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Directors Report of Brandhouse Retails Ltd.

Mar 31, 2012

The Directors have pleasure in presenting the Eighth Annual Report and Audited Accounts of the Company for the year ended 31st March, 2012.

FINANCIAL HIGHLIGHTS (Rs.In Lacs)

Particulars 2011-12 2010-11

Sales & Other Income 78,357 73,773

Expenditure towards sale including cost of sales 72,865 67,796

i Profit before Depreciation Interest and Taxation (PBDIT) 5,492 5,977

- Interest & Bank Charges 2,977 2,816

- Provision for Current Tax 702 690

Cash Profit for the Year 1,813 2,471

Depreciation/Amortisation 974 988

Income Tax for earlier years 147 (444)

Provision for Deferred Tax (Asset) (159) (86)

Profit After Taxation (PAT) 851 2,013

PAT brought forward from last year NiL Nil

Transferred to Debenture Redemption Reserve 23 2,013

PAT carried forward to next year 61 Nil

YEAR IN RETROSPECT

The Sales & Other Income for the year was Rs. 78,357 Lacs recording an increase of 6.21% over the previous year. Operating Profit for the year was Rs. 1,813 lacs against Rs. 2,471 lacs in the previous year. Lower margins in a challenging market affected the profits. This was on account of the fact that Rs.End of Season Sale' (where merchandise is offered at a discount) had to be made for extended period.

DIVIDEND

Your Directors do not recommend payment of dividend on equity capital for the year ended 31st March, 2012 in order to conserve resources for future development and growth.

OPERATING RESULTS AND BUSINESS

Market conditions, in line with the general trend were not very favourable during the year, especially for apparel. To ensure higher earnings, the company has focused on improving the key operational matrix which include better working capital rotation, higher per square foot sales, improving store ambience with a new look and overall focusing on consumer experience.

All the improvements undertaken in the last year revolved around the Customer and to better his/her experience at the store. With focus on retention and to increase the frequency of loyal customers, new merchandise is added on monthly basis. Newer categories with youth appeal were launched at stores supported by online marketing. All the stores are being refurbished with international standards aimed at delivering better experience to customers. The ground reality is that demand has not shrunk, but the Company has faced pressure on margins because of higher costs that cannot be passed on to the customer. The Company is responding by trying to become leaner and more efficient.

A portfolio comprising brands that cater to various demographic and psychographic profiles would act as an ideal impetus for creating presence in different geographies across India. Your Company's strategy of retailing brands with high awareness quotient and market pull would continue to augment growth and profits.

Brandhouse Oviesse Limited - Joint Venture with Oviesse, S.p.A.Italy

During the year under review, your Company's subsidiary, Brandhouse Oviesse Limited (BOL) extended its business operations by adding new stores in Amritsar, Surat and Aurangabad, to offer affordable Italian fast fashion for men, women and children under the brand "OVS" in the Indian market for branded readymade garments.

During the year, the Company invested in 1,61,73,989 equity shares of Rs. 10/- each of BOL. At present, your Company's equity participation in BOL is Rs. 2,898.10 Lacs for 2,89,81,030 equity shares of Rs. 10/- each representing 62.5% of BOL's total paid-up capital of Rs. 4,636.96 Lacs. The remaining 37.5% of the paid-up share capital of BOL is held by Oviesse

S.p.A. Italy.

Revenue From Operations of BOL for the year was Rs. 1,636.1 9 Lacs and Losses for the year was at Rs. 2,788.38 Lacs. The OVS brand is relatively new to the Indian market and therefore is yet to establish itself in the Indian context. Expenditure on expansion of activities and capex have affected the margins so far.

The brand's high fashion offering is getting increasing acceptance from the Indian youth. The expansion of the brand, fine- tuning of the merchandising strategy post customer data analysis and increased percentage of goods sourced from India will ensure that BOL shall soon attain the break even mark and move towards profitability in the near future.

DIRECTORS

Dr. A. C. Shah, Director and Chairman of the Audit Committee, passed away on 16th January, 2012 after a brief illness. The Directors have placed on record their appreciation for the guidance and support given by Dr. Shah during his tenure as the Board member.

Mr. Vijay Kalantri was appointed by the Board with effect from 13th February, 2012 pursuant to section 262 of the Companies Act, 1956, in the casual vacancy caused by the death of Dr. A.C. Shah.

During the year, Mr. Anish Modi resigned as Director upon withdrawal of nomination by India Debt Management Private Limited with effect from 15th September, 2011. For the vacancy so caused Mr. Susheel Kak, nominated by IDM was appointed by the Board. The Company has received the requisite notice from a member pursuant to Section 257 of the Companies Act, 1956 proposing the candidature of Mr. Susheel Kak for the office of Director.

In accordance with the provisions of the Companies Act, 1956 and Article 130 of the Articles of Association of the company, Mr. Denys Firth and Mr. Nitin. S. Kasliwal retire by rotation and being eligible, offer themselves for re-appointment.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956.

1. that in the preparation of the Annual accounts for the year ended on 31st March, 2012 the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

2. that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of profit of the company for the year.

3. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and preventing and detecting fraud and other irregularities; and

4. that the Directors have prepared the annual accounts for the year ended on 31st March, 2012 on a going concern basis.

DEPOSITS

Fixed deposits received from shareholders and public stood at NIL as on 31st March, 2012 (previous year Rs. NIL). The company does not have any fixed deposit scheme.

PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report. However as per the provisions of Section 219(1) (iv) of the Companies Act, 1956 the Reports and Accounts are being sent to the shareholders of the Company excluding the statement of employees under Section 217(2A) of the Companies Act. Any shareholder interested in obtaining a copy of the said statement may write to the Secretary at the Registered Office of the company.

CORPORATE GOVERNANCE

As required under clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance together with the Certificate from the Practicing Company Secretary regarding compliance of the provisions of the Corporate Governance forms part of this Directors' Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis forming part of this Directors' Report is attached.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your company has no activity relating to Conservation of Energy and Technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

During the year under review, the expenditure of your company in foreign exchange was Rs. 39.47 Lacs (Previous year Rs. 129.59 Lacs) and there was no earning in foreign exchange (Previous year NIL).

CONSOLIDATION OF ACCOUNTS

As required by Accounting Standards AS-21 and AS-23 issued by the Institute of Chartered Accountants of India (ICAI), the Audited Consolidated Financial Statements reflecting the consolidation of the Accounts of your Company with its subsidiary are annexed to this Annual Report.

AUDITORS

M/s. Haribhakti & Co., Chartered Accountants and M/s. Malpani & Associates, Chartered Accountants, the joint Statutory Auditors of the company hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. M/s. Haribhakti & Co. and M/s Malpani & Associates, the joint Statutory Auditors have furnished the required certificates under section 224(1B) of the Companies Act, 1956 regarding their eligibility for re-appointment as Statutory Auditors of the Company.

In respect of the observations made by the Auditors, please refer to notes to Financial Statements, Note 29 in respect of Standalone Financial Statements and Note 34 in respect of Consolidated Financial Statements which are self-explanatory and hence in the opinion of the Directors, do not require any further explanation.

ACKNOWLEDGEMENT

Your Directors wish to place on record their gratitude to the shareholders of the Company, Banks, Financial Institutions, valued Customers, suppliers and Business Associates for their support and confidence in the Company. Your Directors gratefully appreciate the co-operation and assistance extended by various Government Agencies and place on record their appreciation for unstinted co-operation and assistance extended to your Company by its employees at all levels.

On Behalf of the Board Nitin S. Kasliwal Chairman & Managing Director Place : Mumbai

Date: 30th May, 2012


Mar 31, 2010

The Board of Directors of your company have pleasure in presenting the Sixth Annual Report together with the Audited Accounts of your company for the year ended on 31st March, 2010.

FINANCIAL HIGHLIGHTS (Rs in Lacs)

Particulars 2009-10 2008-09

1 Turnover 65,746.07 55,234.91

2. Other Income 233.96 5.76

3. Profit from Operations (PBDIT) 5,874.78 4,117.96

Less: Interest 1,915.95 878.03

Less: Depreciation/Amortisation 856.04 827.57

4. Profit before Tax 3,102.79 2,412.36

Less : Provision for Current Tax 1,501.66 1,151.99

Less : Provision for Deferred Tax (19.74) (78.13)

5. Profit After Tax 1,620.87 1,338.50

6. PAT brought forward from last year - -

7. Transferred to Debenture Redemption Reserve 1,620.87 1,338.50

8. PAT carried forward to next year - -

YEAR IN RETROSPECT

The Net Sales/Income from operations for the financial year under review was Rs. 65,746.07 Lacs as against Rs. 55,234.91 Lacs for the previous financial year registering an increase of 19.03%. The Profit from ordinary activities before tax (after Interest and Depreciation charges) stood at Rs. 3,102.79 Lacs and the Profit after tax recorded at Rs. 1,620.87 Lacs for the financial year under review as against Rs. 2,412.36 Lacs and Rs. 1,338.50 Lacs respectively for the previous financial year, improving by 28.62% and 21.10% respectively.

DIVIDEND

Your Directors do not recommend payment of dividend on equity capital for the year ended 31st March, 2010 in order to build up reserves for future development and growth.

DEPOSITORY SYSTEM

As the members are aware, your companys shares are compulsorily tradeable in electronic form. As on 31st March, 2010, 87.9% of the companys total paid-up capital representing 4,71,16,607 shares were in dematerialized form. In view of the numerous advantages offered by the Depository system, members holding shares in physical mode are advised to avail of the facility of dematerialisation with either of the Depositories.

LISTING OF COMPANYS SHARES

Out of total 5,36,02,767 Equity Shares of Rs. 10/- each of the company, 5,19,94,195 Equity Shares were listed with the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited with effect from 27th March, 2009. The remaining 16,08,572 Equity Shares of the company, held by the Promoters of S. Kumars Nationwide Limited were listed with effect from 30th March, 2010.

OPERATING RESULTS AND BUSINESS

Your company completes its sixth successful year in the field of fashion retailing.

Performance of your company has endured on the back of strong foothold in the branded space with its presence across various segments of domestic retail markets. The recent market upsurge and improved customer sentiments have helped increase earnings during the year.

The widening store network of your company across key retail points in the country has given continuous revenue growth which has translated into stronger profit performance. As part of the strategy to enhance its earnings, the company has expanded its own store network with focus on improving the key operational matrix which include better working capital rotation, higher per square foot sales, improving store sales and well considered new store expansion. The retail space continues to offer abundant prospects in India for the company to maximize the benefit.

The company has an ideal blend of brands that cater to various preferences and price points enabling it to penetrate smaller cities with its budget brands and bigger cities with its premium, super-premium and luxury brands. Your company has adopted a strategy of offering brands that are already established and have a high degree of brand recall, thereby maximizing the success rate of a particular brand.

Joint Venture with Oviesse, S.p.A. Italy

During the year under review, your company promoted Brandhouse Oviesse Limited as its wholly owned subsidiary with initial paid-up capital of Rs. 5.00 Lacs pursuant to the Joint Venture Arrangement entered with Oviesse S.p.A. of Italy to launch the Italian fast fashion brand "Oviesse Industry" under single brand retail trade in India. On 12th May, 2010, 37,18,000 equity shares and 22,60,800 equity shares of Rs. 10/- each of Brandhouse Oviesse Limited representing 62.5% and 37.5% respectively of the paid-up capital of Rs. 603 Lacs of Brandhouse Oviesse Limited have been allotted to your company and to Oviesse S.p.A. in accordance with the Joint Venture Arrangement. The further capital infusion in Brandhouse Oviesse Limited would be made in accordance with the agreed Business Plan forming part of the Joint Venture Arrangement.

The Brand "Oviesse Industry" is set for its launch later this year with opening of stores in the major metro cities to provide affordable fast fashion for men, women and kids. As per the Business Plan, Brandhouse Oviesse Limited would set up 190 Oviesse stores across India over next 5 years. The joint venture for the first year will import the merchandise from Italy and thereafter will introduce local sourcing in a phased manner.

DIRECTORS

During the year, Mr. Tarun Joshi resigned as the Managing Director of the company. At the Board meeting held on 30th January, 2010 Mr. Nitin S. Kasliwal, the Chairman of the company was appointed as the Managing Director pursuant to section 269 and 316 of the Companies Act, 1956 for a period of three years with effect from 30th January, 2010 without any remuneration subject to approval from the shareholders and the Central Government.

In accordance with the provisions of the Companies Act, 1956 and Article 130 of the Articles of Association of the company, Mr. Denys Firth and Mr. Dara D. Avari retire by rotation and being eligible, offer themselves for re- appointment.

DIRECTORS RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 217(2AA) of the Companies Act, 1956.

1. that in the preparation of the Annual accounts for the year ended on 31st March, 2010 the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

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

3. that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and preventing and detecting fraud and other irregularities; and

4. that the Directors have prepared the annual accounts for the year ended on 31st March, 2010 on a going concern basis.

DEPOSITS

Fixed deposits received from shareholders and public stood at NIL as on 31st March, 2010 (previous year Rs. NIL). The company does not have any fixed deposit scheme.

PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975, as amended forms part of this Report. However, as per the provisions of Section 219(1) (iv) of the Companies Act, 1956 the Reports and Accounts are being sent to the shareholders of the company excluding the statement of employees under Section 217(2A) of the Companies Act. Any shareholder interested in obtaining a copy of the said statement may write to the Secretary at the Registered Office of the company.

CORPORATE GOVERNANCE

As required under clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance together with the Certificate from the Practicing Company Secretary regarding compliance of the provisions of the Corporate Governance forms part of this Directors Report.

MANAGEMENT DISCUSSION AND ANALYSIS

Management Discussion and Analysis forming part of this Directors Report is attached.

PROMOTER GROUP COMPANIES

As required under Clause 3(1)(e) of the Securities and Exchange Board of India (Substantial Acquisition of shares and Takeover) Regulations, 1997, persons constituting Group (within the meaning as defined in the Monopolies and Restrictive Trade Practices Act, 1969) for the purpose of availing exemption from applicability of the provisions of Regulation 10 to 12 of the aforesaid SEBI Regulations are detailed in Annexure A forming part of this Directors’ Report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTFLOW

Your company has no activity relating to Conservation of Energy and Technology absorption as stipulated in the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

During the year under review, the expenditure of your company in foreign exchange was Rs. 182.94 Lacs (Previous year Rs. 357.81 Lacs) and earning in foreign exchange was Rs. 222.56 Lacs (Previous year NIL).

CONSOLIDATION OF ACCOUNTS

The Audited Consolidated Financial Statements reflecting the consolidation of the Accounts of your Company with its subsidiary are annexed to this Annual Report.

AUDITORS

M/s. Haribhakti & Co., Chartered Accountants and M/s. Malpani & Associates, Chartered Accountants, the joint Statutory Auditors of the company hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. M/s. Haribhakti & Co. and M/s Malpani & Associates, the joint Statutory Auditors have furnished the required certificate under section 224(1B) of the Companies Act, 1956 regarding their eligibility for re-appointment as Statutory Auditors of the company.

In respect of observation made by the Auditors, please refer to Note No. 7 of Schedule 14 which is self-explanatory and hence in the opinion of the Directors, does not require any further explanation.

ACKNOWLEDGEMENT

Your Directors wish to place on record their grateful appreciation for the assistance, guidance and support provided by the customers, suppliers and other business associates. Your Directors also acknowledge the commitment and contribution of your companys employees at all levels and the shareholders.

On behalf of the Board

Place : Mumbai NITIN S. KASLIWAL

Date : 28th May, 2010 CHAIRMAN & MANAGING DIRECTOR

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