Notes to Accounts of Flexituff Ventures International Ltd.

Mar 31, 2018

1 General Information

Flexituff International Limited (“the Company”) is engaged in the business of technical textile. Manufacturing units of the Company are located at Pithampur in Madhya Pradesh and at Kashipur in Uttarakhand. The Company is a public limited company domiciled in India and is incorporated under the provisions of the Companies Act. The Company is listed on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). The registered office of the Company is located at C-41 50, SEZ, Sector - 3, Pithampur, Madhya Pradesh- 454 775.

These financial statements were authorised for issue by the Board of Directors on 30 May 2018.

2 Significant accounting judgments, estimates and assumptions

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future years.

2.1 Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the year end date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

(a) Taxes

Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

(b) Defined benefit plans and other long term benefits (gratuity benefits and leave encashment)

The cost of the defined benefit plans and other long term benefits such as gratuity and leave encashment are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each year end.

The principal assumptions are the discount and salary growth rate. The discount rate is based upon the market yields available on government bonds at the accounting date with a term that matches that of liabilities. Salary increase rate takes into account of inflation, seniority, promotion and other relevant factors on long term basis.

(c) Intangible asset under development

The Company capitalises intangible asset under development for a project in accordance with the accounting policy. Initial capitalisation of costs is based on management’s judgement that technological and economic feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In determining the amounts to be capitalised, management makes assumptions regarding the expected future cash generation of the project, discount rates to be applied and the expected period of benefits.

(d) Foreign currency convertible bonds (FCCB)

FCCB issued by the company are converted into fixed number of equity shares for fixed price at the option of the holders at fixed rate of exchange. Hence, FCCB issued by the Company is Compound financial instrument and is accounted separately, recognising the liability and the equity components. Based on management estimate, the coupon rate at the time of issue of FCCB is same as coupon rate applicable to comparable liability that does not have an equity conversion option. On initial recognition, the fair value of liability component of FCCB is same as consideration received, resulting in nil equity component. Hence, entire FCCB is recognised as liability.

3 Standards (including amendments) issued but not yet effective

The standards and interpretations that are issued, but not yet effective up to the date of issuance of the financial statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

(a) Appendix B to Ind AS 21, Foreign currency transactions and advance consideration

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Companies (Indian Accounting Standards) Amendment Rules, 2018 containing Appendix B to Ind AS 21, Foreign currency transactions and advance consideration which clarifies the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income, when an entity has received or paid advance consideration in a foreign currency. The amendment will come into force from April 1, 2018. The Company is currently evaluating the requirements of amendments. The Company believe that the adoption of this amendment will not have a material effect on its financial statements.

(b) Ind AS 115- Revenue from Contract with Customers

On March 28, 2018, Ministry of Corporate Affairs (“MCA”) has notified the Ind AS 115, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers.

The standard permits two possible methods of transition:

(i) Retrospective approach - Under this approach the standard will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8- Accounting Policies, Changes in Accounting Estimates and Errors

(ii) Retrospectively with cumulative effect of initially applying the standard recognized at the date of initial application (Cumulative catch - up approach) The effective date for adoption of Ind AS 115 is financial periods beginning on or after April 1, 2018.

4 First-time adoption of Ind-AS

These financial statements are the first set of Ind AS financial statements prepared by the Company. Accordingly, the Company has prepared financial statements which comply with Ind AS applicable for year ending on 31 March 2018, together with the comparative year data as at and for the year ended 31 March 2017, as described in the significant accounting policies. In preparing these financial statements, the Company’s opening balance sheet was prepared as at 1 April 2016, being the Company’s date of transition to Ind AS. This note explains the principal adjustments made by the Company in restating its Indian GAAP financial statements, including the balance sheet as at 1 April 2016 and the financial statements as at and for the year ended 31 March 2017.

4.1 Exemptions availed on first time adoption of Ind AS

Ind AS 101, First-time Adoption of Indian Accounting Standards, allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has accordingly applied the following exemptions.

(a) Deemed Cost

The Company has opted para D7 AA and accordingly considered the carrying value of property, plant and equipment’s and Intangible assets as deemed cost as at transition date.

(b) Long term foreign currency monetary item

Ind AS 101 permits a first-time adopter to continue the accounting policy adopted for accounting for exchange differences arising from translation of long-term foreign currency monetary items recognized in the financial statements for the year ending March 31, 2017. The Company has opted to follow this exemption.

(c) Deemed cost of investment in subsidiary and limited liability partnership

The Company has opted para D14 and D15 and accordingly considered the Previous GAAP carrying amount of Investments as deemed cost as at the transition date.

4.2 Mandatory Exemption on first-time adoption of Ind AS

(a) Estimates

An entity’s estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with Indian GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 1 April 2016 and 31 March, 2017 are consistent with the estimates as at the same date made in conformity with Indian GAAP. The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under Indian GAAP:

- Impairment of financial assets based on expected credit loss model.

(b) Derecognition of financial assets and financial liabilities

The Company has applied the derecognition requirements of financial assets and financial liabilities prospectively for transactions occurring on or after 1 April, 2016 (the transition date).

(c) Classification and measurement of financial assets

Ind AS 101, First-time Adoption of Indian Accounting Standards, requires an entity to assess classification and measurement of financial assets (investment in debt instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS.

4.3 Reconciliations

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from previous GAAP to Ind AS required under Ind AS 101:

(a) Reconciliation of Balance sheet as at 1 April 2016 (Transition Date)

(b) Reconciliation of Balance sheet as at 31 March 2017

(c) Reconciliation of statement of profit and loss for the year ended 31 March 2017

(d) Reconciliation of Equity as at 1 April 2016 and as at 31 March 2017

(e) Reconciliation of total comprehensive income for the year ended 31 March 2017

The presentation requirements under previous GAAP differs from Ind AS, and hence, previous GAAP information has been regrouped for ease of reconciliation with Ind AS. The regrouped previous GAAP/ Indian GAAP information is derived from the Financial Statements of the Company prepared in accordance with previous GAAP.

(f) Notes to first-time adoption

(i) Processing cost incurred on Borrowings

Under the previous GAAP, processing cost incurred for borrowings related to qualifying assets are capitalised fully. Remaining processing cost are charged to profit and loss.

As required under the IND AS 109 transactions costs incurred towards origination of borrowings have been deducted from the carrying amount of borrowings on initial recognition. These costs are amortised over the tenure of the borrowing as interest expense, computed using the effective interest rate method corresponding effect being in Long term borrowings and to the extent attributable to Current maturity of long term debts. Transaction cost amortised are accounted as follows:

1) capitalised to the extent amortised till date assets is capitalised, in case it is related to qualifying assets

2) charged to profit and loss as interest expenses in all other case except for (1) above.

On transition to Ind AS, all processing cost incurred are amortised over the period of borrowings and the unamortised amount of processing cost (including unamortised processing cost under Indian GAAP reclassified from prepaid expenses) as at the date of the transition is adjusted from the carrying amount of borrowings. Under Ind AS, processing cost incurred for borrowing related to qualifying assets, amortised till the date of capitalisation are capitalised. The Company has already capitalised the processing cost, incurred for borrowing related to qualifying assets, as a part of the cost of the property, plant & equipment. As a consequence, to restate the carrying amount of loan in accordance with paragraph 10 of Ind AS 101, the carrying amount of the property, plant & equipment as at the date of the transition is reduced by the amount of unamortised processing cost till the date of capitalisation (net of cumulative depreciation impact). The difference between the adjustments to the carrying amount of loan and to property, plant & equipment, respectively is recognised in the retained earnings as at the date of the transition.

(ii) Derecognition of financial instruments

Under Indian GAAP, trade receivables derecognised by way of bills of exchange have been shown as contingent liability since there is recourse clause. Under Ind AS, the trade receivables have been restated with corresponding recognition of short term borrowings.

(iii) Security Deposits

Under Indian GAAP, interest-free security deposit are recorded at their transaction value. Under Ind AS, all financial assets are required to be recognized at fair value on initial recognition. Subsequently, these financial assets are carried at amortised cost using effective interest rate.

(iv) Deferred tax

Under previous GAAP, Minimum alternative tax (MAT) credit entitlement is disclosed under other non current/current assets as applicable. Under Ind AS, MAT credit entitlement is reclassified to Deferred tax. Further, Deferred tax is accounted on all Ind AS adjustments.

(v) Excise Duty

Under Previous GAAP, excise duty was netted off against sale of goods. However, under Ind AS, excise duty is included in sale of goods and is separately presented as expense on the face of the Statement of Profit and Loss. Thus, sale of goods under Ind AS has increased with a corresponding increase in expenses.

(vi) Defined benefit liabilities

Under Ind AS, remeasurements on defined benefit plans i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognised in other comprehensive income instead of profit and loss. Under the previous GAAP, these remeasurements were forming part of the profit and loss for the year.

(vii) Retained earnings

Retained earnings as at 1 April 2016 has been adjusted consequent to the above Ind AS adjustments

(viii) Statement of cash flows

No material impact on transition from Indian GAAP to Ind AS on the statement of cash flows.

(b) Rights, preferences and restrictions attached to shares

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

During the year ended March 31, 2018, the amount of per share dividend recognized as distributions to equity shareholders was Nil (March 31, 2017: 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. The distribution will be in proportion to the number of equity shares held by the shareholders.

As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

(d) No class of shares have been issued as bonus shares or for consideration other than cash by the Company during the period of five years immediately preceding the current year end.

(e) No class of shares have been bought back by the Company during the period of five years immediately preceding the current year end.

b. Terms of unsecured borrowing are as under

i Foreign Currency Convertible Bonds

As at 31 March 2018, the Company has two foreign currency convertible bonds aggregating USD 34 millions :

i)The Companyhas issued 9,000,5.34% foreign currencyconvertible bond ofUSD 1,000 each aggregating to USD 9 millions on 24 December 2013.The bonds are convertible atthe option ofbondholders into equityshares ofRs. 10 each fullypaid atthe conversion price of Rs. 230 per share, subject to terms of issue, with fixed rate of exchange of Rs. 61.86 equal to USD 1 on 30 January 2019.

ii) The Company has issued 25,000, 5.44% foreign currency convertible bond of USD 1,000 each aggregating to USD 25 millions on 26 April 2013. The bonds are convertible at the option of bondholders into equity shares of Rs. 10 each fully paid at the conversion price of Rs. 218 per share, subject to terms of issue, with fixed rate of exchange of Rs. 54.16 equal to USD 1 on 26 April 2018

ii Finance Lease obligation

The Company has obtained finance lease from TATA capital and Netsal Mashinen, AG Switzerland for purchase of plant and machinery at fixed rate of interest 13% and floating rate of Libor 2.5% respectively. The balance of TATA lease as on 31 March 2018 amounts to Rs. 82.65 (including current maturities of Rs.16.84) repayable in monthly installments up to September 2022 and of Netstal amounts to Rs.8.81 (classified entirely to current maturities).

iii Loan from others

Loan from other parties is repayable over a period ranging between 12 to 36 months and has rate of interest ranging from 14% to 17.5%.

c. Nature of security :

(i) Term Loans from banks amounting to Rs. 48.27 (31 March 2017: Rs. 176.90; 1 April 2016: Rs. 628.40) and term loan from other parties amounting to Rs. 1,304.07 (31 March 2017 : Rs. 2,131.58; 1 April 2016 : Rs. 189.17) are secured by equitable mortgage on all immovable fixed assets of the Company, hypothecation of the entire moveable machinery and other fixed assets and a second charge on all current assets of the company. Above Term loans are further secured by Personal Guarantee of Mr. Manish Kalani and corporate guarantee of M/s Kalani Industries Private Limited

(ii) Term Loan from other parties amounting to Nil (31 March 2017: 100.00; 1 April 2016: 200.00) is secured by pari passu first charge on all current assets and pari passu second charge on entire fixed assets and further secured by personal guarantee of Mr. Saurabh Kalani and corporate guarantee of Kalani Industries Private Limited.

(iii) Term loan from banks amounting to Rs. 4.03 (31 March 2017: Rs. 4.09; 1 April 2016: Rs. 4.53) and term loans from others amounting to Nil (31 March 2017: Rs. 0.45; 1 April 2016: Rs. 1.33) is secured by hypothecation of vehicles.

d. Period and amount of default:

The Company has made no defaults in the payment of principal or interest in the current period.

a. Terms and conditions of loans:

i. Outstanding loans from banks carry interest from 5% to 14% p.a., repayable on demand

ii. Outstanding loans other parties carry interest rate of 15% to 16% p.a., repayable within 30 to 91 days

b. Nature of security :

i. Outstanding loans are secured by first charge on all current assets viz. raw material, stores & spares, work-in-progress, finished goods and book debts & second charge on all fixed assets of the Company

ii. Outstanding loans are further secured by personal guarantee of Mr. Manish Kalani and corporate guarantee of M/s Kalani Industries Private Limited.

iii. Outstanding loans are further secured by personal guarantee of Mr. Saurabh Kalani, director of the Company

c. Period and amount of default:

The Company has made no defaults in the payment of principal or interest in the current period

5 Leases

Operating leases where Company is a lessee:

The Company has entered into lease transactions mainly for leasing of office premise for a period between 1 to 6 years. The terms of lease include terms of renewal, increase in rents in future periods, which are in line with general inflation, and terms of cancellation. The operating lease payments recognized in the Statement of Profit and Loss amount to Rs.36.99 (31 March 2017: 26.20) included in Note 37.

Finance leases where Company is a lessee:

The Company has finance leases and hire purchase contracts for various items of plant and machinery. Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net minimum lease payments (MLP) are, as follows:

6 Segment reporting

The Company’s operations predominantly relate to manufacturing of technical textile. The Chief Operating Decision Maker (CODM) reviews the operations of the Company as one operating segment. Hence no separate segment information has been furnished herewith.

The Company does not receive 10% or more of its revenue from transactions with any single external customer.

The amount of its revenue from external customers, broken down by location of its customers is shown in the table below:

7 Fair values of financial assets and financial liabilities

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The amortized cost using effective interest rate (EIR) of non-current financial assets/liabilities are not significantly different from the carrying amount and therefore the impact of fair value is not considered for above disclosure.

Financial assets that are neither past due nor impaired include cash and cash equivalents, security deposits, term deposits, and other financial assets.

8 Fair value hierarchy

The following is the hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

-Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

-Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset 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).

The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:

9 Financial risk management objectives and policies

The Company is exposed to various financial risks. These risks are categorized into market risk, credit risk and liquidity risk. The Company’s risk management is coordinated by the Board of Directors and focuses on securing long term and short term cash flows. The Company does not engage in trading of financial assets for speculative purposes.

(A) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings and derivative financial instruments.

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company exposure to the risk of changes in market interest rates relates primarily to the Company’s longterm debt obligations with floating interest rates.

The Company manages its interest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings. With all other variables held constant, the Company’s profit before tax is affected through the impact on floating rate borrowings, as follows:

(ii) Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating activities (when revenue or expense is denominated in a different currency from the Company’s functional currency).

Foreign currency sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in the foreign exchange rate, with all other variables held constant, of the Company’s profit before tax (due to changes in the fair value of monetary assets and liabilities).

(B) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk is primarily attributable to the Company’s trade and other receivables. The amounts presented in this standalone statement of financial position are net of allowances for doubtful receivables, estimated by management based on prior experience and their assessment of the current economic environment.

The Companymeasures the expected creditloss oftrade receivables and loan from individual customers based on historical trend,industry practices and the business environmentinwhich the entityoperates. Loss rates are based on actual creditloss experience andpasttrends. Based on the historical data, loss on collection of receivable is not material hence no additional provision considered.

(C) Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Processes and policies related to such risks are overseen by senior management who monitors the Company’s net liquidity position through rolling forecasts on the basis of expected cash flows.

10 Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders. The primary objective of the Company’s capital management is to maximize the shareholder value and to ensure the Company’s ability to continue as a going concern.

The Company has not distributed any dividend to its shareholders. The Company monitors gearing ratio i.e. total debt in proportion to its overall financing structure, i.e. equity and debt. Total debt comprises of non-current borrowing (including current maturrities from long term debts) and current borrowing of the Company. The Company manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

11 Previous year figures have been regrouped/ reclassified to confirm presentation as per Ind AS as required by Schedule III of the Act.

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Mar 31, 2016

(b) Rights, preferences and restrictions attached to shares

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

During the year ended March 31, 2016, the amount of per share dividend recognized as distributions to equity shareholders was Nil (March 31, 2015: Rs.1).

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. The distribution will be in proportion to the number of equity shares held by the shareholders.

Notes:

a. Term Loans from banks amounting to Rs. 628.40 (previous year: Rs. 970.23) and term loan from other parties amounting to Rs.189.17 (previous year: Rs. 236.85) are secured by equitable mortgage on all immovable fixed assets of the Company, hypothecation of the entire moveable machinery and other fixed assets (except specific equipment finance through GE Capital Services India) and a second charge on all current assets of the company. Above Term loans are further secured by Personal Guarantee of Shri Manish Kalani and corporate guarantee of M/S Kalani Industries Private Limited.

b. Term loans from other parties amounting to Nil (previous year: Rs 38.32) - (i) First and exclusive charge over Equipment financed through the Facility in accordance with the Deed of Hypothecation. (ii) Personal Guarantee of Mr. Manish Kalani. (iii) Corporate Guarantee of M/s Kalani Industries Private Limited.

c. Term Loan from other parties amounting to Rs. 200.00 (previous year: Nil) is secured by pari passu first charge on all current assets and pari passu second charge on entire fixed assets and further secured by personal guarantee of Mr. Saurabh Kalani and corporate guarantee of Kalani Industries Private Limited.

d. Term loan from banks amounting to Rs. 4.53 (previous year Rs. 6.32) and term loans from others amounting to Rs. 1.33 (previous year: Rs. 2.11) is secured by hypothecation of vehicles.

e. As at March 31, 2016, the Company has two foreign currency convertible bonds aggregating USD 34 million :

i) The Company has issued 9,000, 5.34% foreign currency convertible bond of USD 1,000 each aggregating to USD 9 million on December 24, 2013. The bonds are convertible at the option of bondholders into equity shares of Rs. 10 each fully paid at the conversion price of Rs.230 per share, subject to terms of issue, with fixed rate of exchange of Rs. 61.86 equal to USD 1 on January 30, 2019.

ii) The Company has issued 25,000, 5.44% foreign currency convertible bond of USD 1,000 each aggregating to USD 25 million on April 26, 2013. The bonds are convertible at the option of bondholders into equity shares of Rs. 10 each fully paid at the conversion price of Rs. 218 per share, subject to terms of issue, with fixed rate of exchange of Rs. 54.16 equal to USD 1 on April 26, 2018.

1. Current assets and loans and advance

In the opinion of the Board, the Current assets and loans and advances are approximately of the value stated, if realized in the ordinary course or business, except otherwise stated. The provision for all the known liabilities is adequate and not in excess of amount considered reasonably necessary.

2. Managerial remuneration receivable

Employee benefit expenses include Rs. 9.69 paid/payable during the year towards remuneration paid to one of its whole time director. The maximum remuneration payable under the provisions of section 197 read with Schedule V to the Companies Act, 2013 is Rs 6.41.The Company is in the process of obtaining necessary approval from shareholders for remuneration payable to one of its whole time director. Pending receipt of such approval, the excess remuneration amounting to Rs. 3.28 paid to one of its whole time director is held in trust by the said director, which is shown as recoverable under loans and advances.

3. MAT credit

The Company has an unexpired MAT credit entitlement amounting to Rs. 258.67 as at March 31, 2016 which is classified under current asset based on management’s estimation. The management believes that the unexpired MAT credit entitlement will be utilized in the near future.

4. Segment Information (AS 17)

As per Accounting Standard 17 on “Segment Reporting”, segment information has been provided under the Notes to Consolidated Financial Statement

5. Previous year figures

Previous year figures have been regrouped/ reclassified, where necessary, to conform to this year’s classification. As per our report of even date

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Mar 31, 2015

A. Contingent liabilities and commitments

i. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 397.03 million (Previous Year Rs. 275.57 million).

ii. Guarantee given by Banks on behalf of the Company for Rs. 73.45 million (Previous year Rs. 47.06 million).)

iii. On account of Letter of Credit for Rs. 131.21 million (Previous year Rs. 40.36 million).

iv. Foreign Bills Discounted with Bank Rs. 287.04 million (Previous year Rs. 225.33 million).

v. Corporate Guarantee given by the Company is as under:

Sr. Given in Given on Amount favour of behalf of

1 Governor of Nanofil Rs. 0.2 million Uttarakhand Technologies (Previous Year

Pvt.Ltd., Rs. 0.2 million)

Kashipur

v. Outstanding of Taxes on account of disputes are as follows:

(a) The company filed appeal before CIT(A) / ITAT and contested Income Tax demand for the A.Y. 2004-05, 2005-06 and 2006-07 for Rs.26.19 million, Rs.22.62 million 8j Rs. 6.03 million respectively and also contested TDS demand for the A.Y.2005-06 to 2007-08 Rs. 0.71 million.

(b) The Income Tax department has filed an appeal before the M.P.High Court, challenging the order of ITAT passed in favor of Company for the A.Y.2003-04. The amount of tax and penalty is Rs 6.57 million and Rs. 1.45 million respectively.

(c) The company has contested M.P.VAT/CST. demand for F.Y. 2006-07, 2007-08, 2008- 09, 2009-10, 2010-11,2011-12 % 2012-13 for Rs. 3.85 million, Rs. 1.96 million, Rs. 1.05 million, Rs. 4.38 million, Rs.0. 92 million, Rs. 0.65 million 8j Rs.0.99 million respectively and Entry Tax demand for F.Y. 2006-07, 2007-08, 2008-09, 2009-10 $ 2010-11 for Rs. 2.42 million, Rs.2.77 million, Rs. 4.62 million, Rs. 3.72 million 8j Rs. 0.37 million respectively as per legal opinion obtained.

(d) The company has contested VAT/CST Demand for FY 2010-11, 2011-12, 2012-13,2013-14 % 2014-15 for Rs 20.55 million, Rs 8.92 million, Rs. 6.81 million, Rs 4.0 million $ Rs.2.0 million respectively at Kashipur unit.

B. In the opinion of the Board of Directors the Current Assets, Loans and Advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

C. During the year the Company has booked amount of interest subsidy of Rs.7.91 million (Previous year Rs. 13.83 million) and the same has been credited in interest paid on term loan account.

D. Segment Information (AS-17)

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated Financial Statements

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Mar 31, 2014

A. CONTINGENT LIABILITIES AND COMMITMENTS :-

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.275.57 million (Previous Year Rs.318.02 million)

i. Guarantee given by Banks on behalf of the Company for Rs.47.06 million (Previous year Rs.79.78 million) iii. On account of Letter of Credit for Rs.40.36 million (Previous year Rs.139.98 million), iv. Foreign Bills Discounted with Bank Rs.225.33 million (Previous year Rs.354.97 million).

v. Claims against the Company/disputed liabilities not acknowledged as debts amounting to Rs. Nil (Previous year Rs.21.76 million) vi. Difference between the amount at which FCCB has been stated in the books and the amount of FCCB as calculated on the basis of rate of Foreign Currency on the date of reporting period Rs.174.74 million. (Previous year Nil)

vii. Corporate Guarantee given by the Company is as under

viii. Outstanding of Taxes on account of disputes are as follows- fa) The company filed appeal before CIT(A)/ITAT and contested Income Tax demand for the A.Y. 2004-05, 2005-06 and 2006-07 for Rs.17.14 million, Rs.1 5.39 million & Rs.6.03 million respectively and also contested TDS demand for the A.Y. 2005-06 to 2007-08 Rs.0.71 million

(b) The Income Tax department has filed an appeal before the M. P.High Court, challenging the order of ITAT passed in favor of Company for the A.Y.2003-04. The amount of tax and penalty is Rs.6.58 million and Rs.1.45 million respectively.

(c) The company has contested M.P.VAT/CST. demand for F.Y 2006-07,2007-08, 2008-09, 2009-10 & 2010-11 for Rs.3.85 million, Rs.1.96 million, Rs.1.06 million, Rs.4.38 million &Rs.0.92 million respectively and Entry Tax demand for F.Y. 2006-07,2007-08, 2008- 09, 2009-10 & 2010-11 forRs.2.41 million, Rs.2.77 million, Rs.4.62 million, Rs.3.72 million &Rs.0.38 million respectively as per legal opinion obtained

(d) The company has contested VAT/CST Demand for FY 2009-10, 2010-11 & 2011 -12 for Rs.1.74 million, Rs.23.30 million and Rs.7.82 million respectively at Kashipur unit.

D. During the year the Company has booked amount of interest subsidy of Rs.13.83 million (Previous year Rs.20.65 million) and the same has been credited in interest paid on term loan account.

E. During the year the Company has preferentially allotted 1902173 Equity shares of Rs.10/- each at a premium of Rs.220/- each through private placement to International Finance Corporation

F. The Company has fully disinvested from Satguru Polyfab Pvt. Ltd. on 02nd August 2013 hence it ceased to be subsidiary of the Company. Net loss on sale of investment of Rs.45.49 million considered in extra ordinary item

G. The Company has issued 5.44% Foreign Currency Convertible Bonds of USD 25.00 million to TPG Growth II SF Pte. Ltd. on 26th Apri 2013.As per the term of issue, the holder has an option to convert FCCBs into Equity Shares at a predetermined conversion rate of Rs.218/- per Equity Share on or before 5 years and one day.

H. Similarly Company has issued 5.34% Foreign Currency Convertible Bonds of USD 9.00 million to International Finance Corporation on 31st January 2014. As per the term of issue, the holder has an option to convert FCCBs into Equity Shares at a predetermined conversion rate of Rs.230/- per Equity Share on or before 5 years and one day.

Segment Information (AS-17)

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated

Financial Statements.

Names of related parties and description of relationship

1. Subsidiaries (i) Satguru Polyfab Pvt. Ltd. (till 02nd August 2013)

(ii) Flexiglobal Holdings Ltd., Cyprus- Wholly Owned Subsidiary (iii) Nanofil Technologies Pvt. Ltd.- Wholly Owned Subsidiary

2. Associates (i) Kalani Industries Pvt. Ltd

3. Key Management Personnel Mr. Saurabh Kalani, Mr. K K. Vijayvergiya and

Mr. Manoj Dwived

4. Relatives of Key Management Personnel Mrs. Padma Kalani,

Mr. Manish Kalani, Mr Kartikeya Kalani, Mr. Vinayak Kalani and Mrs. Kaushalya Vijayvergiya

K. Previous year figures are re-grouped or re-arranged to confirm to current year figures.

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Mar 31, 2013

A. CONTINGENT LIABILITIES AND COMMITMENTS :- i. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs.318.02 million (Previous Year Rs.57.43 million).

ii. Guarantee given by Banks on behalf of the Company for Rs.79.78 million (Previous year Rs.73.10 million).

iii. On account of Letter of Credit for Rs.139.98 million ( Previous year Rs.176.37 million).

iv. Foreign Bills Discounted with Bank Rs. 354.97 million ( Previous year Rs.329.51 million).

v. Claims against the Company /disputed liabilities not acknowledged as debts amounting to Rs.21.76 million ( Previous year Rs.30.70 million ).

vi. Corporate Guarantee given by the Company is as under :

vii. Outstanding of Taxes on account of disputes are as follows- (a) The company filed appeal before CIT(A) / ITAT and contested Income Tax demand for the A.Y. 2004-05, 2005-06 and 2006-07 for Rs.17.14 million, Rs.15.39 million & Rs.6.03 million respectively and also contested TDS demand for the A.Y.2005-06 to 2007-08 Rs.0.71 million.

(b) The Income Tax department has filed an appeal before the M.P.High Court, challenging the order of ITAT passed in favor of Company for the A.Y.2003-04. The amount of tax and penalty is Rs.6.58 million and 1.45 million respectively.

(c) The company has contested M.P.VAT. demand for F.Y. 2007-08 , 2008-09 & 2009-10 for Rs.1.96 million, Rs.1.06 million & Rs.4.30 million respectively and Entry Tax demand for F.Y. 2006-07 , 2007-08, 2008-09 and 2009-10 for Rs.10.86 million, Rs.1.68 million, Rs.2.90 million & Rs.3.51 million respectively as per legal opinion obtained.

(d) The company has contested VAT Demand for FY 2009-10, 2010-11& 2011-12 for Rs.0.10 million, Rs.2.75 million and Rs.7.82 million respectively at Kashipur unit.

B. In the opinion of the Board of Directors the Current Assets, Loans and Advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

C. During the year the Company has booked the amount of interest subsidy of Rs.20.65 million ( Previous year 23.08 million ) and the same has been credited in interest paid on term loan account.

D. During the year the Company has preferentially allotted 1227273 Equity share of Rs.10/- each at a premium of Rs.210/- each through private placement to TPG Growth II SF Pte. Ltd.

E. Insurance Claim pertaining to damage on 01.10.2012, to the factory premises at Kashipur including stock, building, plant & machinery etc Rs.13.96 million is provided. Claim from Insurer is yet to be settled, against which sufficient insurance coverage is available.

F. Segment Information (AS-17)

As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated Financial Statements.

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Mar 31, 2012

1.1 7554053 Shares out of the issued, subscribed and paid up share capital were allotted as Bonus Shares in the last five years by capitalisation of Securities Premium and Reserves (Previous year 7554053)

1.2 NIL Shares out of the issued, subscribed and paid up share capital were allotted on conversion of Fully convertible Debentures and exercise of warrants. (Previous year 5986492)

1.3 The Company has reserved issuance of 1075000 (Previous year 1075000) Options under Employees Stock Option Scheme (ESOP) 2011 for offering to eligible employees of the Company. The Company has granted 1068500 Options to the eligible employees at a price of Rs. 95/- per option. The options would vest over a maximum period of 5 years. During the year 2011- 12, 19700 options are exercised by the option holders (Previous year NIL).

Note 2

A. CONTINGENT LIABILITIES AND COMMITMENTS

i. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 57.43 million (Previous Year Rs. 8.47 million).

ii. Guarantee given by Bank on behalf of the Company for Rs.73.10 million (Previous year Rs. 30.38 million).

iii. Outstanding liabilities on account of Letter of Credit for Rs. 176.37 million (Previous year Rs. 53.05 million).

iv. Foreign Bills Discounted with Bank Rs.329.51 million ( Previous year Rs.77.95 million).

v. Forward purchase contracts remaining outstanding Rs. NIL against export sales (Previous year Euro 0.47 million and GBP 1.19 million ). The mark to market profit/(loss) of Rs.0.58 million (Previous year profit Rs.11.21 million) has been provided in the accounts.

vii. Outstanding of Taxes on account of disputes are as follows:

(a) The company filed appeal before CIT(A)/ITAT and contested the disputed Income Tax demand for the A.Y. 2004-05, 2005-06 and 2006-07 for Rs.17.13 million, Rs.15.39 million & Rs. 6.03 million respectively and also contested disputed of TDS demand for the A.Y.2005-06 to 2007-08 Rs.0.71 million .

(b) The company has contested disputed of M.P.C.T. demand for F.Y. 2005-06, 2007-08 & 2008-09 for Rs. 0.03 million , 1.96 million & 1.06 million respectively & Central Sales Tax demand for Rs. 1.96 million for the F.Y 2005-06 and Entry Tax demand for Rs. 1.67 million and 2.89 million for the F.Y 2007-08 and 2008-09 respectively as per legal opinion obtained.

(c) The company has contested disputed of Commercial Tax for FY 2010-11 for Rs 1.55 million at Kashipur unit.

viii. The Income Tax department has filed an appeal before the M.P.High Court, challenging the order of ITAT passed in favor of Company for the A.Y.2003-04. The amount of tax and penalty is Rs 6.58 million and 1.45 million respectively.

B. In the opinion of the Board of Directors the Current Assets, Loans and Advances have a value on realization in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

C. Earning per share (AS-20)

(a) Net Profit after Tax

(As per Profit / Loss Account) Number of fully paid up equity share

Rs. 343.60 million (Previous year Rs.274.36 million) 21731810 Equity Share of Rs. 10/- each (Previous year 17212110 EquityShares)

(b) Weighted average number of equity Shares outstanding during the year 19317368 Equity Shares

(Previous year 12650765 Equity shares)

(c) Effects of potential dilutive equity share

623292 Equity Shares

(Previous year 4078354 Equity Shares)

(d) Weighted average number of equity in computing diluted earning per share

19940660 Equity Shares

(Previous year 16729119 Equity Shares)

(e) Earning per share: – Basic [(a)/(b)]

Rs. 17.79

(Previous year Rs. 21.69)

– Diluted [(a)/(d)]

Rs. 17.23

(Previous year Rs. 16.40)

D. During the year the Company has booked the amount of interest subsidy of Rs.23.08 million (Previous year 11.07 million) and the same has been credited in interest paid on term loan account.

F. Insurance Claim pertaining to damage to the factory premises at Kasipur including stock, building, plant & machinery etc Rs 40.00 million (app.) is yet to be settled against which sufficient insurance coverage is available.The loss on account of this is provided in the books by valuation in case of inventory and repairs expenses in case of Plant & Machiney. Similar claim money stolen of Rs 2. 03 million is also yet to be settled against which sufficient insurance coverage is available. Loss of cash has been provided in the books.

G. Segment Information (AS-17) : As per Accounting Standard (AS) 17 on "Segment Reporting", segment information has been provided under the Notes to Consolidated Financial Statements.

Names of related parties and description of relationship:

1. Subsidiaries

(i) Satguru Polyfab Pvt. Ltd., Gandhidham- Subsidiary (ii) Flexiglobal Holdings Ltd., Cyprus- Wholly Owned Subsidiary (iii) Nanofil Technologies Pvt. Ltd.- Wholly Owned Subsidiary

2. Associates

(i) Kalani Industries Pvt. Ltd. (ii) Entertainment World Developers Limited,

3. Key Management Personnel Mr. Manish Kalani

4. Relatives of Key Management Personnel Mr. Saurabh Kalani

I. Prior period item :

The sum of Rs. NIL ( Previous year Rs. 4.42 million) MAT Credit debited to Other Expenses as Net Prior Period item.

J. Previous year figures are re-grouped or re-arranged to confirm to current year figures

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Mar 31, 2011

A. CONTINGENT LIABILITIES NOT PROVIDED FOR:

i. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 8.47 million (Previous Year Rs. 20.19 million)

ii. Guarantee given by Bank on behalf of the Company for Rs.30.38 million {Previous year Rs.25.60 million)

iii. Outstanding liabilities on account of letter of credit for Rs.53.05 million (Previous year Rs. 37.70 million).

iv. Foreign Bills Discounted with Bank Rs.77.95 million (Previous year Rs. 153.58 million).

v. Forward purchase contracts remaining outstanding equivalent to Euro 0.47 million and GBP 1.19 million against export sales (Previous year NIL). The marked to marked profit of Rs.11.21 million (Previous year Nil) has been provided in the accounts.

vi. Corporate Guarantee given by the Company is as under: Sr. GIVEN IN FAVOUR OF GIVEN ON BEHALF OF AMOUNT (Rs. in million)

1 Customs & Excise Department Entertainment World Developers Limited, Rs.4.55 million Mumbai (Previous Year Rs.4.55 million )

2 State Bank of Patiala Satguru Polyfab Pvt. Ltd., Gandhidham Rs.60.00 million (Previous Year Rs.60.00 million)

3 Governor of Uttarakhand Nanofil Technologies Pvt.Ltd., Kashipur Rs.0.20 million (Previous Year Nil)

vii. Outstanding of Taxes on account of disputes are as follows-

The company filed appeal before CIT(A)/ITAT and contested the disputed Income Tax demand for the A.Y 2004-05 and 2005- 06 for Rs.7.00 million & Rs.2.66 million respectively and also contested disputed of TDS demand for the A.Y.2005-06 to 2007- 08 Rs.0.71 million, A.Y.2009-10 Rs. 1.58 million and also contested disputed of M.P.Sales Tax demand for Rs. 0.02 million & Central Sales Tax demand for Rs. 1.96 million for the A.Y 2005-06 and Entry Tax demand for Rs. 1.68 million for the A.Y 2007- 08 as per legal opinion obtained.

viii. The Income Tax department has filed an appeal before the M.P.High Court, challenging the order of ITAT passed in favor of Company for the A. Y.2003-04. The amount of tax and penalty is Rs 6.58 million and 1.45 million respectively.

B. In the opinion of the Board of Directors the Current Assets, Loans and Advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

C. To company with the requirement of the Micro, Small and Medium Enterprises Development Act 2006, the company requested its suppliers to confirm whether they are covered as Micro, Small or Medium enterprises as is defined in the said Act. Based on the confirmation received, the Company has recognized them for the necessary treatment as provided under the Act, from the date of receipt of such confirmations and there is no default in payment to such enterprises as specified in the said Act, However, the amounts outstanding as well as interest applicable are insignificant and hence not separately discounted.

D. Out of 15,00,000 warrants issued to M/s. Kalani Industries Private Limited Indore on 10th January, 2008 @ Rs.118/- per warrant, 10,68,000 warrants (previous year 4,32,000 warrants) have been converted into equivalent number of fully paid-up equity shares during the year on receipt of unpaid amount.

E. 92 Nos. of Zero Percent Fully Convertible Debentures of Rs. 5.0 million each issued to M/s Clearwater Capital Partners (Cyprus) Limited, Cyprus are converted into 4486492 equity shares @102.53 per share during the year.

F. During the period the Company has booked the amount of interest subsidy of Rs.11.07 million (Previous year 23.31 million) and the same has been credited in interest paid on term loan account.

G. Segment Information (AS-17)

The Company is principally engaged in the business of Manufacturing of HD/PP Woven sacks and FIBC/Jumbo Bags. Accordingly there is no reportable segment as per Accounting Standard No. 17 issued by Institute of Chartered Accountant of India on segment reporting.

Notes :

1 The Cash Flow Statement has been prepared in indirect method with corresponding adjustment in Assets & Liabilities.

2 Cash & Cash Equivalents represent Cash & Bank Balances which are short-term in nature.

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Mar 31, 2010

A. CONTINGENT LIABILITIES NOT PROVIDED FOR:

i. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. 20.19 million (Previous Year Rs.9.07 million)

ii. Guarantee given by Bank on behalf of the Company for Rs. 25.60 million (Previous year Rs. 9.86 million)

iii. Outstanding liabilities on account of letter of credit for Rs. 37.70 million (Previous year Rs. 76.06 million).

iv. Foreign Bills Discounted with Bank Rs.153.58 million (Previous year Rs.241.73 million).

v. Forward purchase contracts equivalent to USD 11.23 million against import of raw material (Previous year NIL)

vii. Outstanding of Taxes on account of disputes are as follows- The company filed append before CIT(A) and contested the disputed Income Tax demand for the A. Y. 2003-04, 2004-05 and 2005-06 fir Rs. 2.10 milion, Rs. 7.00 milion & Rs. 2.66 milion respectively and also contested disputed M.P. Sales Tax demand for Rs. 0.02 milion and Central Tax demand for Rs. 1.96 milion for the A.Y 2005-06 as per legal opinion obtained.

B. In the opinion of the Board of Directors the Current Assets, Loans and Advances have a value on realisation in the ordinary course of business at least equal to the amount at which they are stated in the Balance Sheet.

C. To company with the requirement of the Micro, Small and Medium Enterprises Development Act 2006, the company requested its suppliers to confirm whether they are covered as Micro, Small or Medium enterprises as is defined in the said Act. Based on the confirmation received, the Company has recognized them for the necessary treatment as provided under the Act, from the date of receipt of such confirmations and there is no default in payment to such enterprises as specified in the said Act, However, the amounts outstanding as well as interest applicable are insignificant and hence not separately discounted.

D. Out of 15,00,000 warrants issued to M/s. Kalanii Industries Private Limited Indore on 10th January, 2088 @ Rs. 118/- per warrant, 2,09,000 partly paid-up warrants (previous year 2,23,000 warrants) have been converted into equivalent number of fully paid-up equity shares during the year on receipt of unpaid amount. Balance 10,68,000 share warrants are to be converted into equity shares prior to the fresh issue of equities to the public.

E. 92 Nos. of Zero Percent Fully Convertible Debentures of Rs. 5.0 million each issued to M/s Clearwater Capital Partner (Cyprus) Limited, Cyprus are pending for conversion mino equity shares.

F. During the year under review company has incorporated one wholly owned subsidiary in the name of Nanofil Technologies Private. Limited, Kashipur.

G. During the year the Company has written off earlier years' of Rs. 4.91 million depreciation on Plant & Machinery on account of receipt of capital subsidy of Rs. 18.50 million.

H. During the year the Company has received interest subsidy of Rs. 23.31 million and the same has been credited in interest paid on term loan account.

I. Segment Information (A5-17)

The Company is principally engaged in the business of Manufacturing of HD/PP Woven sacks and FIBC/Jumbo Bags. Accordingly there is no reportable segment as per Accounting Standard No. 17 issued by Institute of Chartered Accountant of _ India on segment reporting.

J. Previous year figures are re-grouped or re-arranged to confirm to current year figures.