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Directors Report of Emtex Industries (India) Ltd.

Mar 31, 2011

To The Members of Emtex Industries (India) Limited

The Directors present herewith the Twenty Ninth Annual Report together with Audited Statements of Accounts of the company for the year ended 31st March 2011.

FINANCIAL PERFORMANCE Year ended Year ended 31.03.2011 31.03.2010 Sales and other Income 1545.29 2267.41

Gross Profit / (Loss) (224.32) 13.68

Less: Depreciation. 78.61 88.82

Net Profit/(Loss) before Tax (302.93) (75.14)

Provision for Tax 0.00 0.00

Net Profit / (Loss) After Tax (302.93) (75.14)

Less: Prior period adjustments / Extra Ordinary Items 0.07 1.06

(303.00) (76,20)

Add: Profit B/f from previous year (22764.09) (22687.89)

Profit/(Loss) available for appropriation (23067.09) (22,764.09)

APPROPRIATION

Balance carried forward to the Balance Sheet (23067.09) (22764.09)

DIVIDEND:

In view of the losses, your Directors regret their inability to recommend payment of any Dividend on the Equity Shares and Preference Shares for the year ended 31st March 2011.

BIFR:

On the reference made to the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) in 2002, the Board had declared your company sick under Section 3 (l)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985, vide its order of 4th January 2006.

The Company submitted a One Time Settlement (OTS) offer cum Draft Rehabilitation Proposal (DRP) for settlement of existing loans and rehabilitation of the unit. The offer has been accepted by the Operating Agency (OA), IFCI Ltd., Bank of Nova Scotia and Punjab National Bank. They have, also been paid in full and final settlement. The Redeemable Preference Shares subscribed by UTI, long overdue for redemption, were also taken on assignment by M/s. Invent Assets Securitization and Reconstruction Private Limited.

Dena Bank, Induslnd Bank and ARCIL, to whom our dues to State Bank of India were assigned, communicated their willingness to accept the offer through M/s. Pegasus Assets Reconstruction Pvt. Ltd. who manages this portfolio. But, in the absence of approval by the remaining secured creditors, the OTS/DRP had not been fully implemented. BIFR has again advised the Company to submit a revised DRP for considering rehabilitation of the unit.

When the OTS-cum-DRP is implemented, the company plans to raise Working Capital and funds for essential Cape, to enable the Company to revive operations in full swing and to generate profit over a period of time.

OPERATIONS:

There was no improvement in the business operations and turnover during the year, which is difficult without infusion of working capital funds. The company is managing its operations with job work' for third parties. When the revised rehabilitation cum OTS proposal is submitted to BIFR and got approved and implemented as mentioned above, working capital facilities can be " mobilized. Thereafter, the operational capability and efficiency of the unit' would improve significantly.

TEXTILE DIVISION:

The operations of textile division are now confined to job works. The demand for fabrics is now picking up in spite the overall slackness in the economy. There has been qualitative improvement in the products, reduction in the cost of operations to the extent possible.

CHEMICAL DIVISION: QUIMICA:

Our chemical division is out of operations for the past couple of years. The prices of essential raw materials like Phenol remain high, making economic operation of our Chemical Division impossible. We can consider revival of operations only when we are able to generate at least cash profit.

FUTURE OUTLOOK:

Textiles being an essential item of the necessities of daily life and considering the changing life styles demands can only go up. Moreover, your company has been specialized in cotton textiles, which are in great demand. Cotton textile is also preferred world over and the demand is insatiable. As your company is catering to this segment, the potential for growth is plenty. But we should be able to effectively tap the opportunities and grow. It is also a known fact that the industry earns substantial foreign exchange for the country and provides employment to millions of Indians directly and manifold others indirectly, apart from contributing substantially to the exchequer, at the Central, State or local levels.

In spite of the difficulties being faced by the company now, we are determined to go forward and withstand the vicissitude so as to consolidate on our strengths and win over the hurdles. We are taking every effort in this direction and hope to come out as winners the implementation of the OTS cum Rehabilitation Plan with the approval of the Hon'ble BIFR.

DIRECTORS:

During the year Mr. V. S. Nair, Nominee Director of IFCI has resigned from the Board of Directors consequent to settlement of company's use to IFCI, the Board of Directors placed on records its gratitude and appreciation for the valuable guidance he has provided to the Company.

Mr. Sunder Rangan and Mr. Ganesh Khemka, Directors of the Company retire by rotation at the forthcoming Annual General Meeting and being eligible, offers themselves for re-appointment.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements under section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2011, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that your 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 your Company at the end of the financial year and of the loss of your Company for the year under review;

(iii) that your Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities;

(iv) that, your Directors have prepared the accounts for the financial year ended 31st March, 20ll on a 'Going Concern' basis.

AUDITORS

M/s. N. G. Jain & Co., Chartered Accountants, Auditors of the Company holds office until the conclusion of the ensuing Annual General Meeting and being eligible, offered themselves for reappointment.

The Company has received a letter from them to the effect that their appointment if made would be within the prescribed limits u/s 224 (IB) of the Companies Act, 1956 and that they are not disqualified for such appointment within the meaning of Section 226 of the Companies Act, 1956.

PARTICULARS OF EMPLOYEES

Your Company has no employee whose remuneration details are required to be provided under the purview of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rule, 1975.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE ORNINGS AND OUTGO :

The particulars as required to be disclosed pursuant to Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosures of particulars in the report of Board of Directors) rules, 1988 are given in the Annexure -1 forming part of this report

ACKNOWLEDGEMENT:

Your Directors take this opportunity to express their sincere gratitude to the Operating Agency, IFCI and 'all ranks and institutional lenders for their support to the company and its rehabilitation plans and look forward to receiving their continued encouragement. Our business associates, creditors, suppliers and customers have shown great forbearance during our difficult times and we sincerely thank them. The Directors are also pleased to record their appreciation to the employees at all levels for' their devotion and commitment and acknowledge their valuable contribution.

For and on behalf of the Board

Shivprakash Makharis

Chairman

Place: Mumbai Dated: 22nd July, 2011


Mar 31, 2010

The Directors present herewith the Twenty Eight Annual Report together with Audited Statements of Accounts of the company for the year ended 31st March 2010.

FINANCIAL HIGHLIGHTS

Rs. in Lac

Particulars Year ended Year ended 31-03-2010 31-03-2009

Sales and other Income 2267.41 3878.43

Gross Profit/(Loss) 13.68 (230.42)

Less : Depreciation 88.82 134.36

Net Profit / (Loss) before Tax (75.14) (364.78)

Provision for Tax 0.00 1.32

Net Profit / (Loss) After Tax (75.14) (366.10)

Less : Prior period adjustments / Extra Ordinary Items 1.06 1305.48

(76.20) (1671.57)

Add: Profit B/f from previous year (22687.89) (21016.32)

Profit/(Loss) available for appropriation (22764.09) (22687.89)

APPROPRIATION

Balance carried forward to the Balance Sheet (22764.09) (22687.89)

DIVIDEND:

In view of the losses, your Directors regret their inability to recommend payment of any dividend on the Equity Shares and Preference Shares for the year ended 31st March 2010.

BIFR:

As our shareholders are aware, the company had made reference to the Honble Board for Industrial and Financial Reconstruction (BIFR) in 2002 and the Board had declared your company sick under Section 3 (1)(o) of the Sick Industrial Companies (Special Provisions) Act, 1985, vide its order of 4th January 2006.

The Company was then directed to submit Draft Rehabilitation Proposal (DRP) to consider rehabilitation of the unit. Accordingly, your company promptly submitted DRP cum One Time Settlement (OTS) offer for settlement of secured creditors comprising of banks and financial institutions, to the Operating Agency (OA), IFCI Ltd., appointed by BIFR in December, 2007. Since only two banks had agreed to this offer in spite of enhancing it as requested at the joint meetings of secured creditors convened by Operating Agency, it could not be implemented. With lapse of a long time and deterioration in the economic scenario over the period, the Strategic Investor withdrew their offer of support. BIFR was duly informed.

Your company then submitted a revised DRP cum OTS on 17/12/2009. It was considered at the Joint Meeting of lenders on 12/01/2010 and 04/02/10. As only few lenders accepted the revised offer, the meeting decided to request for Change of Management and permission to file suit. The BIFR on 8/2/2009 ordered issue of advertisement for Change of Management as per the request of secured creditors. The Operating Agency advertised on 12th March 2010 inviting offers for Change of Management by way of take over/merger/amalgamation/sale on going concern basis with or without some or all liabilities of the Company. But, as there was no bid at all, BIFR again advised the Company to submit revised DRP duly tied up for considering rehabilitation of the unit.

As no Investor was coming forward, the Company has arranged with M/s. Invent Assets Securitisation & Reconstruction Pvt. Ltd ( Invent), to take over the Companys liabilities to secured creditors by way of assignment of debts in terms of the revised OTS offer made by the Company. IFCI Ltd., the OA, readily accepted this offer in March 2010 and their dues have been fully discharged by M/s. Invent. The Redeemable Preference Shares subscribed by UTI, long overdue for redemption, were also taken on assignment by M/s. Invent.

Recently, Bank of Novo Scotia has also accepted payment of our dues to the bank in terms of the revised OTS offer from M/s. Invent by assigning their debt to them. The dues to State Bank of India are already assigned by them to ARCIL, managed by M/s. Pegasus Assets Reconstruction Pvt. Ltd. They also approved the OTS offer and the formalities to make payment to them are under way. Negotiations with other lenders are progressing. The Company is hopeful of getting all debts to banks and financial institutions settled in this manner. Thereafter, the company plans to raise Working Capital and funds for essential Capex, with the support of M/s. Invent who would stand by us to help us to take the operations of the Company to full swing and thus come to profit over a period of time.

OPERATIONS:

The company could not improve its business and turnover during the year, pending infusion of funds for rehabilitation of the company. The company has been carrying on business without working capital. Therefore, the company has been compelled to manage its operations with job work for third parties. On export front also, the company was not able to do business directly, though our contacts and marketing network remain intact. The company could make only minor capital expenditure which were unavoidable to carry on the operations uninterrupted. When the revised rehabilitation cum OTS proposal submitted to OA and BIFR is approved and payments are accepted as mentioned above and working capital facilities are tied up, the operational capability and efficiency of the unit would improve significantly. Your company is quite hopeful of raising additional funds required for capital expenditure and working capital requirements.

TEXTILE DIVISION:

The operations of the companys textile division are affected due to severe liquidity constraints. Therefore, during the year the company had focused only on the profitable items, besides improving efficiency and reduction of the input cost. As a result, though the top line of the company is affected, gross profit margin showed improvement. The demand for fabrics is going up and competition from the unorganized sector is getting reduced day by day. There has been qualitative improvement in the products, reduction in the cost of operations and the brand image of our products continued to receive ample notice.

CHEMICAL DIVISION: QUIMICA:

Owing to severe unhealthy competition from China and cheap imports from other international suppliers of Salicylic Acid and Methyl Salicylate, our chemical division was virtually driven out of operations. The prices of essential raw materials like Phenol have gone beyond economic operation of our Chemical Division. Out of sheer desperation, we had to close down this division a few years ago. We can consider revival of operations only when we are able to generate at least cash profit.

FUTURE OUTLOOK:

The importance of textiles, which is an integral part of the necessities of daily life, need not be over emphasized. Modern life styles and trends of fashion are ever changing, giving good stimulus to the demands for quality textiles. Your company is specialized in cotton textiles, though it can process any type of fabrics. Cotton textile is preferred world over and the demand is insatiable. As a unit catering to these demands to meet one of the necessities of life, stimulated by the fashion industry, Indian textile industry is poised for growth. Consequently, it has become one of the largest and important sectors in the Indian economy. Moreover, the industry earns substantial foreign exchange for the country, provides employment to millions of Indians directly and manifold others indirectly, apart from contributing substantially to the exchequer, whether at the Central, State or local level. Its contribution to overall Industrial production of the country is almost one-fifth of the total.

Such an important segment of our economy cannot be neglected. Whatever threats the company now faces are part of a passing phase. The Indian Textile Industry will flourish and if your company is able to withstand and consolidate our capabilities and marketing prowess, it would be victorious. Despite the stress and strain being faced by the industry and your company now, there is hope of prosperity for the industry and especially for your company. Strenuous efforts are being made to convert our dreams into reality, especially with the implementation of the Rehabilitation Plan with the approval of the Honble BIFR.

DIRECTORS:

Shri. D. T. Gokhe, Nominee Director of UTI has resigned from the Board of Directors consequent to settlement of companys dues to UTI. The Board of Directors placed on record its gratitude and appreciation for the valuable guidance he has been providing to the company. Shri Sundar Rangan. and Shri Ganesh Khemka, Directors of the Company, retire by rotation and being eligible, have offered themselves for re-appointment.

ACKNOWLEDGEMENT:

Your Directors take this opportunity to express their sincere gratitude to the Operating Agency, IFCI and all banks and institutional lenders for their support to the company and its rehabilitation plans and look forward to receiving their continued encouragement. Our business associates, creditors, suppliers and customers have shown great forbearance during our difficult times and we sincerely thank them. The Directors are also pleased to record their appreciation to the employees at all levels for their devotion and commitment and acknowledge their valuable contribution.

For and on behalf of the Board

Shivprakash Makharia

Place : Mumbai Chairman

Dated : 21st July 2010

 
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