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Directors Report of Aditya Birla Fashion and Retail Ltd.

Mar 31, 2015

Dear Members,

The Company's Directors, hereby present the Eighth Annual Report of the Company together with the Audited Financial statements of the Company for the Financial Year ended March 31, 2015.

FINANCIAL PERFORMANCE

(Rs in Crore) Particulars As on As on March 31, 2015 March 31, 2014

Revenue 1,851 1,661

EBITDA 75 39

Finance Cost 120 117

EBDT 45 79

Depreciation 183 109

Earnings Before Tax (228) (188)

Provision for Taxation - -

Net Profit/ (Loss) (228) (188)

Revenue

Your Company reported a revenue of Rs. 1851 Crore in the year 2014-15 ("year under review"), recording a growth of 11.4% over 2013-14 ("previous year"). During the year under review, Company opened 25 new Pantaloons Stores and closed two stores. As at March 31,2015, the Company had 104 Pantaloons Stores and 30 Factory Outlet Stores.

Operating Profit

EBITDA excluding other income at 73 Crore grew by 118% over previous year. Focus on cost efficiencies, improved product mix and pricing has improved the EBITDA during the year under review.

Net Interest

Finance costs stood at Rs. 120 Crore with average borrowing cost of 10.17% versus 10.40 % in the previous year.

Depreciation

The depreciation cost was higher mainly due to accelerated depreciation provided on account of refurbishment and closure of stores.

Balance Sheet

Particulars As on As on March 31, 2015 March 31, 2014

Net Fixed Assets 422 496 (Including Capital Advances and CWIP)

Goodwill 1,168 1,168

Net Working Capital 67 (34)

Capital Employed 1,656 1,630

Net Worth 346 579

Debt 1,311 1,050

The Goodwill recognised on transfer of Pantaloons business to the Company was subsequently tested for impairment in accordance with the Accounting Standard - 28 issued by the Institute of Chartered Accountants of India and continues to stand at Rs. 1,168 Crore as on March 31, 2015.

Net Working Capital as on March 31, 2015, includes Inventory of Rs. 427 Crore, Trade Receivables of Rs. 3 Crore, Cash and Bank Balance of Rs. 7 Crore and Trade Payables of Rs 311 Crore.

The detailed analysis of the performance is included in the section Management Discussion and Analysis. DIVIDEND

In view of the loss for the year under review, no amount is proposed to be transferred to the reserve(s) and your Directors have not recommended payment of any dividend for the year under review.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Sections 134(3) (c) and 134(5) of the Companies Act, 2013, the Directors, to the best of their knowledge and ability, confirm that:-

a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Conservation of energy, technology absorption, foreign exchange earnings and outgo

Company consciously makes all efforts to conserve energy across all its operations.

a) Technology Absorption: Nil

b) Foreign Exchange Earnings and Outgo has been disclosed as part of the Financial Statements of the Company for the year under review.

c) The Company earned NIL (Previous Year: NIL) in foreign currency from Export of Goods and Foreign Exchange outgo was Rs. 16 Lakhs (Previous year: Rs.6 Lakhs).

Details w.r.t. development and implementation of a Risk Management Policy

Board has constituted a Risk Management Committee of the Board ("RMC"), to assist the Board with regard to the identification, evaluation and mitigation of operational, strategic and external risks. RMC has overall responsibility for monitoring and reviewing the Risk Management Plan and associated practices of your Company.

Further, considering the susceptibility of the Company to inherent business risks, Board of your Company, on recommendation of RMC, has adopted a Risk Management Policy, to

- develop and implement Risk Management procedure/ plan including identification therein of elements of risk, if any, which may threaten the existence of the company;

- enable the Company to proactively manage the uncertainty, changes in the internal &external environment to limit negative impacts; and

- capitalize on opportunities along with minimization of identifiable risks,

- in compliance with the provisions of the Act and Clause 49 of the Listing Agreement which requires the Company to lay down procedure for risk assessment and procedure for risk minimization.

More details on risks and threats have been disclosed above, in the section "Management Discussion and Analysis".

Further, in view of the technologically advanced operations, growing complexities of internal structures of the organizations, increasingly transient employees and such other reasons, all organisations, including the Company, are exposed to the risks emanating from fraud(s). Accordingly, the Board of your Company has, on recommendation of the Audit Committee, adopted an Anti-Fraud Policy, to put in place, a system for detecting and/or preventing and/or deterring and/or controlling the occurrence fraud(s).

Details about the policy developed and implemented by the Company on Corporate Social Responsibility ("CSR") initiatives taken during the year

Board has, with a vision "to actively contribute to the social and economic development of the communities and built a better sustainable way of life for weaker sections of society", adopted a CSR Policy and the same is available on your Company's website viz. www.pantaloons.com.

CSR Policy of your Company, enumerates the Vision of the Aditya Birla Group & the Company, as a responsible corporate citizen, and mentions the process to be implements w.r.t. Identification of projects and philosophy of the Company, alongwith key endeavors & goals viz.

- In Education - to spark the desire for learning and knowledge;

- In Health care - to render quality health care facilities to people living in the villages and elsewhere through our Hospitals;

- In Sustainable Livelihood - to provide livelihood in a locally appropriate and environmentally sustainable manner;

- In Infrastructure Development - to set up essential services that form the foundation of sustainable development; and

- to bring about Social Change we advocate and support.

In view of the losses for the year under review, your Company was not required to spend any amount towards the CSR activities, as per the applicable provisions of Section 135 of the Companies Act, 2013. Accordingly, the details of the CSR activities during the year under review are not provided in this Report.

Manner of formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors

Pursuant to the provisions of the Act and Listing Agreement, the Board has to evaluate its own performance and that of its committees and individual directors ("Evaluation").

To enable such evaluation, an evaluation framework has been adopted by all the companies of the Aditya Birla Group, which is devised with a view to provide a more structured approach for the evaluation and which lays down overall guidelines & processes to be adopted for the evaluation of performance. NRC and the Board have, vide their respective Resolutions dated May 8, 2015 and May 13, 2015, approved the Evaluation Framework.

Accordingly, the Board carried out the evaluation of its own performance and that of its committees and individual Directors w.r.t. the year under review. The exercise was carried out through a structured evaluation process covering various aspects of the functioning of the Board and its Committees. Individual Directors were evaluated separately on basis of their respective designations and roles. The manner in which the evaluation has been carried out has been enumerated in the Corporate Governance Report. The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Individual Directors, the Board as a whole and its Committees with the Company.

Details of Directors and Key Managerial Personnel who were appointed or have resigned during the year

During the year under review, Dr. Rakesh Jain, Non-executive Director (DIN: 00020425) and Mr. P. Murari, Independent Director (DIN: 00020437), resigned from their respective Directorships of the Company w.e.f. December 15, 2014 and March 25, 2015 respectively.

Also, pursuant to the Talent Development Policy of the Aditya Birla Group, Mr. Manoj Kedia, Chief Financial Officer of the Company was transferred as the Chief Financial Officer of the "Textiles, Acrylic Fibre and Overseas Spinning" Business of the Aditya Birla Group and accordingly, he ceased to be the Chief Financial Officer of the Company w.e.f. November 4, 2014.

With a view to broaden the Board and pursuant to the provisions of the Act, following appointments were made, subject to the approval of the members of the Company at the ensuing Annual General Meeting-

Name Designation Term & Tenure

Ms. Sukanya Kripalu Additional Director of the For a period of 5 (five Company, proposed to be consecutive years w.e.f appointed as an Independent October 13, 2014 Woman Director

Mr. Arun Thiagarajan Additional Director of the For a period of 5 (five Company, proposed to be consecutive years w.e.f. appointed as an May 11, 2015 Independent Director

Resolutions for appointment of Ms. Kripalu and Mr. Thiagarajan, form part of the Notice for the ensuing Eighth Annual General Meeting of the Company, circulated to the members of the Company, separately.

Mr. Pranab Barua, was appointed as the Managing Director of the Company vide a Special Resolution passed by the members of the Company at the Seventh Annual General Meeting of the Company held on August 27, 2014, w.e.f. October 25, 2013.

Further, in accordance with the provisions of the Act and the Articles of Association of the Company, Mr. Sushil Agarwal, Non- executive Director of the Company, will retire by rotation at the ensuing Annual General Meeting and being eligible for re-appointment, he seeks re-appointment as such. Resolution for his appointment also forms part of the Notice for the ensuing Eighth Annual General Meeting of the Company, circulated to the members of the Company, separately.

Also, on the recommendation of the Nomination and Remuneration Committee of the Board and pursuant to the Talent Development Policy of the Aditya Birla Group, Mr. S. Visvanathan was appointed as the Chief Financial Officer of the Company w.e.f. November 4, 2014.

Names of companies which have become or ceased to be its Subsidiaries, joint ventures or associate companies during the year

During the year, no Company became/ ceased to be a Subsidiary/ Associate/ Joint Venture of your Company.

As at the end of the year under review i.e. on March 31,2015 and also as on the date of this report, your Company does not have any subsidiary and/or Associate Company and the Company is also not a part of any Joint Venture(s).

Details relating to deposits

During the year under review, your Company has not accepted any fixed deposits from the public falling under Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Thus, as on March 31, 2015, there were no deposits which were unpaid or unclaimed and due for repayment. Further, as the Company had not accepted any deposit under Section 58A of the Companies Act, 1956 read with Companies (Acceptance of Deposits) Rules, 1975, in the previous year(s) and as there were no deposits which were unclaimed and due for repayment, as on March 31, 2014, there has been no default in repayment of deposits or payment of interest thereon during the year under review.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

Details in respect of adequacy of internal financial controls with reference to the Financial Statements

Company has established a system of internal controls and business processes, comprising of policies and procedures, with regards to efficiency of operations, financial reporting and compliance with applicable laws and regulations etc. commensurate with its size and nature of the business. Regular internal audit and checks are undertaken to ensure that systems and processes are followed effectively and systems & procedures are periodically reviewed to keep pace with the growing size and complexity of your Company's operations. Your Company also has a well-defined process for an on-going management reporting and periodic review of operations to ensure effective decision-making. During the year under review, proper internal financial controls were in place and the financial controls were adequate and were operating effectively.

Employee Stock Option Scheme and Share Based Employee Benefits

The grant of share based benefits to employees is a mechanism to align the interest of employees with those of the Company, to provide them with an opportunity to share the growth of the Company and also to foster the long-term commitment.

The Securities Exchange Board of India ("SEBI") enacted SEBI (Share Based Employee Benefits) Regulations, 2014 ("Regulations"), thereby repealing the SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 ("Guidelines"). The regulations govern the grant of share based benefits to the employees of the Company, such as Employee Stock Options ("ESOPs"), Restricted Stock Units ("RSUs"), Stock Appreciation Rights ("SARs") etc.

During the year under review, the Board of Directors of the Company, merged its ESOP Compensation Committee with the Nomination and Remuneration Committee ("NRC") and accordingly, the functions and the scope of the erstwhile ESOP Compensation Committee i.e. mainly to administer, implement and monitor the Schemes and plans thereby governing the grant of Share Based Employee Benefits to the employees of the Company, are now included in the overall scope of the NRC. Accordingly, administration and implementation of the "Pantaloons Employee Stock Option Scheme 2013" ("Scheme") and "Pantaloons Stock Appreciation Rights 2013" ("Plan"), now comes under the scope of NRC.

During the year under review, no ESOPs and/or RSUs and/or SARs were granted pursuant to the provisions of the Scheme and/or plan. Further, no ESOPs and/or RSUs and/or SARs have vested in the grantees pursuant to the provisions of the Scheme and/or plan.

In terms of the provisions of the regulations, details of the ESOPs and/or RSUs and/or SARs already granted under the abovementioned Scheme and/or plan are available on your Company's website viz. www.pantaloons.com. Further, the same have been disclosed as part of the Financial Statements of the Company for the year under.

A certificate from the Statutory Auditor thereby confirming that the Scheme has been implemented in accordance with the Guidelines and the regulations will be placed at the ensuing Eighth Annual General Meeting for inspection by the Members.

Composition of the Committees of the Board of Directors

Name of the Committee Composition of Committee

Audit Committee Mr. Bharat Patel, Independent Director (Chairperson)

Ms. Sukanya Kripalu, Independent Director

Mr. Arun Thiagarajan, Independent Director

Mr. Sushil Agarwal, Non-executive Director

Permanent Invitee- Mr. Pranab Barua, Managing

Stakeholders Mr. Bharat Patel, Independent Director (Chairperson Relationship Committee Ms. Sukanya Kripalu, Independent Director

Mr. Sushil Agarwal, Non-executive Director

Nomination Remuneration Mr. Bharat Patel, Independent Director Committee Ms. Sukanya Kripalu, Independent Director

Mr. Sushil Agarwal, Non-executive Director

Mr. Pranab Barua, Managing Director

Corporate Social Mr. Bharat Patel, Independent Director Responsibility Committee Mr. Sushil Agarwal, Non-executive Director

Mr. Pranab Barua, Managing Director

Permanent Invitee - Dr. Pragnya Ram, Group Executive President,

Corporate Communication & CSR, Aditya Birla Group

Risk Management Mr.Bharat Patel, Independent Director (Chairperson) Committee Mr. Sushil Agarwal, Non-executive Director

Mr. Pranab Barua, Managing Director

Details of establishment of Vigil Mechanism Policy

Board has, on recommendation of its Audit Committee, adopted a Policy thereby enumerating the Vigil/ Whistle Blower mechanism, for Directors and employees of the Company, to report concerns about unethical behaviour, actual or suspected fraud or violation of your Company's Code of Conduct and to voice genuine concerns or grievances about unprofessional conduct without fear of reprisal. Adequate safeguards are provided against victimization to those who avail of the mechanism and direct access to the Chairman of the Audit Committee in exceptional cases is provided to them.

Particulars of Employees as per Section 197(12) & Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014

Disclosures with respect to the remuneration of Directors and employees as required under Section 197 (12) of the Act and Rule 5(1) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided separately as Annexure V to this Report.

Details of employee remuneration as required under provisions of Section 197 (12) of the Act and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 will be made available at the Registered Office of the Company during working hours before 21 days of the Annual General Meeting, pursuant to the provisions of the first proviso to Section 136(1) of the Act and any member interested in obtaining such information may write to the Company Secretary and the same will be made available to any such member on request.

DISCLOSURES AS PER THE LISTING AGREEMENT "LISTING AGREEMENT"

Corporate Governance

Your Company is committed to follow the best practices of Corporate Governance, including the requirements under Clause 49 of the Listing Agreement and the Board is responsible to ensure the same, from time to time.

Company has duly complied with the Corporate Governance requirements as set out under Clause 49 of the Listing Agreement, from time to time and the Statutory Auditors of the Company viz. M/s. S R B C & Co LLP, Chartered Accountants, have, vide their certificate dated May 13, 2015 confirmed that the Company is and has been compliant with the conditions stipulated in the Clause 49 of the Listing Agreement. The said certificate is annexed to this report as Annexure VI.

Further, a separate report on Corporate Governance forms part of this Annual Report.

Familiarization programmes

Independent Directors, on their appointment, are issued a Letter of Appointment setting out in detail, the terms of appointment, duties, responsibilities and expected time commitments. Interactive sessions with the members of Senior Management including Business and Functional Heads and KMPs of the Company are organised for the induction of the Independent Directors. Details of programmes for familiarisation of Independent Directors with the Company and related matters are put up on the website of your Company's viz. www.pantaloons.com and have been briefly disclosed as part of the Corporate Governance Report.

Material developments in Human Resources / Industrial Relations front, including number of people employed

Company believes that its people are one of its most valuable assets and therefore the Human Resource philosophy and strategy of your Company is structured to attract and retain the best talent that encourages innovation and creates a work environment of inspiration, creativity and passion. To ensure employee development and growth, training and development of the front end store staff, identifying leadership and key talent across the organization and executing individual development plans continue to be the key focus area of your Company. The total number of employees on rolls of the Company as on March 31,2015 was Rs.5,932.

DISCLOSURES AS PER THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION. PROHIBITION & REDRESSAL) ACT, 2013

Your Company is committed to providing a work environment that is professional and mature, free from animosity and one that reinforces our value of integrity that includes respect for the individual and in pursuance to the same, the Company has a Policy on Prevention of Sexual Harassment at Workplace, which is applicable to all employees of the Company, as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

During the year under review, no cases were filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and 16 complaints were received, out of which 16 complaints have been disposed of after taking an appropriate action and none of the complaints remain pending as of March 31, 2015.

AWARDS AND RECOGNITIONS

Your Company has been proud recipient of the following Awards/Recognitions during the year One of the "Most Trusted Retailer of India"- across categories and formats.

Nielsen, an independent agency which specialises in conducting nationwide surveys/ research projects, conducts an Independent survey for "Economic Times' Brand Equity" on annual basis, which is among the largest research project of its kind in India. The intention of the survey is to identify the "Most Trusted Brands and Retailers" and the Company is proud to have been recognised as one of the "Most Trusted Retailer ", as per the results of the survey conducted during the year under review.

Award for the "Best Direct Marketing Campaign of the Year"

Pantaloons' Greencard i.e. the loyalty program for the Customers of the Company, was awarded as the Best "Direct Marketing Campaign of the Year" at the 8th Loyalty awards presented by AIMIA, World's leading loyalty management organization with over 70 years of consulting expertise.

Award for the "Best Store Design"

Pantaloons' store located at the M. G. Road, Bangalore was awarded for the Best Store Design at the "VMRD-Retail Design Awards", which are among the most coveted awards given in the Indian Retail Industry and which turn a spotlight on exceptionally innovative retail designs initiative and projects taken by Architects, Designers, Visual Merchandisers, Suppliers and other retail solution providers.

OUTLOOK

In the short term, we expect the consumer sentiment and spending to remain muted. However, with the inflation projected to stabilise at lower levels and an anticipated improvement in GDP growth, the consumer spending is likely to improve in the medium term.

ACKNOWLEDGEMENT

We place on record our sincere appreciation for the continued support which your Company has received from its customers, suppliers, investors, promoters, bankers, group companies and above all, its employees.

For and on behalf of the Board of Directors,

Pranab Barua Sushil Agarwal Managing Director Non-executive Director

Place : Mumbai Date : May 13, 2015


Mar 31, 2013

Dear Members,

The Directors are pleased to present the 6th Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March 2013.

SCHEME OF ARRANGEMENT BETWEEN THE COMPANY AND FUTURE RETAIL LIMITED

In the year under review, your Board of Directors had approved acquisition of "Pantaloons Format Business" (Demerged Undertaking) of Future Retail Limited (FRL)(earlier known as Pantaloon Retail (India) Limited) by way of demerger through a Scheme of Arrangement under Sections 391-394 of the Companies Act, 1956 between FRL, the Company, and their respective shareholders and creditors and Indigold Trade and Services Limited(ITSL) (as the shareholder of the Company) ("the Scheme").

The demerger of the Demerged Undertaking will expand the variety of the Company''s offering in the market and complement its existing portfolio. Further, it will enable wider distribution of products and give a wider choice to the consumers and enable business to build on their systems and processes to improve efficiencies. The stores operating under the brand name Pantaloons and derivatives thereof would remain operational and the Company will carry the same brands.

Hon''ble Competition Commission of India and Hon''ble High Court of Bombay vide their order dated December 21, 2012 and March 1, 2013 respectively had approved the Scheme. On receipt of all the requisite approvals required and on completion of the Conditions Precedent listed in the Scheme, the Board of Directors of your Company in their meeting held on April 08, 2013 made Scheme effective on April 8, 2013 (Effective Date). Accordingly, the entire Demerged Undertaking was transferred to and vested in your Company w.e.f July 1, 2012 (Appointed Date).

CHANGE OF NAME

In terms of the Scheme, the name of the Company was changed from "Peter England Fashions and Retail Limited" to "Pantaloons Fashion & Retail Limited".

CHANGE IN REGISTERED OFFICE

The Registered office of the Company was changed from "A-4, Aditya Birla Centre, S.K.Ahire Marg, Worli , Mumbai, 400 030" to "701-704, 7th Floor, Skyline Icon Business Park, 86-92, Off. Andheri-Kurla Road, Marol Village, Andheri (East), Mumbai -400059, India."

CHANGES IN SHARE CAPITAL

Pursuant to the Scheme the Authorised Equity Share Capital of the Company was increased from Rs. 10 Crore to Rs. 100 Crore.

Upon this Scheme coming into effect, in consideration of the transfer of the Demerged Undertaking, your Company allotted 1 Equity Share of Rs. 10/- each credited as fully paid in the capital of the Company to all the Equity Shareholders whose name appeared in the records of FRL or as beneficiary in the records of the depositories of FRL in respect of the shares of FRL on April 18, 2013 (the Record Date), for every 5 (five) fully paid up FRL Equity Shares/FRL DVRs held by them in FRL (the "Share Entitlement Ratio"). Accordingly, total of 4,63,16,518 Equity Shares of the Company were allotted to the shareholders of FRL on April 19, 2013.

CONVERSION OF OPTIONALLY FULLY CONVERTIBLE DEBENTURES INTO EQUITY SHARES

During the period under review, the Board of Directors of the Company had approved issuance of 800 OFCDs of Rs. 1,00,00,000 each of the Company, to ITSL, convertible into 4,59,77,011 Equity shares of Rs. 10/- each on effectiveness of the Scheme.

Accordingly, on April 8, 2013, the said OFCDs were converted into 4,59,77,011 Equity shares of Rs.10/- each on effectiveness of the Scheme.

OPEN OFFER

As on March 31, 2013, the Company was a wholly-owned Subsidiary of Indigold Trade and Services Limited ("ITSL"), a wholly owned subsidiary of Aditya Birla Nuvo Ltd. ("ABNL"), a Aditya Birla Group Company with revenue size of US$ 4.5 billion.

Pursuant to the Scheme, ITSL and ABNL made Open Offer to shareholders of the Company for acquiring 23,114,868 Equity Shares representing 24.91% of Voting Capital of the Company.

On completion of Open Offer, ITSL along with ABNL acquired 1,65,79,185 Equity Shares of Rs.10/- each constituting 17.87% of post issue paid up capital of the Company. Accordingly, ITSL holds 67.95% Equity Share and Voting Capital of the Company as on date.

LISTING OF EQUITY SHARES OF THE COMPANY

Pursuant to the Scheme, the Equity Shares were proposed to be listed on the BSE Limited and National Stock Exchange of India Limited. Accordingly, the Company had made application for seeking exemption from SEBI under the SEBI Circular SEBI/CFD/SCRR/01/2009/03/09 dated September 3, 2009.The Company has received the Listing approval on July 15, 2013. Accordingly, the trading of the Equity Shares of the Company has commenced on July 17, 2013.

FINANCIAL PERFORMANCE

Your Company''s financials for FY 2012-13 include nine months financials of Pantaloons Format Business transferred to the Company with effect from the Appointed Date, i.e., July 1, 2012. Hence, to that extent, your Company''s performance is not comparable with that of previous year.

(Rs. Crore)

Particulars 2012-13 2011-12

Revenue 1285 18

EBITDA 129 2

Less : Finance Cost 144 0

EBDT (14) 2

Depreciation 54 0

Earnings before Tax (69) 2

Less : Provision for Taxation (Net) - 1

Net Profit / (Loss) (69) 1

REVIEW OF PERFORMANCE

Your Company reported revenue at Rs. 1285 Crore during fiscal 2012-13. The Company opened 6 new Pantaloons stores and 3 Pantaloons Factory Outlets during the nine months ending 31st March 2013.

Gross margin was sustained, however, moderated sales growth and higher retailing costs impacted EBITDA margin. Change in the accounting policy, for instance, with respect to Lease rental straight lining, also lowered profitability.

It is pertinent to note that in terms of the Scheme the conduct of the Demerged Undertaking was managed by FRL on behalf of the Company till the Effective Date (i.e April 8, 2013) in the ordinary course of business.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

The Management Discussion and Analysis Report, is prepared in accordance with the requirements laid out in Clause 49 of the Listing Agreement and forms part of this Annual Report.

DIVIDEND

In view of the loss for the year under review, your Directors do not recommend payment of any dividend for the financial year 2012-13

FINANCE

Your Company continues with various initiatives for bringing down the cost of borrowings which includes application of short-term instruments like commercial paper, working capital demand loans within working capital borrowing, long term loans for expansion at competitive terms, so as to have funds at competitive cost.

Pursuant to the Scheme, debt of Rs. 1600 Crore at an interest rate of -13% was transferred to the Company. With a view to optimise the Finance Cost, it was decided to reshuffle the debt portfolio. Accordingly, post effectiveness of the Scheme, the Company raised term loans of Rs. 600 Crore and Non-convertible Debentures of Rs. 300 Crore and re-paid Rs. 800 Crore out of the transferred debt. The average interest rate of long term debt portfolio got reduced to ~ 10.2%.

FIXED DEPOSITS

During the year under review, the Company has not accepted any deposit under section 58A of the Companies Act, 1956 read with Companies (Acceptance of Deposits) Rules, 1975.

As on 31st March 2013, there were no deposits which were unclaimed and due for repayment.

HOLDING COMPANY

As on March 31, 2013, the Company was a wholly-owned Subsidiary of Indigold Trade and Services Limited ("ITSL"), a wholly owned subsidiary of Aditya Birla Nuvo Ltd. (ABNL), a Aditya Birla Group Company with revenue size of US$ 4.5 billion.

Post-Scheme of Arrangement, the holding of ITSL in the Company stood at 50.09%.

Pursuant to the Scheme, ITSL and ABNL made Open Offer to shareholders of the Company for acquiring 23,114,868 Equity Shares representing 24.91% of Voting Capital of the Company.

On completion of Open Offer, ITSL along with ABNL acquired 1,65,79,185 Equity Shares of Rs.10/- each constituting 17.87% of post issue paid up capital of the Company.

Accordingly, ITSL holds 67.95% Equity Share and Voting Capital of the Company as on date.

SUBSIDIARY COMPANY

The Company does not have any subsidiary as on March 31, 2013 and as on date of this Report.

DIRECTORS

During the period under review, the Board inducted Mr. Anil Rustogi, Mr. Devendra Bhandari and Mr. Manoj Kedia as Additional Directors of the Company on April 30, 2012. They resigned from the office of Director w.e.f April 19, 2013. We place on record our deep sense of appreciation for the services rendered by them.

Further, on April 19, 2013, Mr. P Murari, Mr. Bharat Patel and Dr. Rakesh Jain were appointed as Additional Directors on the Board of the Company. They hold office upto the conclusion of the forthcoming Annual General Meeting. We seek your support in confirming their appointment as directors liable to retire by rotation.

As per Article 106 of the Articles of Association of the Company, Mr. Sushil Agarwal and Mr. Pranab Barua retire by rotation in the forthcoming General Meeting. Both of them being eligible seek re-appointment.

Brief particulars of Mr. Murari, Mr. Patel, Mr. Agarwal, Mr. Barua and Dr. Jain are annexed to the Notice of the Annual General Meeting in accordance with the Listing Agreement entered with the Stock Exchanges.

DIRECTORS'' RESPONSIBILITY STATEMENT

The financial statements are prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India and the requirements of the Companies Act, 1956 to the extent applicable to us. There are no material departures from prescribed accounting standards in the adoption of the accounting standards.

The Board of Directors of the Company accepts responsibility for the integrity and objectivity of the financial statements. The Accounting Policies used in the preparation of the financial statements have been consistently applied except as otherwise stated in the notes to accounts accompanying relevant tables.

The estimates and judgements related to the financial statements have been made on a prudent and responsible basis, in order that the financial statements reflect in a true and fair manner the form and substance of transaction and responsibly present our state of affairs and accounts for the year.

We have taken sufficient care to maintain adequate Accounting records in accordance with the provisions of the Companies Act, 1956, to safeguard the assets of the company and to prevent and detect fraud and other irregularities.

CORPORATE GOVERNANCE REPORT

The Company has been adhering to Corporate Governance requirements as set out under Clause 49 of Listing Agreement. The Company has been following the best practices of good Corporate Governance and have taken adequate steps to ensure compliance with clause 49 of Listing Agreement as laid down by the Stock Exchanges.

The Report on Corporate Governance as stipulated under Clause 49 of Listing Agreement forms part of the Annual Report.

HUMAN RESOURCE

The Human Resource philosophy and strategy of your Company is structured to attract and retain the best talent that encourages innovation and creates a work environment of inspiration, creativity and passion. This strategy has, through strong alignment with your Company''s vision, mission and values successfully built and sustained your Company''s standing as one of India''s most admired and valuable corporations despite unrelenting competitive pressures.

EMPLOYEES STOCK OPTIONS (ESOPs)

The grant of stock options to employees is a mechanism to align the interest of employees with those of the Company, to provide them with an opportunity to share the growth of the Company and also to foster the long-term commitment.

Accordingly in terms of the Securities and Exchange Board of India (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 Guidelines, your Company has constituted a ESOP Compensation Committee comprising majority of independent directors for formulating the detailed terms and conditions of the scheme to be known as the "Pantaloons Employee Stock Option Scheme - 2013" (the "ESOS - 2013" or the "Scheme") and administering and supervising the implementation of the Scheme.

Vide its resolution dated July 22, 2013, your Company has formulated and designed Pantaloons Employees Stock Option Plan Scheme - 2013" for its employees and proposes to grant options in accordance with SEBI Guidelines, as amended.

Resolution seeking your approval for issue of ESOPs shall be placed in the forthcoming Annual General Meeting.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975, as amended, the names and other particulars of employees are set out in the Annexure to this Report. However, having regard to the provisions of Section 219(1 )(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. The said information is available for inspection at the Registered office of the Company during its working hours. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

AUDITORS AND AUDITORS'' REPORT

M/s. S.R. Batliboi Co & LLP, Chartered Accountants, Statutory Auditors of the Company hold office until the conclusion of the forthcoming Annual General meeting and are eligible for re-appointment.

The Company has received letter from them to the effect that their re-appointment, if made, would be within the within the prescribed limits under Section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for re-appointment within the meaning of Section 226 of the Act.

The Notes to the Financial Statements are self-explanatory and do not call for any further comments.

SUSTAINIBILITY DEVELOPMENT AND BUSINESS RESPONSIBILITY REPORT

Sustainability Mission of your Company has been detailed in the "Sustainability Development Synergizing Growth with Responsibility" Section which forms part of this Annual Report.

In line with our Sustainability Mission, it is our continuous endeavour to evaluate steps towards responsible sustainability. The Company is in process of devising the Processes, in a manner that will take care of the social and environment concerns. Since, the Pantaloons Format Business has been transferred in the Company only on April 8, 2013; the Company shall take steps towards these Principles during the course of the Financial Year 2013-14.

In line with its Sustainability Mission and Clause 55 of the Listing Agreement, your Company has adopted Principles under all the enshrined Principles.

Accordingly, your Company shall publish detailed Business Responsibility Report from the next year.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION

The Pantaloons Format Business of the Company has been transferred to the Company w.e.f. July 1, 2012 on April 8, 2013. Therefore, the Company does not have anything to report in terms of steps taken during the period under review. However, the Company is in the continuous process of evaluating various energy conservation measures through improved operational and maintenance practices to conserve energy across all its operations.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign Exchange outgoing and earnings are stated on page 54 and 55 respectively in the notes to the Balance Sheet and Profit and Loss Account. The Company earned t 780 Lakhs in foreign currency from Export of Goods. Foreign Exchange outgo was Rs. 114 Lakhs.

ACKNOWLEDGEMENTS

We thank our customers, vendors, investors and bankers for their continued support during the year. We place on record our appreciation of the contribution made by our employees at our levels. Your Directors hereby state that the Company has devised proper system to ensure compliance of all laws applicable to the Company. Your Directors also place on record their gratitude for the continuing support of Shareholders, bankers and Business associates at all levels. Your Directors also appreciate the commitment of the executives, staff and workers of the Company.

For and on behalf of the Board of Directors,

Place : Mumbai Pranab Barua

Date : July 22, 2013 Director

 
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