SPENTEX INDUSTRIES LIMITED Annual Report 2007-08.pdf · SPENTEX INDUSTRIES LIMITED 4 expected to touch US$ 31 bn by 2010. This presents a large opportunity for your Company given

SPENTEX INDUSTRIES LIMITED

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BOARD OF DIRECTORS

Ajay Kumar Choudhary (Chairman)

Mukund Choudhary (Managing Director)

Kapil Choudhary (Deputy Managing Director)

Amrit Agrawal (Director - Finance)

Sitaram Parthasarathy (Director - Works)

Pankaj Sharma

Deepak Diwan

Prem Malik

Ram Kumar Thapliyal

Shyamal Ghosh

Vivek Chhachhi

SECRETARY

Vivek Kumar

AUDITORS

Price Waterhouse

REGISTERED & CORPORATE OFFICE

A-60, Okhla Industrial Area

Phase-II, New Delhi-110020

Ph. : 011-26387738, 41614999Fax : 011-26385181Email : [email protected]; [email protected]

PLANT

B-1, MIDC, Chincholi- Kondi,Dist – Solapur, Maharashtra- 413255

D-48, MIDC, Baramati, Dist. PuneMaharashtra - 413133

51-A, Industrial Area, Sector-III, PithampururDistt. Dhar, Madhya Pradesh - 454774

31-A, MIDC Industrial Area, Butibori,Nagpur - 441122, Maharashtra

2A, Zie Said Street, Tashkent City - 100042Republic of Uzbekistan

2 Tashkent Yuli Street, Toytepa, Urta-chirchikDistrict, Tashkent Region - 102300

Nadrazni 557 436 57, Litvinov, Czech Republic

BANKERS/INSTITUTIONS

State Bank of India

ING Vysya Bank

Bank of Baroda

Indusind Bank

State Bank of Indore

Canara Bank

Indian Bank

Yes Bank Ltd.

ICICI Bank Ltd.

Industrial Development Bank of India

Axis Bank Ltd.

Oriental Bank of Commerce

INDEX

Directors’ Report 1

Corporate Governance Report 5

Management Discussion 13

& Analysis

Auditors’ Report 15

Balance Sheet 19

Profit & Loss Account 20

Cash Flow Statement 21

Schedules 22

Auditors’ Report on Consolidated 39

Financial Statements

Consolidated Balance Sheet 40

Consolidated Profit & Loss Account 41

Consolidated Cash Flow Statement 42

Consolidated Schedules 43

Financial Statments U/s 212 (8) of 60

Companies Act 1956

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ANNUAL REPORT 2007 - 2008

DIRECTORS’ REPORT

Your Directors have great pleasure in presenting the 16th Annual Report together with the Audited Accounts for the year endedMarch 31, 2008.FINANCIAL RESULTS

The highlights of the financial results are as under:(Rs. in Crores)

Particulars 2007-08 2006-07Consolidated Standalone Consolidated Standalone

Net Sales (Turnover) 1337.31 759.72 900.57 740.73Other Income 91.78 55.04 52.34 47.17EBITDA 134.47 68.72 113.57 88.06Financial charges 93.28 67.50 49.74 46.18Depreciation 74.55 42.30 54.03 35.70Prior period adjustment 1.29 1.12 (-)0.71 0.00Profit/(Loss) before tax (PBT) (34.65) (42.20) 10.51 6.18Provision for current tax 0.01 0.00 0.70 0.70Provision for deferred tax (-)11.52 (-)8.13 (-)4.77 0.89Fringe benefit tax 0.47 0.46 0.41 0.39Profit/(Loss) after tax (PAT) but before (23.61) (34.53) 14.17 4.20Minority InterestMinority Interest (1.87) 0.00 1.58 0.00Net Profit/(Loss) (21.74) (34.53) 12.58 4.20

OPERATING RESULTS AND BUSINESS

This year also the Company has spread its operations in the European markets through acquisition. The Company through itsstep-down subsidiary, Schoeller Textile Netherlands B.V., Netherlands has acquired interest in Schoeller Litvinov k.s. a partnershipfirm situated at Czech Republic and acquired its running textiles business having a capacity of 59,000 spindles.

During the year under review, your Company has achieved 48.50% increase in its consolidated revenues which stood atRs.1337.31 Crores as compared to Rs.900.57 Crores in the previous year. Your Company’s consolidated Earning before Interest,Depreciation and Tax (EBITDA) 1.18 times to Rs.134.47 Crores over Rs. 113.57 Crores in the previous year. Your Company hasrecorded a consolidated Loss after Tax of Rs.21.74 Crores against consolidated Profit after Tax of Rs.12.58 Crores.

The segment wise reporting of various business segments are provided in Note 21 of “Notes to Accounts” to the AuditedBalance Sheet and also in “Management Discussion & Analysis”.

The Company’s Ahemdabad unit, which was purchased in the month of December, 2005 from Bank of India under SERFASIAct, 2002 and started commercial production in the month of May, 2006, the Company as a matter of graceful and strategic exitdiscontinued the production in the said unit during the year and to optimize existing production capacity and to achieveeconomies in production cost, management has decided to shift the required plant & machinery of the said unit to other units ofthe Company as balancing equipment to manage the capacities to the maximum extent and also to realize the appreciation invalue of real estate.

During the year under review, the “Contract Manufacturing Agreement” with Bombay Dying and Manufacturing Company Limited(“BDMC”) to manufacture yarn exclusively for them at the Company’s facility known as “Cimmco Spinners” located at Solapur(Maharashtra), for which all the Machines were supplied by BDMC, has been terminated and the Company has acquired allMachines from BDMC, for a lump sum consideration of Rs.16.66 Crores.

DIVIDEND

During the year due to depressed market conditions your Directors do not recommend any dividend.

FUTURE OUTLOOK

While there are challenges to address, overall the prospects for the Indian textile industry are bright. India is the world’s secondbiggest textile manufacturer, right after China. India ranks just after China and USA in the production and consumption of cotton.The Indian textiles industry has established its supremacy in cotton based products, especially in the readymade garments andhome furnishing segment. Export of readymade garments from India amounted to US$ 8 bn in FY06 and is likely to reach US$ 16bn by the end of 2010, assuming a conservative growth of 15% per annum. According to estimates, investments in textiles are


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expected to touch US$ 31 bn by 2010. This presents a large opportunity for your Company given that yarn forms the backboneof the entire textile industry.

ISSUE OF SHARES ON CONVERSION OF WARRANTS

During the year, promoters have exercised option for conversion of 2,75,000 warrants (Issued on 08-12-2005.) Accordingly,the Company has issued and allotted 2,75,000 Equity Shares on June 07, 2007. This resulted paid-up capital of the Companyincreasing from Rs. 71,19,70,350 to Rs. 71,47,20,350 consisting of 7,14,72,035 Equity Shares of Rs.10/- each.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement with Stock Exchanges, a report on Corporate Governance is attachedseparately as a part of the Annual Report and also the Management Discussion and Analysis statement.

DIRECTORS

Mr. Ram Kumar Thapliyal, Mr. Prem Malik and Mr. Shyamal Ghosh, Directors, retire by rotation and being eligible have offeredthemselves for re-appointment.

AUDITORS AND AUDITORS’ REPORT

M/s. Price Waterhouse, Chartered Accountants, who are the Statutory Auditors of the Company hold office until the conclusionof the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to theeffect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Boardrecommends their re-appointment.

The Auditors’ Report read together with the Notes to Accounts is self-explanatory and do not call for any further explanationunder Section 217 (3) of the Companies Act, 1956.

COST AUDITORS

The Central Government has approved the appointment of Mr. Rajesh Goyal, Cost Accountant of M/s. K G Goyal & Associates,Cost Accountants to conduct the audit of the Cost Accounts of the Company for the financial year ending 31st March, 2008 forthe product “Textile”.

FIXED DEPOSITS

Your Company has not accepted any deposits within the meaning of Section 58A of the Companies Act, 1956 and rules madethere under.

SUBSIDIARIES

The Company had six subsidiaries/step-down subsidiaries at the beginning of the year.

The following two subsidiaries were set up during the year:

1. Schoeller Textile Netherlands B.V., Netherlands

2. Schoeller Textil Verwaltungs GmbH, Germany

Ministry of Corporate Affairs, Government of India, vide order No.47/15/2008-CL-III dated March 4, 2008 has granted approvalthat the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section212 of the Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet and Profit & Loss Account andother documents of subsidiary companies are not being attached with the Balance Sheet of the Company. Financial Informationof the subsidiary companies, as required by the said order, is disclosed in the Annual Report. The Company will make availablethe Annual Accounts and related details upon request by any member of the Company. These documents will also be availablefor inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presentedby the Company includes the financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 onaccounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are nomaterial departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgment and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the endof the financial year and of the Loss of the Company for that period;

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For and on behalf of the Board of Directors

Place: New Delhi Ajay Kumar ChoudharyDate : July 31, 2008 Chairman

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts on a going concern basis.

PARTICULARS OF EMPLOYEES

Information relating to employees of the Company, as required under section 217(2A) of the Companies Act, 1956, read withthe Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set outin the Annexure-I to the Directors’ Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo asrequired to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particularsin the Report of Board of Directors) Rules, 1988 are given in Annexure-II to the Directors’ Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on recordtheir appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

ACKNOWLEDGEMENTS

Your Directors gratefully acknowledge the whole hearted support given by the customers, suppliers, shareholders, employees,Central and State governments, financial institutions, banks and look forward for continued cooperation and best wishes intheir endeavor to steer the Company towards greater heights.

Annexure - I to the Directors’ Report

Information Pursuant to Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules,1975 and forming part of the Directors’ Report for the financial year ended 31st March, 2008.

Name Age Qualifiction Date of Designation Gross Experience Last Employer DesignationJoining Remuneration

Ajay Kumar 60 B.Com 31/12/2005 Chairman Rs. 48,00,000 38 CLC Global Ltd. ChairmanChoudhary

Mukund 36 B.Com 21/06/2004 Managing Director Rs. 48,00,000 16 CLC Global Ltd. ManagingChoudhary Director

Kapil 34 B.Com 31/12/2005 Deputy Managing Rs. 48,00,000 13 CLC Global Ltd. DirectorChoudhary Director

Sitaram 47 B.Tech 12/05/2004 Director-Works Rs. 47,16,552 22 CLC Global Ltd. PresidentParthasarthy (Textile)

Amrit Agrawal 40 FCA, FCS 05/12/2005 Director- Finance Rs. 42,00,000 18 CLC Global Ltd. CFO & CS

Ravi 60 MBA 15/07/2004 Head International Rs. 30,84,000 39 Shamken Spinners PresidentUpadhyaya Marketing Ltd. Marketing

C. B. Kataria 41 MMS 27/04/2004 Sr. Vice President Rs. 30,84,000 19 Radhika Fabrics Chief(Marketing) India Ltd. Executive

L N Kaushik 41 M.Tech 19/05/2006 President Rs. 30,00,000 18 Abhishek Ind. Ltd. Vice President

V K Jain 59 M.Tech 08/02/2007 President Rs. 30,00,000 25 Alis Industries Ltd. President

Saumil Parikh 52 B. Com 14/10/2006 Sr. Vice President Rs. 24,00,000 26 Ashima Ltd. Vice President-(Purchase) Materials

Notes: 1. Gross Remuneration has the same meaning as assigned to it under Section 198 of the Companies Act, 1956.

2. The nature of employment in all cases is contractual.

3. Mr. Ajay Kumar Choudhary, Mr. Mukund Choudhary and Mr. Kapil Choudhary are related to each other.

4. All the employees have adequate experience to discharge the responsibilities assigned to them.


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Annexure - II to the Directors’ ReportParticulars required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming

part of the Directors’ Report for the year ended March 31, 2008.

A. CONSERVATION OF ENERGY :

During the year under review further efforts were made to ensure optimum utilization of fuel and electricity.

a. Energy conservation measures taken :

The Company is continuously taking efforts in energy conservation, energy saving tubes and electronic ballasts arebeing installed in a phased maner for this purpose.

b. Relevant data in respect of energy consumption is as below:

Electricity Current year Previous yearPurchasedTotal Units consumed (KHW) 199,621,743 161,817,285Total Amount (Rs. in Lacs) 7880.08 6,115.05Rate per Unit (Rs.) 3.95 3.78Own Generation through Generator SetUnits (KHW) 328,770 9,076,538Units per liter of Diesel/Furnace Oil 10.03 11.82Cost / Unit (Rs.) 3.05 0.12Electricity Consumption (Units)

Per Kg. of Production of yarn 3.12 3.23

B. TECHNOLOGY ABSORPTION :

RESEARCH & DEVELOPMENT (R&D) :

1. Specific areas in which R&D has been carried out by the Company:

Identifying areas of improvements in the processes through properly documented systems to strengthen yarn quality,improvement in productivity and effective maintenance.

2. Benefits derived as result of the above R & D: Effective utilization of resources and fulfillment of customer’s requirements.3. Future plan of action:

Widening of product range to improving profitability.4. Expenditure on R & D:

a) Capital Rs. 22.50 Lacsb) Revenue Rs. 5.14 Lacsc) Total Rs. 24.64 Lacsd) Total R & D Expenditure as percentage of total turnover 0.08%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

a) Efforts: Continuous improvement to process through data analysis and tests.b) Benefits: Improvement in productivity and qualityc) Technology imported during the last 5 years: None

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Efforts: In Spite of Stiff Global Competition and reduced margins, the Company is continuing to put its best effortsin earning foreign exchange contributing to the national exchequer.

b) Earnings and Outgo: Particulars with regard to foreign exchange earnings and outgo appear in Schedule XXI ofannual accounts.

For and on behalf of the BOARD OF DIRECTORS

Place : New Delhi AJAY KUMAR CHOUDHARYDate : July 31 , 2008 CHAIRMAN

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CORPORATE GOVERNANCE REPORT FOR THE YEAR 2007-08(As required under Clause 49 of the Listing Agreement entered into with Stock Exchanges)

1. Company’s Philosophy on Corporate GovernanceThe Company’s philosophy on Corporate Governance is fostering greater accountability, transparency, responsibility, fairness andcommitment to values in all spectrums of business through continual assessment of internal control mechanism vis-à-vis proactiverisk management system for upholding ethos of corporate citizenship. Pre-emptive risk assessment and mitigation by using properinternal audit system, hiring top grade audit firms of international repute, best insurance and consultants, dynamic budgetingsystem with proper business planning and forecasting. The Company is committed to attend best-in-class higher levels disclo-sures to board and shareholders & society at large. The Company has a strong desire to enhance long-term shareholder value andrespect minority rights in addition to complying with all complex and statutory requirements for Corporate Governance.2. Board of DirectorsThe Company has 11 Directors, with an Executive Chairman. Of the 11 Directors, 5 (i.e. 45.45%) are Executive Directors and 6(i.e. 54.55%) are Independent Directors. The composition of the Board is in conformity with clause 49 of the Listing Agreemententered into with Stock Exchanges and exceeds the percentages prescribed in the said Agreement.5 nos. of Board Meetings were held during the year and the interval between any two meetings did not exceed four months (asstipulated by law in force). The respective dates on which Board Meetings were held are 28th April, 2007, 30th June, 2007, 31st

July, 2007, 31st October, 2007 and 31st January, 2008.The names and category of the Directors on the Board, their attendance at the Board Meetings and last Annual General Meetingand number of Directorships and Committees’ Chairmanships/Memberships of each Director in other companies are as follows:

* The Directorship(s) held by Directors do not include Alternate Directorships and Directorships of Foreign Companies, PrivateLimited Companies, Section 25 Companies.

** In accordance with Clause 49, Memberships/Chairmanships of only Audit Committees and Shareholders’/Investors’ GrievanceCommittees of all Public Limited Companies (excluding Spentex Industries Limited) have been considered.

Information supplied to the Board1. Annual operating plans of business, Capital budget and updates on the same as and when required.2. Quarterly results of the Company and its operating divisions/manufacturing units, subsidiary and step-down subsidiary

companies and business segments.3. Performance of manufacturing units and functioning of key executives.4. Performance of Quality Standards and platform for decision making on quality.5. Image and credibility of the Company in the eyes of domestic and international customers by consistent disclosure and

transparency.


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6. Minutes of meetings of audit committee and other committees of the board, and also resolutions passed by circulation.7. The information on recruitment and remuneration of senior officials next to the Board of Directors, including appointment or

removal of the Company Secretary.8. Details of joint venture or collaboration agreements entered into.9. Borrowing Term Loans and Investment of surplus funds as and when happened.10. Transactions that involve substantial payment towards goodwill, brand equity or intellectual property.11. Notices like show cause, demand, penalty which are materially important / effluent and material default in financial

obligations to and by the company and also non-receipt of payments for goods sold by the Company.12. Significant development in Human Resources, Labour problems and their proposed solutions, signing of Wage Agreements etc.13. Investments in subsidiaries, foreign exchange exposures and steps taken by the management on exchange rate movement

and adverse exchange ratio etc.14. Sale of material nature, of investment/subsidiaries/assets, which is not in normal course of business.15. Fulfillment of various statutory compliances/listing requirements.Disclosure of Appointment/Re-appointment of Directors at the Annual General MeetingAccording to the Articles of Association, one-third of the Directors retires by rotation and, if eligible, seeks re-appointment at theAnnual General Meeting of Shareholders. As per Article 102 of the Articles of Association, Mr. Ram Kuma Thapliyal, Mr. PremMalik and Mr. Shyamal Ghosh will retire in the ensuing Annual General Meeting. The Board has recommended the re-appointmentof all the retiring Directors.

a) Mr. Ram Kumar Thapliyal (64) is a Director of the Company since December 31, 2005. He holds Master’s Degreein Economics. He joined as a Probationary Officer in State Bank of India in the year 1968 and retired as Chief GeneralManager with more than 35 years experience in various departments of the Bank. He is Director of AquabiochipGenomics (India) Private Limited. Mr. Thapliyal is the Chairman of the Audit Committee of the Company.Mr. Thapliyal does not hold any shares of the Company.

b) Mr. Prem Malik (66) is a Director of the Company since December 31, 2005. He is a Post Graduate and has richexperience of more than 41 years in Textiles & Clothing Companies and established his name in the textile industry andhe is also instrumental in various tie ups and joint ventures in textiles businesses. He is Chairman of TEXPROCIL andits Committee of Administration. He is Director of G.T.N. Textile limited, Gyscoal Alloys Limited, Smilesville Care PrivateLimited, Alder Trading Company Private Limited, Confederation of Indian Textile Industry (CITI) and SRTEPC. He isMember of Audit Sub-Committee and remuneration Committee of G.T.N. Textile Limited.Mr. Malik is Member of the Audit Committee and Remuneration Committee of the Company.Mr. Malik holds 15,500 shares of the Company in his name as on 31st March, 2008.

c) Mr. Shyamal Ghosh (66) is a Director of the Company since June 30, 2006. He holds Master’s Degree in Economicsand a retired IAS officer and former Secretary to Government of India. He is Director of SAIL, The Lagan EngineeringCo. Limited, Quipo Telcom Infrastructure Limited, Span diagnostic Limited and West Bengal State Electricity distributionCompany Limited. He is Nominee Director in Burn Standard Co. Limited and IDBI Intech Limited. He is member of IndoGlobal Social Service Society. He is Member of Audit Committee of Burn Standard Co. Limited and West Bengal StateElectricity distribution Company Limited. He is Chairman of the Audit Committee of Span diagnostic Limited.Mr. Ghosh does not hold any shares of the Company.

3. Audit Committee

The Audit Committee of the Board consists of two Non-Executive Independent Directors and one Executive Director viz. Mr. RamKumar Thapliyal, Mr. Prem Malik and Mr. Amrit Agrawal, respectively. These members have the requisite accounting and financialmanagement expertise. Statutory Auditors and Internal Auditor are invitees at the meetings of Audit Committee. The CompanySecretary acts as Secretary to the Audit Committee.The Composition of Audit Committee meets the requirements of Section 292A of the Companies Act, 1956 and Clause 49 of theListing Agreement.The terms of reference / powers of the Audit Committee include the following:

1. Oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that thefinancial statement is correct, sufficient and credible.

2. Review and recommend the Revenue budgets and Capital budgets follows by updates from time to time.3. Recommending to the Board, the appointment/re-appointment of the Statutory Auditors, Cost Auditor and the fixation of

audit fees.4. Reviewing the efficiency and effectiveness of internal audit function, adequacy of the internal control systems and

other services rendered by the statutory auditors.5. Reviewing the functioning and weaknesses, if any, observed by the internal auditors, management opinion on such

weaknesses and solutions from time to time.6. Reviewing, with the management, the annual financial statements i.e. directors responsibility statement under Section

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217(2AA) of the Companies Act, 1956 accounting policies and practices, compliances with listing and other legalrequirements, disclosure of related party transactions, implementation of the Accounting Standards as notified u/s211(3C) of the Companies Act, 1956 and Draft Audit Report before submission to the Board for approval.

7. Reviewing, with the management, the quarterly financial results before submitting it to the Board for approval.8. To look into the reasons for any default/delay, if any, in the payment to the Lenders/Bankers/Financial Institutions,

Debenture holder, Creditors and Shareholders (in case of dividend declaration).5 nos. of Audit Committee Meetings were held during the year on 28th April, 2007, 30th June, 2007, 31st July, 2007, 31st October,2007 and 31st January 2008. The details of attendance of each member at the Audit Committee are as follows:

Name of the Director No. of Meetings Held No. of Meetings AttendedMr. Ram Kumar Thapliyal (Chairman) 5 5Mr. Prem Malik 5 3Mr. Pankaj Sharma* 4 4Mr. Amrit Agrawal** 1 1

* Ceased as Audit Committee Member w.e.f 31st October, 2007** Appointed as member of Audit Committee w.e.f. 31st October, 20074. Remuneration CommitteeA Remuneration Committee of the Board has been constituted to review/recommend the remuneration package of the ManagingDirector/Executive Director(s) based on performance and defined criteria/HR policies, subject to the approval of members inensuing Annual General Meeting.The Remuneration Committee comprises of Mr. Prem Malik, Mr. R K Thapliyal and Mr. DeepakDiwan, all are Independent Directors. During the year 1 nos. Committee Meeting was held on 30th June, 2007 with full attendance.The Remuneration of Chairman, Managing Director, Dy. Managing Director, Director-Works and Director-Finance are in accordancewith Schedule XIII of the Companies Act, 1956 and approved by members of the Company.Details of remuneration paid to Directors for the financial year 2007-08 are as under:

* Citigroup Venture Capital International Growth Partnership Mauritius Ltd., is not claming any sitting fee for attending any Boardor Committee meetings by their nominees accordingly the Company is not paying sitting fee to its nominee Mr. Vivek Chhachhi.

Details of shares held by the Non-Executive Directors as on 31 st March 2008Name No. of shares held Name No. of shares heldMr. Deepak Diwan NIL Mr Pankaj Sharma 56,154Mr. R.K. Thapliyal NIL Mr. Shyamal Ghosh NILMr. Prem Malik 15,500 Mr. Vivek Chhachhi NIL

5. Shareholders’ / Investors Grievance Committee:

The Share Transfer & Shareholders’/Investors Grievance Committee comprises of four members viz, Mr. Mukund Choudhary,Managing Director, Mr. Kapil Choudhary Dy. Managing Director, Mr. Pankaj Sharma, Independent Director and Mr. Deepak Diwan,Independent Director of the Company.


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The Committee members met from time to time, inter alia approves issue of duplicate share certificates and oversees andreviews all matters connected with the transfer of securities. The Committee also reviews the performance of the Registrarand Transfer Agents; supervise the mechanism of investor grievance redressal and to ensure cordial investor relation.The committee also reviews all investors’ complaints and their grievances. During the year the Company has received 125complaints from the investors and has responded to their fullest satisfaction and 19 complaints were received from SEBI/StockExchanges, which were duly replied / redressed. There were no complaints outstanding as on 31st March 2008.Mr. Vivek Kumar, Company Secretary is the compliance officer for complying with the requirements of SEBI Regulations and theListing Agreement with the Stock Exchanges in India.ATTENDANCE DETAILS OF SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE:

Name of the Director No. of Meetings Held No. of Meetings AttendedMr. Mukund Choudhary 34 22Mr. Kapil Choudhary 34 29Mr. Deepak Diwan 34 08Mr. Pankaj Sharma 34 31

6. Investment CommitteeAn Investment Committee has been constituted to explore various opportunities to set-up/acquire/establish textile businessoutside India besides its present expansion and acquisition plans in India and to execute various documents/agreements fromtime to time and to form subsidiary companies and fellow subsidiary companies. The Committee comprises of Mr. MukundChoudhary, Managing Director, Mr. Kapil Choudhary, Dy. Managing Director, Mr. Amrit Agrawal, Director-Finance, Mr. PankajSharma, Independent Director and Mr. Vivek Chhachhi, Nominee Director (representing CVCI).During the year, the Company through its step-down subsidary Schoeller Textile Netherlands B.V. has acquired interest inSchoeller Litvinov k.s. a partnership firm situated at Czech Republic and acquired its running textiles business having a capacityof 59,000 spindles.7. Banking CommitteeA Banking Committee has been constituted to authorize company officials to execute/sign various documents/cheques foravailing various credit facilities/term loan provided by the Banks from time to time. The Committee comprises of Mr. MukundChoudhary, Managing Director, Mr. Kapil Choudhary, Dy. Managing Director and Mr. Pankaj Sharma, Independent Director. Duringthe year, 5 Committee meetings were held in which all the members of the Committee were present. The Board of Directors hadtaken note on various facilities sanctioned by Banks.8. General Body Meetings(A) Annual General Meetings:Details of last three Annual General Meetings (AGM) of the Company are as under:

(B) Postal BallotNo special resolution was passed through Postal Ballot during 2007-08.9. Code of ConductThe Board of Directors has adopted the Code of Conduct and ethics for Directors, Senior Management and the designatedemployees. The Code of Conduct has been communicated to the Directors and such designated employees and they haveconfirmed compliance with the said code. The Code has also been posted on the company’s website www.spentex.net.10. Compliancea. Mandatory Requirements:The Company is fully compliant with the applicable mandatory requirements of the revised Clause 49 of the Listing Agreement.b. Adoption of Non-Mandatory Requirements:Although it is not mandatory, three Committees of Board, namely Remuneration Committee, Banking Committee and InvestmentCommittee are in place. Details of all the above mentioned committees have been provided in this report.

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11. DisclosuresØ The disclosure relating to transactions of material nature with the related parties are disclosed in the financial

statements.Ø Company has fulfilled all Statutory Compliances and there were no penalties, strictures imposed on the Company by

Stock Exchanges or SEBI or any Statutory Authority, on any matter related to Capital Markets, during the last threeyears.

Ø Company has issued circular in connection with Whistle Blower Policy and no employee was denied to access to theAudit Committee.

Ø Pursuant to Clause 47(f) of the Listing Agreement, the Company has created a new E-mail ID [email protected] for the purpose of registering complaints by investors and necessary follow up action by the company/compliance officer.

12. Means of CommunicationØ Information on quarterly/half yearly/annual financial results and press releases on significant developments in the

Company, have been submitted to the Stock Exchanges to enable them to put them on their websites andcommunicate to their members.

Ø The quarterly/half-yearly/annual financial results are published in English (The Financial Express/Pioneer) and Hindi(Jansatta/Veer Arjun) newspapers and the same were also posted on the Company’s website www.spentex.net

Ø The Management Discussions and Analysis is a part of Annual Report.Ø Pursuant to Clause 51 of the Listing Agreement (relating to Electronic Data Information filing and Retrieval EDIFAR), the

Company is regularly filing the specific documents/ statements on website www.sebiedifar.nic.in, the Bombay StockExchange Ltd., website www.bseindia.com and the National Stock Exchange of India Ltd., website www.nseindia.com

13. General Shareholder informationØ The 16th Annual General Meeting will be held at Banarasidas Chandiwala Sewa Smarak Trust Society Guest House

Auditorium, Chandiwala Estate, Maa Anandmai Ashram Marg, Kalkaji, New Delhi 110 019 on Friday, the 19thSeptember, 2008 at 10.00 A.M.

Ø Financial Calendar (Tentative) :Financial reporting for the Quarter ending June 30, 2008 : July, 2008Financial reporting for the Quarter ending September 30, 2008 : October, 2008Financial reporting for the Quarter ending December 31, 2008 : January, 2009Financial reporting for the Quarter ending March 31, 2009 : April, 2009AlternativelyAnnual Result for the year ended March 31, 2009 : May/June, 2009

Ø Date of Book closure : Tuesday, the 16th day of September, 2008 to Thursday, the 18th day of September, 2008 (bothdays inclusive).

Ø Dividend Payment Date : Not ApplicableØ Listing of Equity Shares on Stock Exchanges: The Bombay Stock Exchange Ltd., Mumbai (scrip code = 521082) and

National Stock Exchange of India Ltd. Mumbai (scrip code = SPENTEX).Ø ISIN No : INE376C01020Ø The Annual Listing Fee has been paid till 31st March, 2009.Ø Market Price Data : High/Low during each month in last financial year 2007-2008 at BSE and NSE :

Month Apr’07 May’07 Jun’07 Jul’07 Aug’07 Sep’07 Oct’07 Nov’07 Dec’07 Jan’08 Feb’08 Mar’08

The Bombay Stock Exchange Ltd. (BSE)

High 56.00 47.50 40.85 43.40 36.85 34.90 39.50 35.00 59.60 52.90 31.00 25.25

Low 45.50 37.50 35.75 32.00 25.55 26.75 28.05 29.00 30.25 24.20 23.40 16.00

National Stock Exchange of India Ltd. (NSE)

High 54.90 52.90 40.00 45.25 36.80 34.90 39.50 34.70 53.40 53.00 31.00 25.00

Low 45.35 35.50 35.00 31.50 25.40 25.00 28.00 26.10 29.00 24.05 23.00 15.55

Ø The Registrars and Transfer Agents: M/s. Beetal Financial & Computer Services (Pvt.) Ltd. 99, Beetal House,Madangir,Near Dada Harsukh Dass Mandir, Behind Local Shopping Complex, New Delhi 110 062 Ph. No. 011 - 29961281 and011 - 29961282 and Fax No. 011 - 29961284, E-mail [email protected]

Ø Share Transfer System: The Company’s shares are traded under compulsorily demat mode. Shares in physical modelodged for transfer are processed and returned to the shareholders within the stipulated time.


12

No. of Shares No. of Shareholders % No. of Shares %

1 to 500 40,741 90.62 4,067,291 5.69

501 to 1000 2,153 4.79 1,818,959 2.54

1001 to 2000 974 2.17 1,527,523 2.14

2001 to 3000 347 0.77 911,518 1.28

3001 to 4000 150 0.33 542,668 0.76

4001 to 5000 175 0.39 837,714 1.17

5001 to 10000 219 0.49 1,619,423 2.27

10001 and above 199 0.44 60,146,939 84.15

TOTAL 44,958 100.00 71,472,035 100.00

Ø Shareholding Pattern as on 31st March 2008 :

Cate- Category of Number T otal Number of T otal shareholding as agory Shareholders of share- number shares held percentage of total numbercode holders of Shares in of shares

dematerialized As a per- As a perform centage of centage of

(A+B) (A+B+C)

(A) Shareholding of Promoterand Promoter Group

(1) Indian

(a) Individuals/ 10 30,838,874 30,837,870 43.15 43.15Hindu Undivided Family

(b) Central Government/ 0 0 0 0.00 0.00State Government(s)

(c) Bodies Corporate 1 1,064,058 1,064,058 1.49 1.49

(d) Financial Institutions/ Banks 0 0 0 0.00 0.00

(e) Any other (specify) 0 0 0 0.00 0.00

Sub-Total(A)(1) 11 31,902,932 31,901,928 44.64 44.64

(2) Foreign

(a) Individuals (Non Resident 0 0 0 0.00 0.00Individuals/Foreign Individuals

(b) Bodies Corporate 0 0 0 0.00 0.00

(c) Institutions 0 0 0 0.00 0.00

(d) Any other (specify) 0 0 0 0.00 0.00

Sub-Total(A)(2) 0 0 0 0.00 0.00

Total Shareholding of 11 31,902,932 31,901,928 44.64 44.64Promoter and PromoterGroup (A)= (A)(1)+(A)(2)

(B) Public Shareholding

(1) Institutions

(a) Mutual Funds/ UTI 13 22,187 10,306 0.03 0.03

(b) Financial Institutions/ Banks 12 768,982 768,899 1.08 1.08

(c) Central Government/ State 1 59,337 59,337 0.08 0.08Government(s)

(d) Venture Capital Funds 0 0 0 0.00 0.00

(e) Insurance Companies 0 0 0 0.00 0.00

Ø Distribution of shareholding as on 31st March 2008 :

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(f) Foreign Institutional Investors 14 21,242,454 21,240,295 29.72 29.72

(g) Foreign Venture Capital 0 0 0 0.00 0.00Investors

(h) Any other (specify) 2 1,485 1,485 0.00 0.00

Sub-Total (B)(1) 42 22,094,445 22,080,322 30.91 30.91

(2) Non-Institutions

(a) Bodies Corporate 927 4,235,472 4,175,798 5.93 5.93

(b) Individuals-i. Individual shareholders 43,657 9,991,327 8,820,526 13.98 13.98 holding nominal share capital up to Rs. 1 Lac

ii. Individual shareholders 90 2,525,902 2,525,902 3.53 3.53 holding nominal share capital in excess of Rs 1 Lac

(c) Any otherDirector otherthan Promoters 4 196,453 196,453 0.27 0.27Clearing member 82 200,682 200,682 0.28 0.28Trust 4 27,895 27,895 0.04 0.04NRI 141 296,927 208,769 0.42 0.42

Sub-Total (B)(2) 44,905 17,474,658 16,156,025 24.45 24.45

Total Public Shareholding 44,947 39,569,103 38,236,347 55.36 55.36(B)= (B)(1)+(B)(2)

Total (A)+(B) 44,958 71,472,035 70,138,275 100.00 100.00

(C) Shares held by Custodians 0 0 0 0.00 0.00and against which DepositoryReceipts have been issued

GRAND TOTAL 44,958 71,472,035 70,138,275 100.00 100.00(A)+(B)+(C)

Ø Dematerialization of shares: As on 31st March, 2008 the shares in demat form were 70,138,275 representing 98.13%of total Shares allotted so far.

Ø The equity shares of the Company are frequently traded on The Bombay Stock Exchange Ltd., Mumbai (BSE) andNational Stock Exchange of India Ltd., Mumbai (NSE)

Ø Manufacturing Location(s):1. D-48, MIDC, Baramati, District. Pune, Maharashtra 413 1332. B-1, MIDC, Chincholi – Kondi, Sholapur, Maharashtra 413 2553. 31-A, MIDC Industrial Area, Butibori, Nagpur, Maharashtra 441 1224. 51-A, Industrial Area, Sector III, Pithampur, District Dhar, Madhya Pradesh 454 7745. 2A, Zie Said Street, Tashkent City – 100042 Republic of Uzbekistan6. 2 Tashkent Yuli Street, Toypeta, Urta-Chirchik District, Tashkent Region 102300, Republic of Uzbekistan.7. Nadrazni 557 436 57, Litvinov, Czech Republic

Ø Branch Offices: Mumbai and KolkataØ Address for Correspondence :

1. Registered Office Address : A-60, Okhla Industrial Area, Phase II, New Delhi 110 020Ph. 011 - 2638 7738, 4161 4999, Fax: 011 – 2638 5181.Email: [email protected], [email protected]

2. Registrars & Transfer Agents : M/s. Beetal Financial & Computer Services Private Ltd.99, Beetal House, Madangir, Near Dada Harsukh Dass MandirBehind Local Shopping Complex, New Delhi 110 062Ph. No. 011 - 2996 1281, 2996 1282 and Fax No. 011 - 29961284.E-mail : [email protected]

3. Compliance Officer Mr. Vivek Kumar, Company SecretaryPh. 011 - 2638 7738, 4161 4999, Fax: 011 – 2638 5181.Email: [email protected]; [email protected]


14

CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION

We, Mukund Choudhary, Chief Executive Officer and Managing Director, and Amrit Agrawal, Director-Finance, to the best of ourknowledge and belief, certify that:

1. We have reviewed the balance sheet and profit and loss account, cash flow statements and all its schedules and notesto accounts for the financial year 2007-2008.

2. Based on our knowledge and information, these statements do not contain any untrue statement of a material fact oromit to state a material fact or contain statements that might be misleading.

3. Based on our knowledge and information, the financial statements, and other financial information included in this report,present in all material respects, a true and fair view of the Company’s affairs, and are in compliance with the existingaccounting standards and / or applicable laws and regulations.

4. To the best of our knowledge and belief, no transactions entered into by the Company during the year are fraudulent,illegal or violative of the Company’s code of conduct.

5. We are responsible for establishing and maintaining internal controls over financial reporting for the Company, and wehave;

a) designed such internal control over financial reporting to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements in accordance with generallyaccepted accounting principles;

b) evaluated the effectiveness of the Company’s internal control systems pertaining to financial reporting;and,

c) disclosed in this report any change in the Company’s internal control over financial reporting that hasmaterially affected the Company’s internal control over financial reporting.

6. We have disclosed to the Company’s auditors and the Audit Committee of the Company’s Board of Directors;a) deficiencies in the design or operation on internal controls, if any, and steps taken / proposed to be taken

to rectify these deficiencies;b) significant changes in internal controls over financial reporting, if any, during the year covered by this

report.c) significant changes in accounting policies during the year, if any, and that the same have been disclosed in

the notes to the financial statements andd) instances of significant fraud of which we are aware, if any, that involves management or other employ-

ees who have a significant role in the Company’s internal controls system over financial reporting.

Place : New Delhi Mukund Choudhary Amrit AgrawalDate : June 30, 2008 Chief Executive Officer Director - Finance

and Managing Director

CERTIFICATE ON CORPORATE GOVERNANCETo

The Members of Spentex Industries Limited

We have examined the compliance of conditions of Corporate Governance by Spentex Industries Limited for the year ended on31st March 2008, as stipulated in Clause 49 of the Listing Agreement of the Company with the Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination is limited toprocedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the CorporateGovernance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company hascomplied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.

We state that no investor grievance is pending for a period exceeding one month against the Company as per the recordsmaintained by the Shareholders/Investors Grievance Committee.

We further state that such compliance is neither an assurance as to the further viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairs of the Company.

For Balraj Sharma & AssociatesCompany Secretaries

Place : New Delhi (Balraj Sharma)Date : July 31, 2008 FCS-1605

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MANAGEMENT DISCUSSION AND ANALYSISThe fiscal 2007-08 has seen mixed fortune, on one hand the manufacturing of yarn has grown in volumes but on the other handit was adversely affected by the lower Rupee realization against US dollar making export earnings drop significantly. Thesituation further aggravated by the all time high crude oil prices and increase in raw material prices, which resulted intosqueezing the margins further.

During the year under review, the Company has spread its operations in the European markets through acquisition of SchoellerLitvinov k.s., a partnership firm situated in Czech Republic having capacity of 59,000 spindles producing 17,500 Tons/pa yarnof Specialty segment.

INDUSTRY STRUCTURE & DEVELOPMENTS

The Indian Textiles Industry has a very large contribution in India’s total industrial output, employment generation, and in theexport earnings of the country. The Indian textile industry has seen an upsurge in exports to Bangladesh, South America, Brazil,Turkey & and other EU countries compared to last year.

The textile business is mainly concentrated in India and China. Today, India contributes to about 25% share in the world trade ofcotton yarn. Further India being the world’s third largest producer of cotton and second largest producer of cotton yarns andtextiles, is poised to play an increasingly important role in global cotton and textile markets as a result of domestic and multilateralpolicy reforms. India is one of the largest consumers of cotton in the world, ranking second to China in production of cotton yarnand fabrics and first in installed spinning and weaving capacity.

The Government of India has introduced Scheme for Integrated Textile Parks (SITP) in the 11th Five Year Plan to provide worldclass infrastructure facilities for setting up of dedicated textile hubs and to meet international environmental and social standardsfor textile units and extended financial assistance for existing textile units by offering various tax rebates and concessions fortextile products.

OPPORTUNITIES, RISKS, CONCERN & OUTLOOK

The Indian Government agreed to phase out Central Sales Tax before 2010 by reducing the rate by 1 per cent annually and alsopoised to join a 13 member select group of miracle economies that have recorded high growth in a short time span. Also, afterdismantling of quotas, India seems to benefit due to raw material, design skills and skilled labour advantages. India is the world’ssecond largest producer of cotton, second largest producer of cotton yarn, third largest exporter of cotton fabric and fourthlargest exporter of synthetic fabric.

Inspite of above advantages that India has, there would be pricing pressures in view of dismantling of quotas as new small andmedium manufacturers would crop in not only within India but also from other countries where similar quotas were imposedearlier. The rupee dollar exchange rates, increase in raw cotton prices, non-availability of uninterrupted power supply andincrease in power costs are also going to affect the performance of the Company. Also, India has geographical disadvantagewhich take little longer time to reach its products to the key markets.

The availability of cotton, the experiences gained in the quota free regime, the steps initiated by the government in the recentunion budget of 2008-09 to support the sector through various reform measures, reduction in duties, setting up of SEZ,continuation of the TUF and other benefits are expected to boost the Indian Textile Exporters in coming years.

PERFORMANCE REVIEW OF THE COMPANY

The Company has improved its performance in terms of volumes during the year and retained its leadership position in the textileindustry. Strong product offering like cotton and man-made yarn has positioned your Company to serve a wide range ofcustomers across the globe. The financial performance of Spentex industries Limited is discussed in two parts:

(i) Spentex Industries Limited (Unconsolidated) which excludes the performance of subsidiaries of Spentex IndustriesLimited.

(ii) Spentex Industries Limited (Consolidated) which includes the performance of subsidiaries of Spentex IndustriesLimited. The Consolidated Financial Statements bring out comprehensively the performance of CLC Group of companiesand are more relevant for understanding the overall performance of CLC Group.

The total income of Spentex Industries Limited (Unconsolidated) aggregated Rs.759.72 Crore in fiscal 2007-08 as compared toRs.740.73 Crore in fiscal 2006-07, registering a growth of 2.55%.

In the fiscal 2007-08, total income of Spentex Industries Limited (Consolidated) aggregated Rs.1337.31 Crore as compared toRs.900.57 in fiscal 2006-07, registering a growth of 48.50%.


16

SEGMENT-WISE PERFORMANCE

Yarn Manufacturing

During the year under review, your Company has manufactured 64103.52 MT of yarn as compared to 52842.61 MT of yarnproduced during the previous year which reflect an increase of 21.31%.

Revenues from yarn manufacturing also correspondingly increased in the fiscal 2007-08 to Rs. 638.43 Crores as compared toRs. 540.59 Crores in fiscal 2006-07, which shows growth of 18.10%.

Trading – Yarn & Others

The Company’s revenue from trading goods is Rs.81.99 Crore in fiscal 2007-08 as compared to Rs. 192.78 Crore in fiscal2006-2007. The decline in trading activities during the year is due to Company’s concentration on the core business activity i.e.yarn manufacturing.

PERFORMANCE OF SUBSIDIARIES

The Company had six subsidiaries/step-down subsidiaries at the beginning of the year.

The following two subsidiaries were set up/acquired during the year:

1. Schoeller Textile Netherlands B.V., Netherlands

2. Schoeller Textil Verwaltungs GmbH, Germany

The turnover and overall performance of material subsidiary companies are as under:

Amit Spinning Industries Ltd., India: During the year its production of yarn has increased by 16% and sales turnover alsoincreased by 14% as compared to previous year. The Company has its manufacturing facilities at Kolhapur, Maharashtra.

Spentex Tashkent Toytepa LLC, Uzbekistan: It has recorded a turnover of USD 87.20 Million and profits after tax of USD2.90 Million. The Company has two manufacturing units situated at Tashkent and Toytepa with a capacity of 220,000 spindlesand 236 Air jet looms.

Schoeller Litvinov k.s., Czech Republic : It has recorded a turnover of USD 53.70 Million and profits after tax of USD 1.07Million in the very first year of its acquisition. The results were for the period from 01.07.2007 (date of acquisition) to 31st March2008. The Company has manufacturing unit situated at Czech Republic with a capacity of 59,000 spindles.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has established adequate internal control systems, commensurate with its size and nature of business and suchsystems are periodically audited, verified and reviewed for their validity and improvement considering the changing businessscenario from time to time.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

Your company has been systematically nurturing its greatest resource–human resource. The Company and its managementvalue the talent, commitment and dedication of its employees and acknowledge their contribution. Everyone in Company isworking as a team and welcomes the ideas on making Spentex, a globally admired company. Management of your Companybelieves that it is the integration of human resources and business strategy that has culminated in its success. High performanceorientation is the pivot of the HR philosophy of the Company and all the HR policies and strategies are centered on the same.

Industrial Relations remained cordial and not a single day’s work was lost due to strike or any industrial dispute during the year.

INFORMATION TECHNOLOGY

Information Technology continues to be an integral part of Spentex’s business strategy. In view of this, during the year the SAPhas been successfully implemented at the Company’s Corporate Office in New Delhi and in units located at Pithampur andButibori. The implementation of SAP in other units of the Company is in process and shall be implemented fully in the fiscal 2008-09, which will integrate business process, financial parameters, customer transactions and people effectively.

DISCLAIMER

“Management Discussion and Analysis“ contains forward-looking statements, which may be identified by the use of the wordsin that direction, or connoting the same. All statements that address expectations or projections about the future, including, butnot limited to statements about the Company’s strategy for growth, product development, market position, expenditure andfinancial results are forward looking statements. The Company’s actual results, performance or achievements could thus differmaterially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend,modify or revise any forward looking statements on the basis of any subsequent development, information or events.

17


AUDITORS’ REPORT TO THE MEMBERS OF SPENTEX INDUSTRIES LIMITED1. We have audited the attached Balance Sheet of Spentex Industries Limited, as at March 31, 2008, and the related Profit

and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signedunder reference to this report. These financial statements are the responsibility of the Company’s management. Ourresponsibility 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosuresin the financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.

3. As mentioned in Note 10 of Schedule XXI, Sales Tax Exemption for Butibori unit of the Company had expired onDecember 31, 2005. The unit has applied for an extension of 3 years with effect from January 1, 2006 to the DevelopmentCommissioner (Industries), Government of Maharashtra. Further, in case the unit fails to get the exemption fromauthorities, an amount of Rs. 91,516,363 (including interest) will be payable, which has not been provided in the books.Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs. 54,283,498 for the periodJanuary 1, 2006 to March 31, 2008 on the basis that the Sales Tax Exemption will be extended for a further period of 3years with effect from January 1, 2006. The management is hopeful of recovery of this amount. The total loss in the eventsuch extension is not given to the Company, will be Rs.91,516,363 (including Rs 62,692,895 in respect of earlier periods)

Accordingly loss for the year is lower by the said amount with consequent impact on the net assets for the year.

4. As required by the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amend-ment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘TheCompanies Act, 1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the Company as weconsidered appropriate and according to the information and explanations given to us, we further report that :

4.1 (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixedassets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover allthe items over a period of three years, which in our opinion, is reasonable having regard to the size of the Companyand the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified bythe management during the year and no material discrepancies between the book records and the physical inventoryhave been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has notbeen disposed of by the Company during the year.

4.2 (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. Inrespect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, thefrequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable andadequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper recordsof inventory. The discrepancies noticed on physical verification of inventory as compared to book records were notmaterial.

4.3 (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in theregister maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (b), (c) and (d) of the Order are notapplicable.

(b) The Company has taken interest free unsecured loans, repayable on demand from parties covered in the registermaintained under Section 301 of the Act. The maximum amount involved during the year and the year-end balance ofsuch loans aggregates to Rs. 2,100,000 and 17,928, respectively.

(c) In our opinion, terms and conditions of such loans are not prima facie prejudicial to the interest of the Company.

(d) As the loans are repayable on demand, accordingly, paragraph 4(iii) (g) of the Order is not applicable

4.4 In our opinion and according to the information and explanations given to us, there is an adequate internal control systemcommensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets andfor the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according tothe information and explanations given to us, we have neither come across nor have been informed of any continuingfailure to correct major weaknesses in the aforesaid internal control system.


18

Name of the Nature of dues Amount Period to which Due date Date ofstatute (Rs.) the amount relates Payment

Entry Tax Act, 1976 Entry Tax 7,131,814 Various dates Various Not paid

Madhya Pradesh Expense dates

(b) According to the information and explanations given to us and the records of the Company examined by us, theparticulars of dues of income-tax, sales-tax, entry tax and excise duty at March 31, 2008 which have not beendeposited on account of a dispute, are as follows -

Name of the Nature of dues Amount Period to which Forum where thestatute (Rs.) the amount dispute is pending

relatesSales TaxCentral Sales Tax,1956 Unpaid Sales Tax 91,516,363 Jan 06 – March 08 Directorate of Industriesand Maharashtra SalesTax Act

The M.P. Commercial Penalty - purchase tax 164,195 1996-97 First Appellate Authority TaxAct, 1994 demand (including

amount paidRs. 128,195)

The M.P. Commercial Sales tax demand on 2,515,630 2003-04 Deputy CommissionerTax Act, 1994 sale of DEPB licenses (including amount (Appeals), Indore –

paid Rs. 1,881,055) Rs. 705,085, M.P.Commercial Tax AppellateBoard,Bhopal - Rs.1,810,545

Entry Tax Act, 1976 Entry tax demand 1,770,242 1992-00 Deputy Commissioner(including (Appeals), Indore –

amount paid Rs. Rs. 366,044755,733) M.P. Commercial Tax

Appellate Board, Bhopal– Rs. 680,905The M.P. High Court –Rs. 567,816Assessing Authority –Rs. 155,477

Delhi Sales Tax Act, Demand due to non 191,560 2004-05 First Appellate Authority1975 submission of ST1

& C forms

4.5 (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrange-ments referred to in Section 301 of the Act have been entered in the register required to be maintained under thatsection.

(b) In our opinion and according to the information and explanations given to us, there are no transactions made inpursuance of such contracts or arrangements and exceeding the value of Rupees Five Lakhs in respect of any partyduring the year, which have been made at prices which are not reasonable having regard to the prevailing marketprices at the relevant time.

4.6 The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act andthe rules framed there under.

4.7 In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

4.8 We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to theRules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) ofsub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records havebeen made and maintained. We have not, however, made a detailed examination of the records with a view to determinewhether they are accurate or complete.

4.9 (a) According to the information and explanations given to us and the records of the Company examined by us, in ouropinion, the Company is regular in depositing the undisputed statutory dues including investor education and protec-tion fund, wealth tax, customs duty, excise duty, employees’ state insurance, provident fund, sales tax, cess, andother material statutory dues with the appropriate authorities and is generally regular in depositing undisputedstatutory dues in respect of income tax dues and service tax, as applicable, and has not deposited entry tax with theappropriate authorities.

The extent of the arrears of statutory dues outstanding as at March 31, 2008, for a period of more than six monthsfrom the date they became payable, in respect of entry tax is as follows-

19



20

4.10 The Company has accumulated losses as at March 31, 2008 which is less than fifty percent of its net worth and it hasnot incurred cash losses before working capital changes in the financial year ended on that date and in the immediatelypreceding financial year.

4.11 According to the records of the Company examined by us and the information and explanation given to us, the Company hasnot defaulted in repayment of dues to any financial institution or bank or debenture holders as at the balance sheet date.

4.12 The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debenturesand other securities.

4.13 The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not applicable to theCompany.

4.14 In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

4.15 In our opinion and according to the information and explanations given to us, the terms and conditions of the guaranteesgiven by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial tothe interest of the Company.

4.16 In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans havebeen applied for the purposes for which they were obtained.

4.17 According to the information and explanations given to us and an overall examination of the balance sheet of theCompany, we report that the Company has used funds raised on short term basis for long term investment. The Companyhas repaid long term loans of Rs. 68,917,319 out of proceeds of working capital facilities which were repayable duringthe year to various banks.

4.18 The Company has made preferential allotment of shares to parties covered in the register maintained under Section 301of the Act during the year. In our opinion and according to the information and explanations given to us, the price at whichsuch shares have been issued are not prejudicial to the interest of the Company.

4.19 The Company has created security or charge in respect of debentures issued and outstanding at the year-end.

4.20 The Company has not raised any money by public issues during the year.

4.21 During the course of our examination of the books and records of the Company, carried out in accordance with thegenerally accepted auditing practices in India, and according to the information and explanations given to us, we haveneither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have webeen informed of such case by the management.

5. Further to our comments in paragraph 4 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary 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 appearsfrom our examination of those books;

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreementwith the books of account;

(d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this reportcomply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on March 31, 2008 and taken on recordby the Board of Directors, none of the directors is disqualified as on March 31, 2008 from being appointed asa director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) Subject to paragraph 3 above, in our opinion and to the best of our information and according to theexplanations given to us, the said financial statements together with the notes thereon and attached theretogive in the prescribed manner the information required by the Act and give a true and fair view in conformitywith 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 March 31, 2008;

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

Kaushik DuttaPartner

(Membership Number: F-088540)

For and on behalf ofPlace : New Delhi Price WaterhouseDate : June 30, 2008 Chartered Accountants

21


BALANCE SHEET AS AT 31ST MARCH, 2008

Schedule 31-03-2008 31-03-2007Rupees Rupees

SOURCES OF FUNDSShareholders’ FundsCapital I 714,720,350 711,970,350Share Warrants (Refer Note 5 of Schedule XXI ) - 1,004,850Reserves and Surplus II 1,136,022,991 1,274,656,257

1,850,743,341 1,987,631,457

Loan FundsSecured Loans III 5,061,408,487 5,124,952,484Unsecured Loans IV 183,978,494 509,346,451Deferred Tax Liabilities (Net) (Refer Note 15 of Schedule XXI) - 85,186,455

7,096,130,322 7,707,116,847

APPLICATION OF FUNDSFixed AssetsGross Block V 6,447,619,786 6,694,945,946Less: Depreciation 2,773,956,950 2,476,738,145

Net Block 3,673,662,836 4,218,207,801

Capital Work-in-Progress and Capital Advances 257,389,525 22,693,855

3,931,052,361 4,240,901,656

Investments VI 774,979,600 774,979,600Current Assets, Loans & AdvancesInventories VII 1,161,692,341 1,312,027,873Sundry Debtors VIII 860,315,572 698,898,970Cash and Bank Balances IX 17,879,054 48,173,952Other Current Assets X 955,218,969 511,349,883Loans and Advances XI 664,073,970 779,439,439

3,659,179,906 3,349,890,117Less:Current Liabilities and ProvisionsLiabilities XII 1,372,410,705 582,771,449Provisions XIII 103,372,536 75,883,077

Net Current Assets 2,183,396,665 2,691,235,591

Profit and Loss Account (Dr.) 206,701,696 -

7,096,130,322 7,707,116,847

Statement on Significant Accounting Policies XXNotes to Accounts XXI

The Schedules referred to above form an integral part of the Balance Sheet

This is the Balance Sheet referred to in ourReport of even date On behalf of the Board

Kaushik Dutta Mukund Choudhary Managing DirectorPartner Kapil Choudhary Deputy Managing Director(Membership No : F 088540) Amrit Agrawal Director - FinanceFor and on behalf of Vivek Kumar Company SecretaryPrice WaterhouseChartered Accountants

Place : New DelhiDate : June 30, 2008


22

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008

Schedule 2007-2008 2006-2007Rupees Rupees

INCOMESales* (Refer Note 6 on Schedule XX) 7,630,623,092 7,439,913,585Less Excise Duty (33,382,034) (32,635,000)Net Sales 7,597,241,058 7,407,278,585

*Includes duty drawback on exports Rs 235,578,295/-(Previous Year Rs. 29,363,805/-)

Other Income XIV 550,390,417 471,778,689

8,147,631,475 7,879,057,274

EXPENDITURERaw Materials Consumed XV 4,723,037,773 3,573,013,306Cost of Traded Goods Sold 649,064,481 1,649,590,350Salaries, Wages & Benefits XVI 558,229,243 443,633,250Manufacturing and Other Costs XVII 1,788,946,651 1,475,953,610Excise Duty 5,357,973 2,778,000Depreciation / Amortisation 422,977,305 356,974,125Financial Charges XVIII 675,093,896 461,870,948(Increase) / Decrease in Stocks XIX (264,232,551) (146,557,518)

8,558,474,771 7,817,256,071

Profit / (Loss) before Prior Period Items and Tax (410,843,296) 61,801,203Prior Period Items 11,240,684 -Profit / (Loss) before Tax (422,083,980) 61,801,203

Tax Expense (Refer Note 11 on Schedule XX)Current Tax - 6,969,781Deferred Tax (net) (Refer Note 15 on Schedule XXI) (81,396,445) 8,886,736Fringe Benefit Tax 4,585,570 3,955,060

(76,810,875) 19,811,577Profit / (Loss) after Tax (345,273,105) 41,989,626

AppropriationDebenture Redemption Reserve - 41,989,626Profit Brought forward from Previous Year 97,650,706 97,650,706

(247,622,399) 97,650,706Balance transferred from General Reserve 40,920,703 -Balance carried forward to Balance Sheet (206,701,696) 97,650,706

Basic and Diluted Earnings per Share (Face Value Rs. 10 each) (4.83) 0.62(Refer Note 16 on Schedule XXI)

Statement on Significant Accounting Policies XXNotes to Accounts XXI

The Schedules referred to above form an integral part of the Profit & Loss Account

This is the Profit and Loss Account referred to in ourReport of even date On behalf of the Board



23


This is the Cash Flow Statement referred to in our Report of even date.Kaushik Dutta On behalf of the BoardPartner Mukund Choudhary Managing Director(Membership No : F 088540) Kapil Choudhary Deputy Managing DirectorFor and on behalf of Amrit Agrawal Director - FinancePrice Waterhouse Vivek Kumar Company SecretaryChartered AccountantsPlace : New DelhiDate :June 30, 2008

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2008Year ended Year ended

31st March, 2008 31st March, 2007 Rs. Rs.

Profit /(Loss) before Tax (422,083,980) 61,801,203Add:Depreciation / Amortisation 422,977,305 356,974,125(Profit) / Loss on Sale of Fixed Asset (net) (7,790,995) 326,146Provision for Doubtful Debts and Advances - 321,000Provision for Wealth Tax 4,715 20,260Loss on assets held for disposal 45,023,575 -Unrealised Exchange Fluctuation (net) (22,674,972) (26,349,873)Bad Debts and Advances Written off 32,642,978 1,291,034Liabilities no longer required written back (39,617,628) (25,640,836)Provision for Leave Encashment 4,633,785 2,332,805Non Compete fees amortised 1,100,000 -Provision for Gratuity 7,114,492 8,480,377Prior period items 11,240,684 -Dividend Income (354,129) (2,940)Interest Income (42,853,045) (39,934,479)Interest Expense 675,093,896 461,870,948

Operating Profit Before Working Capital Changes 664,456,681 801,489,770Adjustments for changes in working capital : - (Increase)/Decrease in Sundry Debtors (185,799,006 (180,513,059) - (Increase)/Decrease in Other Receivables (128,466,870) (514,492,367) - (Increase)/Decrease in Inventories 150,335,532 (490,222,221) - Increase/(Decrease) in Trade and Other Payables 839,794,547 (22,793,906)

Prior period items (11,240,684) -Direct Taxes Paid ( Net) (16,159,707) (30,905,325)

A. Cash Flow From / (Used for) Operating Activities 1,312,920,493 (437,437,108)Purchase of Fixed Assets (173,736,026) (1,082,507,615)Acquisition of Indo Rama Textiles Ltd. (IRTL) - (1,810,723,709)Sale proceeds of Fixed Assets 38,944,426 30,231,034Purchase of Investment - (608,793,030)Dividend Received 354,129 2,940Interest Received 4,500,192 37,339,236

B. Cash Flow From / (Used for) Investing Activities (129,937,279) (3,434,451,144)Proceeds from Share Capital 2,750,000 86,105,500Share Premium (net) 6,293,650 423,899,621Proceeds from 9% Non-convertible Debenture application money - 500,000,000Repayment of Non-convertible Debentures (576,923,077) (38,461,538)Proceeds from Term Loans 700,000,000 2,404,952,000Repayment of Term Loans (985,626,555) (252,521,550)Proceeds from Working Capital Loans (net) 315,721,370 977,551,349Vehicle Loans (net) (5,047,305) 4,492,352Short term advances (net) 55,190 (104,275,783)Interest Paid (670,501,385) (474,089,240)Dividend paid - (694,000)

C. Cash Flow From / (Used for) Financing Activities (1,213,278,112) 3,526,958,711Increase/(Decrease) in Cash Equivalents {A+B+C} (30,294,898) (344,929,541)Cash and Cash Equivalents at the Beginning of the Year 48,173,952 384,786,493Add: Cash and Cash Equivalents on Amalgamation ofestwhile IRTL with the Company - 8,317,000Cash and Cash Equivalents at the End of the Year 17,879,054 48,173,952Increase / (Decrease) in Cash/Cash Equivalents (30,294,898) (344,929,541)Notes :-Cash and cash equivalents compriseCash and Cheques in hand 1,384,014 13,391,161In Current Accounts 11,521,929 21,316,054In Fixed Deposit Accounts @ 725,000 775,000In Margin Money Account @ 2,845,263 10,347,166In Other Banks 96,085 302,571In unpaid interest on debenture accounts @ - 723,000In unpaid dividend accounts @ 1,306,763 1,319,000

17,879,054 48,173,952# 1 The above Cash flow statement has been prepared under the Indirect method set out in Accounting Standard 3

notified under section 211(3C) of the Companies Act, 1956.# 2 Figures in brackets indicate cash outgo.# 3 @ Includes Margin Money Account, Unpaid Debenture Interest Account and Unpaid Dividend Accounts aggregating Rs.4,877,026 (Previous Year Rs. 13,164,166) which arenot available for use by the Company. (Refer Schedule IX in the accounts)Statement on Significant Accounting Policies XXNotes to Accounts XXIThe Schedules referred to above form an integral part of the Cash Flow Statement


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SCHEDULES FORMING PART OF THE ACCOUNTS31-03-2008 31-03-2007

Rupees RupeesSCHEDULE I : CAPITAL(Refer Notes 5 on Schedule XXI)Authorised114,000,000 Equity Shares of Rs 10/- each 1,140,000,000 1,140,000,000

{Previous Year 114,000,000 equity shares of Rs. 10/- each}7,000,000 Redeemable preference shares of Rs. 10/- each 70,000,000 70,000,000

1,210,000,000 1,210,000,000

Issued, Subscribed and Paid up71,197,035 Equity Shares of Rs. 10/- each, fully paid up (Previous Year 71,197,035) 711,970,350 711,970,350

Add:275,000 Equity Shares of Rs. 10/- each issued on account of 2,750,000 -

conversion of share warrants714,720,350 711,970,350

SCHEDULE II : RESERVES AND SURPLUS(Refer Notes 5 on Schedule XXI)Capital Reserve :Capital Reserve 138,231,706 138,231,706Share Forfeiture Reserve 7,179,250 7,179,250Profit on Restructure 2,358,587 2,358,587

147,769,543 147,769,543Securities Premium AccountAt Commencement of year 938,965,322Add: Premium received on conversion of Share Warrants 7,298,500 946,263,822 938,965,322General Reserve :At Commencement of year 48,281,060Less : Amounts transferred on implementation of Accounting (7,360,357)Standard-15 (Revised) - Employee Benefits (net of deferred taximpact of Rs. 3,790,010)(Refer Note 17 of Schedule XXI)Transferred to Profit & Loss Account (40,920,703) - 48,281,060

Profit & Loss Account - 97,650,706

Debenture Redemption ReserveAt Commencement of year 41,989,626Add: Transferred during the year -

41,989,626 41,989,626

1,136,022,991 1,274,656,257

SCHEDULE III : SECURED LOANS(Refer Note 12 on Schedule XXI)Debentures (Refer Notes 1 and 4(a) below)9% Redeemable Non-convertible Debentures 384,615,385 461,538,462500 Mibor-Linked Redeemable Non-convertible Debentures ofRs 1,000,000 each (to the extent secured) - 201,853Loans from Banks (Refer Notes 2 and 4(b) below)a) Long TermRupee Term Loans 2,819,945,833 3,009,309,386Foreign Currency Loan 173,401,850 284,187,000b) Short TermCash Credit Facilities 643,697,594 861,187,337Export Packing Credit Facilities 1,032,510,697 499,299,584Other loans (Refer Notes 3 and 4(c) below)Vehicle Loans 7,237,128 9,228,862

5,061,408,487 5,124,952,484

25


Notes :1 Debentures

9% Redeemable Non-Convertible Debentures issued to Axis Bank Ltd. are secured by first charge on Plot No. A-60, OkhlaIndustrial Area, New Delhi 110020, together with all Building and structures thereon and all plant and machinery bothpresent and future on pari passu basis and second charge on whole of the movable fixed assets relating or pertaining tothe mortgaged properties on pari passu basis. These debentures are redeemable at par in 26 equal quarterly installmentscommencing from December 31, 2006.

2 Loans From Banksi) Rupee Term Loans from Banks, other than mentioned in note no. (ii) below, are secured by first pari-passu charge on

all the fixed assets of the Company, both present and future. These loans are further secured by second pari passucharge on entire current assets and personal guarantee of the promoters.

ii) Sub-debt from ICICI Bank of Rs. 500,000,000 is secured by third charge on all the movable and immovable assets ofthe Company and personal guarantee of the promoters and Corporate Loan from State Bank of Indore is secured byfirst pari passu charge on the current assets and second pari passu charge on all the fixed assets of the Company,both present and future.

iii) Foreign Currency Term Loan from State Bank of India is secured by first pari-passu charge on all the fixed assets ofthe Company, both present and future. These loans are further secured by second pari passu charge on entirecurrent assets and personal guarantee of the promoters.

iv) Cash Credit and Export Packing Credit facilities from Banks are secured by first pari-passu charge on all the currentassets of the Company, both present and future.These loans are further secured by second pari passu charge onentire fixed assets and personal guarantees of the promoters.

3 Other loansVehicle loans are secured by hypothecation of Motor cars.

4 Repayment Termsa) Debentures aggregating to Rs. 76,923,077 (Previous Year Rs. 77,124,930) are repayable within one year.b) Term Loans aggregating to Rs. 616,300,635 (Previous Year Rs. 507,895,968) are repayable within one year.c) Vehicle Loans aggregating to Rs. 4,407,169 (Previous Year Rs. 4,087,105) are repayable within one year.

31-03-2008 31-03-2007Rupees Rupees

SCHEDULE IV : UNSECURED LOANS

Short-term loansFrom Others* 9,603,494 9,548,304500 Mibor-Linked Redeemable Non-convertible Debentures ofRs 1,000,000 each (to the extent unsecured) - 499,798,147Deferred Purchase Payments (Refer Note 7 on Schedule XXI) 174,375,000 -

183,978,494 509,346,451* Repayable on demandSCHEDULE V - FIXED ASSETS(Refer Notes 3, 4, 10, 12 on Schedule XX and notes 4 and 6 on Schedule XXI) (Amount in Rs.)


26

SCHEDULE VI : INVESTMENTS 31-03-2008 31-03-2007(Refer Note 7 on Schedule XX) Rupees Rupees

I) Trade - Quoted Nos.In Subsidiaries (Long Term Investments)Amit Spinning Industries Limited 20,981,077 204,469,921 204,469,921(Face value Rs. 5/- each, fully paid up)Aggregate Market Value of Quoted InvestmentsRs. 87,071,470 (Previous Year Rs. 130,082,677)

II) Trade - Unquoted (At Cost)In Subsidiaries (Long Term Investments)Spentex Mauritius Pvt. Ltd 2 90 90Spentex Netherland B .V (Face value Euro 1/- each, fully paid up) 18,200 561,011,339 561,011,339Spentex Tashkent Toytepa LLC # - 9,323,779 9,323,779

III) Non Trade - QuotedIn Fully Paid-up equity shares of Rs. 10/- each :Ceat Limited 100 5,724 5,724CFL Capital Financial Services Limited 100 1,985 1,985CESC Limited 100 5,553 5,553Harrisons Malayalam Limited 100 3,744 3,744KEC International Limited 100 6,909 6,909Phillips Carbon Black Limited 100 5,653 5,653RPG Cables Limited 170 5,382 5,382RPG Transmission Limited 100 7,261 7,261RPG Life Sciences Limited 100 8,065 8,065Spencer & Co. Limited 200 7,563 7,563Saregama India Limited 100 1,322 1,322

Aggregate Market Value of Quoted InvestmentsRs.209,387 (Previous Year Rs. 187,350/- ) 774,864,290 774,864,290

II) Trade - Unquoted (At Cost) Nos.The Baramati Co-operative Bank Limited(Face value Rs.20/- each, fully paid up) 1,300 26,000 26,000The Sadguru Jangli Maharaj Co-operative Bank Ltd.(Face value Rs.50/- each, fully paid up) 1,000 50,000 50,000National Saving Certificates 39,310 19,310Add: Additions consequent to amalgamation - 20,000(Pledged with sales Tax Authorities)

115,310 115,310

774,979,600 774,979,600

# The Company has participating interest of 0.82% in Charter Capital of Spentex Tashkent Toytepa, LLC

SCHEDULE VII : INVENTORIES(Refer Note 5 of Schedule XX)Stores, Spares & Packing Materials 52,242,508 47,587,185(including stock in transit Rs. 4,674,525/-, Previous Year Rs. 354,000/-.)Raw Materials 541,558,439 988,548,824(including stock in transit Rs. 30,013,386/-, Previous Year Rs. 12,954,000/-)Work-in-process 95,060,420 76,267,691Finished goodsManufactured 460,768,018 163,175,499(including stock in transit Rs. 32,054,630 /-,Previous Year Rs. 39,046,983/- )Traded 7,329,518 468,097,536 31,698,678 194,874,177Waste 4,733,438 4,749,996

1,161,692,341 1,312,027,873SCHEDULE VIII : SUNDRY DEBTORS - UNSECUREDOutstanding for a period over six months

Considered Good 76,456,060 24,235,079Considered Doubtful 3,915,731 4,097,316

80,371,791 28,332,395Other Debts

Considered Good 783,859,512 674,663,891864,231,303 702,996,286

Less : Provision for doubtful debts 3,915,731 4,097,316860,316,572 698,898,970

27


SCHEDULE IX : CASH & BANK BALANCESCash balance on hand (Includes Cash in Transit Rs. NIL , 1,384,014 13,391,161Previous Year Rs. 548,681)Balances with Scheduled Banks :In Current Accounts 11,521,929 21,316,054In Fixed Deposit Accounts* 725,000 775,000In Margin Money Account * 2,845,263 10,347,166In Unpaid Interest on Debenture Accounts - 723,000In Unpaid Dividend Accounts 1,306,763 1,319,000Balances with other Banks.In Current AccountBaramati Sahakari Bank 93,710 300,196Shree Sadguru Jangli Maharaj Bank 2,375 2,375

17,879,054 48,173,952* Having a lien by Banks and includes receipts pledged with sales tax authoritiesSCHEDULE X : OTHER CURRENT ASSETS

Interest accrued on deposit (including interest accured on loan to a subsidiary 35,856,030 5,915,357Rs. 34,437,576, Previous Year Rs. 2,834,000.)Claims and other receivables 615,660,995 439,788,396Deposits 67,651,591 65,308,130Fixed assets held for sale ( at net book value or estimated net realisable value, 236,050,353 338,000whichever is lower )

955,218,969 511,349,883

SCHEDULE XI : LOANS AND ADVANCESLoans and advances to subsidiaries 422,688,456 381,963,371UnsecuredAmounts recoverable in cash or in kind or for value to be receivedConsidered good 127,465,95 239,209,272Considered doubtful 684,253 989,000

550,838,667 240,198,272Less : Provision for Doubtful Advances 684,253 989,000

550,154,414 239,209,272Balance with Customs, Excise, Govt. Authorities etc. 26,214,836 95,134,000Advance Income Tax/Tax Deducted at Source 87,704,720 63,132,796(includes advance fringe benefit tax Rs. 7,748,884/-, Previous Year Rs. 3,234,767/-)

664,073,970 779,439,439

SCHEDULE XII : CURRENT LIABILITIES(Refer Notes 3 on Schedule XXI)Sundry CreditorsTotal outstanding dues of micro enterprises and small enterprises* - -Total outstanding dues of creditors other than micro enterprise and small enterprises@ 1,277,123,912 535,102,899Unamortised premium on swap contracts - 960,000Unpaid Dividend ** 1,306,763 1,319,000Unpaid Debenture Interest - 723,000Other Liabilities 87,910,565 28,717,526Interest accrued but not due on loans and debentures 6,069,465 15,949,024

1,372,410,705 582,771,449* As certified by the Management based on available information** Not due to be credited to Investor Education and Protection Fund@ Includes payable to Amit Spinning Industries Limited (subsidiary company) Rs. 49,710,024/-(Previous Year Rs. 47,690,906/-)

SCHEDULE XIII: PROVISIONS(Refer Notes 17 on Schedule XXI)For Taxation (including fringe benefit tax Rs. 8,135,575, Previous Year Rs. 3,549,474) 26,325,239 21,739,138For Wealth Tax 60,435 55,720For Leave Encashment 27,892,322 14,427,391For Gratuity 49,094,540 39,660,828

103,372,536 75,883,077

31-03-2008 31-03-2007Rupees Rupees


28

SCHEDULE XIV : OTHER INCOMEDividend from long term investments 354,129 2,940Commission (gross) 19,664,920 37,869,954(Tax Deducted at Source Rs. 2,298,973, Previous Year Rs. 1,030,696)Interest on deposits (gross) 42,853,045 39,934,479(Tax Deducted at Source Rs. 8,412,217, Previous Year Rs. 15,357,178)Conversion Charges (gross) 181,541,263 118,036,518(Tax Deducted at Source Rs. 3,757,442 , Previous Year Rs. 1,308,595)Liabilities no longer required written back 39,617,628 25,640,836Profit on Sale of Fixed Assets (net) 7,790,995 -Income from Forward and Swap Contracts 56,939,450 24,296,375Export Incentives 123,211,254 143,067,760Foreign Exchange Fluctuation Gain (net) 33,415,752 36,834,390Miscellaneous Income 45,001,981 46,095,437

550,390,417 471,778,689

SCHEDULE XV : RAW MATERIALS CONSUMEDOpening Stock 988,548,824 455,840,168Additions consequent to amalgamation - 199,349,000

988,548,824 655,189,168Add : Purchases 4,276,047,388 3,906,372,962Less : Closing Stock 541,558,439 988,548,824

4,723,037,773 3,573,013,306

SCHEDULE XVI : SALARY, WAGES AND BENEFITS(Refer Notes 9,14 and 17 on Schedule XXI )Salaries, Wages and Bonus 476,564,025 386,754,805Contributions to Provident and Other Funds 41,729,194 30,079,382Employees Welfare Expenses 42,636,024 28,657,041Less: Salaries, Wages and Benefits charged to a subsidiary (2,700,000) (1,857,978)

558,229,243 443,633,250SCHEDULE XVII : MANUFACTURING AND OTHER COSTS(Refer Notes 9 and 13 on Schedule XXI)Stores, Spares and Packing Materials Consumed (net) 279,016,608 216,776,977Sub-contracting Charges 19,477,680 77,358,998Power, Fuel & Water 777,562,257 691,363,540Rent 7,087,645 8,040,001Rates & Taxes 2,471,971 4,921,695Repairs & Maintenance :Plant & Machinery 15,326,111 10,796,049Building 5,285,605 5,150,348Others 11,459,360 9,960,737Insurance 13,586,053 13,654,651Communication Expenses 14,683,494 10,772,462Traveling and Conveyance 46,300,310 22,313,352Legal and Professional charges 23,774,340 23,528,663Commission 67,870,463 67,555,047Freight Outward and Clearing Charges (net of recoveries) 338,312,477 211,879,873Loss on Sale of Fixed Assets (net) - 326,146Loss on assets held for disposal 45,023,575 -Loss on sale of raw materials 12,978,593 -Donation and Contribution (other than to political parties ) 1,273,341 65,000Provision for doubtful debts - 321,000Bad debts and Advances written off 32,642,978 1,291,034Sitting Fees 407,000 544,000Cost of outsourcing activities - 12,568,000Selling and Other Expenses 48,825,107 22,929,873Miscellaneous Expenses 45,114,321 69,777,776Less: Expenses charged to subsidiaries (19,532,638) (5,941,612)

1,788,946,651 1,475,953,610

2007-2008 2006-2007Rupees Rupees

29


SCHEDULE XVIII: FINANCIAL CHARGES(Refer Note 10 on Schedule XX)Interest - Non Convertible Debentures 52,542,830 73,004,605Interest- Fixed Loans 273,751,164 196,191,421- Others 309,357,194 162,670,053Bank Charges 39,442,708 30,004,869

675,093,896 461,870,948

SCHEDULE XIX : (INCREASE) / DECREASE IN STOCKS

Opening Stock :Finished goods 163,175,499 4,831,520Work in process 76,267,691 10,470,797Waste 4,749,996 7,888,464

244,193,186 23,190,781Additions consequent to amalgamationFinished goods - 25,928,946Work in process - 46,523,580Waste - 595,929

244,193,186 96,239,236Closing Stock :Finished goods 460,768,018 163,175,499Work in process 95,060,420 76,267,691Waste 4,733,438 4,749,996

560,561,876 244,193,186Sub Total (316,368,690) (147,953,950)Less: Transfer to Trial Production Expenses (included in Capital Work in Progress) 52,136,139 1,396,432(Increase) / Decrease in Stocks (264,232,551) (146,557,518)

SCHEDULE XX : SIGNIFICANT ACCOUNTING POLICIES1. Basis of Accounting

The Financial Statements are prepared to comply in all material aspects with all the applicable accounting principles in India,the applicable accounting standards notified u/s 211(3C) of the Companies Act, 1956 and the relevant provisions of theCompanies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

2. Use of EstimatesThe preparation of the financial statements in conformity with Indian Generally Accepted Accounting Principles requires themanagement to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosuresrelating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income andexpenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations underemployee retirement benefit plans, income taxes and the useful lives of fixed assets and intangible assets.

3. Fixed AssetsFixed Assets are stated at their original cost including freight, duties (net of MODVAT/CENVAT), taxes and other incidentalexpenses relating to acquisition and installation.Expenditure incurred during the period of construction are carried forward as capital work-in-progress and on completion,the costs are allocated to the respective fixed assets.

4. Depreciation / AmortizationDepreciation for all fixed assets situated at manufacturing locations is provided on the straight line method on a pro-ratabasis at the rates determined on the basis of useful lives of the respective assets. Management estimates the useful livesfor the various fixed assets situated at manufacturing locations as follows :

Description – Manufacturing locations Useful lives (in years)

Factory Building 17-29Building (Other than factory building) 58Plant and Machinery 2-18Office Equipments 10-20Computers 1-6Furniture and Fixtures 2-15

Vehicles 10-12

2007-2008 2006-2007Rupees Rupees


30

The rates derived from the above useful lives are higher than the minimum rates specified in Schedule XIV to the CompaniesAct, 1956 (‘Act’).Depreciation for all fixed assets at locations other than at manufacturing locations is provided on the written down valuemethod at the rates specified in Schedule XIV to the Act.Leasehold land is amortized over the lease period on a straight line basis.Capitalised enterprise resource planning software (SAP) is amortised over a period of five years on straight line basis.Acquired goodwill is amortized using the straight-line method over a period of 10 years

5. InventoriesInventories have been valued at lower of cost and net realizable value.The cost in respect of raw materials is determined:i) under the Specific identification of cost method for the Cotton Divisionii) using the weighted average method for the Synthetic Division.In respect of both divisions, cost includes customs duty, wherever paid, and are net of credit under MODVAT/CENVATscheme, wherever applicable.The cost in respect of work-in-progress, finished goods and stores and spares is determined using the weighted averagecost method and includes direct materials and labour and a proportion of manufacturing overheads based on normaloperating capacity, where applicable.Waste is valued at estimated net realizable value.

6. Revenue RecognitionSale of goods : Revenue on sale of goods is recognized on transfer of significant risk and rewards of ownership to thebuyer and on reasonable certainty of the ultimate collection. Sales are net of excise duty, trade discounts and sales returns.Interest: Income is recognised on a time proportion basis taking into account the amount outstanding and the applicable rates.Commission and Insurance claim: Income is recognized when no significant uncertainty as to measurability orrecoverability exists.

7. InvestmentsInvestments that are readily realisable and intended to be held for not more than a year are classified as currentinvestments. All other investments are classified as long-term investments. Current investments are carried at lower ofcost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However,provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

8. Foreign Currency TransactionsTransactions in foreign currency are accounted for at the exchange rates prevailing on the date of transaction. Allmonetary items denominated in foreign currency are translated at year end rates. Exchange differences arising on suchtransactions and also exchange differences arising on the settlement of such transactions are adjusted in the Profit andLoss Account.In case of forward contracts, the premium or discount on all such contracts arising at the inception of each contract isrecognised / amortised as income or expense over the life of the contract. Any profit or loss arising on the cancellation orrenewal of such contracts is recognized as income or expense for the period.In respect of foreign branch, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at theexchange rate prevailing on the date of the transaction. Monetary assets and liabilities are restated at the year end ratesand resultant gains or losses are recognised in the Profit and Loss Account.

9. Employee BenefitsThe Company’s contributions to recognised Provident Funds are charged to revenue on an accrual basis.The Company has Defined Benefit plans namely Leave Encashment and Gratuity for all employees, the liability for which isdetermined on the basis of an actuarial valuation at the end of the year. Gratuity Fund (for other than Synthetic division) isadministered through Life Insurance Corporation of India. Short term compensated absences are recognised at the undiscountedamount of benefit for services rendered during the year.Termination benefits are recognised as an expense immediately. Actuarial gains and losses comprise experience adjustmentsand the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account as incomeor expense.In the year of transition (i.e. 2007-08), the difference between transitional liability and the liability that would have beenrecognized at the beginning of the transitional year under the Company’s previous accounting policy has been adjusted againstthe opening revenue reserves of that year in accordance with Accounting Standard 15 (revised 2005) ‘Employee Benefits’.

10. Borrowing CostsBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalised as a part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in whichthey are incurred.

31


11. TaxationTax expense for the year, comprising current tax, deferred tax and fringe benefit tax is included in determining the netprofit/(loss) for the year.A provision is made for the current tax and fringe benefit tax based on tax liability computed in accordance with relevanttax rates and tax laws. Deferred tax assets are recognised for all deductible timing differences and carried forward to theextent it is reasonably / virtually certain that future taxable profit will be available against which such deferred tax assetscan be realised.Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by theBalance Sheet date.

12. LeasesAssets acquired under long term finance lease are capitalised and depreciated in accordance with Company’s policy forassets situated at manufacturing and other locations. The associated obligations are included in other loans under“Secured Loans”.

13. Impairment of AssetsAt each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If suchindication exists, the Company estimates the recoverable amount and where carrying amount of the asset exceeds suchrecoverable amount, an impairment loss is recognised in the profit and loss account to the extent the carrying amountexceeds recoverable amount. Where there is any indication that an impairment loss recognised for an asset in prioraccounting periods may no longer exist or may have decreased, the Company books a reversal of the impairment loss notexceeding the carrying amount that would have been determined (net of amortisation or depreciation) had no impairmentloss been recognised for the asset in prior accounting periods.

SCHEDULE XXI

Notes to Accounts1) Contingent Liabilities not provided for in respect of : (Amount in Rs.)

Description This Year Previous Yeara) Demands from Income Tax Authorities under appeal 51,232,534 24,481,129b) Demands from Sales Tax Authorities under appeal 4,641,627 17,065,085c) Show cause notices/demands raised by Excise / Customs 227,131,953 173,504,176

Dept. (including applicable penalties), not acknowledged as debtsd) Show cause notices/demands raised by MP Government / 117,856,000 117,856,000

MPEB Department , not acknowledged as debtse) Claims against the Company not acknowledged as debts 13,298,670 4,607,000f ) Guarantees and Letters of credit issued on behalf of the 871,212,262 129,726,295

Company, outstanding at the year endg) Bills Discounted with Banks on behalf of the Company, 1,078,532,683 985,206,725

outstanding at the year endh) Corporate Guarantee given to IREDA for Loan to M/s 271,206,500 181,452,500

Himalayan Crest Power Limitedi) Corporate Guarantee given to AXIS Bank Ltd.& UCO Bank 302,866,520 451,702,796

for Loan to M/s Amit Spinning Industries Limitedj) Corporate Guarantee given to ICICI Bank Singapore for loan NIL 382,448,000

to Spentex Tashkent Toytepa LLC & Spentex (Netherlands) B.V.Current year Nil, (Previous year USD 8,800,000)

k) Corporate Guarantee given to Tashkent Toytepa Textil for 1,835,313,031 2,611,076,800deferred payment of purchase consideration on behalf ofSpentex Tashkent Toytepa LLC Current Year USD 45,745,589(Previous Year USD 60,080,000)

l) Corporate Guarantee given to CVCI for investment in Spentex 80,240,000 86,920,000(Netherlands) B.V. Current Year USD 2,000,000, (Previous YearUSD 2,000,000)

m) Corporate Guarantee given to Lehman Brothers and SBI - 1,724,830,494 NILTokyo Branch for loan to Spentex (Netherlands) B.VCurrent Year USD 42,991,787 (Previous Year Nil )


32

The Company has assumed liabilities for certain disputed cases in respect of excise duty amounting to Rs. 29,074,675(Previous Year Rs. 29,074,675) and certain other disputed cases amounting to Rs. 750,000 (Previous Year Rs. 750,000)under the terms of sale negotiated for purchase of assets from Bank of India at Ahmedabad. In the event that the outcomeof these cases are not in the favour of the Company, the amount would be adjusted with the carrying value of assetstaken over from Bank of India.The amount shown in the items (a) to (e) represent the best possible estimates arrived at on the basis of availableinformation. The uncertainties and possible reimbursements are dependent on outcome of the different legal processeswhich have been invoked by the Company or the claimants as the case may be and therefore cannot be predictedaccurately. The Company engages reputed professional advisors to protect its interest and has been advised that it hasstrong legal positions against such disputes. The amount shown in items (f) to (m) represent guarantees given and billsdiscounted in the normal course of the Company’s operations and are not expected to result in any loss to the Companyon the basis of beneficiaries fulfilling their ordinary commercial obligations.

This Year (Rs.) Previous Year (Rs.)2) Estimated value of contracts remaining to be executed on 11,204,362 18,150,818

capital account (net of advances)3) Based on information available with the Company, there are no dues to Micro, Small and Medium Enterprises, as defined

in the Micro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2008.4) In accordance with the current industry practice, plant and machinery of the Company has been treated as “Continuous

Process Plant” as defined under Schedule XIV to the Companies Act,1956.5) Pursuant to an agreement dated December 8, 2005 the Company has allotted 127,895 Equity Shares to Mr. Ajay Choudhary,

70,586 Equity Shares to Mr. Mukund Choudhary and 76,519 Equity Shares to Mr. Kapil Choudhary in conversion of anequal number of Share Warrants. The Company had received an advance of 10% of the share subscription priceamounting to Rs. 1,004,850 from them during 2005-06 and balance consideration of Rs. 9,043,650 has been received atthe time of conversion of such Share Warrants during the year at the agreed rate of Rs. 36.54 (including premium of Rs.26.54 per share).

6) In order to optimize operational efficiencies, during the year, management has decided to terminate production at Ahmedabadfactory and dispose assets in a phased manner. As on March 31, 2008, the management has categorized such assetsas ‘Fixed assets held for sale`, under Other Current Assets at lower of estimated net realizable value and net book valueand accordingly, has booked a loss of Rs. 38,750,750.

7) Deferred Purchase Payments for purchase of Plant and MachineryDuring the year, the Company has terminated the contract manufacturing agreement with Bombay Dying and ManufacturingCompany (BDMC) and purchased the assets from BDMC for Rs. 187,942,975 (including VAT of Rs. 20,882,553), payableover a period of three years in 4 installments as mentioned below.

Sr. No. Payable date Amount Amount (Rs.) (Rs.)

1 December 31, 2007 13,567,9752 April 1, 2009 56,250,0003 April 1, 2010 (Refer Note a) below) 56,250,0004 April 1, 2011 61,875,000 174,375,000

Total 187,942,975

Notes:a) Included in Schedule IV ‘Unsecured Loans’b) As on March 31, 2008 these assets are undergoing trial runs to conform to the Company’s production plans and are

shown under Capital Work in Progress under Schedule V – ‘Fixed Assets’.8) The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and

claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stageof duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of Indiawho allowed rebate for both the stages of duty.However, the Department appealed in the Hon’ble High Court of Mumbai which was upheld by the Hon’ble High Court. TheSynthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing theHon’ble High Court Order and allowing the rebate on input stage of duty.Pending the decision in the matter by the Hon’ble Supreme Court, the Synthetic Division has not yet reversed the rebatereceivable on input duty aggregating to Rs 58,154,319 (including Rs 2,826,621 at its Pithampur Unit).Further, relying on the judgment of the Hon’ble High Court of Mumbai for the Butibori unit, a demand has been raised by theDepartment on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of dutyamounting to Rs 60,216,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621 havebeen disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance.

}

33


The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has beenkept pending against the demand till the final order is received from the higher authority (Revision Authority).While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation/ utilization of these cenvat balances of Rs. 118,370,685 coupled with cenvat credit of Rs. 20,447,344 (accumulated as aresult of inverted duty structure between raw materials and finished goods till previous year) over a reasonable period oftime, in case the decision of the Hon’ble Supreme Court goes in favour of the department.

9) The Company has charged Rs 22,232,638 to Amit Spinning Industries Limited and Schoeller Litvinov, k.s. (its subsidiaries)in respect of expenses borne by it which are allocable to these subsidiaries. These amounts have been offset against therespective expense heads.

10) The Sales tax exemption under the Package Scheme of Incentives, 1993 for the Butibori unit of the Synthetic Division hadexpired on December 31, 2005. However, the unit has filed for an extension of 3 years with effect from January 1, 2006to the Development Commissioner (Industries), Government of Maharashtra.

In view of expiry of the Exemption benefits, the Butibori unit has given an undertaking to the Sales Tax Department forpayment of taxes with interest with effect from January 1, 2006 in case it fails to get the extension of exemption period andis accordingly selling finished goods, waste and scrap etc. without charging sales tax (VAT and Central Sales Tax) underexemption. In case the unit fails to get the exemption certificate from the authorities, the tax and interest payable on March31, 2008 shall be as under: -

Sales Value Sales Tax Interest T otal

(Rs.) (Rs.) (Rs.) (Rs.)

January, 2006 - March, 2006 165,414,164 6,475,767 2,185,571 8,661,338

April, 2006 - March, 2007 1,048,420,320 41,562,736 12,468,821 54,031,557

April, 2007 - March, 2008 729,883,547 25,063,885 3,759,583 28,823,468

Total 1,943,718,031 73,102,388 18,413,975 91,516,363

Further, the unit has accrued VAT receivable of Rs 54,283,498 for the period January 1, 2006 to March 31, 2008 on the basisthat the Sales Tax Exemption will be extended for a further period of 3 years with effect from January 1, 2006.The unit has also filed a petition before the Hon’ble High Court, Nagpur to grant relief on the said matter and is hopeful ofrecovery of such amount.

11) The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailedTransfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enter-prises’ on an ‘arm’s length’ basis. These regulations, inter alia, also require the maintenance of prescribed documents andinformation including furnishing a report from an Accountant within the due date of filing of Return of Income. For the yearended March 31, 2008, the Company has initiated the process of compliance with the said transfer pricing regulations forwhich the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

12) Leased Assets included in vehicles where the Company is a lessee under finance leases are :This Year Previous Year

(Rs.) (Rs.)Not later than one year 4,927,346 4,744,516Later than one year but not later than five years 3,089,931 5,524,621Later than five years Nil NilTotal Minimum lease payments 8,017,277 10,269,137Less : Future finance charges on finance leases 780,149 1,040,275Present value of finance lease liabilities 7,237,128 9,228,862Representing lease liabilities:Current 4,407,169 4,087,105Non current 2,829,959 5,141,757Total 7,237,128 9,228,682The present value of finance lease liabilities may be analysed as follows :Not later than one year 4,407,169 4,087,105Later than one year but not later than five years 2,829,959 5,141,757Later than five years Nil NilTotal 7,237,128 9,228,682


34

13) Payment to Auditors:This Year Previous Year

(Rs.) (Rs.)a) Statutory Audit (*) 3,707,880 2,244,800b) Tax Audit (*) 449,440 224,480c) Other services, Certifications, etc (*) 2,671,921 606,096d) Out of pocket expenses 227,385 94,867

7,056,626 3,170,243

(*) including taxes, as applicable.

14) Remuneration to Managerial personnelThis Year Previous Year

(Rs.) (Rs.)a) Salary and Allowances 21,511,124 17,642,766b) Contributions to Provident Fund and Superannuation Fund 1,266,372 695,040c) Estimated value of Perquisites 419,135 982,206

Total 23,196,631 19,320,012Directors’ Sitting Fees 407,000 544,000

Foot Note:The contribution to Gratuity Fund and leave encashment have been made on group basis and separate figures applicableto an individual employee are not available and have, therefore, not been taken into account in the above computation.

15) TaxationDeferred Tax

Break-up of Deferred Tax Assets and Liabilities into major components This Year Previous Yearof the respective balances is as under : (Rs.) (Rs.)I. Balance brought forward - Deferred Tax Asset / (Liability) (85,186,455) (76,299,719)

Transitional Adjustment for Employee benefits – Deferred Tax Asset 3,790,010 -

Balance brought forward after transitional adjustment for (81,396,445) (76,299,719)Employee Benefits as per AS-15

II. For the Year :

(i) Tax impact of difference between carrying amount of fixed assets 30,070,076 (306,446,856) in the financial statements and the income tax return

(ii) Tax impact of expenses charged in the financial statements but 1,496,207 1,742,945 allowable as deduction in future years under income tax

(iii) Realisation of tax impact of unabsorbed depreciation created in the 49,830,162 228,212,175 previous years (Refer Note b) below )

Net Deferred Tax (Liability)/Asset 81,396,445 (8,886,736)

III. Closing Deferred Tax (Liability)/Asset - (85,186,455)

Notes:

a) The tax impact for the above purpose has been arrived at by applying a tax rate of 33.99 % (Previous Year 33.99%),being the prevailing tax rate for Indian companies under the Income Tax Act, 1961.

b) Deferred Tax Asset has been recognized only to the extent of Deferred tax liability

16) Earnings Per Share (EPS):

The following table reconciles the numerators and denominators used This Year Previous Yearto calculate Basic and Diluted EPS for the Year: (Rs.) (Rs.)Net profit / (loss) attributable to Equity Shareholders (345,273,105) 41,989,626Weighted Average Shares outstandingWeighted average shares outstanding 71,421,693 67,756,624Effect of Dilutive Securities * 117,992Diluted weighted average shares outstanding 71,421,693 67,874,616Nominal value of Equity Shares (Rs.) 10 10Basic Earnings per Share (Rs.) (4.83) 0.62Diluted Earnings per share (Rs.) (4.83) 0.62* There are no potential dilutive securities.

35


17 Employee Benefits

The Company has adopted Accounting Standard 15 (AS 15) (revised 2005) on ‘Employee Benefits’ notified u/s 211(3C) ofThe Companies Act , 1956. These financial statements include the obligations as per requirement of this standard .

Defined Contribution Plans:

The Company has Defined Contribution plans for post retirement employment benefits’ namely Provident Fund andEmployee State Insurance Scheme. Expense for the same is being charged to Profit and Loss account for the year.

Defined Benefit Plans:

The liability for gratuity and leave encashment / compensated absences is determined on the basis of an actuarial valuationat the end of the year. Gains and losses arising out of actuarial valuations are recognized in the Profit and Loss Accountfor the year.

(Amount in Rs.)

Gratuity Leave Encashment Funded Unfunded

A. Components of Employer Expense1 Current Service Cost 5,773,869 4,349,6812 Interest Cost 3,620,592 1,151,4293 Curtailment Cost/(Credit) - -4 Settlement Cost/(Credit) - -5 Return on Plan Assets (370,200) -6 Past Service Cost - -7 Actuarial Losses/(Gains) 8,002,740 2,443,084

Total expense recognised in the Statement of Profit & 17,027,001 7,944,194Loss AccountThe Gratuity and Leave Encashment Expenses have been recognisedin “Salaries,Wages and Bonus” under Schedule XVI

B. Net Asset / (Liability) recognised in Balance Sheet as at March 31, 2008.

1 Present Value of Defined Benefit Obligation 56,054,644 16,492,3002 Fair Value on Plan Assets 6,960,104 -3 Status [Surplus/(Deficit)] (49,094,540) (16,492,300)4 Unrecognised Past Service Cost - -

Net Asset/(Liability) recognised in Balance Sheet (49,094,540) (16,492,300)

C. Change in Defined Benefit Obligations (DBO) during the yearended March 31, 20081 Present Value of DBO at the Beginning of Year 45,133,764 14,353,5432 Current Service Cost 5,773,869 4,349,6813 Interest Cost 3,620,592 1,151,4294 Curtailment Cost/(Credit) - -5 Settlement Cost/(Credit) - -6 Plan Amendments - -7 Acquisitions - -8 Actuarial (Gains)/Losses 8,002,740 2,443,0849 Benefits Paid (6,476,321) (5,805,437)10 Present Value of DBO at the End of Year 56,054,644 16,492,300

D. Change in Fair Value of Assets during the year ended March 31, 20081 Plan Assets at the Beginning of Year 3,486,199 -2 Acquisition Adjustment - -3 Expected Return on Plan Assets 313,758 -4 Actuarial Gains/(Losses) 56,442 -5 Actual Company Contribution 3,433,614 -6 Benefits Paid (329,909) -7 Plan Assets at the End of Year 6,960,104 -


36

Gratuity Leave EncashmentFunded Unfunded

PercentageE. Actuarial Assumptions

1 Discount Rate (%) at March 31, 2008 8.00% 8.00%2 Expected Return on Plan Assets at March 31, 2008 9.00% N.A.3 Annual increase in salary cost 5.50% 5.50%

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotionand other relevant factors such as supply and demand factors in the employment market.

Notes:a) In respect of the Employee’s Gratuity Fund, constitution of Plan Assets is not readily available from the Life Insurance

Corporation of India.

b) Short term compensated absences amounting to Rs. 3,018,246 has been included in Leave Encashment shown underPersonnel Expenses (Refer Schedule XVI) with a corresponding liability included under Provisions(Refer Schedule XIII)

c) The Company has adopted Accounting Standard 15 (revised 2005) ‘Employee Benefits’ during the last year i.e. yearended March 31, 2008. Accordingly, the transitional adjustment aggregating to Rs. 7,360,357 (net of deferred tax assetRs. 3,790,009) has been charged against the general reserves as at April 1, 2007. The details of the transitionaladjustment is as follows:

- Long Term Leave Encashment / Compensated Absences Rs. 296,629 (net of deferred tax asset Rs. 152,741) - Short Term Leave Encashment / Compensated Absences Rs. 5,532,810 (net of deferred tax asset Rs. 2,848,966) - Gratuity Rs. 1,530,917 (net of deferred tax asset Rs. 788,303)

F. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and marketscenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are welldiversified.

18. Related Party Disclosures:

A) In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of therelated parties where control exists and/or with whom transactions have taken place during the year and description ofrelationships, as identified and certified by the management, are:

i) Enterprises under significant influence:a) Himalayan Crest Power Limited

b) CLC & Sons (Pvt.) Limited

ii) Key Management Personnel and their Relatives

a) Mr. Ajay Kumar Choudhary Chairman

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

f ) Mr. Chiranjilal Choudhary Father of Mr. Ajay Kumar Choudhary

g) Mrs. Chanderkala Choudhary Mother of Mr. Ajay Kumar Choudhary

h) Mrs. Lekha Devi Choudhary Wife of Mr. Ajay Kumar Choudhary

i) Mrs. Jyoti Choudhary Wife of Mr. Mukund Choudhary

j) Mrs. Ritu Choudhary Wife of Mr. Kapil Choudhary

iii) Subsidiaries

a) M/s Amit Spinning Industries Limited f ) M/s Spentex ( Singapore ) Pte. Ltd.

b) M/s Spentex Tashkent Toytepa LLC g) M/s Schoeller Litvinov k.s.

c) M/s Spentex Netherland B.V. h) M/s Schoeller Textile Netherlands B.V.

d) M/s Spentex Mauritius Pvt. Ltd. i) M/s Schoeller Textil Verwaltungs GMBH

e) M/s Spentex (Cyprus) Pvt. Ltd. j) M/s Schoeller Textil GMBH & Co. KG

37

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38

19. In accordance with Accounting Standard - 17 on Segment Reporting issued under Section 211 (3C) of the Companies Act,1956, the Company has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading.Further, two geographical segments by location of customers have been considered as secondary segments viz. Within Indiaand Outside India. The segment wise disclosures are as follows:

A. Business Segment Reporting (Amount in Rs.)

DESCRIPTION TEXTILE- TEXTILE-TRADING OTHER TRADING TOTALMANUFACTURING

Segment Revenue

Total Revenue 6,833,310,960 718,461,782 131,869,996 7,683,642,738(5,599,261,733) (1,462,895,939) (480,432,618) (7,542,590,290)

Inter - Segment Sales 86,401,680 - - 86,401,680(135,311,705) (-) (-) (135,311,705)

External Sales 6,746,909,280 718,461,782 131,869,996 7,597,241,058(5,463,950,028) (1,462,895,939) (480,432,618) (7,407,278,585)

Segment Results 288,362,876 (12,594,732) 36,081,030 311,849,174(373,563,970) (72,618,730) (36,726,426) (482,909,126)

Unallocated Corporate Expense (net) - - - 90,451,619 (-) (-) (-) (-828,546)

Operating Profit - - - 221,397,555 (-) (-) (-) (483,737,672)

Interest Expenses - - - 675,093,896 (-) (-) (-) (461,870,948)

Interest Income - - - 42,853,045 (-) (-) (-) (39,934,479)

Profit /(Loss) before Prior period items and Tax - - - (410,843,296) (-) (-) (-) (61,801,203)

Income Tax - - - -(6,969,781)

Deferred Tax - - - (81,396,445) (-) (-) (-) (8,886,736)

Fringe Benefit Tax - - - 4,585,570 (-) (-) (-) (3,955,060)

Prior Period Items - - - 11,240,684 (-) (-) (-) (-)

Profit/(Loss) after Tax - - - (345,273,105)(41,989,626)

OTHER INFORMATION

Segment Assets 6,460,654,472 209,446,387 99,642,924 6,769,743,783(6,708,518,968) (215,521,700) (46,879,798) (6,970,920,466)

Unallocated Corporate Assets - - - 1,595,468,084 (-) (-) (-) (1,394,850,907)

Total Assets - - - 8,365,211,867 (-) (-) (-) (8,365,771,373)

Segment Liabilities 1,308,495,039 60,745,140 2,189,286 1,371,429,465(534,376,169) (86,503,336) (6,542,510) (627,422,015)

Unallocated Corporate Liabilities - - - 5,349,740,757 (-) (-) (-) (5,750,717,902)

Total Liabilities - - - 6,721,170,222 (-) (-) (-) (6,378,139,917)

Capital expenditure incurred during the year - - - 425,017,369

(-) (-) (-) (1,102,185,244)

Depreciation and Amortisation for the year - - - 422,977,305

(-) (-) (-) (356,974,126)

39


B) GEOGRAPHICAL SEGMENT REPORTING: (Amount in Rs.)REVENUE ASSETS

Within India 2,489,579,837 7,107,784,779(3,585,543,718) (7,966,185,002)

Outside India 5,107,661,221 1,257,427,088(3,821,734,867) (399,586,371)

Current Year 7,597,241,058 8,365,211,867Previous Year (7,407,278,585) (8,365,771,373)

20. Information regarding Capacity, Production, Purchases,Sales and Closing Stocks:a) Production Capacity

Product Unit Current year Previous YearInstalled Installed

Cotton Yarn Spindles 135,072 187,808Synthetic Yarn Spindles 122,976 122,976Knitting Textile Products MT 214 Nil

1. As certified by the Management2. The Cotton Yarn Spinning Industry has been delicensed.b) Purchases, Sales and Stocks - Traded Goods

(figures in brackets are for the Previous Year.)* Purchase of Cotton Yarn Includes Rs. 81,192 kgs, amounting to Rs. 86,401,681 on account of Inter Unit Transfer.# The above sales figures do not include the export incentives - Duty Drawback of Rs 77,402,538 (Previous Year Rs. 15,543,740).

c) Production, Sales and Stocks - Manufactured Goods @

(figures in brackets are for the Previous Year.)* Sale of Cotton Yarn Includes Rs. 81,192 kgs, amounting to Rs. 86,401,680 on account of Inter Unit Transfer.# The above sales figures do not include the export incentives - Duty Drawback of Rs. 158,175,757 (Previous Year Rs. 13,820,065).


40

@#Above figures includes trial production of 920,242 Kg (Previous Year 505,828 kg), sales of trial production of 465,672 kg(Previous Year 478,238 Kg) amounting to Rs. 51,915,195 (Previous Year Rs 46,335,792) and Finished goods stock of trialproduction of 454,570 Kg (Previous Year 27,590 Kg) valued at Rs. 4,578,042 (Previous Year Rs. 1,396,432) amd Cottonwaste pf 11,031 Kg (Previous Year Nil) valued at Rs. 411,691/- (previous year Nil).

d) Particulars regarding Fabric Manufactured through Job Work:Product UOM Opening Stock Production Sales Closing Stock

Qty. Value (Rs.) Qty. Value (Rs.) Qty. Value (Rs.)Polyster Filament Yarn Kgs - - - - - - -

(1,911) (175,415) (-) (-) (-) (1,911) (175,415)

(figures in brackets are for the Previous Year.)21) Raw Materials and Components consumed :

Description Current Year Previous YearKgs. Value (Rs) Kgs. Value (Rs)

Cotton 42,453,813 2,312,482,348 30,242,904 1,484,851,411Polyster Staple Fiber 24,282,597 1,519,438,319 22,466,000 1,020,353,000Viscose Staple Fibre 8,021,302 872,018,237 8,068,000 646,007,000PTA - - 5,158,000 229,508,000MEG - - 1,998,000 84,482,000Single Yarn 32,528 4,092,307Others* 150,061 15,006,562 63,883 107,811,895Total 74,940,301 4,723,037,773 67,996,787 3,573,013,306

* It is not practicable to furnish quantitative information of other raw materials and components consumed in view of thelarge number of items which differ in size and nature, each being less than 10% in value of the total.

22) Value of Imported and Indigenous Raw Material, Components Stores, Spares and Packing Materials ConsumedCurrent Year Previous Year

% Value (Rs.) % Value (Rs.)a) Raw Material and Components

Imported 7.98 377,019,146 10.18 363,722,754 Indigenous 92.02 4,346,018,627 89.82 3,209,290,552

100.00 4,723,037,773 100.00 3,573,013,306b) Store, Spare and Packing Materials Consumed :

Imported 14.99 41,828,268 25.88 56,105,196 Indigenous 85.01 237,188,340 74.12 160,671,781

100.00 279,016,608 100.00 216,776,977Current Year (Rs.) Previous Year (Rs.)

23) C I F Value of Imports : Raw Materials 318,820,834 412,777,510 Stores and Spares & Packing Materials 40,950,233 281,202,768 Capital Goods 15,984,260 640,670,552

375,755,327 1,334,650,83024) Expenditure in Foreign Currency

(On accrual basis-net of tax) Travelling 4,237,305 4,119,674 Commission 50,742,619 40,154,125 Claim Paid on Export Sales 6,367,687 10,510,929 Others 131,736 3,173,586

61,479,347 57,958,31425) Earning in Foreign Exchange

(On accrual basis) FOB Value of Exports 4,552,863,870 3,670,968,072 Commission - 2,821,512

4,552,863,870 3,673,789,58426) Previous year’s figures have been regrouped / recasted wherever necessary to conform to current year’s classification

On behalf of the BoardMukund Choudhary Managing DirectorKapil Choudhary Deputy Managing DirectorAmrit Agrawal Director - FinanceVivek Kumar Company Secretary


41


AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS

TO THE BOARD OF DIRECTORS


1. We have audited the attached consolidated Balance Sheet of Spentex Industries Limited (‘the Company’) and its subsidiaries(‘the Group’) as at March 31, 2008, the consolidated Profit and Loss Account and the consolidated Cash Flow Statementfor the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’smanagement. 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 requirethat we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements. An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

3. We did not audit the financial statements of subsidiary companies, namely Amit Spinning Industries Limited, SchoellerLitvinov, k.s., Spentex (Cyprus) Pvt. Limited and Spentex (Mauritius) Pvt. Limited, whose financial statements reflect totalassets of Rs. 4,494,800,366 as at March 31, 2008 and total revenues of Rs. 2,958,732,020 for the year/period then ended.These financial statements have been audited by other auditors, whose reports have been furnished to us, and ouropinion, insofar as it relates to the amounts included in respect of these subsidiaries, is based solely on the report of theother auditors.

4 As mentioned in Note 14 of Schedule XXI, Sales Tax Exemption for Butibori unit of the Company had expired onDecember 31, 2005. The unit has applied for an extension of 3 years with effect from January 1, 2006 to the DevelopmentCommissioner (Industries), Government of Maharashtra. Further, in case the unit fails to get the exemption fromauthorities, an amount of Rs. 91,516,363 (including interest) will be payable, which has not been provided in the books.Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs. 54,283,498 for the periodJanuary 1, 2006 to March 31, 2008 on the basis that the Sales Tax Exemption will be extended for a further period of 3years with effect from January 1, 2006. The management is hopeful of recovery of this amount. The total loss in the eventsuch extension is not given to the Company, will be Rs.91,516,363 (including Rs 62,692,895 in respect of earlierperiods).

Accordingly loss for the year is lower by the said amount with consequent impact on the net assets for the year.

5 We report that the consolidated financial statements have been prepared by the Company’s management in accordancewith the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute ofChartered Accountants of India.

6 Subject paragraph 4 above, on the basis of the information and explanations given to us and on consideration of theseparate audit reports on individual audited financial statements of Spentex Industries Limited and its aforesaid subsidiaries,in our opinion, the consolidated financial statements give a true and fair view in conformity with the accounting principlesgenerally accepted in India:

(a) in the case of the consolidated balance sheet, of the consolidated state of affairs of the Group as at March 31, 2008;

(b) in the case of the consolidated profit and loss account, of the consolidated results of operations of the Group for theyear then ended on that date; and

(c) in the case of the consolidated cash flow statement, of the consolidated cash flows of the Group for the year thenended on that date.

Kaushik DuttaPartner

(Membership Number: F-088540)

For and on behalf ofPlace : New Delhi Price WaterhouseDate : June 30, 2008 Chartered Accountants


42

CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2008

Schedule 31-03-2008 31-03-2007Rupees Rupees

SOURCES OF FUNDSShareholders’ FundsCapital I 714,720,350 711,970,350Preference Share Application Money Pending Allotment 601,800,000 651,750,000(Refer Note 8 on Schedule XXI)Share Warrants (Refer Note 12 on Schedule XXI) - 1,004,850Reserves and Surplus II 1,688,823,658 1,352,064,328

3,005,344,008 2,716,789,528

Minority Interest 70,153,279 88,891,615

Loan FundsSecured Loans III 8,214,275,121 6,007,958,554Unsecured Loans IV 2,171,699,621 3,093,009,651Deferred Tax Liabilities (Net) (Refer Note 26 on Schedule XXI) - 24,992,320

13,461,472,029 11,931,641,668APPLICATION OF FUNDS

Fixed AssetsGross Block V 15,908,314,206 11,734,522,404Less: Depreciation 6,470,535,710 3,095,295,564Net Block 9,437,778,496 8,639,226,840Capital Work-in-Progress and Capital Advances 478,208,682 103,157,622

9,915,987,178 8,742,384,462Investments VI 4,719,992 4,719,992Deferred Tax Asset 82,875,466 -(Refer Note 26 on Schedule XXI)

Current Assets, Loans & AdvancesInventories VII 2,873,857,015 1,840,307,161Sundry Debtors VIII 1,335,675,549 903,792,892Cash and Bank Balances IX 122,286,951 228,633,205Other Current Assets X 1,282,008,499 543,606,787Loans and Advances XI 611,445,199 884,216,355

6,225,273,213 4,400,556,400Less: Current liabilities and ProvisionsLiabilities XII 2,672,599,409 1,137,716,580Provisions XIII 120,819,325 78,302,606

Net Current Assets 3,431,854,479 3,184,537,214Profit and Loss Account (Dr.) 26,034,914 -

13,461,472,029 11,931,641,668Statement on Significant Accounting Policies XXNotes to Accounts XXI

The Schedules referred to above form an integral part of the Balance Sheet

This is the Balance Sheet referred to in ourReport of even date On behalf of the Board



43


CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008

Schedule 2007-2008 2006-2007Rupees Rupees

INCOMESales* (Refer Note 7 on Schedule XX) 13,406,521,084 9,038,314,047Less: Excise Duty (33,382,034) (32,635,000)Net Sales 13,373,139,050 9,005,679,047* Includes duty drawback on exports Rs. 248,399,923/-(Previous Year Rs. 30,652,081/-)

Other Income XIV 917,768,105 523,435,20614,290,907,155 9,529,114,253

EXPENDITURERaw Materials Consumed XV 8,153,462,560 4,942,609,682Cost of Traded Goods Sold 429,715,130 1,219,277,040Salaries, Wages & Benefits XVI 1,401,956,477 598,264,686Manufacturing and Other costs XVII 3,552,014,851 1,991,199,205Excise duty 5,357,973 2,778,000Depreciation / Amortisation V 745,532,756 540,349,423Financial Charges XVIII 932,868,308 497,354,518(Increase) / Decrease in Stocks XIX (596,405,678) (360,722,644)

14,624,502,377 9,431,109,910

Profit/ (Loss) before Prior Period Items and Tax (333,595,222) 98,004,343Prior Period Items (Refer Note 15 on Schedule XXI) 12,890,157 (7,097,865)Profit/ (Loss) before Tax (346,485,379) 105,102,208

Tax Expense (Refer Note 12 on Schedule XX)Current Tax 162,336 6,969,781Deferred Tax (net) (Refer Note 26 on Schedule XXI) (115,198,204) (47,671,655)Fringe Benefit Tax 4,725,570 4,135,921

(110,310,298) (36,565,953)Profit / (Loss) afterTax but before Minority Interest (236,175,081) 141,668,161Minority Interest (18,738,336) 15,825,162Profit / (Loss) afte Tax and Minority Interest (217,436,745) 125,842,999

AppropriationDebenture Redemption Reserve - 41,989,626

(217,436,745) 83,853,373

Profit brought forward from Previous Year 181,504,079 97,650,706 (35,932,666) 181,504,079

Loss on foreign currency translation on restatement of Profitbrought forward (31,022,951) -

(66,955,617) 181,504,079Balance transferred from General Reserve 40,920,703 -Balance carried forward to Balance Sheet (26,034,914) 181,504,079

Basic Earnings per Share (Face Value Rs. 10 each) (3.04) 1.86Diluted Earning per Share (Face Value Rs. 10 each ) (3.04) 1.85(Refer Note 27 on Schedule XXI) (41.

Statement on Significant Accounting Policies XXNotes to Accounts XXIThe Schedules referred to above form an integral part of the Profit & Loss Account

This is the Profit and Loss Account referred to in ourReport of even date On behalf of the Board




44

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2008Year ended Year ended

31st March, 2008 31st March, 2007Rs. Rs.

Profit / (Loss) before Tax (346,485,379) 105,102,208Add:Depreciation / Amortisation 745,532,756 540,349,423(Profit) / Loss on Sale of Fixed Asset (Net) (16,957,173) 326,146Provision for Doubtful Debts 17,193,165 321,000Provision for Wealth Tax 4,715 20,260Loss on assets held for disposal 45,023,575 -Inventory Written off 17,385,010 -Unrealised Exchange Fluctuation (net) (237,333,634) (30,575,549)Bad Debts and Advances Written off 32,642,978 1,291,034Liabilities no longer required written back (74,804,282) (29,179,485)Provision for Leave Encashment 14,812,599 3,888,204Non Compete fees amortised 1,100,000 -Provision for Gratuity 1,822,938 8,396,771Prior period items 12,890,157 (7,097,865)Dividend Income (4,064) (2,940)Interest Income (30,342,153) (38,426,563)Financial Charge 932,868,308 497,354,518Operating Profit Before Working Capital Changes 1,125,349,516 1,051,767,162Adjustments for changes in working capital :- (INCREASE)/DECREASE in Sundry Debtors (456,265,059) (391,852,284) - (INCREASE)/DECREASE in Other Receivables (262,494,092) (651,526,775) - (INCREASE)/DECREASE in Inventories (1,050,934,863) (1,018,501,509) - INCREASE/(DECREASE) in Trade and Other Payables 1,574,290,848 604,885,830Prior period items (12,890,157) 7,097,865Direct Taxes Paid ( Net) (20,038,178) (30,905,325)A. Cash Flow From / (Used For) Operating Activities 897,018,015 (429,035,036)Purchase of Fixed Assets (1,622,820,960) (5,992,156,556)Acquisition of Assets of erstwhile Indo Rama Textiles Ltd ( IRTL) - (1,810,723,709)Sale proceeds of Fixed Assets 349,696,635 421,623,851Purchase of Investment - (4,545,521)Dividend Received 626,934 2,940Interest Received 8,576,275 35,831,319B. Cash Flow From / (Used For) Investing Activities (1,263,921,116) (7,349,967,676)Proceeds from Share Capital 2,750,000 86,105,501Share Application Money Pending Allotment - 651,750,000Share Premium (net) 6,293,650 423,899,671Proceeds from 9% Non-convertible Debentures - 500,000,000Repayment of Non-convertible Debentures (576,923,077) (38,461,538)Proceeds from Term Loans 2,405,100,000 5,854,958,475Repayment of Term Loans (1,436,873,582) (339,232,398)Proceeds from Working Capital Loans (net) 1,357,636,503 1,079,369,707Proceeds from Short Term Loans (net) 29,658,809 -Vehicle Loans (net) (5,047,305) 4,618,116Repayment of Deferred Payment (633,531,200) -Proceed From Government Grant 46,779,735 -Repayment of Short term advances (7,677,379) (104,275,783)Interest Paid (920,632,683) (503,505,327)Dividend paid - (694,000)C. Cash Flow From / (Used For) Financing Activities 267,533,471 7,614,532,424Increase/(Decrease) in Cash Equivalents {A+B+C} (99,369,630) (164,470,288)Cash and Cash Equivalents at the Beginning of the Year 228,633,205 384,786,493Exchange difference on translation of foreign currency cash and cash equivalents (6,976,624) -Add: Cash and Cash Equivalents on Amalgamation of erstwhile IRTL with the Company - 8,317,000Cash and Cash Equivalents at the End of the Year 122,286,951 228,633,205Increase / (Decrease) in Cash/Cash Equivalents (99,369,630) (164,470,288)Notes :-Cash and cash equivalents compriseCash and Cheques in hand 4,153,361 13,685,062In Current Accounts 84,547,051 21,926,920In Fixed Deposit Accounts 725,000 775,000In Margin Money Account s @ 6,321,594 15,999,552In Balance with Other Banks 25,233,182 174,204,671In unpaid interest on debenture accounts @ - 723,000In unpaid dividend accounts @ 1,306,763 1,319,000

122,286,951 228,633,205

# 1 The above Cash flow statement has been prepared under the Indirect method set out in Accounting Standard 3 notified u/s 211(3C) of The Companies Act, 1956.# 2 Figures in brackets indicate cash outgo.#3 @ Includes Margin Money Account, Unpaid Debenture Interest Account and Unpaid Dividend Accounts aggregating Rs. 33,490,454 which are not available for use by the Company.

(Refer Schedule IX in the accounts)Statement on Significant Accounting Policies XXNotes to AccountsThe Schedules referred to above form an integral part of the Cash Flow Statement XXIThis is the Cash Flow Statement referred to in our Report of even date.

On behalf of the BoardKaushik Dutta Mukund Choudhary Managing DirectorPartner Kapil Choudhary Deputy Managing Director(Membership No : F 088540) Amrit Agrawal Director - FinanceFor and on behalf of Vivek KumarCompany SecretaryPrice WaterhouseChartered Accountants

Place : New DelhiDate :June 30, 2008

45


CONSOLIDATED SCHEDULES FORMING PART OF THE ACCOUNTS 31-03-2008 31-03-2007

Rupees RupeesSCHEDULE I : CAPITAL(Refer Note 9 on Schedule XX & Note 12 on Schedule XXI)

Authorised114,000,000 Equity Shares of Rs 10 each 1,140,000,000 1,140,000,000

{Previous Year 114,000,000 Equity Shares of Rs. 10 each}7,000,000 Redeemable Preference Shares of Rs. 10 each 70,000,000 70,000,000

1,210,000,000 1,210,000,000Issued, Subscribed and Paid up71,197,035 Equity Shares of Rs. 10 each, fully paid up

(Previous Year 71,197,035 nos.) 711,970,350 711,970,350Add:

275,000 Equity Shares of Rs. 10 each issued on account 2,750,000 - of conversion of Share Warrants

714,720,350 711,970,350

SCHEDULE II : RESERVES AND SURPLUS(Refer Note 9 on Schedule XX)Capital Reserve : a) Capital Reserve (Refer Note 1b) On Schedule XXI) At commencement of the year 138,231,706 Add: Acquired consequent to acquisition of subsidiaries 651,265,354 789,497,060 138,231,706b) Share Forfeiture Reserve 7,179,250 7,179,250c) Profit on Restructure 2,358,587 2,358,587

799,034,897 147,769,543Government Grant:(Refer Note 2 on Schedule XXI)

At commencement of the year -Add: Received during the year 76,187,295Less: Transferred to Profit and Loss Account (29,407,559) 46,779,736 -

Securities Premium Account :At Commencement of the year 938,965,322Add: Premium received on conversion of Share Warrants 7,298,500(Refer Note 12 on Schedule XXI)Less : Exchange fluctuation on restatement of opening balance (39,951,462) 906,312,360 938,965,322

General Reserve :At Commencement of the year 48,281,060Less : Amounts transferred on implementation of Accounting (7,360,357)Standard-15 (Revised) - Employee Benefits (Net of deferred taxes)(Refer Note 22 on Schedule XXI)Transferred to Profit & Loss Account (40,920,703) - 48,281,060

Profit & Loss Account - 181,504,079Debenture Redemption Reserve:

At Commencement of the year 41,989,627Add: Transferred during the year - 41,989,627 41,989,627

Foreign Currency Translation ReserveAt Commencement of the year (6,445,303)Add: Transferred during the year (98,847,659) (105,292,962) (6,445,303)

1,688,823,658 1,352,064,328SCHEDULE III :SECURED LOANSDebentures (Refer Notes 1 and 4(a) below)

9% Redeemable Non-convertible Debentures 384,615,385 461,538,462500 Mibor-Linked Redeemable Non-convertible Debentures ofRs 1,000,000 each (to the extent secured) - 201,853

Loans from Banks (Refer Notes 2 and 4(b) below)a) Long Term

Rupee Term Loans 3,122,812,353 3,406,881,813Foreign Currency Loan 1,878,501,850 666,547,000

b) Short TermCash Credit Facilities 1,600,198,616 962,705,105Export Packing Credit Facilities 1,032,510,697 499,299,584Interest Accrued and Due on above 650,000 1,430,111Others 187,711,990 -

Other loans (Refer Notes 3 and 4(c) below)Vehicle Loans 7,274,230 9,354,626

8,214,275,121 6,007,958,554


46

Notes :

1. Debentures

9% Redeemable Non-Convertible Debentures issued to Axis Bank Ltd. are secured by first charge on Plot No. A-60, OkhlaIndustrial Area, New Delhi 110020, together with all Building and structures thereon and all plant and machinery both presentand future on pari passu basis and second charge on whole of the movable fixed assets ralating or pertaining to themortgaged properties on pari passu basis. These debentures are redeemable at par in 26 equal quarteriy installmentscommencing from December 31, 2006.

2. Loans From Banks

i) Rupee Term Loans from Banks, other than mentioned in note no. (ii) below, are secured by first pari-passu charge onall the fixed assets of the Company , both present and future. These loans are further secured by second pari passucharge on entire current assets and personal guarantee of the promoters.

ii) Sub-debt from ICICI Bank of Rs. 500,000,000 is secured by third charge on all the movable and immovable assets of theCompany and personal guarantee of the promoters and Corporate Loan from State Bank of Indore is secured by firstpari passu charge on the current assets and second pari passu charge on all the fixed assets of the Company, bothpresent and future.

iii) Foreign Currency Term Loan from State Bank of India is secured by first pari-passu charge on all the fixed assets ofthe Company , both present and future. These loans are further secured by second pari passu charge on entirecurrent assets and personal guarantee of the promoters.

iv) Foreign Currency Term Loan from Lehman Brothers Commercial Corporation Asia Limited is secured by pledge ofInterest Reserve Bank Account maintained with Deutsche Bank AG, Amsterdam, assignment of Schoeller TextileNetherlands B.V. (STNBV) credit agreement with the Spentex Netherlands B.V.(SNBV), pledge of 180 nos. of STNBV’sshares and assignment of Intergroup credit agreement (between SNBV and Spentex Tashkent Toytepa LLC). The loanis furher secured by fixed assets of Spentex Tashkent Toytepa LLC (Uzbek plant).

v) Short Term-Others

Secured by pledge of all assets of Schoeller Litvinov k.s.

vi) Cash Credit and Export Packing Credit facilities from Banks are secured by first pari-passu charge on all the currentassets of the Company , both present and future. These loans are further secured by second pari passu charge onentire fixed assets and personal guarantees of the promoters.

3. Other loans

Vehicle loans are secured by hypothecation of Motor cars.

4. Repayment Terms

a) Debentures aggregating to Rs. 76,923,077 (Previous Year Rs 77,124,930) are repayable within one year

b) Term Loans aggregating to Rs. 673,444,635 (Previous Year Rs. 566,010,343) are repayable within one year.

c) Vehicle Loans aggregating to Rs. 4,444,271 (Previous year Rs. 4,212,869) are repayable within one year.

31-03-2008 31-03-2007 Rupees Rupees

SCHEDULE IV : UNSECURED LOANS

Short-term loansFrom Others (Refer Note 1 below) 47,492,621 9,848,304500 Mibor-Linked Redeemable Non-convertible Debentures ofRs 1,000,000 each (to the extent unsecured) - 499,798,147Deferred Purchase Payments (Refer Note 14 on Schedule XXI and Note 2 below) 2,124,207,000 2,583,363,20

2,171,699,621 3,093,009,651

1) Repayable on demand.

2) Deferred Payment Liability aggregating to Rs. 487,458,000 (Previous year Rs. 527,917,500) are repayable within one year.

47


Notes : # Taken over consequent to acquisition of Schoeller Litvinov k.s. , a subsidiary@ Deletions/Adjustments to fixed assets under Gross Block and Depreciation/Amortisation include Rs. 297,135,802 (Previous Year Nil) and Rs.12,103,752 (Previous Year Nil) respectively, on account of restatement at the closing exchange rate.

31-03-2008 31-03-2007 Rupees Rupees

SCHEDULE VI : INVESTMENTS(Refer Note 8 on Schedule XX and Note 9 on Schedule XXI)

Nos. ValueI) Non Trade - Quoted

In Fully Paid-up equity shares of Rs. 10/- each :Ceat Limited 100 5,724 5,724 5,724CFL Capital Financial Services Limited 100 1,985 1,985 1,985CESC Limited 100 5,553 5,553 5,553Harrisons Malayalam Limited 100 3,744 3,744 3,744KEC International Limited 100 6,909 6,909 6,909Phillips Carbon Black Limited 100 5,653 5,653 5,653RPG Cables Limited 170 5,382 5,382 5,382RPG Transmission Limited 100 7,261 7,261 7,261RPG Life Sciences Limited 100 8,065 8,065 8,065Spencer & Co. Limited 200 7,563 7,563 7,563Saregama India Limited 100 1,322 1,322 1,322

59,161 59,161

Aggregate Market Value of Quoted InvestmentsRs. 209,387 (Previous Year Rs. 187,350/-)

SCHEDULE V - FIXED ASSETS (Refer Notes 3, 4, 5, 9, 11, 13 & 14 on Schedule XX and Notes 11, 13, 14,19 & 23 on Schedule XXI)

(Amount in Rs.)


48

31-03-2008 31-03-2007Rupees Rupees

II) Non Trade - Unquoted (At Cost)The Baramati Co-operative Bank Limited 1,300 26,000 26,000 26,000(Face value Rs. 20/- each, fully paid up)The Sadguru Jangli Maharaj Co-operative Bank Ltd. 1,000 50,000 50,000 50,000(Face value Rs. 50/- each, fully paid up)Shamrao Vithal Co-op Bank Ltd 250 2,500 2,500 2,500(Face Value Rs. 10/- each ,fully paid up)United Yarn 1 31 31 31(Face Value Rs. 31/- each ,fully paid up)Share of Lotus House Prem. Co-Op Hsg. Soc. 1,500 1,500 1,500 1,500Datta Nagari Patsanstha 500 5,000 5,000 5,000(Face Value Rs. 10/- each ,fully paid up)Saraswat Co-op bank Ltd. 1,420 10 14,200 14,200(Face Value Rs. 10/- each ,fully paid up)Myantrade Corporation Pte. Ltd. 4,522,290 4,522,290National Saving Certificates 39,310 19,310Add: Additions consequent to amalgamation - 20,000(Pledged with sales Tax Authorities)

4,660,831 4,660,8314,719,992 4,719,992

SCHEDULE VII : INVENTORIES(Refer Note 6 on Schedule XX)

Stores, Spares & Packing Materials 447,982,656 56,466,037(including stock in transit Rs. 4,674,525/-, Previous YearRs. 354,000/-.)Raw Materials 803,585,651 1,268,477,046(including stock in transit Rs. 117,644,050/- Previous YearRs. 12,954,000/-)Work-in-process 267,823,693 125,168,930Finished goodsManufactured 1,255,145,445 347,852,962(including stock in transit Rs. 32,054,630 /- Previous YearRs. 39,046,983/- )Traded 93,790,399 1,348,935,844 35,774,494 383,627,456 Waste 5,529,171 6,567,692

2,873,857,015 1,840,307,161

SCHEDULE VIII : SUNDRY DEBTORSUnsecuredOutstanding for a period over six monthsConsidered Good 79,484,063 25,931,385Considered Doubtful 90,146,782 35,505,444

169,630,845 61,436,829Other DebtsConsidered Good 1,256,191,486 877,861,507Considered Doubtful 23,442,898 -

1,449,265,229 939,298,336Less : Provision for doubtful debts 113,589,680 35,505,444

1,335,675,549 903,792,892SCHEDULE IX : CASH & BANK BALANCESCash balance on hand (Includes Cash in Transit Rs. NIL ,Previous Year Rs 548,681/-) 4,153,361 13,685,062Balances with Scheduled Banks :In Current Accounts 28,839,714 21,926,920In Fixed Deposit Accounts 725,000 775,000In Margin Money Accounts * # 6,321,594 15,999,552In unpaid interest on debenture accounts - 723,000In unpaid dividend accounts 1,306,763 1,319,000Balances with other Banks:In Current Accounts 55,803,422 174,204,671In Fixed Deposit Accounts 9,780,349 -In Margin Money Accounts * 15,356,748 -

122,286,951 228,633,205* Having a lien by Banks# Includes receipts pledged with Sales Tax authorities

49


31-03-2008 31-03-2007Rupees Rupees

SCHEDULE X : OTHER CURRENT ASSETS(Refer Note 13 on Schedule XXI)Interest accrued on deposit and others 1,418,514 3,082,131Claims and other receivables 976,564,049 439,788,396Deposits 67,975,583 100,398,260Fixed assets held for sale ( at net book value or estimated net realisable value,whichever is lower ) 236,050,353 338,000

1,282,008,499 543,606,787SCHEDULE XI : LOANS AND ADVANCESUnsecuredAmounts recoverable in cash or in kind or for value to be receivedConsidered good 485,250,828 524,254,299Considered doubtful 9,919,253 10,224,000

495,170,081 534,478,299Less : Provision for Doubtful Advances 9,919,253 10,224,000

485,250,828 524,254,299Balance with Customs , Excise, Govt Authorities, etc. 38,489,651 93,608,498Advance Income Tax/Tax Deducted at Source 87,704,720 266,353,558(includes advance fringe benefit tax Rs. 8,084,211/-, Previous Year Rs. 3,436,820/-)

611,445,199 884,216,355

SCHEDULE XII : CURRENT LIABILITIES(Refer Note 10 on Schedule XXI)Sundry Creditorstotal outstanding dues of micro enterprises and small enterprises and* - -total outstanding dues of creditors other than micro enterprises and small enterprises 2,344,084,752 919,645,328Unamortised premium on swap contracts - 960,000Unpaid Dividend ** 1,306,763 1,319,000Unpaid Debenture Interest - 723,000Other Liabilities 297,911,367 194,483,979Interest accrued but not due on loans and debentures 29,296,527 20,585,273

2,672,599,409 1,137,716,580* As certified by the Management based on available information** Not due to be credited to Investor Education and Protection Fund

SCHEDULE XIII: PROVISIONS(Refer Notes 10 and 12 on Schedule XX)For Taxation (including fringe benefit tax Rs. 8,477,628/-, 26,667,292 21,941,191Previous Year Rs. 3,751,527/-)For Wealth Tax 60,435 55,720For Leave Encashment 39,626,535 15,982,790For Gratuity 54,465,063 40,322,905

120,819,325 78,302,606

2007-2008 2006-2007Rupees Rupees

SCHEDULE XIV : OTHER INCOMEDividend from long term investments 4,064 2,940Commission (gross) 19,664,920 37,869,954(Tax Deducted at Source Rs. 2,298,973/- , Previous Year Rs. 1,030,696/- )Interest on deposits (gross) 30,342,153 38,426,563(Tax Deducted at Source Rs. 12,595,546/- , Previous Year Rs. 15,357,178/- )Conversion Charges (gross) 181,541,263 119,556,856(Tax Deducted at Source Rs. 3,757,442 /- , Previous Year Rs. 1,308,595/-)Liabilities no longer required written back 74,804,282 29,179,485Profit on Sale of Fixed Assets (net) 16,957,173 -Income from Forward and Swap Contracts 56,939,450 24,296,375Export Incentives 123,211,254 143,067,760Foreign Exchange Fluctuation Gain (net) 291,075,513 39,529,019Miscellaneous Income 123,228,033 91,506,254

917,768,105 523,435,206


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SCHEDULE XVI : SALARY, WAGES AND BENEFITS(Refer Notes 22 & 25 on Schedule XXI)Salaries, Wages and Bonus 1,094,419,423 511,353,588Contributions to Provident and Other Funds 258,984,465 55,524,807Employees Welfare Expenses 48,552,589 31,386,291

1,401,956,477 598,264,686SCHEDULE XVII : MANUFACTURING AND OTHER COSTS(Refer Note 24 on Schedule XXI)Stores, Spares and Packing Materials Consumed (net) 547,883,607 320,707,997Sub-contracting Charges 24,886,581 82,469,813Power, Fuel & Water 1,303,394,657 820,228,008Rent 8,059,326 8,587,561Rates & Taxes 161,860,176 9,357,221

Repairs & Maintenance :Plant & Machinery 176,840,356 12,424,700

Building 5,584,296 5,545,056Others 11,731,659 9,927,671

194,156,311 27,897,427Insurance 90,782,323 23,948,777Communication Expenses 23,772,744 11,621,572Traveling and Conveyance 93,282,800 23,450,108Legal and Professional charges 76,655,909 27,749,967Commission 82,719,874 68,231,618Freight Outward and Clearing Charges (net of recoveries) 604,144,525 230,637,880Loss on Sale of Fixed Assets (net) - 326,146Loss on assets held for disposal 45,023,575Loss on sale of raw materials 12,978,593 -Inventory Written off 17,385,010 -Donation and Contribution (other than to political parties) 3,857,220 65,000Provision for Doubtful Debts 17,193,165 321,000Bad debts and Advances written off 32,642,978 1,291,034Sitting Fees 408,000 551,000Cost of outsourcing activities - 12,568,000Selling and Other Expenses 90,871,169 107,009,594Miscellaneous Expenditure written off - 629,046Miscellaneous Expenses 120,056,308 213,550,436

3,552,014,851 1,991,199,205SCHEDULE XVIII: FINANCIAL CHARGES(Refer Note 11 on Schedule XX)Interest - Non Convertible Debentures 52,542,830 73,004,605Interest- Fixed Loans 447,064,125 220,006,582- Others 320,777,027 173,521,889Bank Charges 112,484,326 30,821,442

932,868,308 497,354,518

2007-2008 2006-2007Rupees Rupees

SCHEDULE XV : RAW MATERIALS CONSUMED

Opening Stock 1,268,477,046 536,569,713Additions consequent to acquisition/amalgamation 153,800,070 199,349,000

1,422,277,116 735,918,713Add : Purchases 7,534,771,095 5,475,168,015Less : Closing Stock 803,585,651 1,268,477,046Raw Materials Consumed 8,153,462,560 4,942,609,682

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2007-2008 2006-2007Rupees Rupees

SCHEDULE XIX : (INCREASE) / DECREASE IN STOCKSOpening Stock :Finished goods 347,852,962 13,153,894Work in process 125,168,930 16,421,322Waste 6,567,692 14,846,837

479,589,584 44,422,053Additions consequent to acquisition / amalgamation of a subsidiaryFinished goods 314,853,947 25,928,946Work in process 85,512,961 46,523,580Waste - 595,929

879,956,492 117,470,508Closing Stock :Finished goods 1,255,145,445 347,852,962Work in process 267,823,693 125,168,930Waste 5,529,171 6,567,692

1,528,498,309 479,589,584Sub Total (648,541,817) (362,119,076)Less: Transfer to Trial Production Expenses (included in 52,136,139 1,396,432Capital Work-in-progress)(Increase) / Decrease in Stocks (596,405,678) (360,722,644)

SCHEDULE XX : SIGNIFICANT ACCOUNTING POLICIES

1. Basis for preparation of consolidated financial statements:The consolidated financial statements of the Group have been prepared and presented under the historical cost conventionon the accrual basis of accounting in accordance with the accounting principles generally accepted in India and complywith the applicable accounting standards notified u/s 211(3C) of the Companies Act, 1956.The financial statements of the Parent Company and the subsidiaries have been combined on a line-by-line basis by addingtogether the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances /transactions as per Accounting Standard 21 on Consolidated Financial Statements.

2. Use of EstimatesThe preparation of the financial statements in conformity with Indian GAAP requires the management to make estimates andassumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets andliabilities as at the date of the financial statements and reported amounts of income and expenses during the period.Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefitplans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets.

3. Fixed AssetsFixed Assets are stated at their original cost including freight, duties (net of MODVAT/CENVAT), taxes and other incidentalexpenses relating to acquisition and installation.Expenditure incurred during the period of construction are carried forward as capital work-in-progress and on completion,the costs are allocated to the respective fixed assets.

4. Depreciation / AmortizationDepreciation for all fixed assets situated at manufacturing locations is provided on the straight line method on a pro-ratabasis at the rates determined on the basis of useful lives of the respective assets. Management estimates the useful livesfor the various fixed assets situated at manufacturing locations as follows

Description – Manufacturing locations Useful lives (in years)Factory Building 17-29

Building (Other than factory building) 58

Plant and Machinery 2-18

Office Equipments 10-20

Computers 1-6

Furniture and Fixtures 2-15

Vehicles 10-12


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The rates derived from the above useful lives are higher than the minimum rates specified in Schedule XIV to theCompanies Act, 1956 (‘Act’).Depreciation for all fixed assets at locations other than at manufacturing locations is provided on the written down valuemethod at the rates specified in Schedule XIV to the Act.Leasehold land is amortized over the lease period on a straight line basis.Capitalised enterprise resource planning software (SAP) is amortised over a period of five years on straight line basis.Acquired goodwill is amortized using the straight-line method over a period of 10 years.

5. Goodwill on Consolidation is stated at cost and where applicable,impairment is recognized.6. Inventories

Inventories have been valued at lower of cost and net realizable value.The cost in respect of raw materials is determined:

i) under the Specific identification of cost method for the Cotton Divisions in India and weighted average method forCotton Divisions outside India.

ii) using the weighted average method for the Synthetic Divisions.In respect of above, it includes customs duty, wherever paid, and are net of credit under MODVAT/CENVAT scheme,wherever applicable.The cost in respect of work-in-progress, finished goods and stores and spares is determined using the weighted averagecost method and includes direct materials and labour and a proportion of manufacturing overheads based on normaloperating capacity, where applicable.Waste is valued at estimated net realizable value.

7. Revenue recognitionSale of goods : Revenue on sale of goods is recognized on transfer of significant risk and rewards of ownership to thebuyer and on reasonable certainty of the ultimate collection. Sales are net of excise duty, trade discounts and sales returns.Interest: Income is recognised on a time proportion basis taking into account the amount outstanding and the applicable rates.Commission and Insurance claim: Income is recognized when no significant uncertainty as to measurability orrecoverability exists.

8. InvestmentsInvestments that are readily realisable and intended to be held for not more than a year are classified as currentinvestments. All other investments are classified as long-term investments. Current investments are carried at lower ofcost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However,provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

9. Foreign currency transactionsTransactions in foreign currency are accounted for at the exchange rates prevailing on the date of transaction. Allmonetary items denominated in foreign currency are translated at year end rates. Exchange differences arising on suchtransactions and also exchange differences arising on the settlement of such transactions are adjusted in the Profit andLoss Account.In case of forward contracts, the premium or discount on all such contracts arising at the inception of each contract isrecognised / amortised as income or expense over the life of the contract. Any profit or loss arising on the cancellation orrenewal of such contracts is recognized as income or expense for the period.In respect of foreign branch, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at theexchange rate prevailing on the date of the transaction. Monetary assets and liabilities are restated at the year end ratesand resultant gains or losses are recognised in the Profit and Loss Account.In respect of foreign operations identified as non-integral to the operations of the Company, the translation of functionalcurrency into reporting currency is performed for balance sheet accounts using the exchange rates in effect at thebalance sheet date and for revenue and expense accounts using an appropriate weighted average exchange rate. Thegain or loss resulting from such translations is accumulated in a foreign currency translation reserve.Contingent liabilities are translated at the closing rate.

10. Employee benefitsThe Company’s contributions to recognised Provident Funds are charged to revenue on an accrual basis.The Company has Defined Benefit plans namely Leave Encashment and Gratuity for all employees, the liability for whichis determined on the basis of an actuarial valuation at the end of the year. Gratuity Fund (for other than Synthetic division)is administered through Life Insurance Corporation of India. Short term compensated absences are recognised at theundiscounted amount of benefit for services rendered during the year.Termination benefits are recognised as an expense immediately. Actuarial gains and losses comprise experience adjustmentsand the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account asincome or expense.In the year of transition (i.e. 2007-08), the difference between transitional liability and the liability that would have beenrecognized at the beginning of the transitional year under the Company’s previous accounting policy has been adjusted againstthe opening revenue reserves of that year in accordance with Accounting Standard 15 (revised 2005) ‘Employee Benefits’.In case of a foreign subsidiary in Uzbekistan, pension arrangements are as per the State Pension scheme of the Republicof Uzbekistan, which requires contributions by the employer calculated as a percentage of current gross salaries. Thesubsidiary’s State Pension scheme contribution amounts to 24 percent of employees’ gross salaries and 0.7 percent ofturnover, and is expensed as incurred.

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11. Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset arecapitalised as a part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in whichthey are incurred.

12. TaxationTax expense for the year, comprising current tax, deferred tax and fringe benefit tax is included in determining the netprofit/(loss) for the year.A provision is made for the current tax and fringe benefit tax based on tax liability computed in accordance with relevanttax rates and tax laws. Deferred tax assets are recognised for all deductible timing differences and carried forward to theextent it is reasonably / virtually certain that future taxable profit will be available against which such deferred tax assetscan be realised.Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by theBalance Sheet date.

13. LeasesAssets acquired under long term finance lease are capitalised and depreciated in accordance with Company’s policy forassets situated at manufacturing and other locations. The associated obligations are included in other loans under“Secured Loans”.

14. Impairment of AssetsAt each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If suchindication exists, the Company estimates the recoverable amount and where carrying amount of the asset exceeds suchrecoverable amount, an impairment loss is recognised in the profit and loss account to the extent the carrying amountexceeds recoverable amount. Where there is any indication that an impairment loss recognised for an asset in prioraccounting periods may no longer exist or may have decreased, the Company books a reversal of the impairment loss notexceeding the carrying amount that would have been determined (net of amortisation or depreciation) had no impairmentloss been recognised for the asset in prior accounting periods.

SCHEDULE XXIConsolidated Notes to Accounts1. GROUP COMPANIESa) The Consolidated Financial Statements have been prepared in accordance with Accounting Standard 21 (AS 21) -

“Consolidated Financial Statements” notified under section 211(3C) of the Companies Act, 1956.The Financial Statements of the following subsidiaries, drawn upto March 31, 2008, alongwith Spentex Industries Limited,the Parent, constitutes the Group, considered in preparation of the consolidated Financial Statements:-

Name of Company Relationship Country of Percentage of Percentage ofIncorporation ownership ownership

interest as on interest as onMarch 31, 2008 March 31, 2007

Spentex (Netherlands), B.V.(100 % held by the Company and its nominees) Subsidiary Netherlands 100.00% 100.00%Spentex Tashkent Toytepa LLC (STTL) Subsidiary Uzbekistan 100.00% 100.00%(99.18% of Spentex (Netherlands), B.V. and 0.82% ofSpentex Industries Limited)Spentex (Singapore) Pte Ltd. Subsidiary Singapore 100.00% 100.00%(a 100% subsidiary of Spentex (Netherlands), B.V.)Spentex (Mauritius) Pvt. LTD. Subsidiary Mauritius 100.00% 100.00%(a 100% subsidiary of the Company.)Spentex (Cyprus) Pvt. LTD. Subsidiary Cyprus 100.00% 100.00%(a 100% subsidiary of Spentex Mauritius Pvt. Ltd.)Schoeller Textile (Netherland), B.V Subsidiary Netherlands 100.00% 0.00%(a 100% subsidiary of Spentex (Netherlands), B.V.)Schoeller Litvinov k.s. #(25 % with Schoeller Textile (Netherlands), B.V. Subsidiary Czech 100.00% 0.00%(limited partnership) and 75% withSchoeller Textil, GmbH & Co. KG (unlimited partnership))Schoeller Textil GmbH & Co. KG Subsidiary Germany 100.00% 0.00%(100 % limited partnership Interest of Schoeller Textile(Netherlands), B.V. and unlimited partnership interest ofSchoeller Textiles Verwaltungs, GmbH)Schoeller Textil Verwaltungs GmbH(a 100% subsidiary of Schoeller Textile (Netherlands) B.V) Subsidiary Germany 100.00% 0.00%Amit Spinning Industries Limited (ASIL) Subsidiary India 50.96% 50.96%

# The Company has acquired Schoeller Litvinov, k.s. along with its assets and liabilities as on June 30, 2007.


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b) Capital Reserve

During the year, Schoeller Textile (Netherlands), B.V. acquired Schoeller Litvinov k.s and its affiliates (namely SchoellerTextil GmbH & Co. KG and Schoeller Textil Verwaltungs GmbH) in Czech Republic and Germany respectively.

To give effect to the frame work agreement to acquire these entities, the following payments were made and ownershipstake acquired:

Particulars (Amount in Rs.)

Purchase Consideration (A) 792,218,888Less:Ownership stake acquired in Schoeller Litvinov, k.s. and affiliatesShare Capital – Schoeller Litvinov, k.s 732,210,043Reserves & Surplus - Schoeller Litvinov, k.s 100,288,325Repayment of Promoter Loans 609,397,816Share Capital – Schoeller Textil GmbH & Co. KG 6,327Share Capital – Schoeller Textil Verwaltungs GmbH 1,581,731Total (B) 1,443,484,242

Capital Reserve (B-A) 651,265,354

2. During the year, STTL, a subsidiary of the Company received Government grant in the form of exemption from import tax fortechnological equipment. Grants must be used to expand working capital and promote labour and modernisation andpromoting new products.STTL transferred Government grant to Profit and Loss Account to the extent of available on purchase of imported spareparts nventory and equipments i.e.UZS 952,909 thousand (equivalent to Rs.29,407,559)

3. Contingent Liabilities

Description This Year Previous Year

a) Demands from Income Tax Authorities under appeal 51,232,534 24,481,129

b) Demands from Sales Tax Authorities under appeal 4,641,627 17,065,085

c) Contingent liability on account of Value Added Tax - 4,698,524

d) Show cause notices/demands raised by Excise / Customs Department

(including applicable penalties), not acknowledged as debts 234,986,602 181,358,825

e) Show cause notices/demands raised by Madhya Pradesh Government /MPEB / MSEB, not acknowledged as debts 132,211,000 132,211,000

f) Claims against the Company not acknowledge as debts 13,298,670 4,607,000

g) Guarantees and Letters of credit issued on behalf of the Company,outstanding at the year end 1,498,095,927 157,857,938

h) Claims on account of Property Tax - 42,106,949

i) Bills Discounted with Banks on behalf of the Company, outstandingat the year end 1,078,532,683 985,206,725

j) Corporate Guarantee given to IREDA for Loan to M/s Himalayan CrestPower Limited 271,206,500 181,452,500

k) Corporate Guarantee given to AXIS Bank Ltd. and UCO Bank for Loan toM/s Amit Spinning Industries Limited 302,866,520 451,702,796

l) Corporate Guarantee given to ICICI Bank Singapore for loan to SpentexTashkent Toytepa LLC & Spentex ( Netherlands ) B.VCurrent year Nil, ( Previous year USD 8,800,000) Nil 382,448,000

m) Corporate Guarantee given to Tashkent Toytepa Textil for deferred paymentof purchase consideration on behalf of Spentex Tashkent Toytepa LLC.Current Year USD 45,745,589 (Previous Year USD 60,080,000) 1,835,313,031 2,611,076,800

n) Corporate Guarantee given to CVCI for investment in Spentex (Netherlands)B.V. Current Year USD 2,000,000, (Previous Year USD 2,000,000) 80,240,000 86,920,000

o) Corporate Guarantee given to Lehman Brothers and State Bank of India,Tokyo Branch for loan to Spentex (Netherlands) B.V.Current Year USD 61,351,707 (Previous Year Nil ) 2,461,430,494 Nil

(Amount in Rs.)

55


The amount shown in the items (a) to (h) represent the best possible estimates arrived at on the basis of availableinformation. The uncertainties and possible reimbursements are dependent on outcome of the different legal processeswhich have been invoked by the Company or the claimants as the case may be and therefore cannot be predictedaccurately. The Company engages reputed professional advisors to protect its interest and has been advised that it hasstrong legal positions against such disputes. The amount shown in items (i) to (o) represent guarantees given and billsdiscounted in the normal course of the Company’s operations and are not expected to result in any loss to the Company onthe basis of beneficiaries fulfilling their ordinary commercial obligations.

4 The Company has assumed liabilities for certain disputed cases in respect of excise duty amounting to Rs. 29,074,675(Previous Year Rs. 29,074,675) and certain other disputed cases amounting to Rs. 750,000 (Previous Year Rs. 750,000)under the terms of sale negotiated for purchase of assets from Bank of India at Ahmedabad. In the event that the outcomeof these cases are not in the favour of the Company, the amount would be adjusted with the carrying value of assets takenover from Bank of India.

5 ASIL had submitted a proposal for One Time Settlement (OTS) of its debts under the Corporate Debt Restructuring (CDR)Mechanism. The OTS package was finalized and approved by the CDR Empowered Group. All the lenders except Bank ofRajasthan (BOR) conveyed their acceptance of the proposal. ASIL had outstanding loan of Rs. 49,300,000 repayable toBOR in the earlier years. As per the terms of the CDR proposal, a sum of Rs. 23,400,000 was payable, which had beendeposited with the Mumbai High Court. The same has now been paid to the BOR during the year. Balance payable of Rs.25,900,000 (including interest payable of Rs. 1,430,000) has been written back in the books of account during the year.

This Year Previous Year

6. Estimated value of contracts remaining to be executed on capital account Rs. 23,755,460 Rs. 47,479,568(net of advances)

7. ASIL had guaranteed repayments of Housing Loan taken from HDFC by the employees of ASIL, in the event of their ceasingto be in the employment with ASIL and / or non-repayment of the loan by them. Since the employees have defaulted inrepayment, HDFC had approached ASIL who has come forward to pay and settle the dues of the borrowers at Rs.23,600,000 as against a sum of Rs. 27,132,000 due to HDFC. Accordingly ASIL has signed an MOU with HDFC stipulatingthe term and conditions of settlement. The amount so settled was to be paid in installment beginning March 07 andaccordingly a sum of Rs. 5,000,000 has been paid as on March 31, 2007 and has been treated as an advance towardscapital procurement. During the year ended March 31, 2008, the balance of Rs. 18,600,000 has been paid and consequentlyall the housing properties have been transferred in the name of the ASIL with effect from January 1, 2008 and capitalizedas Fixed Assets.

8. During the year 2006-07, Spentex ( Netherlands ) B.V received USD 15,000,000 from Citigroup Venture Capital International GrowthPartnership Mauritius Ltd. (CVC) for issue of Preference Share Capital which is still pending allotment as at March 31,2008.

9. The Shares of Myantrade Corporation Pte. Ltd. are yet to be transferred in the name of ASIL pending payment of balanceconsideration of Rs. 3,814,290 (Previous Year Rs. 3,814,290).

10. Based on information available with the Group, there are no dues to Micro, Small and Medium Enterprises, as defined in theMicro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2008.

11. In accordance with the current industry practice, plant and machinery of the Group has been treated as “ContinuousProcess Plant” as defined under Schedule XIV to the Companies Act,1956.

12. Pursuant to an agreement dated December 8, 2005 the Company has allotted 127,895 Equity Shares to Mr. Ajay Choudhary,70,586 Equity Shares to Mr. Mukund Choudhary and 76,519 Equity Shares to Mr. Kapil Choudhary in conversion of an equalnumber of Share Warrants. The Company had received an advance of 10% of the share subscription price amounting to Rs.1,004,850 from them during 2005-06 and balance consideration of Rs. 9,043,650 has been received at the time of conversionof such Share Warrants during the year at the agreed rate of Rs. 36.54 (including premium of Rs. 26.54 per share).

13. In order to optimize operational efficiencies, during the year, the management has decided to terminate production atAhmedabad factory and dispose assets in phased manner. As on March 31, 2008, the management has categorized suchassets as ‘Fixed assets held for sale’ under Other Current Assets at lower of estimated net realizable value and net bookvalue and accordingly, has booked a loss of Rs. 38,750,750.

14. Deferred Purchase Payments for purchase of Plant and Machinery.

a) The Company’s subsidiary, Spentex Tashkent Toytepa LLC, entered into an asset sale and purchase agreement withTashkent Toytepa Textile LLC on July 21, 2006. In accordance with this agreement, the above amount is repayable in 3equal installments of USD 12,150,000 and the remaining amount is repayable as the 4th installment. As on March 31, 2008,an amount of USD 48,600,000 (equivalent to Rs. 1,949,832,000) was outstanding in books of account, repayable inremaining three installments.


56

b) During the year, the Company has terminated the contract manufacturing agreement with Bombay Dying and ManufacturingCompany (BDMC) and purchased the assets from BDMC for Rs. 187,942,975 (including VAT of Rs. 20,880,552), payableover a period of three years in 4 installments as mentioned below.

Sr. No. Payable date Amount (Rs.) Amount (Rs.)

1 December 31, 2007 13,567,975

2 April 1, 2009 56,250,000

3 April 1, 2010 Refer Note a) below 56,250,000

4 April 1, 2011 61,875,000 174,375,000

Total 187,942,975

Notes:

a) Included in Schedule IV ‘Unsecured Loans’

b) As on March 31, 2008 these assets are undergoing trial runs to conform to the Company’s production plans and are shown under Capital Work in Progress under Schedule V - ‘Fixed Assets’.

15. Prior period expenditure includes Commission on Export Sales Rs.11,361,217 , Personnel Cost Rs.941,689 and Other .Expenses Rs.587,251.

16. The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 andclaiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stageof duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India whoallowed rebate for both the stages of duty.

However, the Department appealed in the Hon’ble High Court of Mumbai which was upheld by the Hon’ble High Court. TheSynthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing the Hon’bleHigh Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by Hon’ble Supreme Court, the Synthetic Division has yet reversed the rebate receivableon input duty aggregating to Rs.58,154,319 (including Rs.2,826,621 at its Pithampur Unit).

Further, relying on the judgment of the Hon’ble High Court of Mumbai for the Butibori unit, a demand has been raised by theDepartment on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of dutyamounting to Rs 60,216,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. TheCommissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has beenkept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation /utilization of these cenvat balances of Rs. 118,370,685 coupled with cenvat credit of Rs 20,447,344 (accumulated as aresult of inverted duty structure between raw materials and finished good till pervious year) over a reasonable period oftime, in case the decision of the Hon’ble Supreme Court goes in favour

17. The Sales tax exemption under the Package Scheme of Incentives, 1993 for the Butibori unit of the Synthetic Division hadexpired on December 31, 2005. However, the unit has filed for an extension of 3 years with effect from January 1, 2006to the Development Commissioner (Industries), Government of Maharashtra.

In view of expiry of the Exemption benefits, the Butibori unit has given an undertaking to the Sales Tax Department forpayment of taxes with interest with effect from January 1, 2006 in case it fails to get the extension of exemption period andis accordingly selling finished goods, waste and scrap etc. without charging sales tax (VAT and Central Sales Tax) underexemption. In case the unit fails to get the exemption certificate from the authorities, the tax and interest payable on March31, 2008 shall be as under: -

Particulars Sales Tax Interest T otal(Rs.) (Rs.) (Rs.)

January, 2006 – March, 2006 6,475,767 2,185,571 8,661,338

April, 2006 - March, 2007 41,562,736 12,468,821 54,031,557

April, 2007 - March, 2008 25,063,885 3,759,583 28,823,468

Total 73,102,388 18,413,975 91,516,363

Further the Unit has accrued VAT receivable of Rs 54,283,498 for the period January 1, 2006 to March 31, 2008 on thebasis that the Sales Tax Exemption will be extended for a further period of 3 years with effect from January 1, 2006.

The Unit has also filed a petition before the Hon’ble High Court, Nagpur to grant relief on the said matter and is hopeful ofrecovery of such amount.

}

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18. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailedTransfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enter-prises’ on an ‘arm’s length’ basis. These regulations, inter alia, also require the maintenance of prescribed documents andinformation including furnishing a report from an Accountant within the due date of filing of Return of Income. For the yearended March 31, 2008, the Company has initiated the process of compliance with the said transfer pricing regulations forwhich the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

19. Fixed Assets of ASIL includes investment in SAP ERP package having a Written Down Value (WDV) of Rs. 12,299,000 asat the end of the year. The package is not in operation. However since the license is said to be transferable at pricecomparable to the WDV no impairment loss has been booked in these accounts.

20. In accordance with Accounting Standard - 17 on Segment Reporting as notified u/s 211(3C) of The Companies Act, 1956, theCompany has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading. Further, twogeographical segments by location of customers have been considered as secondary segments viz. Within India andOutside India. The segment wise disclosures are as follows :

A. Business Segment Reporting(Amount in Rs.)

DESCRIPTION TEXTILE- TEXTILE- OTHER TOTALMANUFACTURING TRADING TRADING

Segment RevenueTotal Revenue 13,200,952,356 815,005,382 131,869,995 14,147,827,733

(7,627,975,505) (1,462,895,939) (480,432,618) (9,571,304,062)Inter - segment sales 643,912,186 130,776,497 - 774,688,683

(565,625,015) (-) (-) (565,625,015)External Sales 12,557,040,170 684,228,885 131,869,995 13,373,139,050

(7,062,350,490) (1,462,895,939) (480,432,618) (9,005,679,047)Segment Results 592,765,364 -13,623,106 36,081,032 615,223,290

(432,138,176) (72,618,730) (36,726,427) (541,483,333)Unallocated corporate expense (Net) 46,292,357

(-15,448,965)Operating Profit 568,930,933

(556,932,298)Interest Expense - - 932,868,308

(-) (-) (-) (497,354,518)Interest income - - - 30,342,153

(-) (-) (-) (38,426,563)Profit/-Loss before Prior period - - - -333,595,222items and Tax (-) (-) (-) (98,004,343)Income Tax - - - 162,336

(-) (-) (-) (6,969,781)Deferred Tax - - - -115,198,204

(-) (-) (-) (-47,671,655)Fringe Benefit Tax - - - 4,725,570

(-) (-) (-) (4,135,921)Prior Period Items - - - 12,890,157

(-) (-) (-) (-7,097,865)Profit/-Loss after tax - - - -236,175,081

(-) (-) (-) (141,668,161)OTHER INFORMATIONSegment Assets 15,329,445,674 210,096,415 99,642,924 15,639,185,013

(12,496,087,871) (249,172,154) (46,879,798) (12,792,139,823)Unallocated corporate assets - - - 589,670,836

(-) (-) (-) (355,521,031)Total Assets - - - 16,228,855,849

(-) (-) (-) (13,147,660,854)Segment liabilities 2,898,838,981 69,659,168 2,189,286 2,970,687,435

(1,184,541,607) (87,896,237) (6,542,510) (1,278,980,354)Unallocated corporate liabilities - - - 10,278,859,320

(-) (-) (-) (9,151,890,972)Total Liabilities - - - 13,249,546,755

(-) (-) (-) (10,430,871,326)Capital expenditure incurred during - 713,332,758the year (-) (-) (-) (5,206,389,080)Depreciation and Amortisation for - - - 745,532,756the year (-) (-) (-) (540,349,423)


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B) GEOGRAPHICAL SEGMENT REPORTING: (Amount in Rs.)

DESCRIPTION REVENUE ASSETS

Within India 2,792,696,330 7,826,466,548 (3,672,530,039) (7,664,605,046)

Outside India 10,580,442,720 8,402,389,301(5,333,149,008) (5,483,055,808)

Current Year 13,373,139,050 16,228,855,849Previous Year (9,005,679,047) (13,147,660,854)

Figures shown in brackets represents previous year figures

21 Related Party Disclosures:A) In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the

related parties where control exists and/or with whom transactions have taken place during the year and descriptionof relationships, as identified and certified by the management, are:

i) Enterprises under significant influence

a) Himalayan Crest Power Limited

b) CLC & Sons (Pvt.) Limited

ii) Key Management Personnel and their Relatives a) Mr. Ajay Kumar Choudhary Chairman

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

f) Mr. Chiranjilal Choudhary Father of Mr. Ajay Kumar Choudhary

g) Mrs Chanderkala Choudhary Mother of Mr. Ajay Kumar Choudhary

h) Mrs. Lekha Devi Choudhary Wife of Mr. Ajay Kumar Choudhary

i) Mrs. Jyoti Choudhary Wife of Mr. Mukund Choudhary

j) Mrs. Ritu Choudhary Wife of Mr. Kapil Choudhary

k) Mrs. Varsha Agrawal Wife of Mr. Amrit Agrawal

B) Description of Transactions with the Related Parties in the ordinary course of business. (All amounts in Rs.)

* Guarantees outstanding excludes personal guarantee given by Directors to Banks / Financial institutions for facilitation of business.**Based on legal counsel opinion, the management is of the view that guarantee given on behalf of Himalayan Crest Power

Limited does not result in non-compliance of Section 295 of the Companies Act. 1956.Figures shown in brackets represents previous year figures.

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22. Employee Benefits

The Group has adopted Accounting Standard 15 (AS 15) (revised 2005) on ‘Employee Benefits’ notified u/s 211(3C) of TheCompanies Act , 1956. These consolidated financial statements include the obligations as per requirement of this standardexcept for those subsidiaries which are incorporated outside India who have determined the valuation/provision foremployee benefits as per requirements of their respective countries. In the opinion of the management, the impact of thisdeviation is not considered material.

Post Retirement Employee Benefits

The Group has calculated the various benefits provided to employees as under:

Defined Contribution Plans:

The Group has Defined Contribution plans for post retirement employment benefits’ namely Provident Fund and EmployeeState Insurance Scheme. Expense for the same is being charged to Profit and Loss account for the year.

Defined Benefit Plans:

The liability for gratuity and leave encashment / compensated absences is determined on the basis of an actuarial valuationat the end of the year. Gains and losses arising out of actuarial valuations are recognized in the Profit and Loss Accountfor the year.

(Amount in Rs.) Gratuity Leave Encashment Funded Unfunded

A. Components of Employer Expense1 Current Service Cost 6,626,020 4,578,4822 Interest Cost 4,158,211 1,253,0453 Curtailment Cost/(Credit) - -4 Settlement Cost/(Credit) - -5 Return on Plan Assets (576,631) -6 Past Service Cost - -7 Actuarial Losses/(Gains) 8,689,907 2,550,817Total expense recognised in the Statement of Profit & Loss Account 18,897,507 8,382,344The Gratuity and Leave Encashment Expenses have been recognised in “Salaries, Wages and Bonus”under Schedule XVI

B. Net Asset / (Liability) recognised in Balance Sheet as at March 31, 2008.1 Present Value of Defined Benefit Obligation 64,428,663 18,112,0342 Fair Value on Plan Assets 9,963,600 -3 Status [Surplus/(Deficit)] (54,465,063) (18,112,034)4 Unrecognised Past Service Cost - -Net Asset/(Liability) recognised in Balance Sheet (54,465,063) (18,1 12,034)

C. Change in Defined Benefit Obligations (DBO) during the year endedMarch 31, 20081 Present Value of DBO at the Beginning of Year 51,835,636 15,620,2642 Current Service Cost 6,626,020 4,578,4823 Interest Cost 4,158,211 1,253,0454 Curtailment Cost/(Credit) - -5 Settlement Cost/(Credit) - -6 Plan Amendments - -7 Acquisitions - -8 Actuarial (Gains)/Losses 8,689,907 2,550,8179 Benefits Paid (6,881,111) (5,890,574)10 Present Value of DBO at the End of Year 64,428,663 18,112,034

D. Change in Fair Value of Assets during the year ended March 31, 20081 Plan Assets at the Beginning of Year 5,922,543 -2 Acquisition Adjustment - -3 Expected Return on Plan Assets 533,029 -4 Actuarial Gains/(Losses) 43,602 -5 Actual Company Contribution 4,199,125 -6 Benefits Paid (734,699) -7 Plan Assets at the End of Year 9,963,600 -


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E. Actuarial Assumptions

Gratuity Leave EncashmentFunded Unfunded

Percentage1 Discount Rate (%) at March 31, 2008 8.00% 8.00%2 Expected Return on Plan Assets at March 31, 2008 8.00 % - 9.00% N.A.3 Annual increase in salary cost 5.50% 5.50%

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotionand other relevant factors such as supply and demand factors in the employment market.

Notes:

a) In respect of the Employee’s Gratuity Fund, constitution of Plan Assets is not readily available from the Life InsuranceCorporation of India.

b) Short term compensated absences amounting to Rs. 13,132,725 has been included in Leave Encashment shown under‘Salary,Wages and Benefits’ (Refer Schedule XVI) with a corresponding liability included under Provisions (Refer Sched-ule XIII)

c) The Company has adopted Accounting Standard 15 (revised 2005) ‘Employee Benefits’ during the year ended March31, 2008. Accordingly, the transitional adjustment aggregating to Rs. 7,360,357 (net of deferred tax asset Rs. 3,790,010)has been charged against the general reserves as at April 1, 2007. The details of the transitional adjustment is as follow:

- Long Term Leave Encashment / Compensated Absences Rs. 296,629 (net of deferred tax asset Rs. 152,741)

- Short Term Leave Encashment / Compensated Absences Rs. 5,532,810 (net of deferred tax asset Rs. 2,848,966)

- Gratuity Rs. 1,530,917 (net of deferred tax asset Rs. 788,303)

F. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and marketscenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are welldiversified.

23. Leased Assets included in vehicles where the Group is a lessee under finance leases are :This Year Previous Year

(Rs.) (Rs.)Not later than one year 4,969,826 4,870,280

Later than one year but not later than five years 3,089,931 5,524,621

Later than five years Nil Nil

Total Minimum lease payments 8,059,757 10,394,901Less : Future finance charges on finance leases 785,527 1,040,275

Present value of finance lease liabilities 7,274,230 9,354,626Representing lease liabilities:

-Current 4,444,271 4,212,869-Non current 2,829,959 5,141,757

Total 7,274,230 9,354,626The present value of finance lease liabilities may be analysed

Not later than one year 4,444,271 4,212,869

Later than one year but not later than five years 2,829,959 5,141,757

Later than five years Nil Nil

Total 7,274,230 9,354,62624. Payment to Auditors :

a) Statutory Audit (*) 3,707,880 2,244,800

b) Tax Audit (*) 449,440 224,480

c) Other Services, Certifications, etc. (*) 2,671,921 606,096

d) Out of pocket expenses 227,385 94,867

Total 7,056,626 3,170,243

(*) including taxes, as applicable.

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25. Remuneration to Managerial Personnel This Year Previous Year(Rs.) (Rs.)

a) Salary and Allowances 21,511,124 17,642,766

b) Contributions to Provident Fund and Superannuation Fund 1,266,372 695,040

c) Estimated value of Perquisites 419,135 982,206

Total 23,196,631 19,320,012

Directors’ Sitting Fees 407,000 544,000

Foot Note:

The contribution to Gratuity fund and leave encashment has been made on group basis and separate figures applicableto an individual employee are not available and have, therefore, not been taken into account in the above computation.

26. Taxation

Deferred Tax:

Break-up of Deferred Tax Assets and Liabilities into major components of the respective balances is as under :

As at 31st As at 31stMarch , 2008 March , 2007

(Rs.) (Rs.)

I. Balance brought forward - Deferred Tax Asset / (Liability) (24,992,320) (72,663,975)

Transitional Adjustment for Employee benefits - Deferred Tax Assets 3,790,010 -

Balance brought forward after transitional adjustment for Employee (21,202,310) (72,663,975)Benefit as per AS-15

Balance on date of acquisition of Schoeller Litvinov k.s. (11,120,428) -

Total (32,322,738) (72,663,975)

II. For the Year :

(i) Tax impact of difference between carrying amount of fixed assets in 40,532,849 (297,491,220)

the financial statements and the income tax return

(ii) Tax impact of expenses charged in the financial statements but 3,347,063 (20,716,155)

allowable as deduction in future years under income tax

(iii) Realisation of tax impact of unabsorbed depreciation / carried forward 71,318,292 298,274,030

business losses created in the previous year

Net Deferred Tax Asset/(Liability) 1 15,198,204 47,671,655

III. Closing Deferred Tax Asset/(Liability) 82,875,466 (24,992,320)

This Year Previous Year(Rs.) (Rs.)

27. Earnings Per Share (EPS)

The following table reconciles the numerators and denominators used tocalculate Basic and Diluted EPS for the Year:

Net profit/(loss) attributable to equity shareholders (217,436,745) 125,842,999

Weighted Average Shares outstanding Nos. Nos.Weighted average shares outstanding 71,421,693 67,756,624Effect of Dilutive Securities - 117,992

Diluted weighted average shares outstanding 71,421,693 67,874,616

Nominal value of Equity Shares Rs. 10 10

Basic Earnings per Share Rs. (3.04) 1.86

Diluted Earnings per share Rs. (3.04) 1.85


62

28. Pursuant to the exemption granted by the Department of Company affairs, Government of India, the Parent Company ispublishing the consolidated and standalone financial statements of Spentex Industries Limited and its subsidiaries. Thefinancial statements and auditors' report of the individual subsidiaries are available for inspection by the shareholders at theregistered office. However, the information in aggregate on capital, reserves, total assets, total liabilities, details ofinvestments turnover, profit before taxation, provision for taxation, profit/(loss) after taxation and proposed dividend foreach subsidiary follows:

Figures shown in brackets represents previous year figures.

29. Previous year’s figures have been regrouped / recasted wherever necessary to conform to current year’s classification.

On behalf of the Board

Mukund Choudhary Managing DirectorKapil Choudhary Deputy Managing DirectorAmrit Agrawal Director - FinanceVivek Kumar Company Secretary


(Amount in Rs.)

63


AS REQUIRED UNDER PART IV, SCHEDULE VI TO THE COMPANIES ACT,1956

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS:Registration No. 1 3 8 1 5 3 State Code 5 5

CIN L 7 4 8 9 9 D L 1 9 9 1 P L C 1 3 8 1 5 3

Balance Sheet Date 3 1 . 0 3 . 2 0 0 8

II. CAPITAL RAISED DURING THE YEAR ( Amount in Rs. Thousands)Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement

N I L 2 7 5 0

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands)

Total Liabilities Total Assets

7 0 9 6 1 3 0 7 0 9 6 1 3 0SOURCES OF FUNDS :

Paid up Capital Reserves and Surplus

7 1 4 7 2 0 1 1 3 6 0 2 3

Secured Loans Unsecured Loans

5 0 6 1 4 0 8 1 8 3 9 7 8

APPLICATION OF FUNDS :Net Fixed Assets Investments

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

Net Current Assets Miscellaneous Expenditure

2 1 8 3 9 9 6 N I L

Accumulated Loss

2 0 6 7 0 1

IV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)

Turnover (Including Other Income) Total Expenditure

8 1 4 7 6 3 1 8 5 5 8 4 7 5

Profit before tax Profit after tax

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

Earning per Share in Rs. Dividend rate

- 4 . 8 3 N I L

V. GENERIC NAMES OF PRINCIPAL PRODUCTS/SERVICES OF COMPANY (As Per Monetary Terms)

Item Code NO. (ITC Code) 52053411 Item Code NO. N. A.Product Description COTTONYARN Product TRADING IN TEXTILE/FABRIC

Documents

SPENTEX INDUSTRIES LIMITED Annual Report 2007-08.pdf · SPENTEX INDUSTRIES LIMITED 4 expected to touch US$ 31 bn by 2010. This presents a large opportunity for your Company given