members of the Committee were present at the meetings.
this Annual Report. There were no pending shareholders complaints / grievance and transfer of shares as on 31 March
2010.
2 (i) Board of Directors
The Company has designated an e-mail id of the Compliance Officer, specifically, to look after
Composition of Board investor grievances and to resolve them in a speedy manner, in compliance with Clause 47 (f) of the
Listing Agreement.
The Board of Directors of the Company comprises of :
Compliance Officer
- One Executive Director.
- - Three Non – Executive Independent Directors. Name : Ms. Gunjan Jain
Designation : Company Secretary
Executive/ Number of No. of Committee AttendanceAttendance E-mail Id : investors@selanoil.com .
Name of
Non–Executive/ Other Memberships in in Board in Last
Director
Independent Directorships other Companies Meetings AGM
Chairman Member 6. Buyback of Shares Committee
Chairman
and The Board had established a Buyback of Shares Committee comprising of Mr. V.B. Mahajan as
R. Kapur * - - - 5 Yes
Whole-Time Chairman and Mr. R. Kapur and Mr. S.K. Singh as Members to review the buyback programme
Director undertaken by the Company. The Committee met seven times during the year and all the members
Non – Executive were present at these meetings.
A. Mahajan # - - - - Yes
Director
Non – Executive 7. Committee for Preferential Issue of Warrants
S. K. Singh
and Independent - - - 5 Yes
Director In 2008, the Board had established a committee for preferential issue of warrants. The Committee
Non – Executive comprises of Mr. V.B. Mahajan (Chairman), Mr. S.K. Singh and Mr. R. Kapur, Members. The
T. Currimbhoy * and Independent - - - - No Committee met once during the year and all the members were present at these meetings.
Director
Non – Executive 8. General Body Meetings
V. B. Mahajan and Independent - - - 5 Yes
Director Location and time for last three Annual General Meetings were :

* Non – Resident Directors Year AGM Location Date Time

# Resigned w.e.f. 6 May 2010 2006-07 AGM Ashok Country Resort, New Delhi 24/09/07 10 : 00 a.m.
2007-08 AGM Ashok Country Resort, New Delhi 17/09/08 10 : 00 a.m.
Note : Directorships in Foreign Body Corporates, Private Limited Companies and Associations are
2008-09 AGM Ashok Country Resort, New Delhi 08/09/09 10 : 00 a.m.
excluded.

2 (ii) Number of Board Meetings held and the dates on which held No Extra- Ordinary General Meeting was held during the year.

9. Disclosures
There were 5 Board Meetings held during the financial year 2009 – 10, as per the provisions of
Clause 49 of the Listing Agreement. The dates on which the meetings were held are : 6 May 2009 ,
25 July 2009, 29 October 2009, 6 November 2009 and 21 January 2010.
9. (a) Disclosures on materially significant related party transactions i.e. transactions of the
3. Audit Committee Company of material nature, with its promoters, the directors or the management, their
subsidiaries or relatives, etc. that may have potential conflict with the interests of the
Company at large.
The Audit Committee of the Company was constituted on 9 May 2000 as per the provisions of the
Listing Agreement. The Committee now comprises of three members, out of which two are non- Mr. R. Kapur, the Whole-Time Director was paid remuneration during the year as disclosed
executive and independent directors. The Chairman of the Committee is also a non–executive and in Note 8 & 10 of Notes on Accounts.
independent director. The Constitution of the Committee is as follows : Mr. V. B. Mahajan
(Chairman), Mr. R. Kapur and Mr. S. K. Singh, Members. During the year, 9. (b) Details of non-compliance by the Company, penalties, strictures imposed on the
Company by stock exchanges or SEBI, or any statutory authority, on any matter
Brief description of terms of reference : related to capital markets, during the last three years.
1. Review of the financial reporting process and the Company’s financial statements. None.
2. Review of the adequacy of accounting records as maintained in accordance with the
provisions of the Companies Act, 1956. 9. (c) Disclosure on number of shares and convertible instruments held by non – executive
3. Review of the adequacy of internal control system. directors.
4. Such other powers and role as stipulated under Clause 49 of the Listing Agreement and
Section 292 A of the Companies Act, 1956. Mr. S.K.Singh : 1,000
Mr. V.B.Mahajan : 5,680
The Committee met four times during the current year (on 5 May 2009, 23 July 2009, 23 October
2009 and 20 January 2010 ). All the Committee members were present at all the meetings.
10. Means of Communication
4. Remuneration Committee
The Half Yearly and Quarterly results are published immediately after the Board Meeting held to
Constitution of Remuneration Committee is a non – mandatory requirement under the Listing consider and take them on record, in leading national newspapers and the same is intimated to Stock
Agreement with the Stock Exchanges. However, it has been made mandatory under Schedule XIII of Exchanges (BSE / NSE) where the shares of the Company are listed as per the requirements of the
the Companies Act, 1956. Therefore, a Committee of Independent Directors Presently, has been Listing Agreement. The quarterly results, shareholding pattern and the Annual Report are also
constituted to determine the remuneration package of its Directors when appointed. Presently, the available on the Company’s website www.selanoil.com.
Committee comprises of : Mr. S. K. Singh (Chairman) , Mr. V. B. Mahajan and Mr. Rohit Kapur,
members. A Management Discussion and Analysis Report has been attached and forms part of this report.
The Committee met once during the year and all the members were present at the meeting.
CORPORATE GOVERNANCE (CONTD…) SELAN
11. General Shareholder Information

i. Annual General Meeting :

- Date and Time 15 September 2010 at 10 : 00 a.m.
- Venue Ashok Country Resort, Rajokri Road, Kapashera, New Delhi – 110 037

ii. Calendar (Tentative) : Annual General Meeting 15 September 2010

for financial year 2010-11 Results for quarter ending June 30, 2010 Second week of August, 2010
Results for quarter ending September 30, 2010 Fourth week of October, 2010
Results for quarter ending December 31, 2010 Fourth week of January, 2011
Results for quarter ending March 31, 2011 Fourth week of April, 2011

iii. Book Closure Date : 8 September 2010 to 15 September 2010

iv. Dividend : During the year 2009-10, the Board of Directors of the Company had recommended
interim dividend of 15% to the shareholders of the Company. This has been paid to the
shareholders on 21 August 2009. This is now being put for approval of the shareholders
as final dividend for the year 2009-10 at the forthcoming AGM.

v. Listing of Equity Shares on Stock : Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Exchanges

vi. Stock Code : Scrip Code on Bombay Stock Exchange : 530075

Scrip Code on National Stock Exchange : SELAN (Equity)

vii. Stock Market Data : Bombay Stock Exchange (BSE)

SHARE PRICE (IN RS.) SENSEX
MONTH
HIGH LOW HIGH LOW
Apr 2009 164.00 127.00 11,492.10 9,546.29
May 2009 207.00 137.00 14,930.54 11,621.30
Jun 2009 245.90 185.00 15,600.30 14,016.95
Jul 2009 206.00 154.05 15,732.81 13,219.99
Aug 2009 324.00 182.50 16,002.46 14,684.45
Sep 2009 314.80 269.20 17,142.52 15,356.72
Oct 2009 377.25 290.50 17,493.17 15,805.20
Nov 2009 352.00 285.05 17,290.48 15,330.56
Dec 2009 364.80 312.35 17,530.94 16,577.78
Jan 2010 467.90 344.00 17,790.33 15,982.08
Feb 2010 458.00 368.20 16,669.25 15,651.99
Mar 2010 453.00 406.05 17,793.01 16,438.45

viii. Registrar and Transfer Agents : MCS Limited

F – 65, First Floor
Okhla Industrial Area Phase – I
New Delhi – 110 020

Tel # 011 - 4140 6149

Fax # 011 - 4170 9881

ix. Share Transfer System : Share transfer requests received in physical form with demat requests are registered
within an average of 15 days from the date of receipt. Share transfer requests received
in physical form without demat requests are registered within an average of 20 days.
x. Distribution of shareholding as on : Category No. of Shares Held % Holding
31 March 2010 as on 31.03.2010
Promoters :
- Indian 2,534,776 16.414
- Foreign 3,953,833 25.603
Banks, Financial Institutions 2,000 0.013
Foreign Institutional Investors 445,890 2.887
Private Corporate Bodies 1,318,797 8.540
Indian Public 5,815,189 37.657
Trusts and Foundations 650 0.004
NRIs / OCBs 1,371,631 8.882
GRAND TOTAL 15,442,766 100.00

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 CORPORATE GOVERNANCE (CONTD…) SELAN
xi. Dematerialisation of shares : 85.79% of the outstanding shares have been dematerialized upto
31 March 2010.
Trading in equity shares of the Company is permitted only in dematerialized
form w.e.f. 25 September 2000 as per notification issued by the Securities and
Exchange Board of India (SEBI).

xii. Liquidity : The shares of the Company are listed on Bombay Stock Exchange (BSE) and
the National Stock Exchange of India Ltd. (NSE). The shares of the Company
are adequately liquid.

xiii. Field Locations : Bakrol, Indrora and Lohar oilfields in the State of Gujarat. The Company also
has Ognaj oilfield and Karjisan gasfield situated in the State of Gujarat.

xiv. (i) For transfer / dematerialisation of shares, : MCS Limited

payment of dividend on shares, interest Unit : Selan Exploration Technology Ltd.
and redemption of debentures, and any F – 65, First Floor
other query relating to the shares and Okhla Industrial Area Phase – I
debentures of the Company New Delhi – 110 020
(ii) Any query on the Annual Report : Company Secretary
Selan Exploration Technology Ltd.
J-47/1, Shyam Vihar
Dindarpur, Najafgarh
New Delhi – 110 043

DECLARATION REGARDING COMPLIANCE BY BOARD MEMBERS AND SENIOR MANAGEMENT PERSONNEL

WITH THE COMPANY’S CODE OF CONDUCT

This is to confirm that the Company has adopted a Code of Conduct for its Board of Directors and Senior Executives. The above
mentioned code is available on the website of the Company.
I confirm that the Company has in respect of the financial year ended 31 March 2010 received from the senior management team of
the Company and the members of the Board a declaration of compliance with the Code of Conduct as applicable to them.

21 July 2010 P.S. Oberoi

New Delhi Manager

Auditor’s Report on Corporate Governance

To the Shareholders of
Selan Exploration Technology Ltd.
1. We have examined the compliance of conditions of corporate governance by Selan Exploration Technology Ltd. for the year ended
31 March 2010, as stipulated in Clause 49 of the listing agreement of the Company with stock exchanges.
2. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to
procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate
Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.
3. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has
complied with the conditions of Corporate Governance as stipulated in the abovementioned listing agreement.
4. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness
with which the management has conducted the affairs of the Company.

for V. SANKAR AIYAR & CO.

Chartered Accountants
(Firm’s Regn. No. 109208W)

Place : New Delhi M. S. Balachandran

Date : 21 July 2010 Partner
Membership No. 024282

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AUDITORS’ REPORT SELAN
To the Shareholders of Selan Exploration Technology Limited
1. We have audited the attached Balance Sheet of SELAN EXPLORATION TECHNOLOGY LIMITED as at 31 March 2010, the Profit & Loss Account and also 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 the 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, issued by the Department of Company Affairs, 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 such checks as we
considered appropriate and according to the information and explanations given to us.
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 Cash Flow Statement dealt with by this Report are in agreement with the books of account ;
d) 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, to the extent applicable ;
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 31 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 ;
f) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the 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 :
i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31 March 2010 ;
ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and
iii. in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE REFERRED TO IN OUR REPORT OF EVEN DATE TO THE

SHAREHOLDERS OF SELAN EXPLORATION TECHNOLOGY LIMITED
1. i) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
ii) The Management has physically verified the assets at the year end, the frequency of which in our opinion is reasonable. No material discrepancies were noticed on
such verification.
iii) Since there is no substantial disposal of fixed assets during the year, the preparation of financial statements on a going concern basis is not affected on this account.
2. i) The inventory of the Company consisting of crude oil, spares and consumables have been physically verified once during the year which, in our opinion is considered
reasonable, keeping in view the size of the Company and nature of its business.
ii) The procedures of physical verification of stocks followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its
business.
iii) The Company is maintaining proper records of inventory. The discrepancies noticed on physical verification between the physical stock and the stock records have
been adjusted in the books of accounts.
3. i) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the
Companies Act, 1956.
ii) 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.
4. In our opinion and according to the information and explanations given to us, there is an 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. During the course of our audit, no major weaknesses
in internal control were either reported or noticed.
5. According to the information and explanations given to us, the particulars of contracts or arrangements that needed to be entered into a register maintained in
pursuance of Section 301 of the Companies Act, 1956, have been so entered. However, there are no transactions exceeding the value of rupees five lakhs in respect of
any party during the year.
6. During the year, the Company has not accepted deposits from public and consequently, the directives issued by the Reserve Bank of India and the provisions of
Section 58A or 58AA of the Companies Act, 1956, or any other relevant provisions of the Act and the rules framed thereunder, are not applicable.
7. The Company did not have any internal audit during the year.
8. The Central Government has not prescribed maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956, in respect of the Company's activities.
9. i) According to the records of the Company, the Company has been generally regular in depositing with appropriate authorities the statutory dues including Provident
Fund, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Cess and other statutory dues, though delay was observed in the payment of advance income-
tax for which interest has been paid / provided. We are informed that there is no liability towards Employees State Insurance, Investor Education and Protection
Fund, and Excise Duty for the year under audit. According to the information and explanations given to us, there are no undisputed amounts payable in respect of the
aforesaid statutory dues, which have remained outstanding as at 31 March 2010 for a period of more than six months from the date they became payable.
ii) As regards disputed amounts not paid, the position is as under:

Nature of the Dues Amount (Rs.) Period to which the amount relates Forum where dispute is pending

Sales Tax 12,20,776 1995 – 96 to 1998 – 99 Sales Tax Appellate Tribunal, Ahmedabad

10. The Company has no accumulated losses at the end of the financial year. The Company has not incurred cash losses during the financial year or the immediately
preceding financial year.
11. The Company has not defaulted in repayment of dues to financial institutions or banks or debenture holders.
12. The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of
Clause 4(xii) of the Companies (Auditors’ Report) Order, 2003, are not applicable to the Company.
13. The provisions of any special statute relating to chits do not apply to the Company. Therefore, the provisions of Clause 4(xiii) of the Companies (Auditors’ Report)
Order, 2003, are not applicable to the Company.
14. The Company is not dealing or trading in shares, securities, debentures and other investments. Therefore, the provisions of Clause 4(xiv) of the Companies (Auditors’
Report) Order, 2003, are not applicable to the Company.
15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.
16. The Company has not availed any funds on long term basis during the year.
17. The Company has not raised any funds on short term basis during the year.
18. During the year, the Company has made preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act.
However, the price at which the shares were allotted is not prejudicial to the interest of the Company.
19. Since no debentures have been issued by the Company, the question of creating securities or charge does not arise.
20. The Company has not raised any money during the year by way of public issue.
21. Based on the audit procedures performed and representation by the management, we report that no fraud on or by the Company has been noticed or reported during
the year under audit.

For V. Sankar Aiyar & Co. M. S. BALACHANDRAN

New Delhi Chartered Accountants Partner (M.No: 024282)
21 July 2010 (Firm’s Regn. No. 109208W)

*8*
BALANCE SHEET SELAN
As at 31 March 2010 (in Rs.)
Particulars Schedule 31 March 2010 31 March 2009
SOURCES OF FUNDS
Shareholders’ Funds
Share Capital 1 154,427,660 143,207,060
Reserves and Surplus 2 1,280,915,886 833,803,069
Share application money pending allotment - 29,700,000
Loan Funds
Secured Loans 3 148,392,458 250,790,646
Deferred Tax Liability (Net) (See Note 11) 335,527,000 322,198,000
TOTAL 1,919,263,004 1,579,698,775
APPLICATION OF FUNDS
Fixed Assets 4
Gross Block 183,712,388 169,964,033
Less: Depreciation to date 117,514,984 100,822,210
Net Block 66,197,404 69,141,823
Capital Work in Progress (at cost) 13,830,368 20,633,900
Development of Hydrocarbon Properties
As per last Balance Sheet 891,915,838 531,068,059
Additions during the year 150,397,146 449,098,211
1,042,312,984 980,166,270
Less : Written off during the year 108,998,084 88,250,432
933,314,900 891,915,838
Current Assets, Loans and Advances 5
Inventories 105,235,956 112,492,609
Sundry Debtors 110,052,187 98,980,074
Cash and Bank Balances 785,594,842 468,959,000
Other Current Assets 6,716,299 5,322,433
Loans and Advances 15,713,835 12,380,610
1,023,313,119 698,134,726
Less: Current Liabilities and Provisions 6
Current Liabilities 86,039,374 93,677,149
Provisions 31,353,413 6,450,363
117,392,787 100,127,512
Net Current Assets 905,920,332 598,007,214
TOTAL 1,919,263,004 1,579,698,775

Significant Accounting Policies and 12

Notes forming part of Accounts
Annexure to our Report of Date
for V. SANKAR AIYAR & CO.
Chartered Accountants
Firm’s Regn. No. 109208W

S. K. SINGH
M. S. BALACHANDRAN GUNJAN JAIN R. KAPUR V. B. MAHAJAN

New Delhi PARTNER COMPANY SECRETARY CHAIRMAN DIRECTOR(S)

21 July 2010 Membership No. 024282

*9*
 PROFIT AND LOSS ACCOUNT SELAN

For the Year Ended 31 March 2010

(in Rs.)

Particulars Schedule 31 March 2010 31 March 2009

INCOME

Sale of Crude Oil 729,057,360 1,058,761,346

Sale of Natural Gas 4,287,754 -
Less : Payment for Profit Petroleum to GoI for prior year - (20,988,299)
Less : Payment for Profit Petroleum to GoI for the year [See note 2] (38,864,748)
(25,298,160)
Net Sales
708,046,954 998,908,299
Increase /(Decrease) in Closing Stock of Crude Oil 1,247,376 233,624
Other Income 7 28,192,222 28,435,364

TOTAL
737,486,552 1,027,577,287

EXPENDITURE

Operating Expenses 8 42,206,901 41,765,315

Personnel 9 34,836,286 52,022,446
Administration 10 24,949,321 25,708,371
Development of Hydrocarbon Properties 11 150,397,146 449,098,211
Interest on Term Loans 23,929,049 32,093,087
Royalty, Cess and Sales Tax 45,616,084 54,866,297
Depreciation (including impairment loss) 18,441,680 9,822,856
Development of Hydrocarbon Properties written off 108,998,084 88,250,432
Claims Recoverable written off - 14,484,725
449,374,551 768,111,740
Transfer to : Development of Hydrocarbon Properties (150,397,146) (449,098,211)
TOTAL 298,977,405 319,013,529
PROFIT BEFORE INCOME TAX 438,509,147 708,563,758
Less : Provision for Taxation
– Current Tax 137,180,000 112,200,000
– Deferred Tax 13,329,000 129,259,000
– Fringe Benefit Tax (relating to previous year) 5,000 706,690
PROFIT AFTER INCOME TAX 287,995,147 466,398,068
Profit brought forward from last year 727,891,016 336,793,153
PROFIT AVAILABLE FOR APPROPRIATION 1,015,886,163 803,191,221
APPROPRIATIONS :
General Reserve 30,000,000 50,000,000
Interim Dividend paid on Equity Shares (@ Rs. 1.50 per share) 21,327,399 21,624,105
Corporate Dividend Tax 3,624,592 3,676,100
Balance Carried to Balance Sheet 960,934,172 727,891,016
Basic earnings per Equity Share of Rs. 10/- each. [See note 10] 19.91 32.38
Diluted earnings per Equity Share of Rs. 10/- each. [See note 10] 19.91 32.02

Significant Accounting Policies and 12

Notes forming part of Accounts

Annexure to our Report of Date

for V. SANKAR AIYAR & CO.
Chartered Accountants
Firm’s Regn. No. 109208W
S. K. SINGH
M. S. BALACHANDRAN GUNJAN JAIN R. KAPUR V. B. MAHAJAN
New Delhi PARTNER COMPANY SECRETARY CHAIRMAN DIRECTOR(S)
21 July 2010 Membership No. 024282

* 10 *
CASH FLOW STATEMENT SELAN
For the year ended 31 March 2010
(in Rs.)
Particulars 31 March 2010 31 March 2009
A. CASH FLOW FROM OPERATING ACTIVITIES :
Net Profit/(Loss) before tax 438,509,147 708,563,758
Adjustments for :
Depreciation (including impairment loss) 18,441,680 9,822,856
Interest paid 23,929,049 32,093,087
Loss on sale of assets 403,520 25,255
Provision for Gratuity 6,860 388,910
Provision for Leave Encashment 203,202 385,866
Interest Income (26,074,187) (29,356,866)
Expenditure on Development of Hydrocarbon Properties written off 108,998,084 88,250,432
125,908,208 101,609,540
Operating Profit before Working Capital changes 564,417,355 810,173,298
Adjustments for :
Trade and other receivables (15,799,204) 8,922,099
Inventories 7,256,653 (39,530,780)
Trade and other payables (8,786,050) (17,819,476)
(17,328,601) (48,428,157)
Cash generated from operations 547,088,754 761,745,141
Taxes paid (116,116,604) (106,839,476)
Net Cash from Operating Activities 430,972,150 654,905,665

B. CASH FLOW FROM INVESTING ACTIVITIES :

Intercorporate Deposits - 1,500,000
Purchase of Fixed Assets and Capital Work in Progress (9,111,550) (32,867,543)
Extraordinary items – Expenditure on Development of (150,397,146) (449,098,211)
Hydrocarbon Properties

Sale of Fixed Assets 14,301 80,000

Interest Received 26,074,187 29,356,866
Net cash from Investing Activities (133,420,208) (451,028,888)

C. CASH FLOW FROM FINANCING ACTIVITIES :

Proceeds from Share Application Money - 29,700,000
Share Capital and Share Premium 182,655,000 -
Buyback of Shares of the Company (including Premium) (17,064,739) (11,512,316)
Proceeds from Medium Term Borrowings - 169,400,000
Repayment of Medium Term Borrowings (102,398,188) (84,362,890)
Dividend Paid (20,179,124) (42,109,841)
Interest Paid (23,929,049) (32,093,087)
Net Cash (used in) /raised from Financing Activity 19,083,900 29,021,866

NET INCREASE/(DECREASE) IN CASH AND

CASH EQUIVALENT (A+B+C) 316,635,842 232,898,643

Cash and cash equivalents as at 1.4.2009 468,959,000 236,060,357

(Opening balance)
Cash and cash equivalents as at 31.3.2010 785,594,842 468,959,000
(Closing balance) *

* Includes Rs. 21.72 million (Previous year Rs. 23.24 million)

not available for ready use

Annexure to our Report of Date

for V. SANKAR AIYAR & CO.
Chartered Accountants
Firm’s Regn. No. 109208W
S. K. Singh
M. S. BALACHANDRAN GUNJAN JAIN R. KAPUR V. B. Mahajan
New Delhi PARTNER COMPANY SECRETARY CHAIRMAN DIRECTOR(S)
21 July 2010 Membership No. 024282

11 *
 SCHEDULES SELAN
Forming Part of The Statement of Accounts
(in Rs.)
Particulars 31 March 2010 31 March 2009
1. SHARE CAPITAL

Authorised:

29,000,000 Equity Shares of Rs. 10 each 290,000,000 290,000,000

100,000 Preference Shares of Rs. 100 each 10,000,000 10,000,000

Total 300,000,000 300,000,000

Issued and Subscribed:

15,442,766 Equity Shares (previous year 14,320,706) of Rs. 10 each, fully paid up 154,427,660 143,207,060

Note : During the year, the Company had bought back and extinguished 107,940 equity shares of
Rs. 10/- each under the Buyback Scheme (see Note 4) and issued 1,230,000 shares of Rs. 10 each on
conversion of warrants (see note 4)

Total 154,427,660 143,207,060

2. RESERVES & SURPLUS

Surplus :

Balance as per Profit and Loss Account 960,934,172 727,891,016

Capital Reserve :

(i) Surplus on Redemption of Debentures

As per last Balance Sheet 2,051,158 12,609,834
Less : price paid for buyback in excess of face value 2,051,158 10,558,676

- 2,051,158
(ii) Profit on Forfeiture of Warrants / Forfeited Shares (see note 4) 9,405,000 106,000
9,405,000 2,157,158
Capital Redemption Reserves :

As per last Balance Sheet 41,792,940 40,839,300

Transfer from Share Premium Account (to the extent of face value) 1,079,400 953,640
42,872,340 41,792,940

Share Premium Account :

As per last Balance Sheet 5,507,685 6,461,325

Less : Transfer to Capital Redemption Reserve to the extent of 1,079,400 953,640
face value of shares bought back
Less : Price paid for buyback in excess of face value 4,428,285 -
Share Premium on conversion of Warrants during the year. 190,650,000 -

190,650,000 5,507,685
General Reserves

As per last Balance Sheet 56,454,270 6,454,270

Less : Price paid for buyback in excess of face value 9,399,896 -
Transfer from Profit & Loss Account 30,000,000 50,000,000
77,054,374 56,454,270

Total 1,280,915,886 833,803,069

3. SECURED LOANS

Medium Term Loan – from Banks (See note below) 146,960,126 247,931,361
Interest accrued and due as on 31 March 2010 (since paid) 1,432,332 2,859,285

Note :
Exclusive charge on all fixed assets and current assets both present and
future.
Due within one year –Rs. 69,460,126 (previous year Rs. 100,500,000).
148,392,458 250,790,646

* 12 *
SCHEDULES SELAN

Forming Part of The Statement of Accounts (contd…)

Rs.

4. FIXED ASSETS GROSS BLOCK DEPRECIATION NET BLOCK

As at As at Upto For the Written Upto As at As at

Particulars 1.4.2009
Additions Deletions
31.3.2010 31.3.2009 Year back 31.3.2010 31.3.2010 31.3.2009

PLANT AND
149,645,482 14,446,184 - 164,091,666 93,840,860 16,598,032* - 110,438,892 53,652,774 55,804,622
MACHINERY

FURNITURE AND
3,048,670 - 663,214 2,385,456 1,057,426 165,090 540,396 682,120 1,703,336 1,991,244
FITTINGS

OFFICE EQUIPMENTS 4,679,147 133,289 1,275,972 3,536,464 1,566,658 203,053 986,469 783,242 2,753,222 3,112,489

COMPUTERS 1,321,957 62,500 223,672 1,160,785 647,392 166,315 218,172 595,535 565,250 674,565

VEHICLES 8,448,730 - 3,869 8,444,861 3,103,966 763,809 3,869 3,863,906 4,580,955 5,344,764

ELECTRICAL
508,423 - - 508,423 168,740 24,008 - 192,748 315,675 339,683
FITTINGS

INTANGIBLE ASSETS –
2,311,624 1,273,109 - 3,584,733 437,168 521,373 - 958,541 2,626,192 1,874,456
SOFTWARE

TOTAL 169,964,033 15,915,082 2,166,727 183,712,388 100,822,210 18,441,680 1,748,906 117,514,984 66,197,404 69,141,823

Previous year 140,241,950 30,121,153 399,070 169,964,033 91,293,169 9,822,856 293,815 100,822,210 69,141,823 48,948,781

* Includes impairment loss of Rs. 5,902,118 (previous year NIL)

* 13 *
SCHEDULES SELAN
Forming Part of The Statement of Accounts (contd…)
(in Rs.)
Particulars 31 March 2010 31 March 2009
5. CURRENT ASSETS

a) Inventories :
97,277,971
Stores and components relating to Development of Hydrocarbon Properties (at cost) 89,825,715
Stores, spares and consumables (at lower of cost or net realisable value) 5,107,741 6,159,514
Stock of Crude oil (at lower of cost or net realisable value) 10,302,500 9,055,124
105,235,956 112,492,609

b) Sundry Debtors :

(Unsecured - Considered good)

Outstanding for a period exceeding six months - -
Others 110,052,187 98,980,074
110,052,187 98,980,074

c) Cash and Bank Balances :

Cash in Hand 74,180 13,601

Balance with Scheduled Banks :
Current accounts 6,992,850 6,997,652
Deposit accounts :
- Public Sector Banks 527,597,272 189,770,906
- Private Sector Banks 229,202,815 248,932,941
Deposit accounts under lien :
- For Government of India / State Government 8,045,724 7,406,881
- For Bank Loans 13,682,001 15,837,019
785,594,842 468,959,000

d) Other Current Assets :

Interest accrued on deposits 6,716,299 5,322,433

6,716,299 5,322,433

e) Loans and Advances :

(Unsecured - Considered Good)
Advances recoverable in cash or in kind or for value to be received 12,992,975 9,451,750
Security Deposits 2,720,860 2,928,860
15,713,835 12,380,610
Total 1,023,313,119 698,134,726

6. CURRENT LIABILITIES & PROVISIONS

A. Current Liabilities
Sundry Creditors :
- due to Micro & Small Enterprises (See note no. 19) - -
- Others (including due to a Director – Net of TDS Rs. 13,405,400; previous 73,185,441 72,343,248
year Rs. 2,783,920)
Other liabilities 10,567,289 20,195,532
Unclaimed Dividend (see note below) 2,286,644 1,138,369
86,039,374 93,677,149
B. Provisions :
- For Taxation – Net of Advance Payment of Income Tax (including Advance 28,752,855 3,994,867
Tax and Tax Deducted at Source)
- For Fringe Benefit Tax - 65,000
- For Gratuity 1,527,943 1,521,083
- For Leave Encashment 1,072,615 869,413
31,353,413 6,450,363
Total 117,392,787 100,127,512
Note : Does not include any amount due and outstanding, to be credited to the Investor Education and Protection Fund.

* 14 *
SCHEDULES SELAN
Forming Part of the Statement of Accounts (contd…)
(in Rs.)
Particulars 31 March 2010 31 March 2009
7. OTHER INCOME
Interest on Bank/Intercorporate Deposits (TDS Rs 2,843,112 ; Previous year Rs. 5,678,141) 26,074,187 27,995,666
Gain on Foreign Exchange 684,142 -
Others 1,433,893 439,698
Total 28,192,222 28,435,364
8. OPERATING EXPENSES
Handling and Processing Charges 7,663,428 8,158,020
Other Direct Operative Expenses 10,422,407 7,777,100
Payments to Contractors for services 7,343,042 7,652,509
Land Rent 1,605,423 1,079,205
Power and Fuel 2,405,085 2,069,141
Repairs and maintenance :
- Plant and Machinery 1,957,573 2,894,222
- Others 675,058 1,594,901
Stores, spares and consumables 1,598,010 1,473,697
Transportation 8,531,875 9,066,520
Total 42,206,901 41,765,315
9. PERSONNEL
Contribution to Provident Fund 236,520 232,776
Gratuity 315,582 395,620
Leave Encashment 498,511 853,277
Salaries and wages 33,116,895 49,831,788
Staff benefits 668,778 708,985
Total 34,836,286 52,022,446
10. ADMINISTRATION
Administrative services and supplies 3,453,317 3,075,273
Advertisement and Business Development 2,027,636 3,533,424
Advisory Services 2,152,603 3,062,398
Communication 904,207 787,587
Directors Fees 800,000 780,000
Insurance 429,879 1,294,977
Loss on sale/write off of fixed assets 403,520 25,255
Miscellaneous expenses 2,409,565 2,838,730
Legal Fees 3,348,638 3,728,305
Rent 1,790,020 2,296,132
Rates and Taxes 20,635 75,373
Travelling and Conveyance 2,155,125 2,549,389
Interest on delayed payment of Statutory Dues 5,054,176 1,661,528
Total 24,949,321 25,708,371
11. DEVELOPMENT OF HYDROCARBON PROPERTIES
Cementing and Pumping Services 769,523 32,490,940
Contract Rig Charges and Rig Site Preparation 3,809,251 175,002,423
Insurance 77,211 1,050,341
Management and Drilling Supervision 5,360,700 13,307,046
Materials for Drilling of Oil Wells 558,615 52,800,802
Miscellaneous Expenses 1,346,975 9,087,700
Mud Chemical, Engineering & Logging Services 8,462,015 65,153,784
Perforation and Well Cleaning Services 40,245,037 47,801,368
Rent 1,721,822 1,219,288
Seismic Survey, Data Processing & Wireline Services 83,923,420 46,441,205
Travelling & Conveyance 4,122,577 4,743,314
Total 150,397,146 449,098,211

* 15 *
12. SIGNIFICANT ACCOUNTING POLICIES SELAN

And Notes Forming Part of Accounts for the year ended 31 March 2010
A. SIGNIFICANT ACCOUNTING POLICIES
1) The financial statements are prepared under historical cost convention, on a going concern basis and in accordance with applicable accounting
standards under Companies (Accounting Standards) Rules 2006, notified by the Central Government under Section 211(3C) of the Companies Act,
1956.

2) Use of estimates :

The preparation of financial statements requires management to make certain estimates and assumptions that affect the amount reported in the
financial statements and notes thereto. Differences between actual results and estimates are recognised in the period in which they materialise.

3) Revenue recognition :

Income on sale of crude oil and gas is accounted for net of VAT and recognised when the risk & rewards are transferred to the buyer’s
representative.

Interest income is recognised on time proportion basis.

4) Fixed Assets :

a) Fixed Assets are shown at cost.

b) Depreciation is provided on straight line method in the manner and at the rates specified in Schedule XIV of the Companies Act, 1956.
Depreciation on additions is charged from the month in which the asset is put to use.

5) Valuation of inventories :

a) Crude oil - valued at cost or net realisable value, whichever is lower. Cost is calculated on absorption cost method.
b) Stores, spares and consumables - at cost (on weighted average basis) or net realizable value, whichever is lower.

6) (i) Foreign currency transactions are recorded at the exchange rates prevailing on the date of transaction.

(ii) In terms of Production Sharing Contract (PSC) with Government of India, selling price of crude oil per barrel is to be determined FOB
delivery point at the prevailing international market rates in US Dollars. However, payment is receivable in Indian Rupees at the US
Dollar / Rupee conversion rate prevailing at the time of payment.

The PSC permits sale of gas to domestic users. Sale of Gas is based on a rupee denominated rate as per contractual agreements.

(iii) The accounts receivable and payable are restated at the rates prevailing on the balance sheet date and the resultant exchange difference is
recognised in the Profit & Loss Account.

7) Considering the nature of the oil industry and that Accounting Standard AS-26 being not applicable to Oil Industry, it is considered appropriate to
show the development expenses of oil fields under "Development of Hydrocarbon Properties" as a separate item. Development of Hydrocarbon
Properties includes the costs incurred on the collection of seismic data, drilling of wells, collection of log data, interpretation and reservoir modeling
costs and other related expenditures. These expenditures are amortized over a period not exceeding the remaining period of the contract. The
categorization / allocation of expenses is done on a basis considered appropriate by the Management.

8) Employee benefits :

The Company makes regular contributions to duly constituted funds set up for Provident Fund and Family Pension Fund. In respect of accruing
liability for gratuity, the employees have been covered under the Group Gratuity Scheme of Life Insurance Corporation of India. There is no
prescribed rule for encashment of leave by employees.

9) Leases :

The Company has not entered into any financial lease. Hire charges for equipment and rental for premises are treated as operating lease and
charged to revenue.

10) Deferred Tax :

In accordance with Accounting Standard 22 – Taxes on Income, deferred tax is recognised, subject to consideration of prudence, being the
difference between accounting and taxable income that originate in one year and are capable of reversal in a subsequent year.

11) Impairment of Assets :

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If any such indication exists, the
Company estimates the recoverable amount. If the carrying amount of the asset exceeds its recoverable amounts, an impairment loss is recognized
in the profit and loss account to the extent the carrying amount exceeds the recoverable amount.

12) Provisions and Contingencies :

The Company creates a provision when there is a present obligation as result of past event that probably requires an outflow of resources and a
reliable estimate can be made of the amount of obligation. A disclosure of contingent liability is made when there is a possible obligation or a
present obligation that will probably not require outflow of resources or where a reliable estimate of the obligation cannot be made.

* 16 *
12. SIGNIFICANT ACCOUNTING POLICIES (CONTD …) SELAN
B. NOTES ON ACCOUNTS
1. Contingent Liabilities :
Disputed sales tax demand under appeal, not provided for - Rs. 1.53 million (previous year 1.53 million).
The future cash outflow on the above, if any, is determinable only on receipt of the decisions pending before the authorities.
2. In the Arbitration Proceedings between the Company and the Ministry of Petroleum and Natural Gas, Government of India (GoI) with respect
to the Lohar oilfield, inter-alia, the issue was whether Profit Petroleum is payable to the GoI in a financial year, when the Investment Multiple in
the preceding year is less than 3.5. The Arbitral Tribunal has by its Award dated 3 May 2010, declared that the Investment Multiple actually
achieved has to be calculated every year to determine the share of Profit Petroleum in the preceding year, to be shared in the succeeding year.
Consequently, Profit Petroleum is to be shared with the GoI only, if the Investment Multiple in the preceding year exceeds a value of 3.5. Since
the Investment Multiple actually achieved by the Company at the end of the preceding year, i.e. 2009 is less than 3.5, no Profit Petroleum is
payable to GoI. The amount recoverable from the Government of India up to 31.03.2010, based on the Award, is estimated at USD 1,674,002
(excluding interest).
3. In the opinion of the Board and to the best of their knowledge and belief, the value on realisation of the current assets, loans and advances in
the ordinary course of business will not be less than the amount stated in the Balance Sheet.
4. During the year, 1,230,000 shares of Rs. 10 each at a premium of Rs. 155 each were issued on conversion of warrants of Rs. 10 each and 570,000
warrants of Rs. 10 each were forfeited and the Application amount of Rs. 9,405,000 was transferred to Capital Reserve. During the year,
107,940 shares were bought back under the buyback scheme.
5. The disclosures of Employee Benefits as defined in the Accounting Standard are given below :
i) Change in present value of obligation Amount in Rs.
31 Mar 2010 31 Mar 2009
Gratuity Leave Encashment Gratuity Leave Encashment
(Funded) (non funded) (Funded) (non funded)
a) Present value of obligation as at the
1,521,083 869,413 1,132,173 483,547
beginning of the period
b) Interest cost 114,081 65,206 79,252 33,848
c) Current service cost 248,892 340,625 403,227 465,716
d) Benefits paid - (98,511) (67,644) (455,854)
e) Actuarial (gain)/loss on obligation (356,113) (104,118) (25,925) 342,156
f) Present value of obligation as at the end of 1,527,943 1,072,615 1,521,083 869,413
period

ii). The amounts to be recognized in balance sheet Amount in Rs.

31 Mar 2010 31 Mar 2009
Gratuity Leave Encashment Gratuity Leave Encashment
(Funded) (non funded) (Funded) (non funded)
a) Present value of obligation as at the end of
the period
1,527,943 1,072,615 1,521,083 869,413

b) Fair value of plan assets as at the end of 1,385,223 - 245,749 -

the period
c) Funded status (142,720) 1,072,615 (1,275,334) (869,413)
d) Excess of actual over estimated 480 - (374) -
e) Net asset/(liability) recognized in (142,720) (1,072,615) (1,275,334) (869,413)
balance sheet

iii) Expense recognized in the statement of profit and loss Amount in Rs.
31 Mar 2010 31 Mar 2009
Gratuity Leave Encashment Gratuity Leave Encashment
(Funded) (non funded) (Funded) (non funded)
a) Current service cost 248,892 340,625 403,227 465,716
b) Interest cost 114,081 65,206 79,252 33,848
c) Expected return on plan assets (101,982) - (374) -
d) Net actuarial (gain)/ loss recognized in the (356,593) (104,118) (25,551) 342,156
period
e) Expenses recognized in the statement of
(95,602) 301,713 456,554 841,720
profit & loss

iv) Economic Assumptions

31 Mar 2010 31 Mar 2009
Gratuity Leave Encashment Gratuity Leave Encashment
(Funded) (non funded) (Funded) (non funded)
a) Discounting Rate 7.50 7.50 7.00 7.00
b) Future Salary Increase 5.00 5.00 4.50 4.50
c) Expected Rate of return on plan assets 9.00 - 8.00 -

Note : The above information is given from the report furnished by the Actuary as at the end of the year.

* 17 *
12. SIGNIFICANT ACCOUNTING POLICIES (CONTD…) SELAN
(Rs. in 000’s)
Particulars 31 March 2010 31 March 2009

6. Miscellaneous Expenses include :

(a) Provision for Wealth Tax 10 32

(b) Donations 211 132
7. (a) Managerial Remuneration – Salary and allowances to Manager 833 480
(b) Managing / Whole Time Director’s Renumeration (including Salary) 23,000 37,000

Computation of net profit in accordance with Section 349 of the Companies Act, 1956
708,564
Profit Before Tax 438,509 9,823
Add : Depreciation charged in the Accounts 12,540 37,000
Managing / Whole –Time Director’s Remuneration 23,000 25
Loss on sale of Fixed Asset 404 -
Impairment Loss 5,902 780
Directors Sitting Fee 800
481,155 756,192
Less : Depreciation under Section 350 of the Companies Act, 1956 12,540 9,823
Profit as per Section 349 of the Companies Act, 1956 468,615 746,369
Commission payable at 5% of the Above 23,431 37,318
Salary & Commission restricted to 23,000 37,000

Note : Provision for accruing liability for Gratuity and Leave Encashment which are done on overall Company basis and are not separately ascertainable
and, therefore, not included above.

8. Segment Reporting as per Accounting Standard – 17

The Company is primarily engaged in the business of exploration and production of oil and natural gas. Therefore, it is a single segment business.

9. Related Party Disclosures as per Accounting Standard – 18

(a) Related Parties and their relationships

(i) Key Management Personnel

- Mr. Rohit Kapur - Chairman and Whole –Time Director

(ii) Enterprises over which Key Management Personnel are able to exercise (control)
significant influence

- Winton Roavic Private Limited

(b) Transactions with the above parties in the ordinary course of business

with parties referred in (i) above

- Managerial Remuneration (To Whole –Time Director) 23,000 37,000
with parties referred in (ii) above
- Rent paid - 180

10. Earnings Per Share (EPS) as per Accounting Standard – 20

(a) Profit after tax (Rs. in 000's) 287,995 466,398

(b) Average number of equity shares of Rs. 10/- each outstanding during the year
- Basic 14,463,314 14,402,533
- Diluted 14,463,314 14,567,533

(c) EPS (Rs.)

- Basic 19.91 32.38
- Diluted 19.91 32.02
- Cash EPS 29.64 48.17

Cash EPS is calculated after adding back Development of Hydrocarbon Properties written off,
Deferred Tax and Depreciation to Net Profit.

11. Major components of Deferred Tax Liabilities and Deferred Tax Assets are as under : (Rs. in Thousands)

Deferred Tax Liability / Deferred Tax

Current Year Charge /
(Asset) Liability / (Asset)
(Credit)
as at 01.04. 09 as at 31.03.10
Deferred Tax Liabilities :
(i) Difference between book and tax depreciation 19,661 (671) 18,990
(ii) Development of Hydrocarbon Properties 303,162 14,072 317,234
(A) 322,823 13,401 336,224
Deferred Tax Assets :
(i) Provision for Gratuity 329 3 332
(ii) Provision for Leave Encashment 296 69 365
(B) 625 72 697
Deferred Tax Liability (Net) (A)-(B) 322,198 13,329 335,527

* 18 *
 12. SIGNIFICANT ACCOUNTING POLICIES (CONTD…) SELAN
(Rs. in 000’s)
Particulars 31 March 2010 31 March 2009

12. a) Licensed capacity (Not Applicable)

b) Installed capacity (Not Applicable)
c) Production (incl water, sediments, etc.) Bbl 234,744 287,382
d) Sales – Crude Oil -Quantity Bbl 238,140 282,745
-Value 729,057 1,058,761
M3
Sales – Associated Natural Gas -Quantity 456,549 -
-Value 4,288 -
e) Crude Oil – Closing Stock -Quantity Bbl 14,481 17,877
-Value 10,302 9,055
f) Crude Oil – Opening Stock - Quantity Bbl 17,877 13,240
- Value 9,055 8,822
13. CIF Value of Imports
a) Capital Goods 1,273 1,732
b) Components, stores & spares (including 17,247 77,152
Development of Hydrocarbon Properties)

14. Value of Spare Parts and Components consumed

i) a) Imported 5,169 43,826
b) Percentage to the Total 82 97
ii) a) Indigenous 1,141 1,474
b) Percentage to the Total 18 3
iii Total 6,310 45,299
)

15. Expenditure in Foreign Currency (on payment basis)

a) Technical Services (Net of TDS) 45,540 2,115

b) Insurance 10 -
c) Travel 2,855 3,373

16. (i) Remittance in foreign currency to Non – Residents on account of dividends – NIL Interim Dividend Interim Dividend
(ii) Dividends paid through mandatee bank accounts in india 2009-10 2008-09
a) Number of non-resident shareholders 372 315
b) Number of shares held by them 5,142,236 4,911,879
c) Dividend (paid in INR) (Rs. in Thousands) 7,713 7,368
d) Year to which the dividend relates 2009-10 2008-09

17. a) Foreign Currency Exposure (indirect)

Not Hedgeable – Debtors US$’000 2,411 1,944
b) Foreign Currency Exposure
Creditors – Non hedged US$’000 125 440

18. Payment to Auditors

a) Audit Fees 280 280

b) Tax Audit 40 40

c) Certification / Company Law / Other Matters 175 245

d) Taxation Matters 145 245

e) Reimbursement of expenses 18 1

f) Service Tax 53 70

19. The Company has not received any intimation from “suppliers” or “service providers” regarding their status under the Micro, Small and Medium
Enterprises (Development) Act, 2006, and hence, disclosure, if any, relating to amounts unpaid as at 31 March 2010 together with interest payable as
required under the said Act are not as certain able.

20. Previous year figures have been regrouped wherever necessary to correspond with the current year figures.
Annexure to our Report of Date
for V. SANKAR AIYAR & CO.
Chartered Accountants
Firm’s Registration no. 109208W
S. K. SINGH
M. S. BALACHANDRAN GUNJAN JAIN
R. KAPUR V. B. MAHAJAN
New Delhi PARTNER COMPANY SECRETARY CHAIRMAN DIRECTOR(S)
21 July 2010 Membership No. 024282

* 19 *
BALANCE SHEET ABSTRACT SELAN
And Company’s General Business Profile
(in terms of amendments to Schedule VI of Part IV)

I. Registration Details
Registration No. TC/SMS/ 5 5 - 0 2 1 4 4 5 State Code 5 5

Balance Sheet Date 3 1 0 3 1 0

Date Month Year

II. Capital Raised during the year (Amount in Rs. )

Public Issue Right Issue
N I L N I L

Bonus Issue Private Placement

N I L 1 2 3 0 0 0 0 0 0

III. Position of Mobilisation and Deployment of Funds (Amount in Rs. )

Sources of Funds
Total Liabilities Total Assets
1 9 1 9 2 6 3 0 0 4 1 9 1 9 2 6 3 0 0 4

Paid –up Capital Reserves & Surplus

1 5 4 4 2 7 6 6 0 1 2 8 0 9 1 5 8 8 6

Share Application Money

N I L

Secured Loans Unsecured Loans

1 4 8 3 9 2 4 5 8 N I L

Application of Funds
Net Fixed Assets Investments Hydrocarbon Properties
6 6 1 9 7 4 0 4 N I L 9 3 3 3 1 4 9 0 0

Net Current Assets Miscellaneous Expenditure

9 0 5 9 2 0 3 3 2 N I L

Accumulated Losses
N I L

IV. Performance of the Company (Amount in Rs. )

Turnover (Gross Revenue) Total Expenditure
7 3 7 4 8 6 5 5 2 4 4 9 3 7 4 5 5 1

Profit / Loss Before Tax Profit / Loss After Tax

4 3 8 5 0 9 1 4 7 2 8 7 9 9 5 1 4 7

EPS in Rs. Dividend rate %

1 9 . 9 1 - -

V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)

Item Code No. (ITC Code) 9 9 9 3 0 0

Product Description O I L E X P L O R A T I O N
P R O J E C T S

Item Code No. (ITC Code) 5 0 3 0 0 0

Product Description D R I L L I N G O F W E L L S

Item Code No. (ITC Code) 1 1 0 0 0

Product Description C R U D E P E T R O L E U M

S. K. SINGH
GUNJAN JAIN R. KAPUR V. B. MAHAJAN
New Delhi COMPANY CHAIRMAN DIRECTOR(S)
21 July 2010 SECRETARY

* 20 *
 THE BOARD OF DIRECTORS SELAN

And Key Management

Held senior management positions with American Cyanamid Inc., a
Fortune 100 Company, including General Manager of one of its
ROHIT KAPUR worldwide subsidiaries. A graduate of Columbia College (BA) and
Columbia Business School (MBA), he has been actively involved with
SELAN since its inception; Chairman of Board of Directors of SELAN.

Dr. Corbishley began his career with Shell in 1971 and has spent over 30
years with them in various countries including most recently as
D. J. CORBISHLEY
Managing Directors of Shell – India for five years. Dr. Corbhishley has a
Ph. D. from the University of Durham; Corporate Advisor with SELAN.

Dr. Trivedi is a Natural Science post graduate from Mumbai University

and has had 20 years of experience as Advisor / Consultant in various
fields such as Project Management, Development Finance, Valuation of
P. TRIVEDI
Private Equity, Wealth Management and Investment Advisory services.
He has also held Senior Advisory and Management positions at SELAN
since 1995 and contributed successfully.

Mr. Kapoor has over 20 years of experience, including 15 years with

Schlumberger, a leading global oilfield service company and Transocean,
a leading global offshore drilling company. A fellow member of the
SHIV KAPOOR
Institute of Chartered Accountants in England and Wales, he has
recently launched MaxKapital, a proprietory business providing strategic
advisory services; Head – Strategy Development of SELAN.

Mr. Singh has over 50 years of extensive experience in the Oil Industry in
S. K. SINGH Senior Management positions starting with Burmah – Shell followed by
Shell and B.P Zambia Ltd., Bharat Petroleum Corporation Ltd. and as
advisor to Essar Oil Ltd.; member of the Board of Directors of SELAN.

A leading architect and non-resident Indian, living and practicing

in New York. Mr. Currimbhoy did his post graduate studies from
TARIK CURRIMBHOY
Cornell University. He is well known to the Indian community in the US
and the Middle East; member of Board of Directors of SELAN.

Mr. Mahajan has held senior management positions in both public and
private sector. Having started his career at Asea Brown Boveri, he has
V. B. MAHAJAN worked at Richardson Hindustan Ltd. (now Procter and Gamble India
Ltd.) and was Managing Director of NAFED; member of Board of
Directors of SELAN.