Notes to Accounts of Arrow Textiles Ltd.

Mar 31, 2018

1 COMPANY OVERVIEW

Arrow Textiles Limited (“the Company”) is a Company incorporated on 30^th January, 2008 under the provision of the Companies Act applicable in India. The Company is incorporated and domiciled and having principal place of business in India. The registered office is at Plot No.101 - 103, MIDC, Satpur, Nashik - 422 007, Maharashtra, India. The principal business of the company is manufacturing of textile woven labels, fabric printed labels and elastic / woven tape. The shares of the company is listed on the National Stock Exchange of India Limited (NSE) and on the BSE Limited (BSE).

Terms & Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs.10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting. The Directors have recommended, subject to approval of shareholders at the ensuing Annual General Meeting, a Dividend for the Year Ended on 2018: 15% (2017: 15%). In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. This distribution will be in proportion to the number of equity shares held by the shareholders.

Brief Description of the Plans:

The Company has various schemes for employee benefits such as Provident Fund, ESIC, Gratuity and Leave Encashment. The Company’s defined contribution plans are Provident Fund (in case of certain employees) and Employees State Insurance Fund (under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952). The Company has no further obligation beyond making the contributions to such plans.

A. Define Benefit Plans:

The Company’s defined benefit plans include Gratuity. The gratuity plan is governed by the Payment of Gratuity Act, 1972 under which an employee who has completed five years of service is entitled to specific benefits. The level of benefits provided depends on the member’s length of service and salary at retirement age.

The Plan typically to expose the Company to actuarial risk such as Interest Risk, Longevity Risk and Salary Risk;

a) Interest Risk:- A decrease in the bond interest rate will increase the plan liability.

b) Longevity Risk: The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the plan’s liability.

c) Salary Risk: The present value of the defined plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan’s participants will increase the plan’s liability.

The above sensitivity analyses are based on change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.

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

B. Defined Contribution Plans

The Company also has certain defined contribution plans. The contributions are made to registered provident fund, Employee State Insurance Corporation and Labour Welfare Fund administered by the government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The expense recognised during the period towards defined contribution plans are as follows:

C. Leave Obligations

The leave obligations cover the Company’s liability for earned leave. The amount of the provision of Rs. 4413.56 (‘000) [31^st March, 2017 Rs. 4971.53(‘000)] is presented as current, since the Company does not have an unconditional right to defer settlement for any of these obligations.

2. INFORMATION IN ACCORDANCE WITH THE REQUIREMENTS OF IND AS 24 ON RELATED PARTY DISCLOSURES A LIST OF RELATED PARTIES

(i) Key Management Personnel’s (KMP):

Mr. Jaydev Mody (JM) - Chairman

Mr. Chand Arora (CA) - Managing Director

Mr. Ulhas Kale (UK) - CFO

Mr. Aurobind Patel (AP) - Director

Dr. Vrajesh Udani (VU) - Director

Mr. Aditya Mangaldas (AM) - Director

Ms. Anjali Mody (ANJ) - Director

Ms. Sushma Vesvikar (SV) - Company Secretary upto 27.03.2017

Ms. Deepika Pandey (DP) - Company Secretary from 15.05.2017 to 11.05.2018

Mr. Saurabh Gangadhare (SG) - Company Secretary from 18.05.2018

(ii) Relatives of KMP:

Mrs. Zia Mody (ZM) - Wife of the Chairman

(iii) Enterprises over which persons mentioned in (i) and (ii) above exercise significant influence with whom company has transactions:

AZB & Partners (AZB)

Freedom Registry Limited (FRL)

3. SEGMENT REPORTING

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/ non elastic woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primary and secondary segment disclosures prescribed by Ind AS - 108 “Segment Reporting” have not been provided in these financial statements as it is not applicable.

4. CORPORATE SOCIAL RESPONSIBILITY (CSR) EXPENDITURE

a) Gross amount required to be spent by the Company during the year 2017-18 - Rs. 1342 (‘000) [Previous Year 2016-17 - Rs. 1360 (‘000)]

5. EVENT OCCURRING AFTER BALANCE SHEET DATE:

The Board of Directors has recommended Equity dividend of ''1.50/- per share (Previous year Rs. 1.50/- per Credit risk arises from the possibility that the counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses financial reliability of customers and other counter parties, taking into account the financial condition, current economic trends, and analysis of historical bad debts and ageing of financial assets. Individual risk limits are set and periodically reviewed on the basis of such information.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis through each reporting period. To assess whether there is a significant increase in credit risk the Company compares the risk of default occurring on asset as at the reporting date with the risk of default as at the date of initial recognition. It considers reasonable and supportive forwarding-looking information such as:

i) Actual or expected significant adverse changes in business;

ii) Actual or expected significant changes in the operating results of the counterparty,

iii) Financial or economic conditions that are expected to cause a significant change to the counterparty’s ability to meet its obligations,

The Company measures the expected credit loss of trade receivables and loan from individual customers based on historical trend, industry practices and the business environment in which the entity operates. Loss rates are based on actual credit loss experience and past trends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.

a) The Company manages its capital to ensure that it will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Company consists of net debt (borrowings as detailed in notes 18, 22 and 24 offset by cash and bank balances) and total equity of the Company.

The Company determines the amount of capital required on the basis of annual as well as long term operating plans and other strategic investment plans. The funding requirements are met through long-term and shortterm borrowings. The Company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio of the Company.

6. LIQUIDITY RISK

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, Company treasury maintains flexibility in funding by maintaining availability under committed credit lines. Management monitors rolling forecasts of the Company’s liquidity position (comprising the undrawn borrowing facilities below) and cash and cash equivalents on the basis of expected cash flows.

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Group’s position with regards to interest income and interest expenses and to manage the interest rate risk, treasury performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

The sensitivity analyses below have been determined based on the exposure to interest rates for assets and liabilities at the end of the reporting period. For floating rate assets and liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year and the rates are reset as per the applicable reset dates. The basis risk between various benchmarks used to reset the floating rate assets and liabilities has been considered to be insignificant.

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s Profit for the year would decrease/increase by amount as stated below.

7. OTHER PRICE RISKS

The Company is not significantly exposed to equity price risks / other price risks.

The Company is exposed to Currency Risk arising from its trade exposures and Capital receipt / payments denominated, in other than the Functional Currency. The Company has a detailed policy which includes setting of the recognition parameters, benchmark targets, the boundaries within which the treasury has to perform and also lays down the checks and controls to ensure the continuing success of the treasury function.

The Company has defined strategies for addressing the risks for each category of exposures (e.g. for imports, for loans, etc.). The centralised treasury function aggregates the foreign exchange exposure and takes prudent measures to hedge the exposure based on prevalent macro-economic conditions.

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

b) Fair Value Hierarchy and Method of Valuation

Except as detailed in the following table, the Company considers that the carrying amounts of financial instruments recognised in the financial statements approximate their fair values.

Level 1 : Quoted prices (unadjusted) in active markets for identical assets and liabilities.

Level 2: Input other than quoted prices included within level 1 that are observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3: Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

These are the Company’s first financial statements prepared in accordance with Ind AS. The Company has prepared the its opening balance sheet as per Ind AS as at April 01, 2016 (“transition date”) by recognising all assets and liabilities whose recognition is required by Ind AS, not recognising items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from Previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognised assets and liabilities.

In preparing these financial statements, the Company has availed optional exemptions and mandatory exceptions in accordance with Ind AS 101 as explained below:

(a) Past Business Combinations

The Company has elected not to apply Ind AS 103 ‘Business Combinations’ retrospectively to past business combinations that occurred before the transition date.

(b) Deemed Cost for Property, Plant and Equipment and Intangible Assets

The Company has elected to consider the carrying value of all its items of property, plant and equipment and intangible assets recognised in the financial statements prepared under Previous GAAP and use the same as deemed cost in the opening Ind AS Balance Sheet.

(c) Estimates

The Company’s estimates in accordance with Ind ASs at the transition date are in consistent with estimates made for the same date in accordance with previous GAAP after adjustments to reflect any difference in accounting policies.

Transition to Ind AS - Reconciliations

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

I. Reconciliation of Equity as at 1st April, 2016 and as at 31st March, 2017.

II. Reconciliation of Statement of Profit and Loss for the year ended 31st March, 2017.

III. Adjustments to Statement of Cash Flows for the Year Ended 31st March, 2017.

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with financial statements prepared under Ind AS.

Reconciliations between Previous GAAP and Ind AS

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliation from previous GAAP to Ind AS.

Footnotes:

A Under the previous GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the financial statements were recognised as liability in financial statements as at 01 April 2016. Under Ind AS, such dividends are recognised when it is approved by the shareholders in the general meeting.

B Current investments in mutual funds was measured at lower of cost or net realisable value under previous GAAP. Under Ind AS, investments in mutual funds are measured at fair value with fair value gain or loss being recognises in the statement of profit and loss.

C Under Ind AS, actuarial gains or losses on remeasurement of defined benefit obligation is recognised in other comprehensive income (including its tax effect) which was recognised in statement of profit and loss under previous GAAP.

D Other adjustments includes measurement of borrowings and reversal of foreign exchange fluctuation on foreign currency advances considered as non monetary items.

E In addition to the above adjustments, under Ind AS, the Company has recognised a deferred liability of government grant received earlier for acquisition of property, plant and equipment with corresponding debit to property, plant and equipment. Company recognises government grant income and depreciation on property, plant and equipment straight line basis over the useful lives of underlying assets. This does not have impact on equity or profit.

III. Effect of Ind AS adoption on the Statement of Cash Flow for the year ended 31st March, 2017

The Ind AS adjustments are either non cash adjustments or are regrouping among the cash flows from operating, investing and financing activities. Consequently, Ind AS adoption has no impact on the net cash flow for the year ended 31st March, 2017 as compared with the Previous GAAP.

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Mar 31, 2016

1) Terms & Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian Rupees. The dividend proposed by the Board of Directors is subject to approval of the shareholders in the ensuing Annual General Meeting.

The Directors have recommended, subject to approval of shareholders at the ensuing Annual General Meeting, a Dividend for the Year Ended on 2016 : 10% (2015 : Nil)

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. This distribution will be in proportion to the number of equity shares held by the shareholders.

2) The Company has obtained licenses under the Export Promotion Capital Goods (EPCG) Scheme for importing capital goods at concessional rates of custom duty.

Under the terms of the said scheme, the Company is required to earn foreign exchange value equivalent to 8 times of the CIF value of imports and / or the duty saved in respect of license where export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of 8 years from date of license of capital goods. The Export Promotion Capital Goods Schemes, Foreign Trade Policy 2015-20 as issued by the Central Government of India covers manufacturers, exports and service providers. Accordingly, in accordance with the Chapter 5 of Foreign Trade Policy -2015-2020, the Company has to fulfill the specific export obligation against the said EPCG license. The pending export obligation for the year ended 31^st March, 2016 is Rs. Nil and in USD Nil, [(Previous Year Rs. Nil and in USD Nil] and further the average export obligation against the EPCG license pending for the year ended 31^st March, 2016 of Rs. 11,873.94 (Rs. ‘000) [(Previous Year of Rs. 14,733.80 (Rs. “000)]

3) Segment Reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primary and secondary segment disclosures prescribed by Accounting Standard - 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, have not been provided in these financial statements as it is not applicable.

4) Debit & Credit balances of various parties are subject to confirmation/reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance Sheet at least at the value which is reasonably certain to recover in ordinary course of business.

5) Related Party Disclosures

(1) Related parties and transactions with them during the year as identified by the Management are given below:

(i) Key Management Personnel’s:

- Mr. Chand Arora (CA) - Managing Director

- Mr. Ulhas Kale (UK) - CFO

(ii) Individuals owning directly/indirectly an interest in the voting power that gives them significant influence:

- Mr. Jaydev Mody (JM) - Chairman

- Mrs. Zia Mody (ZM) - Wife of the Chairman

- Ms. Anjali Mody (AM) - Daughter of the Chairman

(iii) Enterprises over which persons or their relatives mentioned in (i) & (ii) above exercise significant influence:

- AZB & Partners (AZB)

- Freedom Registry Limited (FRL)

- Highstreet Cruises & Entertainment Private Limited (HCEPL)

- Delta Corp Ltd. (DCL)

(6) Employee Benefits

Disclosure required under Accounting Standard-15 (Revised 2005) for “Employee Benefits” are as under:

i) The Company has recognized the expected liability out of the Compensated Absence and Gratuity as at 31^st March, 2016 based on actuarial valuation carried out using the Project & Unit Credit Method.

ii) The below disclosure have been obtained from independent actuary. The other disclosures are made in accordance with Accounting Standard-15 (revised) pertaining to the Defined Benefit Plan is as given below:

7) Lease Rent Agreement

The Company has operating lease agreement for assets taken on lease. The aggregate lease rentals payable are charged as rent in the Statement of Profit and Loss Account.

8) Previous Year Comparatives

The previous year’s figures have been reworked, regrouped, rearranged, recanted and reclassified wherever necessary to conform to current year’s classification.

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Mar 31, 2015

1. Terms & Rights attached to Equity Shares The Company has only one class of equity shares having a par value of ` 10/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. This distribution will be in proportion to the number of equity shares held by the shareholders

2. The Company has obtained licenses under the Export Promotion Capital Goods (EPCG) Scheme for importing capital goods at concessional rates of custom duty.

Under the terms of the said scheme, the Company is required to earn foreign exchange value equivalent to 8 times of the CIF value of imports and / or the duty saved in respect of license where export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of 8 years from date of license of capital goods. The Export Promotion Capital Goods Schemes, Foreign Trade Policy 2009-14 as issued by the Central Government of India covers manufacturers, exports and service providers. Accordingly, in accordance with the Chapter 5 of Foreign Trade Policy -2009-14, the Company has to fulfill the specific export obligation against the said EPCG license. The pending export obligation for the year ended 31st March, 2015 is Rs. Nil and in USD Nil, [ (Previous Year Rs. Nil and in USD Nil] and further the average export obligation against the EPCG license pending for the year ended 31st March, 2015 of Rs.14,733.80 (Rs. '000) [(Previous Year of Rs.17,141.76 (Rs. "000)]

3. Segment Reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primary and secondary segment disclosures prescribed by Accounting Standard - 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, have not been provided in these financial statements as it is not applicable.

4. Debit & Credit balances of various parties are subject to confirmation/reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance Sheet at least at the value which is reasonably certain to recover in ordinary course of business.

5. On account of change in method of providing depreciation on tangible assets to comply with provision of Schedule II of the Companies Act, 2013, the depreciation is higher by Rs.5362.51 ('000)

6. Related Party Disclosures

(1) Related parties and transactions with them during the year as identified by the Management are given below:

(i) Key Management Personnel's:

* Mr. Chand Arora (CA) - Managing Director

* Mr. Ulhas Kale (UK) - CFO

(ii) Individuals owning directly/indirectly an interest in the voting power that gives them significant influence:

* Mr. Jaydev Mody (JM) - Chairman

* Mrs. Zia Mody (ZM) - Wife of the Chairman

* Ms. Anjali Mody (AM) - Daughter of the Chairman

(iii) Enterprises over which persons or their relatives mentioned in (i) & (ii) above exercise significant influence:

* AZB & Partners (AZB)

* Freedom Registry Limited (FRL)

* Highstreet Cruises & Entertainment Private Limited (HCEPL)

* Delta Corp Ltd. (DCL)

7. Employee Benefits

Disclosure required under Accounting Standard-15 (Revised 2005) for "Employee Benefits" are as under:

8. The Company has recognized the expected liability out of the Compensated Absence and Gratuity as at 31st March, 2015 based on actuarial valuation carried out using the Project & Unit Credit Method.

9. Contingent Liabilities and Commitments (to the extent not provided for)

(Rs. in '000)

Financial Year For the year For the year 31st March, 2015 31st March, 2014

i) The contingent CST liabilities on account of non receipt of "C"& "H" Forms is as follows:

FY 2002-2003(H Forms, case in High Court pending for decision) 715.23 715.23

FY 2012-2013 - 2,041.99

FY 2013-2014 2740.97 -

ii) Income Tax

A.Y2010-2011 (Appeal Pending before CIT Appeal) 164.49 -

TOTAL 3620.69 2757.22

iii) Commitments

Estimated amount of contracts remaining to be executed on 1249.79 2921.74 capital accounts and not provided for (Net of Advances)

10 Previous Year Comparatives

The previous year's figures have been reworked, regrouped, rearranged, recasted and reclassified wherever necessary to conform to current year's classification.

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Mar 31, 2014

A) The Company has obtained licenses under the Export Promotion Capital Goods (EPCG) Scheme for importing capital goods at concessional rates of custom duty.

Under the terms of the said scheme, the Company is required to earn foreign exchange value equivalent to 8 times of the CIF value of imports and / or the duty saved in respect of license where export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of 8 years from date of license of capital goods. The Export Promotion Capital Goods Schemes, Foreign Trade Policy 2009-14 as issued by the Central Government of India covers manufacturers, exports and service providers. Accordingly, in accordance with the chapter 5 of Foreign Trade Policy – 2009-14, the Company has to fulfill the specific export obligation against the said EPCG license. The pending export obligation for the year ended 31st March, 2014 is Rs. Nil and in USD Nil, [( Previous Year Rs. 2,196.73 (,000) and in USD 48.04 (''000)] and further the average export obligation against the EPCG license pending for the year ended 31st March, 2014 is Rs. 17,141.76 (''000) [(Previous Year of Rs. 23,330 ("000)]

The Company has also obtained Advance License on 7th March, 2012 under the Foreign Trade Policy 2009-14 as issued by the Central Government of India (FTP) for importing Raw Material i.e. Polyester Satin Tape at a free of custom duty. The said license was valid till 06/03/2014 to Import Raw Material i.e. Polyester Satin Tape up to 60,000 kgs however, the Company has imported material of 57,743 Kgs. only till license validity.

Under the terms of the said scheme, the Company is required to fulfill export obligation of Rs. 4 crores and import of 60,000 kgs of Raw Material. The said import has been fixed by the order of the Director General Foreign Trade, Ministry of Finance within a period of 2 years from date of license to import of raw material. The said export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance within a period of 3 years from date of License to export the finished goods product made out of imported raw material. Accordingly, in accordance with the Chapter 3 of Foreign Trade Policy - 2009-14, the Company has to fulfill export obligation. The pending export obligation for the year ended 31st March, 2014 is Rs. Nil [(Previous Year Rs. 13,600 (''000)].

b) segment reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/ woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primarily and secondary segment disclosures prescribed by Accounting Standard – 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, have not been provided in these financial statement as it is not applicable.

(e) Debit & Credit balances of various parties are subject to confirmation/reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance Sheet at least at the value which is reasonably certain to recover in ordinary course of business.

(f) Related Party Disclosures

(1) Related parties and transactions with them during the year as identified by the Management are given below: (i) Key Management Personnel''s and their Relatives:

a) Mr. Chand Arora-Managing Director (CA) (ii) Individuals owning directly/indirectly an interest in the voting power that gives them significant influence:

Mr. Jaydev Mody (JM)

Mrs. Zia Mody (ZM)

(iii) Enterprises over which persons or their relatives mentioned in (i) & (ii) above exercise significant influence:

AZB & Partners (AZB)

Freedom Registry Limited (FRL)

Highstreet Cruises & Entertainment Private Limited (HCEPL)

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Mar 31, 2013

(a) The Company has obtained licenses under the Export Promotion Capital Goods (EPCG) Scheme for importing capital goods at concessional rates of custom duty.

Under the terms of respective schemes, the Company is required to earn foreign exchange value equivalent to 8 times of the CIF value of imports and / or the duty saved in respect of license where export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of 8 years from date of license of capital goods. The Export Promotion Capital Goods Schemes, Foreign Trade Policy 2009-14 as issued by the Central Government of India covers manufacturers, exports and service providers. Accordingly, in accordance with the chapter 5 of Foreign Trade Policy –2009-14, the company have to fulfill export obligation pending for the year ended 31st March 2013 of Rs. 2,196.73 (''000) and in USD 48.04 (''000),[( Previous Year Rs. 21,489.40 (,000) and in USD 452.75 (''000)]

The Company has also obtained Advance License on 7th March 2012 under the Foreign Trade Policy 2009-14 as issued by the Central Government of India (FTP) for importing Raw Material ie. Polyester Satin Tape at a free of custom duty.

Under the terms of respective schemes, the Company is required to fulfill export obligation in Rs. 4 Crores. The said obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of 3 years from date of license. Accordingly, in accordance with the Chapter 3 of Foreign Trade Policy - 2009-14, the Company has to fulfill export obligation pending for the year ended 31st March, 2013 of Rs.13,600 (''000),[( Previous Year Rs. Nil (,000).]

(b) segment reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic/woven tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primarily and secondary segment disclosures prescribed by Accounting Standard – 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, have not been provided in these financial statement as it is not applicable.

(c) Debit & Credit balances of various parties are subject to confirmation/reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance Sheet at least at the value which is reasonably certain to recover in ordinary course of business.

(d) related party disclosures

(1) Related parties and transactions with them during the year as identifed by the management are given below:

(i) Key Management Personnel''s and their Relatives:

Mr. Chand Arora (CA) – Managing Director (ii) Individuals owning directly/indirectly an interest in the voting power that gives them significant influence:

Mr. Jaydev Mody (JM)

Mrs. Zia Mody (ZM) (iii) Enterprises over which persons or their relatives mentioned in (i) & (ii) above exercise significant influence:

AZB & Partners (AZB)

Aarti Management Consultancy Private Limited (AMCPL)

Aditi Management Consultancy Private Limited (AMCOPL)

Freedom Registry Limited. (FRL)

(e) Employee Benefts: -

Disclosure required under Accounting Standard-15 (revised 2005) for "Employee Benefits" are as under:

i) The Company has recognized the expected liability out of the Compensated Absence and Gratuity as at 31st March, 2013 based on actuarial valuation carried out using the Project Credit Method.

ii) The below disclosure have been obtained from independent actuary. The other disclosure are made in accordance with As-15 (revised) pertaining to the Defined Benefit Plan is as given below:

(i) Note on utilization of funds raised through Right Issue of Equity Shares during the year

During the F.Y.2011-12, The Company has raised Rs. 59,852.39 (''000'') through allotment of 54,41,126 shares of Rs.10 each at a price of Rs.11 per equity share to Promoters Group. The details of utilization of the above proceeds are as under:

f) contingent liabilities

(Rs. in ''000)

particulars march 31, 2013 march 31, 2012

2009-2010 371.93

2010-2011 716.58 1548.93

2011-2012 1,781.47

ToTal 2,498.05 1920.86

(g) The Company has reversed its earlier years Income Tax provision on the basis of Supreme Court''s judgment of CIT vs. Smifs Securities Ltd., where it is held that the goodwill created on amalgamation is an intangible asset eligible for depreciation. Accordingly, the Company has claimed depreciation on the Goodwill for earlier years and the excess provision of Income Tax made in the accounts have been reversed.

h) previous year comparatives

The previous year''s figures have been reworked, regrouped, rearranged, re casted and reclassified wherever necessary to confirm to current year''s classification.

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Mar 31, 2012

Note:

*Aryanish Finance and Investments Private Ltd, Bayside Property Developers Private Ltd and Delta Real Estate Consultancy Private Ltd are holding Equity shares in the capacity of trustees for Aarti J Mody Trust, Aditi J Mody Trust and Anjali J. Mody Trust, respectively.

a) Terms & Rights attached to Equity Shares

The Company has only one class of equity shares having a par value of Rs. 10/- per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. This distribution will be in proportion to the number of equity shares held by the shareholders.

Provision for doubtful debts

The Company periodically evaluates all customers dues. The need for provisons is assessed based on various factors include collectivity of specific dues, risk perceptions of the industry in which customer operates, general economic factors.

(a) The Company has obtained licenses under the Export Promotion Capital Goods (EPCG) Scheme for importing capital goods at a concessional rates of custom duty against submission of bank guarantee and bonds.

Under the terms of respective schemes, the Company is required to earn foreign exchange value equivalent to, or more than, eight times the CIF value of imports in respect of certain licenses and eight times the duty saved in respect of license where export obligation has been fixed by the order of the Director General Foreign Trade, Ministry of Finance as applicable within a period of eight years from date of import of capital goods. The export Promotion Capital goods schemes, Foreign Trade Policy 2009-14 as issued by the Central Government of India covers both manufacturers, exports and service providers. Accordingly, in accordance with the chapter 5 of Foreign Trade Policy -2009-14, the Company have to full fill export obligation pending for the year ended 31 st March, 2012 of Rs. 21,489.40 ('000) and in USD 452.75 ('000),[( Previous Year Rs. 69,694.37 (,000) and in USD 1,548.76 ('000)]

(b) Segment Reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primary and secondary segment disclosures prescribed by Accounting Standard - 17 (Segment Reporting) issued by the Institute of Chartered Accountants of India, have not been provided in these financial statement as it is not applicable.

(c) Debit & Credit balances of various parties are subject to confirmation / reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance Sheet at the value which is reasonably certain to recover in ordinary course of business.

(d) Related party Disclosures

1) Related parties and transactions with them during the year as identified by the Management are given below:

(i) Key Management Personnel's and their Relatives:

a) Mr. Chand Arora-Managing Director (CA)

b) Mrs.Indra Arora- Wife of Managing Director (IA)

(ii) Individuals owning directly/indirectly an interest in the voting power that gives them significant influence:

a) Mr. Jaydev Mody-Chairman (JM)

b) Mrs. Zia Mody(ZM)

(iii) Enterprises over which persons or their relatives mentioned in (i) & (ii) above exercise significant influence

a) AZB & Partners (AZB)

b) Aarti Management Consultancy Private Limited (AMCPL)

c) Aditi Management Consultancy Private Limited (AMCOPL)

d) Delta Corp Ltd (DCL)

e) Lark Enterprises (LE)

f) Freedom Registry Ltd. (FRL)

(g) Employee Benefits: -

Disclosure required under Accounting standard-15 (revised 2005) for "employee benefits"are as under:

(e) The Company has recognized the expected liability out of the compensated absence and Gratuity as at 31st March, 2012 based on actuarial valuation carried out using the Project Credit Method.

(f) Details of dues to Micro and Small Enterprises as defined under the MSMED Act,2006. Company has sent letters to suppliers to confirm whether they are covered under Micro, Small and Medium Enterprises Development Act 2006 as well as they have file required memorandum with the prescribed authorities. Out of the letters sent to the parties, some confirmations have been received till the date of finalization of Balance Sheet. Based on the confirmation received the detail of outstanding are furnished in the Notes.

(g) Previous Year comparatives

As notified by Ministry of Corporate Affairs, Revised Schedule VI under the Companies Act, 1956 is applicable to the Financial Statements for the financial year commencing on or after 1st April, 2011. Accordingly, the financial statements for the year ended March 31, 2012 are prepared in accordance with the Revised Schedule VI. The amounts and disclosures included in the financial statements of the previous year have been reclassified to conform to the requirements of Revised Schedule VI.

---

Mar 31, 2010

A) Contingent Liabilities

Claims against the Company not acknowledged as debts :

(Rupees in 000)

March 31, March 31,

Particulars 2010 2009

Bank Guarantees outstanding in favor of the Government 638.00 638.00

and other parties

Claims against the Company not acknowledged as debt Nil 5,028.28



b) During the year the Company has changed its accounting policy for Miscellaneous Expenditure to be in line with Accounting Standard 26 issued by The Institute of Chartered Accountants of India, due to which balance in Miscellaneous Expenditure is fully charged to profit and loss account. Had this change not taken place the Profit would have been higherby Rs. 3,369.11 (Rs. ‘000).

c) Segment Reporting

The Company is engaged in the business of manufacturing of textile woven labels, fabric printed labels and elastic tape primarily in India. As the Company primarily operates in a single segment, the reporting requirement of primarily and secondary segment disclosures prescribed by Accounting Standard - 17 (Segment Reporting) issued by The Institute of Chartered Accountants of India, have not been provided in these financial statement as it is not applicable.

d) Related Party Disclosures

(A) Related parties and transactions with them during the year as identified by the Management are given below:

(i) Key Management Personnel and their Relatives:

- Mr. Chand Arora - Managing Director (appointed from 01.10.2008)

- Mrs.Indra Arora-Wife of Managing Director

(ii) Individuals owning directly/indirectly an Interest in the voting power that gives them significant influence:

a) Mr. JaydevMody

b) Mrs.Zia Mody

(iii) Enterprises over which persons or their relative mentioned in i & ii above exercise significant influence:

- Delta Corp Limited

- Lark Enterprises

- AZB& Partners



e) Debit and Credit balance of various parties are subject to confirmations/reconciliation and consequent adjustments, if any. The Company is of the view that reconciliation(s), if any, arising out of final settlement of accounts with these parties is not likely to have any material impact on the accounts. Current Assets are stated in the Balance sheet at least at the value which is reasonably certain to recoverin ordinary courseof business.

f) Disclosure of Sundry Creditors under Current Liability is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006". Amount overdue as on 31st March 2010, to Micro, Small and Medium Enterprises on account of principle amount together with interest, aggregateto Rs. NIL (Previous Year: Rs. NIL).

g) Employee Benefits:

Disclosure required under Accounting Standard – 15 (revised 2005) for "employee benefits" are as under:

h) The Company has recognized the expected liability arising out of the compensated absence and Gratuity as at 31st March, 2010 based on actuarial valuation carried out using the Project Credit Method.

i) Previous Year Comparatives

The previous years figures have been reworked, regrouped, rearranged and reclassified wherever necessary.