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Directors Report of Garden Silk Mills Ltd.

Mar 31, 2015

Dear Shareholders,

The Directors hereby present the Thirty-sixth Annual Report on the business and operations of the Company, together with the Audited Statements of Accounts for the year ended 31st March, 2015.

Financial Results

The Company''s performance during the financial year ended 31st March, 2015 on standalone basis, as compared to the previous financial year, is summarized below.

(Rs in crores)

Particulars 2014-15 2013-14

Total Revenue 2648.44 3081.27

Earning before interest,depreciation and tax(EBIDTA) 116.62 66.69

Less: Finance Costs 183.24 158.22

Depreciation 76.13 92.37

Profit/(Loss)beforeTax (142.75) (183.90)

(Add)/Less:ProvisionforTax 0.00 (39.45)

Profit / (Loss) after Tax (142.75) (144.45)

Dividend

Considering the loss incurred by the Company, your Directors do not recommend any dividend on equity shares for the financial year 2014-15.

Transferto Reserve

In absence of distributable profits / earnings, it is not proposed to transfer any amount to reserves for the financial year 2014-15.

Nature of Business

The Company belongs to the GARDEN VARELI Group which is a leader in the Indian Textile Industry with particular strength in polyester filament based textiles, both yarn and fabric. The Company is also a leading player in polyester chips for both textile and film applications. The Company is known to be a differentiated producer of chips, Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY), Draw Texturised Yarn, Draw Warped Yarn, Draw Twisted Yarn, greige fabric, as well as printed and dyed fabric. The Company is a regular supplier of bright, cationic, micro denier, fine denier yarn, mother yarn and dope-dyed yarn in the market.

There was no change in the nature of business of the Company during the year under review.

Review of Operations

The Company''s standalone total revenue for the year 2014-15 was Rs. 2648.44 crore as compared to Rs. 3081.27 crore for the previous year, a decline of about 14%. The fall in sales was due to lower utilization rates due to excess capacity in the face of subdued market conditions. The entire industry operated at a lower utilization rate owing to a large capacity addition by the largest producer of PFY.

Despite lower revenues, the operating profit (earning before interest, depreciation and tax) for the year 2014-15 was higher at Rs. 116.62 crore as compared to Rs. 66.69 crore in the previous year. This was possible despite a challenging year that saw an oil-price driven crash in raw material prices leading to concomitant inventory losses and weak market sentiment. Our emphasis on increased product differentiation, along with record operational efficiencies, timely exports and careful working capital management helped us to remain competitive and improve our EBITDA. However, the high and increased interest cost resulted in another year of loss for the Company. The net loss for the year stood at Rs. 142.75 crore as compared to Rs. 144.45 crore in the previous year.

The sale of chips was lower at 102,031 MT for the year 2014-15 as compared to 124,620 MT in the previous year. The total sale of polyester filament yarn (PFY) was marginally lower at 149,222 MT as compared to 152,200 MT in the previous year.

The overall production of Chips was at 244053 MT during the year 2014-15 as compared to 266831 MT achieved in the previous year. Whereas the production of PFY during the year was higher at 152275 MT as compared to 148949 MT in the previous year. In the weaving segment, grey cloth production for the year 2014-15 was higher at 292.89 lacs mtrs as compared to 275.86 lacs mtrs. during the previous year. The Company had to curtail the production during the year to avoid inventory losses due to volatility of prices of raw material as well as finished goods. Production was also hampered by a shortage of PTA due to plant maintenance by local PTA suppliers in the early part ofthe financial year.

Your Company''s performance was assisted by never-before achieved operational efficiency, first quality production and wastage levels across its yarn plants. Coal, which is the major fuel for the company reduced in price by over 8% during the year. This, coupled with increased substitution of gas with coal was a major cause of cost reduction across our chips and yarn divisions.

Owing to the over-competitive local market, the company also increasingly focussed on the international market. Subsidiaries and their financial position

During the year under review, GAIA International FZE, Wholly Owned Overseas Subsidiary was incorporated on 8th July, 2014. The subsidiary commenced its operation during the year 2014-15. The subsidiary achieved a turnover ofRs. 333.29 Lacs and incurred net loss of Rs. 20.09 Lacs for the year ended 31st March, 2015.

Garden Exim Pte Ltd, another Wholly Owned Overseas Subsidiary was incorporated on 23rd October, 2014. The subsidiary has not commenced its operation during the year 2014-15. The subsidiary incurred net loss ofRs. 4.74 Lacs for the year ended 31st March, 2015.

The consolidated total revenue of the Company for the year 2014-15 was Rs. 2648.69 crore. The operating Profit (earning before interest, depreciation and tax) was at Rs. 116.60 crore. The loss for the year 2014-15 was Rs. 143 crore.

Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing the salient features of the financial statements of the Company''s Subsidiaries (in Form AOC-1) is forming part of the Consolidated Financial Statements. Pursuant to Section 136 of the Companies Act, 2013 ("the Act") the Company is exempted from attaching to is Annual Report, the Annual Report ofthe Subsidiary Company.

The financial statement of the subsidiary company is kept open for inspection by the shareholders at the Registered Office of the Company. The Company shall provide the copy of the financial statement of its subsidiary company to the shareholders upon their request free of cost. It is also available on the website of the Company.

The financial year 2014-15, being the first year that consolidated financial statement are presented, comparative figures for the previous year have not been presented in accordance with the transitional provisions of AS-21 consolidated financial statement.

Changes in Share Capital

During the year under review, your Company allotted 1,949,860 equity shares ofRs. 10 each fully paid up at a premium of Rs. 25.90 per share to the promoters / promoter group on exercise of option for conversion ofthe 1,487,147 0.001% Optionally Convertible Cumulative Preference Shares (OCCPS) issued on preferential basis pursuant to the SEBI (ICDR) Regulation, 2009. As a result of such allotment, the paid up equity share capital of the Company increased from 40132665 equity shares of Rs. 10 each aggregating to Rs. 40,13,26,650 to 42082525 equity shares of Rs. 10 each aggregating to Rs. 42,08,25,250.

During the year under review, the Company has not issued shares with differential voting rights, nor granted stock options nor sweat equity. As on 31st March, 2015, the shareholding of the Directors in the Company has been disclosed in the Corporate Governance Report which forms part ofthis report.

Disclosures in respect of voting rights not directly exercised by employees.

There are no shares held by trustees for the benefit of employees and hence no disclosure under Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014 has been furnished.

Public Deposits

During the year under review, your Company did not accept any deposits in terms of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014. As on April 1, 2014, no amounts were outstanding which were classified ''Deposits'' under the applicable provisions of Companies Act, 1956 and hence the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Companies Act, 2013 is not applicable.

Directors

Induction

On the recommendations of the Nomination and Remuneration Committee, the Board appointed Shri Sunil S. Sheth as an Independent Director of the Company with effect from 13th August, 2014. Shri Sunil Sheth had a long tenure as Member of the Board and retired by rotation at the AGM held on 30th July, 2014 and did not seek re-appointment. However, in the interest of maintaining continuity and providing guidance during challenging time, the Nomination and Remuneration Committee and the Board of Directors of the Company requested Shri Sunil Sheth to accept the Board position once again. Shri Sheth accepted the request. We seek your support in confirming the appointment of Shri Sunil Sheth in the ensuing AGM.

Smt. Anita Mandrekar was appointed as an Additional Directors (Independent) on the Board with effect from 30th May, 2015 respectively. We seek your confirmation for her appointment as Independent Directors for a term up to 5 (five) consecutive years i.e. from the date ofthe 36th AGM ofthe Company on non-rotational basis.

The resolutions seeking approval of the Members for the appointment of Shri Sunil S. Sheth and Smt. Anita Mandrekar have been incorporated in the Notice ofthe ensuing Annual General Meeting ofthe Company along with brief details about them. The Company has received notice under Section 160 of the Companies Act, 2013 along with the requisite deposit proposing the appointment of Shri Sunil S. Sheth and Smt. Anita Mandrekar.

The Independent Directors of the Company have declared that they meet the criteria of Independence in terms of Section 149(6) of the Companies Act, 2013 and that there is no change in their status of independence.

Resignation

During the year under review, Shri Madanlal Lankapati, independent Director resigned from the Board of Directors ofthe Company with effect from 30th March, 2015. The Board of Directors wish to place on record their appreciation for the contribution made by Shri Lankapati to the Board and the Company during his tenure as a Director.

Re-appointments

Pursuant to the provisions of Section 152 of the Companies Act, 2013, Shri Alok P. Shah (DIN: 00218180) will retire at the ensuing Annual General Meeting, and being eligible, seek re-appointment. The Board recommends his re-appointment.

The Companies Act, 2013, provides for the appointment of Independent Directors. Sub-section (10) of Section 149 of the Companies Act, 2013 provides that Independent Directors shall hold office for a term of up to five consecutive years on the board of a company and shall be eligible for re-appointment on passing of a special resolution by the shareholders of the Company. Accordingly, all the Independent Directors except for Shri Sunil Sheth who was appointed as additional Director on 13th August, 2014 were appointed by the shareholders at the general meeting held on 30th July, 2014. Further, sub- section (13) of Section 149, provides that the provisions of retirement by rotation as defined in sub-section (6) and (7) of Section 152 of the Companies Act, 2013 shall not apply to such IDs. Hence, none of the Independent Directors retire at the ensuing AGM.

During the year, the non-executive directors of the Company have no pecuniary relationship of transactions with the Company.

Key Managerial Personnel

At the Board Meeting held on 28th May, 2014 Mr. Praful A. Shah, Managing Director, Mr. Alok P. Shah, Joint Managing Director and CFO and Mr. Kamlesh B. Vyas, Company Secretary and Compliance Officerwere designated as "Key Managerial Personnel" of the Company pursuant to Section 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance and that of its committees viz. Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee and that of the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Nomination and Remuneration Policy

The Board has adopted, on recommendation of the Nomination and Remuneration Committee, a policy for selection and appointment of Directors, Senior Management and their remuneration.

The details pertaining to criteria for determining qualifications, positive attributes, independence of a Director, remuneration policy and other related matters have been provided in the Corporate Governance Report and also posted on the website of the Company, www.gardenvareli.com.

Declaration by Independent Directors

As per the provisions of Section 149 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement, there were three Non-Executive Independent Directors - Shri Arunchandra N. Jariwala, Shri J. P. Shah and Shri Yatish Parekh. The Company has received the necessary declaration from each Independent Directors in accordance with Section 149(7) ofthe Companies Act, 2013, that he/she meets the criteria of independence as laid out in the sub section (6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Further the two new Additional Directors appointed by the board of Directors ofthe Company have also submitted similar Declarations.

Directors'' Responsibility Statement

Pursuant to Section 134(5) ofthe Companies Act, 2013, the Board of Directors ofthe Company, to the best of their knowledge and ability, confirm that:

i. in the preparation ofthe annual accounts, the applicable accounting standards have been followed and there are no material departures;

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

iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively;

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

Extract ofAnnual Return

Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, Extract of the Annual Return in Form MGT-9, for the financial year ended 31st March, 2015 made under the provisions of Section 92(3) of the Act is attached as Annexure F which forms part of this Report.

Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013

During the year under review, your Company has invested in 1 Equity Share of GAIA International FZE, Dubai of 185000 AED equivalent to Rs. 30.26 Lacs and 10000 Equity Shares of Garden Exim Pte Ltd, Singapore of 1 USD equivalent to Rs. 6.24 Lacs towards share capital of the subsidiaries.

Corporate Governance

The report on Corporate Governance and the certificate from the Statutory Auditors regarding compliance with the conditions of Corporate Governance have been furnished in the Annual Report and forms part of the annual report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Energy conservation is a key component of the Company''s continuous improvement program. Power, heat and steam are key inputs for the Company requiring careful and prudent management across levels in the organization. During the year under review, there was no major capital investment on energy conservation equipment.

The particulars as required under the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 in respect of Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are furnished in Annexure A to this Report.

Particulars of Employees and Related disclosure

The information as required under the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out in Annexure G hereto, which forms part of this report. As on 31st March, 2015 there were 5639 permanent employees.

Statutory Auditors:

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s Natvarlal Vepari & Co., Chartered Accountants, the Statutory Auditors of the Company, hold office upto the conclusion of this Annual General Meeting. However, their appointment as Statutory Auditors of the Company is subject to ratification by the Members at every Annual General Meeting.

The Company has received confirmation from the firm regarding their consent and eligibility under Sections 139 and 141 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 for appointment as the Auditors of the Company.

As required under Clause 41 of the Listing Agreement, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India.

The Audit Committee and the Board of Directors have recommended the appointment of the Auditors for the financial year 2015-16. Necessary resolution for ratification of appointment of the said Auditors is included in the Notice ofAnnual General Meeting for seeking approval of members.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with notifications / circulars issued by the Ministry of Corporate Affairs from time to time and as per the recommendation of the Audit Committee, the Board of Directors at their meeting dated 28th May, 2014, appointed M/s Manubhai & Associates, Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2014-15.

In respect of Financial Year 2015-16, the Board, based on the recommendation of the Audit Committee, has approved the appointment of M/s Manubhai & Associates, Cost Accountants, as the Cost Auditors of the Company. A resolution for ratification of the payment to be made for such appointment is included in the notice of the ensuing Annual General Meeting.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed M/s K. Dalai & Co., a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the year 2014-15. The report of the Secretarial Auditor is annexed to this report as Annexure D which is self explanatory and give complete information.

Comments on the Auditors Report

The Audit Report on the financial statements for the year ended on 31st March, 2015 and observations/comments/remarks etc. made by statutory auditors of the Company read with the Notes to Financial Statements are self-explanatory.

With regard to the observation made by the Auditors at Point No.ix of the Annexure to the Auditors'' Report regarding the delay in payment of interest for the quarter January-March, 2015, we would like to inform that the same has been paid during the quarter April-June 2015.

Internal Auditors

Pursuant to the provisions of Section 138 of the Companies Act, 2013, the Board of Directors of the Company has appointed Shri Piyush Patel, Chartered Accountant (ICAI Membership No.116769) as Internal Auditor of the Company. The audit committee of the Board of Directors in consultation with the Internal Auditor formulates the scope, functioning, periodicity and methodology for conducting the internal audit.

Related Party Transactions

The Company has formulated a policy on dealing with Related Party Transactions. The policy is disclosed on the website of the Company. All transactions entered into with Related Parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on arm''s length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. During the year, the Company had not entered into any contracts / arrangements / transactions with related parties which can be considered as material in nature. The related party transactions are disclosed under Note 30 of the Note to Financial Statements for the financial year 2014-15.

Disclosure of orders passed by the regulators or courts or tribunal

No significant and material orders have been passed by any Regulators or Court or Tribunal which can have an impact on the going concern status and the Company''s operations in future.

Corporate Social Responsibility Committee

The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR committee was constituted by the Board of Directors of the Company comprising of three directors including Independent Directors.

The Company has incurred loss during the last three financial years, therefore the provisions with respect to amount to be spent towards the CSR activity is not applicable. However, the Company has voluntarily incurred expenditure on CSR related activity during the year. The details in terms of the Companies (Corporate Social Responsibility Policy) Rules, 2014, are appended to this Report as Annexure B .

Audit Committee

An Audit Committee is in existence in accordance with the provisions of Section 177 of the Companies Act, 2013. The Audit Committee of the Company comprises of four Independent Directors. The composition of directors and other details are provided in the Corporate Governance Report of the Company. During the year, there were no instances where the Board has not accepted the recommendation ofthe Audit Committee.

Nomination and Remuneration Committee

A nomination and Remuneration Committee is in existence in accordance with the provisions of sub-section (3) of Section 178 Kindly refer section on Corporate Governance, under the head, ''Nomination and Remuneration Committee'' for matters relating to constitution, meeting, functions of the Committee and the remuneration policy formulated by this Committee.

Risk Management Policy

The Board of Directors of the Company has formed a risk management policy to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. It regularly analyses and takes corrective actions for managing / mitigating the same. The audit committee has additional oversight in the area of financial risks and controls. Your Company''s risk management framework ensures compliance with the provisions of Clause 49 of the Listing Agreement. The details of Risk Management as practiced by the Company forms part of the Corporate Governance Report.

Insurance

The properties and insurable interests of your Company like buildings, plant and machinery, stocks etc. are adequately insured by the Company.

Finance

Your Company has repaid / prepaid Secured Rupee Term Loan availed from banks / financial institutions, to the tune of Rs. 207.13 Crore during the year. The Company also availed term loan aggregating to Rs. 33.05 Crore from the banks / financial institutions during the year.

Cash and cash equivalent as at March 31, 2015 was Rs. 45.37 crore. The Company continues to focus on judicious management of its working capital. Receivables, Inventories and other working capital parameters were kept under strict check through continuous monitoring. The working capital requirement of the Company continues to be funded by a consortium of banks led by Bank of Baroda.

The Company has also taken steps to refinance some of its loans at a lower interest rate with the support of its bankers.

Your Company has entered into a Long Term Advance Payment and Supply Agreement (ASPA) with one of its export customers. Under the ASPA, your Company has received Long Term Advances against Exports to the tune of USD 66.48 Million which will be adjusted against exports to that Customer over 10 years.

Payment of remuneration / commission to Directors from holding or subsidiary companies

None of the managerial personnel i.e. Managing Director and Whole Time Director/s of the Company are in receipt of remuneration / commission from the holding or subsidiary company of the Company.

Meetings ofthe Board

During the year, 6 Board Meetings and 4 Audit Committee Meetings were convened and held. Directors actively participated in the meetings and contributed valuable inputs on the matters brought before the members from time to time. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and as per Clause 49 of the Listing Agreement. The details of the meetings are furnished in the Corporate Governance Report.

Independent Directors'' Meeting

In compliance with the requirements of Schedule IV of the Companies Act, 2013 and Clause 49(II)(B)(6) of the Listing Agreement a meeting ofthe Independent Directors was held on 18th March, 2015, without the participation ofthe Executive Directors or management personnel. The Independent Directors carried out performance evaluation of Non-Independent Directors and the Board of Directors as a whole, performance of Chairman of the Company, the quality, contents and timelines of flow of information between the Management and Board, based on the performance evaluation framework of the Company.

The criteria for performance evaluation have been detailed in the Corporate Governance Report forming part of this report. Familiarisation programme for Independent Directors

Pursuant to the provisions of Clause 49 ofthe Listing Agreement, the Company has formulated a programme for familiarizing the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature ofthe industry in which the Company operates, business model ofthe Company etc. through various initiatives. Quarterly updates on relevant statutory changes encompassing important laws are regularly circulated to the Directors.

The detail of such familiarization programmes for Independent Directors are posted on the website of the Company at www.gardenvareli.com.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The Company has constituted an Internal Complaint Committee (''ICC'') as required by the said Act with 3 members of which 2 members as the employees and 1 member representing NGO. The Company is strongly opposed to sexual harassment and employees are made aware about the consequences of such acts and about the constitution of ICC. During the year under review, no complaints were tiled with the Committee under the provisions of the said Act.

Material Subsidiary

During the year ended 31st March, 2015, the Company does not have any material listed / unlisted subsidiary companies as detined in Clause 49 of the Listing Agreement. The details of the policy on determining material unlisted subsidiary of the Company is available on the Company''s website www.gardenvareli.com.

Disclosures under Section 134(3)(l) ofthe Companies Act, 2013

There were no material changes and commitment which could affect the Company''s tinancial position have occurred between the end oftinancial year ofthe Company and the date ofthis Report.

Vigil Mechanism /Whistle Blower Policy

Pursuant to Section 177(9) ofthe Companies Act, 2013 read with Rule 7 ofthe Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 ofthe Listing Agreement, the Board of Directors had approved the Policy on Vigil Mechanism / Whistle Blower and the same was hosted on the website ofthe Company.

Your Company hereby affirms that no Director / employee has been denied access to the Chairman ofthe Audit Committee and that no complaints were received during the year. Brief details about the policy are provided in the Corporate Governance Report attached as Annexure B to this Report and also available on the Company''s website www.gardenvareli.com.

Unclaimed and Unpaid Dividends

As on 31st March, 2015 an aggregate amounts of Rs. 48.97 Lacs is lying in the unpaid equity dividend account ofthe Company in respect ofthe dividend for the tinancial year 2007-08,2008-09,2009-10 and 2010-11. Members who have not yet received / claimed their dividend entitlements are requested to contact the Company or the Registrar and Transfer Agents of the Company.

Investor Education and Protection Fund

In terms of Section 205C ofthe Companies Act, 1956, read with the Investor Education and Protection Fund (Awareness and Protection of Investor) Rules, 2001 (which are still applicable as the relevant sections under the Companies Act, 2013 are yet to be notitied), the Company has credited during the year ended 31st March, 2015 an aggregate amount ofRs. 10.51 lacs, which pertains to the dividend for the year 2006-07 and remained unpaid or unclaimed for a period of 7 years from the date of declaration, to the Investor Education and Protection Fund (IEPF).

Service of documents through electronic means

All documents, including the Notice and Annual Report shall be sent through electronic transmission in respect of members whose email IDs are registered in their demat account or are otherwise provided by the members. A member shall be entitled to request for physical copy of any such documents.

Adequacy of Internal Financial Control

The Company has in place adequate internal financial controls with reference to financial statements. Periodic audits are undertaken on continuous basis covering all the major operations. Reports of internal audits are reviewed by management from time to time and desired actions are initiated to strengthen the control and effectiveness of the system. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

The Internal Financial Control with reference to financial statements as designed and implemented by the Company are adequate. During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency of such controls.

Acknowledgement

Your Directors take this opportunity to thank the customers, suppliers, bankers, business partners / associates, financial institutions and various regulatory authorities for their consistent support / encouragement to the Company.

Your Directors are thankful to the esteemed shareholders for their continuous support and the confidence reposed in the Company and its management.

For and on behalf of the Board

Praful A. Shah Chairman & Managing Director

Surat, 5th June, 2015


Mar 31, 2014

Dear Shareholders,

The Directors are pleased to present the Thirty-fifth Annual Report together with the audited accounts of the Company for the financial year ended 31st March, 2014.

Financial Results

(Rs. in crores)

2013-14 2012-13

Revenue from operations 3081.27 3703.77

Profit before interest,

depreciation and tax 66.69 91.60

Less: Finance Costs 158.22 148.93

Depreciation 92.37 93.54

Profit/(Loss) before Tax (183.90) (150.87)

(Add)/Less: Provision for Tax (39.45) (50.17)

Profit/(Loss) after Tax (144.45) (100.70)

Dividend

Considering the loss incurred by the Company, your Directors do not recommend any dividend on eguity shares for the year.

Review of Operations

The year 2013-14 witnessed a severe slowdown coming after FY13 which was itself a difficult year for the Indian economy. This downturn continued to affect the polyester industry as well.

The net turnover of the Company for the year 2013-14 declined 1 7.06% at Rs.3066.62 crores as compared to Rs.3697.25 crores in the previous year. The Company achieved total sale of yarn at Rs.1900.90 crores as compared Rs.1865.60 crores in the previous year. The sales of chips were at Rs.1172.89 crores, a major decline of about 39% compared with the previous year. The sale of fabrics improved marginally from Rs.201.37 crores in the previous year to Rs.215.00 crores in the year 2013-14. The income from export sales for the year declined 6.7% at Rs.398.00 crores as compared to Rs.426.59 crores in the previous year.

Continuous backward integration by PFY producers towards polyester chips production in order to reduce the cost of yarn production has deeply affected the merchant sales of existing polyester chips manufacturers. Your Company being the largest textile-grade polyester chips manufacturer in India, witnessed a steep volume decline of 23.8% CAGR over FY12-14.

The main reasons for higher decline in the Company''s chips volumes vis a vis industry can be attributed to: (1) entry of new suppliers of chips; and (2) continuation of disadvantageous taxation policies like: (a) 2% VAT credit reversal for goods sale out of Gujarat utilizing inputs procured within Gujarat (b) Availability of 2% CST exemption on domestic sale outside Gujarat for competitors situated in Silvassa - Daman areas and (c) delay in introduction of GST.

These tax related disadvantages also extend to Company''s POY and FDY segments in which the Company was able to maintain its position. These segments were less affected owing to the premium position of the Company''s products. In fact, in terms of utilization levels, we were among the highest in the industry. Chips segment, in which margins and differentiation is low, was most affected.

These tax disadvantages are temporary. We further expect removal of VAT credit reversal and introduction of GST in the next 1-2 years time.

Owing to large capacity additions the demand-supply gap worsened across chips and PFY segments in FY13 and FY14 compared even with FY12 which itself was a challenging year. If one includes the capacities of producers who have recently shut capacities, utilisation levels are at around 65%.

Your Company continued to be the leader in draw-warped and draw-twisted yarns in the world. We are India''s largest sized-yarn producer and the country''s premium seller of fully drawn yarn, the fastest growing segment of the PFY industry.

Our weaving and finishing (dyed and printed fabric) divisions continue to be at the forefront of design innovation in India. The sheer varieties of designs generated are unparalleled in the industry.

In our finished (dyed and/or printed) fabric division we continued to emphasise naturals via the introduction of new cottons, 100% viscose filament, bemberg as well as blended varieties like poly-viscose and poly-cotton fabrics. Various new sized yarn-based saree varieties have been introduced. We have also introduced a host of new embroidery and other value-added varieties especially for party-wear and wedding- wear.

During the year, the Company''s 21 MW Thermal Captive Power Plant (CPP) became fully operational at its Jolwa Plant. This reduces dependence on high-cost furnace oil and gas- based power.

Corporate Governance

Your Company continues to be committed to good corporate governance practices. Your Company complies with the standards set out by Clause 49 of the Listing Agreement with the Stock Exchanges.

A separate report on Corporate Governance along with the Auditors''Certificate on compliance with the Corporate Governance as stipulated in Clause 49 forms part of this report.

Directorate

Mr. Sunil S. Sheth, a Director liable to retire by rotation, who does not seek re-election, be not re-appointed a Director of the Company.

In terms of Section 152 of the Companies Act, 2013, Mr. Sanjay S. Shah would retire by rotation at the forthcoming Annual General Meeting and is eligible for re-appointment. Mr. Sanjay S. Shah has offered himself for re-appointment.

In terms of the provisions of Section 149 of the Companies Act, 2013, it is proposed to appoint Mr. Arunchandra N. Jariwala, Mr. Yatish C. Parekh, Mr. J. P. Shah and Mr. Madanlal U. Lankapati as independent directors for a period of 5 years with effect from 1st April 2014. The Company has received reguisite notice in writing from members proposing the aforesaid directors forappointmentas Independent Directors.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges.

On the recommendations of Nomination and Remuneration Committee, the Board of Directors of the Company at their meeting held on 28th May 2014, subject to the approval of shareholders in the forthcoming General Meeting, approved the appointment and payment of remuneration of Mr. Alok P. Shah as Joint Managing Director of the Company for a term of 3 (three) years effective from 1 st November 2014.

The resolution for appointment is proposed to the Members in the Notice of the Annual General Meeting vide item No.5 and the explanatory statement includes the terms of appointment.

The Companies Act, 2013

The Ministry of Corporate Affairs (MCA) vide its Circular dated 4th April 2014 has clarified that the financial statements and documents annexed thereto, auditors report and board''s report in respect of financial year that have commenced earlier than 1st April 2014 shall begoverned by the provisions of the Companies Act, 1956 and in line with the same, the Company''s financial statements, auditors''report and Board''s report and attachments thereto have been prepared in accordance with the provisions of the Companies Act, 1956.

Directors'' Responsibility Statement

Pursuant to the reguirement under Section 217(2AA) of the Companies Act, 1956, with respecttoDirectors''Responsibility Statement, it is hereby confirmed that:

(i) in the preparation of the Annual Accounts for the year ended 31st March 2014, the applicable accounting standards, read with reguirements set out under Schedule VI to the Companies Act, 1956, have been followed and there are no material departures from the same;

(ii) 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 as at 31st March 2014 and of the loss of the Company for the year ended on that date;

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

(iv) the Directors have prepared the annual accounts of the Company on a''going concern''basis.

Auditors

Messrs Natvarlal Vepari & Co., Chartered Accountants, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a confirmation from them to the effect that their re- appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and the provisions of the Companies (Audit and Auditors) Rules, 2014 and that they are not disqualified for re-appointment.

Since Messrs Natvarlal Vepari & Co., Chartered Accountants, have been functioning as the auditors of the Company for more than 10 years, in accordance with the aforesaid rules, the Audit Committee and the Board of Directors have recommended the re-appointment of auditors for a maximum period of three consecutive years, subject to ratification of their appointment at every AGM.

The Notes on Financial Statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.

Cost Auditors

In accordance with Section 141 of the Companies Act, 2013 and subject to the approval of the Central Government, the Audit Committee has recommended and the Board of Directors had appointed M/s Manubhai & Associates, Cost Accountant, Surat being eligible and having sought re- appointment, as Cost Auditors of the Company, to carry out thecostauditofthe products manufactured bytheCompany during the financial year 2014-15.

Internal Control Systems

Your Company has proper and adequate systems of internal control. Regular Internal Audits and Checks are carried out and the management also constantly reviews the internal control systems and procedures to ensure orderly and efficient conduct of the Business. Periodically, the systems are reviewed and aligned to the needs of the organization. This is an ongoing exercise. Implementation of ERP on the Oracle based platform has improved controls, created analytical tools and enhanced the decision making process. The internal auditors periodically interact with the Audit Committee of the Board of Directors of the Company to discuss various internal controls / internal audit issues.

Fixed Deposits

During the year the Company has not accepted any fixed deposits from the public. There are no fixed deposits outstanding with the Company as on 31st March 2014.

Human Resources and Industrial Relations

Good human resource management plays a key role in company performance. The employee relations during the year have remained cordial and satisfactory. Attracting and retaining dedicated and skilled human resource, offering them a conducive work environment and excellent career development opportunities are currently prime HR priorities.

The Company maintains a transparent work culture that offers equal opportunities of growth to all employees. While emphasis is laid on recruiting best accessible talent at all levels all the time, the Company takes due care of keeping its talent pool skilled and updated by proving adequate on-the- job training to its employees. The Company strongly believes that its growth and sustainability is closely aligned to those of its human capital.

Environment and Safety

The Company is conscious of the importance of environmentally clean and safe operations. The Company''s policy requires the conduct of all operations in such manner so as to ensure high safety levels, compliance of statutory and industrial requirement for environment protection and conservation of natural resources to the extent possible.

Investor Education and Protection Fund

Pursuant to the provisions of section 205A(5) and 205C of the Companies Act, 1956 an amount of Rs.11,44,610/-, which pertains to the dividend for the year 2005-06, and remained unpaid or unclaimed for a period of 7 years from the date of declaration, has been transferred by the Company to the Investor Education & Protection Fund.

Reward, Recognition & Quality Systems Certification

During the year, the Company''s CP Division got certified OSHAS 18001 :2007 by Bureau Veritas. Our quality, health and safety processes are now continuously monitored, assessed and improved to meet internationally recognized standards. Each raw-material and product is tested extensively and all manufacturing processes are continually optimized with a strong commitment to energy efficiency, occupational health, environmental responsibility and safety.

Your Company achieved the status of "Trading House" awarded by the Office of Joint Director General of Foreign Trade, Ministry of Commerces Industry, Government of India on achieving the required Export targets.

The Company''s Vareli Plant enjoys the unique distinction of being the first in polyester weaving industry to achieve ISO 9002:1994 certification by Bureau Veritas Quality International (BVQI). The processes certified are Draw-Warping and Texturizing,Twisting, Sizing, Warping and Weaving.The scope of audit includes "Manufacture of Woven Greige Fabrics and Processed Yarns".

The manufacturing of Texturized, Flat Polyester Filament, Polyester Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.

Energy, Technology and Foreign Exchange

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as reguired, to be disclosed in terms of Section 217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Directors) Rules, 1988 is annexed herewith and forms part of this report.

Particulars of Employees

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with Rule 2 of the Companies (Particulars of Employees) Rules of 1975, as amended, names and other particulars of the employees are set out in the annexure to the Directors Report.

Having regard to the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to the members of the Company. Any member interested in obtaining such particulars may write to the Company Secretary of the Company.

The aforesaid Annexure is also available for inspection of Members at the Registered Office of the Company, 21 days before the Annual General Meeting and up to the date of the ensuing Annual General Meeting during business hours on working days.

Insurance

The properties and insurable assets and interests of your Company, like building, plant and machinery and stocks, among others, are adeguately insured.

Cash Flow Analysis

The Cash Flow Statement for the year under reference in terms of clause 32 of the Listing Agreement with the stock exchanges forms part of the Annual Report.

Corporate Social Responsibility

During the year under review, your Company continued various economic activities combined with the fulfillment of its social responsibilities for the communities it operates in and undertook various initiatives in the area of welfare, environment conservation, education, health and empowerment, across its operations.

Acknowledgement

The Directors wish to place on record their appreciation for the continued support and co-operation extended to your Company by Banks, Financial Institutions, Customers, Suppliers, Government Authorities, Regulatory authorities and other stakeholders. Your Directors are thankful to the esteemed shareholders for their continued support and the confidence reposed in the Company and its Management.

Your Directors also acknowledge the support extended by all the employees for their dedicated service.

For and on behalf of the Board

Praful A. Shah

Surat, 28th May, 2014 Chairman & Managing Director


Mar 31, 2013

Dear Shareholders,

The Directors are pleased to present the 34th Annual Report together with the audited accounts of the Company for the financial year ended 31st March, 2013.

Financial Results: (Rs.in crores) 2012-13 2011-12

Total Income 3703.77 3527.72

Profit before interest, 91.60 122.05 depreciation and tax

Less: Finance Costs 148.93 153.95

Depreciation 93.54 86.15

ProW(Loss) before Tax (150.87) (118.05)

(Add)/Less: Provision for Tax (50.17) (39.17)

ProW(Loss) after Tax (100.70) (78.88)

Dividend:

Considering the loss incurred by the Company, your Directors do not recommend any dividend on eguity shares for the year.

Corporate Governance:

Your Company reaffirms its commitments to the good corporate governance practices. Pursuant to clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report and Auditors'' Certificate regarding compliance of conditions of Corporate Governance are enclosed and form an integral part of this report.

Directors:

Pursuant to the provisions of Sections 255 and 256 of the Companies Act, 1956 and in accordance with provisions of Articles of Association of the Company, Shri Rajen R Shah, Shri A. N. Jariwala, Shri J. P. Shah and Shri Yatish Parekh, Directors of the Company, are liable to retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.The Board recommends their re-appointment. The Notice convening the Annual General Meeting includes the proposals for re-appointment of Directors.

Details of the Directors seeking reappointment as reguired under Clause 49 (VI) of the Listing Agreements are provided in Notice forming part of this Annual Report. None of the Directors are disgualified under Section 274(1 )(g) of the Companies Act, 1956.

Directors'' Responsibility Statement:

Pursuant to the reguirement under Section 217(2AA) of the Companies Act, 1956, with respecttoDirectors''Responsibility Statement, it is hereby confirmed that:

(i) in the preparation of the Annual Accounts for the year ended 31st March, 2013, the applicable accounting standards, read with reguirements set out under Schedule VI to the Companies Act, 1956 have been followed and there are no material departures from the same;

(ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2013 and of the loss of the Company for the year ended on that date;

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

(iv) the Directors have prepared the annual accounts of the Company on a''going concern''basis.

Auditors and Auditors''Report:

Natvarlal Vepari & Company, Chartered Accountants, Statutory Auditors of the Company, holds office until the conclusion of the ensuing Annual General Meeting and is eligible for re-appointment.

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

Based on the recommendations of the Audit Committee, the Board of Directors of the Company proposes the re-appointment of Natvarlal Vepari & Company, chartered accountants, as the Statutory Auditors of the Company. You are reguested to appoint the auditors and fix their remuneration.

The Notes on Financial Statements referred to in the Auditors'' Report are self-explanatory and do not call for any further comments.

Cost Audit:

Manubhai & Associates, Cost Accountants, were appointed with the approval of the Central Government to carry out the cost audit relating to products Polyester Chips and Yarns for the year 2012-13. They will submit their report to the Board of Directors, before forwarding it to the Ministry of Corporate Affairs, Government of India.

Based on the recommendation of the audit committee, Manubhai & Associates, cost accountants, being eligible, have also been appointed by the Board as the Cost Auditors for FY14.The Company has received a letter from them to the effect that their re-appointment would be within the Limits prescribed under Section 224(1 B) of the Companies Act, 1956 and that they are not disgualified for such re-appointment within the meaning of Section 226 of the Act.

The cost audit report for the Financial Year 2011 -12 was filed with Ministry of Corporate Affairs on 25th December, 2012.

Internal Control:

Your Company has adeguate internal control procedures commensurate with the size of operations and the nature of the business. These controls ensure efficient use and protection of Company''s financial and non-financial resources. Regular internal audit and checks ensure that responsibilities are executed effectively. The Audit Committee of the Board of Directors reviews the adeguacy and effectiveness of interna control systems and suggests improvement for strengthening them, from time to time.

Fixed Deposits:

The Company has not accepted or renewed any deposits during the year. There are no outstanding and overdue deposits as of 31 st March, 2013.

Human Resources and Industrial Relations:

ndustrial relations at all the plants were cordial. Your Company offers various incentives to motivate performance. The employees attend technical seminars and workshops to enhance their expertise levels. The Company''s continuous focus on skill building provides egual opportunities on latera growth.

Health, Safety and Environment Measures:

Your Company focuses on achieving excellence in occupational and personal health of employees at all manufacturing sites as well as at its offices.

Your Company is committed to providing a safe workplace to its employees and contractors, and to the communities in which it operates. Our Vareli plant has won the Gujarat State Safety award for a substantial number of years in the last decade. Safety training and management is viewed with egual importance as other management disciplines. We have been chosen by the Factory Inspector to disseminate our experience to other industries and it is a matter of great pride that the organisation''s dedication to safety has been so recognised.

Your Company continued its focus in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staff and labour for maintaining hygienic and green surroundings.

Investor Education and Protection Fund

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956 an amount of Rs. 12,43,259/-, which pertains to the dividend for the year 2004-05, and remained unpaid or unclaimed for a period of 7 years from the date of declaration, has been transferred by the Company to the nvestor Education & Protection Fund.

Reward, Recognition and Quality Systems Certification:

Your Company continues to have the status of "Star Export House" by the Office of Joint Director General of Foreign Trade, Ministry of Commerces Industry, Government of India on achieving the reguired Export targets.

The Company''s Vareli Plant enjoys the unigue distinction of being the first in polyester weaving industry to achieve ISO 9002:1994 certification by Bureau Veritas Quality Internationa (BVQI). The processes certified are Draw-Warping and Texturizing,Twisting, Sizing, Warping and Weaving.The scope of audit includes "Manufacture of Woven Greige Fabrics and Processed Yarns".

The manufacturing of Texturized, Flat Polyester Filament, Polyester Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.

Energy, Technology and Foreign Exchange:

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as reguired, to be disclosed in terms of Section 217(1 )(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Directors) Rules, 1988 is annexed herewith and forms part of this report.

Human Resources and Industrial Relations:

Your Company recognizes human resources as the backbone of its long-term success. Your Company maintains a cordia relationship with its employees. It emphasis on safe work practices and productivity improvement is unrelenting.

Your Company also associates itself with several social causes and empowers its employees to contribute to the society and carries out regular CSR activities reaching out to the less privileged.

Particulars of Employees:

Details reguired as per Section 217(2A) of the Companies Act, 1956 read with Rule 2 of the Companies (Particulars of

Employees) Rules of 1975, as amended and forming part of the Directors Report for the year ended 31st March, 2013 is given in a separate Annexure to this Report. However, in line with the provisions of Section 219(1)(b)(iv) of the said Act, post the exclusion of the information as reguired above, the annual report is being sent to all the members of the Company and the others entitled thereto.

Any member interested in obtaining these details may write to the Company Secretary at the Registered Office of the Company. The aforesaid Annexure is also available for inspection of Members at the Registered Office of the Company, 21 days before the Annual General Meeting and up to the date of the ensuing Annual General Meeting during business hours on working days.

Corporate Social Responsibility:

The Company as a responsible corporate citizen is contributing to sustainable development by its economic activities combined with the fulfillment of its socia responsibilities for the communities it operates in.

Your Company undertook various initiatives in the area of community and stakeholder welfare, environment conservation education, health and empowerment, across its operations.

Cautionary Statement:

Statement in this Directors''Report & Management Discussion and Analysis describing the Company''s objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual result might differ materially from those expressed or implied.

important factors that could make a difference to the Company''s operations include raw material availability and prices, cyclical demand and pricing in the Company''s principal market, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future on the basis of subseguent developments, information or events.

Acknowledgement:

Your Directors take this opportunity to thank the Banks, Financial Institutions, Central and State Government authorities, Regulatory authorities, Customers, Suppliers, Shareholders and Investors at large for their continued support to the Company and look forward to having the same support in the years to come.

Your Directors also wish to place on record their deep and special appreciation for the unstinting diligence and dedication of the Company''s employees.

For and on behalf of the Board

Praful A. Shah

Surat, 31st May, 2013 Chairman & Managing Director


Mar 31, 2012

To The Members of Garden Silk Mills Limited

The Directors present their Report on the Audited Accounts of the Company for the year ended 31st March, 2012.

Financial Results:

(Rs. in crore)

2011-12 2010-11

Total Income 3527.72 3407.39

Profit before interest, depreciation and tax 122.05 287.48

Less: Finance Costs 153.95 90.07

Depreciation 86.15 76.52

Profit / (Loss) before Tax (118.05) 120.89

(Add)/Less: Provision for Tax (39.17) 33.02

Profit / (Loss) after Tax (78.88) 87.87

Add: Balance brought forward from Previous year 253.55 180.44

Balance Available for 174.67 268.31

Appropriation

Appropriations:

General Reserve 0.00 6.75

Proposed Dividend 0.00 6.89

Tax on Dividend 0.00 1.12

Balance carried to Balance Sheet 174.67 253.55

174.67 268.31

Notes:

Previous years' figures have been regrouped wherever necessary to bring them in line with the current year's representation of figures.

Dividend:

Considering the loss incurred by the Company, your Directors do not recommend any dividend on equity shares for the year.

Review of Operations:

The year 2011-12 marked a deterioration in the fundamentals of both the global and the Indian economies. The global and domestic textile industries were not spared either. The year under review was a challenging one for your Company as well. It marked the first loss for the Company since its inception.

During the year under review, your Company achieved a gross turnover of Rs. 3,763.55 crores as compared to Rs. 3,667.05 crores in the previous year, an increase of 2.6%. The total sale of yarn was 156,246 M.T. an increase of 9.2% over the previous year. In value terms, sales of yarn have gone up by 23.5% to Rs. 1,749.84 crores. Sales of chips were 211,093 M.T. during the year, a reduction of 28%. In value terms, chips sales were at Rs. 1,770.96 crores, a reduction of 12.2% compared with the previous year. We maintained our sale of fabrics at Rs. 189.30 crores as compared to Rs. 188.52 crores for the previous year.

The unprecedented crash in raw material prices in the first quarter of the year under review resulted in significant inventory losses. It also led to panic in the downstream market and thus severe demand contraction. The second quarter saw a clawback but the third and fourth quarters were hamstrung by very weak consumer demand for polyester filament yarn-based fabrics coupled with rising raw material prices that could not be adequately passed on. Energy cost, which is the biggest operating cost for the company, increased dramatically. Gas, which is the major energy cost component for the company, saw a cost increase of 47%, supported by a crash in the rupee and a large increase in the dollar price of gas.

Average interest rates for the company increased by about 230 basis points last year. This resulted in substantially increased financial costs. The lowered return on capital coupled with the high interest rate in the last financial year led to a financial loss for your Company.

Despite the contraction in domestic demand for yarn and fabric, your Company was able to increase production and sales of yarn and maintain sales of fabric. Chips were worse affected as the demand slowdown affected the small chip- based spinners relatively more than direct spinners, reducing their demand for textile-grade chips. The reduced demand and margins in the chips division led to curtailed production and sales of chips.

Operations were further impacted during the year due to a temporary shutdown of our continuous polymerization (CP) plant on account of technical modifications, as well as a shortage of PTA.

Despite the slowdown, the company maintained its position as the largest producer of polyester textile and film-grade chips in the world.

Your Company is proud to be known to have the largest product range and to be the most differentiated among any polyester filament yarn producer in India, if not the world.

We are the only Indian company to be present in every segment of the polyester filament yarn business: POY, FDY, draw-twisting, draw-texturising, air-texturising, draw-warping, warping, sizing, twisting and other yarn-preparatory segments.

The Company has always been a leader in yarn innovation and this position has been consolidated in the year under review. A host of new products have been introduced through close cooperation between our R&D, production and marketing departments. Despite the draw-texturised yarn sector witnessing significant de-growth last year, our texturising division held its own as we have emerged a leader in specialized texturised yarns for different applications such as automotive and lining. We are today the largest producer of lycra yarns on DTY machines in the country.

The Company continues to be the leader in draw-warped and draw-twisted yarns in the world. We are India's largest sized-yarn producer and country's one of the largest producers of fully drawn yarn.

Our weaving and finishing (dyed and printed fabric) divisions continue to be at the forefront of design innovation in India. The sheer varieties of designs generated are unparalleled in the industry. In our finished (dyed and/or printed) fabric division we continued to emphasise naturals via the introduction of new cottons, 100% viscose filament, bemberg as well as blended varieties like poly-viscose and poly-cotton fabrics. Various new sized yarn-based saree varieties have been introduced. We have also introduced a host of new embroidery and other value-added varieties especially for party-wear and wedding-wear.

In order to reach working women in towns and villages, we have introduced saree ranges and dress materials / suit combinations at competitive price-levels.

During the year, a fire occurred at the 'Texturising Division' of our Plant at Village Jolwa, Taluka Palsana, Dist. Surat on August 4, 2011, damaging few of the machineries and inventory in the Division. The Company took immediate steps and restored the production on the remaining machines of the Texturising Division. There was no injury to any person or casualties due to such accident. The plant and machineries, building and the material in stock were adequately covered under insurance.

Export:

To counter the slowdown in the domestic industry your Company paid special emphasis on exports. The total export of goods of your Company during the year 2011-12 was higher at Rs. 412.24 crores as compared to Rs. 340.49 crores in the previous financial year.

Expansion Program:

Your Company successfully enhanced its POY / FDY manufacturing capacity by about 225 TPD in a phased manner during the second half of the year. In the coming months the company hopes to make a range of new products on these spinning lines that will substitute the import of specialty yarns used by the domestic weaving industry.

To further strengthen and maintain its leadership in downstream yarn preparatory activities and to achieve better yarn margins, the Company enhanced its yarn processing capacity during the year. This will increase captive consumption of our own POY production to provide value- added yarns in the market.

We commissioned an 18 MW coal-based power plant which commenced power generation in August 2011 at the Company's plant at Jolwa.

Further, a 21 MW coal-based power plant project has been initiated in 2011, which is likely to come on stream by the third quarter of the current year. This initiative is expected to substantially reduce our power generation cost by restricting the use of expensive gas-based power plants.

Overview of Economy:

India's economic growth rate in 2011-12 moderated to 6.5 per cent from 8.4 per cent in 2010-11. Alarmingly, Gross Domestic Product (GDP) growth has been steadily declining over the last few quarters and slipped to 5.3 per cent in the fourth quarter of 2011-12 the lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors. By comparison the GDP growth in January-March quarter of 2010-11 was 9.2 per cent indicating the magnitude of the economic slowdown. Indicators suggest the year 2012-13 will see a further slowdown in economic growth to around 6 per cent. While inflation has moderated somewhat, it still remains uncomfortably high and according to the RBI risks to inflation are still on the upside. Government borrowings are also uncontrolled, leading to a dangerously high fiscal deficit. Soaring inflation concomitant with a high deficit suggests that the high interest rates, which have subdued the economy, will continue to remain elevated.

The sovereign-debt crisis in Europe along with the slowdown in the major world economies increases the likelihood of weak export potential from India and poor foreign investments into the country despite the weak rupee. Weak private and public investments, slowing consumer demand and restricted government scope to stimulate the economy through either monetary or fiscal policy suggests harder times ahead for the economy. Despite the falling crude and coal prices internationally, in rupee terms prices of these key commodities have risen, thus worsening inflation and endangering the current account position.

Yet the gloom diminishes when one puts the past in perspective and realizes how far India has come over the last two decades measured by almost every economic and social indicator. Growth has slowed but growth there will be and it will be quick by world standards though probably not our own. The aggregate GDP growth figures hide the 'miracle' performance of "Little Indias" including relatively poor states like Bihar, UP and Chattisgarh that have been mostly unaffected by the slowdown as well as more developed ones like Gujarat that continue to grow at double-digit levels.

India's extraordinary demographic dividend over next few decades will allow for an enormous increase in working age population that will benefit labour-intensive sectors like textiles. Around 250 million people are expected to enter the workforce over the next 15 years. Any slowdown would increase labour availability further still. In China, our largest textile and polyester competitor, the working-age population is expected to start declining in some years, a fact that is expected to decelerate the growth of labor-intensive manufacturing like textiles. The relatively strong Yuan puts further pressure on China's manufactured exports. India should witness a revival in labour-intensive sectors over the next decade.

Industry Scenario:

In the year 2010-11spectacular global and Indian economic growth along with record-high cotton prices lifted production and profitability of polyester manufacturers. Expensive cotton was substituted with polyester. Record profitability globally meant that 2010-11 saw the initiation of the largest polyester filament yarn capacity expansions witnessed both globally (especially China) and in India.

For the PFY industry the year 2011-12 started with optimism which was soon belied as the industry witnessed an unprecedented crash in raw material prices in April-May 2011 which shadowed the rapid fall in cotton prices. The crash resulted in inventory losses in the chain but, worryingly, did not increase consumer demand despite a now-cheaper PFY-based fabric.

High food inflation weakened demand for PFY in the rural areas which have been the main driver of PFY growth in recent years. Also slower GDP growth meant lower increase in disposable income further affecting demand for clothing. Cheaper cotton also resulted in pressure on pricing and demand of polyester. The effect of all these was a contraction in demand of PFY by domestic weavers. The silver lining was that India could substantially increase polyester filament yarn exports owing to the high quality standards and cost-competitiveness of its PFY producers. India also showed strong growth in exports of PFY-based fabrics and made-ups in the year under review.

Overall, according to the Textile Commissioner's office PFY production fell by 5.8% in 2011-12 compared with the previous year. The reduction in polyester yarn demand coupled with the increase in supply resulted in contraction in operating margins for the industry and your Company. It may be noted that cotton yarn production fell by 11.8% and PSF fell by 7.49% last year showing that there has been a generalized fall in textile production in India. In the first 2 months of this financial year growth resumed as PFY production grew by 6.6% (cotton yarn production grew by only 1.53% and PSF production fell by 1.04%). Yet the expected increase in PFY capacities will continue to put pressure on margins.

In the year under review, domestic demand for texturised yarn decreased substantially. Texturised yarn is the larger of two categories of PFY. Fortunately, the other category - flat yarn (mainly fully drawn yarn) -grew rapidly to substantially (though not fully) offset the contraction in texturised yarn demand. The shift from texturised yarn-based fabric to more flat yarn-based fabric has been largely due to a shift in fashion. Flat yarn is preferred in the growing embroidery segment and offers better drape properties in twisted-yarn based fabric. Since your Company is a leader in flat yarn production and also produces highly differentiated and value-added flat yarns, the recent shift keeps us well-positioned in the year ahead. To offset the domestic slowdown leading Indian producers of yarn increased export sales as did your Company.

In the recent budget 2012-13, considering the need for fiscal correction, the standard rate of Central Excise Duty has been raised to 12% from the existing level of 10%. This increases the tax differential with cotton products which effectively enjoy an exemption from excise duty.

Further the Inter-Ministerial Steering Committee (IMSC) under R-TUFS, in May'12, decided to continue R-TUFS in 2012-13 to the extent of the unutilized amount of the subsidy cap of Rs. 1,972 crores.

In addition to international developments, India's textile industry has also been affected by Government decisions such as reduction of drawback rates and withdrawal of interest subvention on export credit as well as the inordinate delay in disbursement of TUFS claims.

Opportunities and Outlook:

The PFY market is the largest synthetic yarn segment in India and accounts for over 50% of the total demand for synthetic yarn. Surat and its outskirts provide the largest market for PFY, being at the heart of the polyester filament weaving and processing industry. The Company's manufacturing units have a locational advantage being situated in the Surat area. Its location gives it proximity to both raw material suppliers as well as end users.

The Surat area is also the most innovative textile center which gives the Company a natural outlet for its specialty yarns and fabrics.

The economic slowdown may affect PFY growth as well. Yet 2012-13 is widely expected to see a revival in PFY demand. In the first 2 months of 2012-13 PFY-based fabric growth has been strong at around 22% y-o-y. Moreover, the demand for differentiated products continues to increase as does our ability to cater to the demand for specialty products. Moreover the flat yarn segment which is a core-competency for your Company is growing rapidly despite the slowdown. While commodity textile-grade chips sales are likely to be under pressure in the coming year, the Company intends to sell primarily specialty chips like various bright-chip variants, full dull, cationic and silica-based chips whose demand is expected to increase.

The Company's wide product range, highly differentiated product-mix, high quality standards, strong service-ethics and reputation for fair practices give it a special position among customers of chips, yarn and fabric. We hope to leverage our position to sell during the slowdown and to help us introduce the new products we have planned to bring to the market.

The fundamentals of PFY based fabrics - wrinkle-resistant, highly durable, most versatile, affordable, light and fashionable - remain sound. For Indian women, such fabrics will always be preferred not just by the cost-sensitive buyer but also by the fashion-conscious rich. PFY based fabrics have a dominant position in sarees and are very popular in the growing salwar-kameez/kurti segment. PFY is also the most widely used yarn in fabric for party and wedding wear among both rich and poor consumers. The application of PFY is increasing in denim-wear, sportswear, home-textiles and automotive textiles. Globally, demand growth of polyester is much faster than that of cotton. This is true for both developing and developed countries. It is widely expected that PFY growth in India will be much faster than global growth.

With the large PFY capacity expansions likely to come on stream this year and the next, operating margins in the industry over the next couple of years will remain under pressure. However, as far as your Company is concerned, it is expected that with the introduction of important new products produced on our new and existing spinning lines and with the second thermal power plant coming on stream we will improve our performance in time to come.

We have strong tie-ups with raw material (PTA and MEG) suppliers and that offers advantages at a time when raw materials are projected to be in short supply.

Risks and Concerns:

The PFY industry is very competitive, with players ranging from large vertically integrated players with very low variable costs to small flexible players who can rapidly respond to market changes in terms of both price and product mix. The competition is likely to reach a historical climax this year and the next with the large expansions planned in 2010-11 coming on stream.

An economic slowdown - both domestic and global - may have some adverse effect on the growth of the PFY industry. Yet, since growth will be on a low base it is expected the industry will not be as badly affected as it was last year. In the first 2 months of 2012-13 PFY-based fabric growth has been very strong.

Raw material prices fluctuate in line with international prices and will continue to have an impact on the Company's results as raw materials constitute around 80% of the Company's net sales. Increased emphasis on differentiated and value-added products as well as a reduced working capital cycle this year will help reduce this risk.

The industry is dependent on the international price of crude oil which directly impacts the price of both our key raw materials PTA and MEG. Any crude supply shock could have an adverse impact on the industry.

The PTA industry is presently in distress, both globally and in India. There are signs that owing to the poor margins in the PTA business, suppliers may possibly curtail supply, resulting in temporary shortages.

The Company hedges its forex exposures and hence, does not carry significant forex risk. The Company's relatively high debt coupled with high interest rates makes it sensitive to interest rate fluctuations. Over the years it expects to bring down debt levels.

For domestic sales of chips and yarns outside of Gujarat State, the Company has a disadvantage compared with central sales tax (CST) exempted units in Silvassa and Daman. Once the exemptions expire (latest by 2017) or once GST is implemented, this disadvantage is expected to be removed or significantly reduced. The Company's emphasis on value- added and differentiated products, exports and Gujarat-based sales is expected to partly counter this shortcoming.

Finance and Investment:

Tight monetary policy throughout the year kept bank base rates high which resulted in increased and high interest rates for the Company. Since interest rates are expected to remain high and owing to the relatively high amount of leverage, it is the intent of the Company to reduce debt in the years to come.

Over time the Company intends to unlock value from non- core assets such as Art and Artifacts, land and other unproductive assets.

The Company follows a conservative policy in managing its foreign exchange liabilities to minimise the risks associated with fluctuations in exchange rates. This has limited the losses resulting from the large fluctuations in the rupee during the year.

The Company has been taking advantage of interest subsidy under Technology Upgradation Fund (TUF) provided by the central government.

The Company along with its lenders has worked out a realignment of certain long term debts. As a result of this, repayments of these loans will be extended by about 2 years.

Credit Rating:

During the year under review Credit Analysis & Research Ltd. (CARE), on review of operational and financial performance of the Company, revised the rating from CARE A (Single A Plus) to CARE BB (Double B) assigned to the long-term facilities of your Company. Further, the Rating Committee of CARE has revised the rating from 'CARE A1 ' (A One Plus) to 'CARE A4' (A Four) assigned to the short- term facilities of your Company.

Corporate Governance:

Your Company reaffirms its commitments to the good corporate governance practices. Pursuant to clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance Report and Auditors' Certificate regarding compliance of conditions of Corporate Governance are enclosed and form an integral part of this report.

Directors:

Pursuant to the provisions of section 255 and 256 of the Companies Act, 1956 and in accordance with provisions of Articles of Association of the Company, Shri Sanjay S. Shah, Shri Suhail P. Shah, Shri Alok P. Shah and Shri Madanlal U. Lankapati, Directors of the Company, are liable to retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting. The Board recommends their re-appointment. The Notice convening the Annual General Meeting includes the proposals for re-appointment of Directors.

Details of the Directors seeking reappointment as required under Clause 49 (VI) of the Listing Agreements are provided in Notice forming part of this Annual Report. None of the Directors are disqualified under Section 274(1 )(g) of the Companies Act, 1956.

Smt. Shilpa P. Shah resigned as member of the Board w.e.f. 1st May, 2012. She held the position of Whole-time Director since inception of the Company in the year 1979.

During this period, she made several significant contributions to the Company's growth and business strategies, more particularly in marketing and advertising of Company's finished fabrics segment. She has played a pivotal role in making Garden and Vareli household names across the breadth of our country. The advertising campaigns she has conceived and executed have captured the imagination of men and women alike over a generation. The Company has immensely benefited from her contribution and guidance. The Board places on record their deep sense of appreciation for the distinguished services rendered by Smt. Shilpa Shah during her tenure as a Director of the Company.

In recognition of her experience and contributions, the management of the Company appointed Smt. Shilpa Shah as a senior member of the Company's management team, designated as Director-Advertising w.e.f. 1st May, 2012. The resolution seeking members' approval in terms of Section 314(1)(B) of the Companies Act, 1956, forms part of the Notice of Annual General Meeting. The remuneration committee and the Board of Directors have recommended the said 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 statements in terms of Section 217 (2AA) of the Companies Act, 1956:

(i) that in the preparation of the Annual Accounts for the year ended 31st March, 2012, the applicable accounting standards, read with requirements set out under Schedule VI to the Companies Act, 1956 have been followed and there are no material departures from the same;

(ii) 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 as at 31st March, 2012 and of the loss of the Company for the year ended on that date;

(iii) that the 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 the Company and for preventing and detecting fraud and other irregularities; and

(iv) the annual accounts have been prepared on a going concern basis.

Auditors and Auditors' Report:

Natvarlal Vepari & Company, Chartered Accountants, Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956 and they are not disqualified for such re-appointment within the meaning of section 226 of the said Act.

Based on the recommendations of the Audit Committee, the Board of Directors of the Company proposes the re-appointment of Natvarlal Vepari & Company, chartered accountants, as the Statutory Auditors of the Company.

The comments on statement of accounts referred to in the report of the auditors are self explanatory and therefore do not call for any further comments.

Cost Audit:

Manubhai & Associates, Cost Accountants, were appointed with the approval of the Central Government to carry out the cost audit relating to products Polyester Chips and Yarns for the year 2011-12. They will submit their report to the Board of Directors, before forwarding it to the Ministry of Corporate Affairs, Government of India.

Based on the recommendation of the audit committee, Manubhai & Associates, cost accountants, being eligible, have also been appointed by the Board as the Cost Auditors for FY13. The Company has received a letter from them to the effect that their re-appointment would be within the Limits prescribed under section 224(1B) of the Companies Act, 1956 and that they are not disqualified for such re-appointment within the meaning of section 226 of the Act.

The cost audit report for the Financial Year 2010-11 which was due to be filed with the Ministry of Corporate Affairs on 30th September, 2011 was filed on 27th September, 2011.

Internal Control Systems and their adequacy:

The Company maintains adequate internal control systems, which provides, among other things, reasonable assurance of recording the transactions of its operations in all material respects and of providing protection against significant misuse or loss of company assets.

Internal Controls are adequately supported by Internal Audit and periodic review by the management. The Audit Committee meets periodically to review with the management, and statutory auditors, financial statements. The audit committee also meets with the internal auditors to review adequacy / scope of internal audit function, significant findings and follow up thereon and findings of any abnormal nature.

Your Company has successfully implemented an Oracle Applications ERP system across the Company. This has ensured improved controls making them process driven rather than individual driven. It will ensure the highest data integrity with an audit trail. It enables integration of all systems.

Human Resources and Industrial Relations:

Industrial relations at all the plants were cordial. Your Company offers various incentives to motivate performance. The employees attend technical seminars and workshops to enhance their expertise levels. The Company's continuous focus on skill building provides equal opportunities on lateral growth.

Health, Safety and Environment Measures:

Your Company continued its focus in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staff and labour for maintaining hygienic and green surroundings.

Your Company is aware of its responsibilities as a good corporate citizen in health, safety and environmental management. Your Company contributes to community welfare activity and takes up initiatives and measures related to education and health. The Company recognises protection and management of environment as one of its highest priorities and every effort is made to conserve and protect the environment.

The Company continues to focus on maintenance and performance improvement of related pollution control facilities like effluent treatment plant and waste disposal facility at its manufacturing locations. The Company has put in place co-generation systems that keep carbon emissions to the minimum.

Investor Education & Protection Fund:

Pursuant to the provisions of section 205A(5) and 205C of the Companies Act, 1956 an amount of Rs. 11,47,921 which pertains to the dividend for the year 2003-04, and remained unpaid or unclaimed for a period of 7 years from the date of declaration, has been transferred by the Company to the Investor Education & Protection Fund.

Reward, Recognition & Quality Systems Certification:

Your Company continues to have the status of "Star Export House" by the Office of Joint Director General of Foreign Trade, Ministry of Commerce & Industry, Government of India on achieving the required Export targets.

The Company's Vareli Plant enjoys the unique distinction of being the first in polyester weaving industry to achieve ISO 9002:1994 certification by Bureau Veritas Quality International (BVQI).

The processes certified are Draw-Warping and Texturising, Twisting, Sizing, Warping and Weaving. The scope of audit includes "Manufacture of Woven Greige Fabrics and Processed Yarns"

The manufacturing of Texturised, Flat Polyester Filament, Polyester Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.

Statutory Information:

Details required as per section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules of 1988, are provided in the annexure to this report.

Details required as per section 217(2A) of the Companies Act, 1956 read with Rule 2 of the Companies (Particulars of Employees) Rules of 1975, as amended and forming part of the Directors Report for the year ended 31st March, 2012 is given in a separate Annexure to this Report. However, in line with the provisions of Section 219(1)(b)(iv) of the said Act, post the exclusion of the information as required above, the annual report is being sent to all the members of the Company and the others entitled thereto.

Any member interested in obtaining these details may write to the Company Secretary at the Registered Office of the Company. The aforesaid Annexure is also available for inspection of Members at the Registered Office of the Company, 21 days before the Annual General Meeting and upto the date of the ensuing Annual General Meeting during business hours on working days.

The Company has not accepted any deposits, within the meaning of Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposits) Rules, 1975 made thereunder.

Corporate Social Responsibility:

The Company as a responsible corporate citizen is contributing to sustainable development by its economic activities combined with the fulfillment of its social responsibilities for the communities it operates in.

Your Company undertook various initiatives in the area of community and stakeholder welfare, environment conservation education, health and empowerment, across its operations.

Cautionary Statement:

Statement in this Directors' Report & Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual result might differ materially from those expressed or implied.

Important factors that could make a difference to the Company's operations include raw material availability and prices, cyclical demand and pricing in the Company's principal market, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.

Acknowledgement:

Your Directors take this opportunity to thank the Banks, Financial Institutions, Central and State Government authorities, Regulatory authorities, Customers, Suppliers, Shareholders and Investors at large for their continued support to the Company and look forward to having the same support in the years to come.

Your Directors also wish to place on record their deep and special appreciation for the unstinting diligence and dedication of the Company's employees.

For and on behalf of the Board

Praful A. Shah

Surat, 8th August, 2012 Chairman & Managing Director


Mar 31, 2010

The Directors are pleased to present their 31st report on the business and operations of your Company together with the Audited Statements of Accounts for the year ended 31st March, 2010.

Summarised Financial Results:

(Rs. in crore)

12 months 9 months

ended ended

31 st March, 31st March,

2010 2009

Operating Income 2514.89 1331.61

Other Income 6.41 7.06

Profit before interest, 238.82 161.81

depreciation and tax

Less: Interests Finance 73.17 46.98

Charges (Net)

Depreciation 72.56 44.84

Profit before Tax 93.09 69.99

Less: Provision for Tax 29.88 20.41

Profit after Tax 63.21 49.58

Add: Balance b/f from 130.02 78.51 Previous year

Transfer from Debenture 0.00 11.25

Redemption Reserve

Balance Available for 193.23 13934

Appropriation

Appropriations:

General Reserve 4.75 2.60 Proposed Dividend 6.89 5.74

Tax on Dividend 1.15 0.98

Balance carried to Balance Sheet 180.44 130.02

193.23 139.34

Previous years figures have been regrouped wherever necessary to compare with current years presentation.

Financial Year:

The financial year of the Company was changed from 30th June to 31st March in the previous year 2008-09 therefore the figures for the current year ended 31st March, 2010 are not strictly comparable with the corresponding previous year as the previous year period pertains to 9 months.

Transfer to General Reserve:

Out of the total profit of Rs.63.21 crore for the financial year 2009-10, an amount of Rs.4.75 crore is proposed to be transferred to the General Reserve.

Dividend:

Your Directors are pleased to recommend a dividend of Rs.1.80 per equity share of Rs.10 each on 3,82,90,560 shares

for the year ended 31st March, 2010 for your consideration. The Dividend, if approved at the ensuing Annual General Meeting, will be paid to those shareholders whose names appear on the register of members of the Company as on the Book Closure date.

Review of operations:

Gross sales for the year ended 31st March, 2010 increased to Rs.2,662.33 crore as compared to Rs.1,863.64 crore in the corresponding 12 months period of 2008-09, registering a growth of about 43%.

Polyester chip sales increased substantially during the year from Rs.784.45 crore to Rs.1,356.04 crore whereas yam sales were higher at Rs.1,132.55 crore as compared to Rs.911.84 crore in the corresponding 12 months of the previous year. The FOB value of goods exported by the Company during the 12 months period ended 31.03.2010 increased to Rs.158.62 crore as compared to Rs.40 crore in the corresponding period of 2008-09.

The Earnings before Interest, Depreciation &Tax (EBIDTA) rose by 18.77% to Rs.238.82 crore compared to Rs.201.09 crore in the previous year. The Profit before Tax also grew by 18.55% to Rs.93.09 crore in the financial year 2009-10.

The Company achieved higher production of chips/polymer melt at 358758 MT during the financial year 2009-10 as compared to 231758 MT in the corresponding period of 2008-09. The increase in chip/polymer production was the main reason for the increase in profits for the year.The increase in output more than offset the reduction in chip margins which followed increased competition from new entrants.

With the enhancement in POY/FDY manufacturing capacity, the yarn production during the year, was higher at 127520 MT compared to 94703 MT in the 12 months period of 2008-09. The higher yarn production was the second most important reason for profit increase. During the year the Company increased its emphasis on specialty yarns and broadened the geographical distribution of its products.

Fabric production increased from 318.41 lac meters to 352.10 lac meters in the year under review. The Company increased its presence in the kidswear segment by introducing many new georgette and chiffon varieties for this segment. The Company also increased its sales of embroidered sarees and dress materials and institutional sales.

In the last year fabric development has been geared towards jaquard and dobbies. In line with the market your Company has made a shift from traditional dress materials and sarees to shirtings, fabric for garmenters and interlining fabric.

The Government of India partially rolled back the stimulus package, by raising the excise duty on polyester from 4% to 8% in July 2009 and increased it by another 2% on polyester

and feedstock alike in the Union Budget 2010-11, thus bringing them at a uniform rate of 10%. The higher excise duty will enable the Company to substantially reduce its accumulated cenvat balance and hence improve financial liquidity.

Your Company has closed down its activity of the finance division during the year and therefore the present business activity falls within a single primary business segment viz. Textiles.

Expansion Program:

To expand its product portfolio and to maintain its leadership in domestic market, your Company has over a period successfully enhanced its chips and yarn manufacturing capacity with an emphasis on specialty products.

In January 2009 after the successful expansion of Continuous Polymerization (CP) capacity to 416,000 TPA the Company successfully added POY and FDY capacity of 47,250 TPA in April 2009. The fruits of this expansion are visible in the results of the year under review. Moreover, the Company has successfully commissioned a project involving further enhancement of polyester chips capacity by 300 tonnes per day (TPD) at its plant at Village Jolwa, Taluka Palsana, Dist. Surat which commenced commercial production during April, 2010. The chips to be produced will be specialty chips that will cater to the needs of not just the textile industry but also the fast growing film and packaging industry.

During the year, your Company undertook expansion involving increase in POY capacity by about 144 TPD and FDY capacity of about 112 TPD at Jolwa. These projects are expected to be commissioned in a phased manner during January-June, 2011. These new plants will markedly increase production of specialty products. To cater to the growing needs of the sized-yarn sector the Company has initiated a draw-warping expansion project which will further enhance draw-warping capacity by 35 TPD.This project is expected to be on-stream by October, 2010.

To meet the captive power requirement for these projects, the Company is also putting up a coal based thermal power project of 18 MW at Jolwa which is expected to commence power generation before March, 2011.

Our expansion projects over the year are aligned with our objective of maintaining above-industry-average growth and will consolidate our position as a global leader in specialized polyester products. These initiatives will improve our economies of scale, our technological capabilities and strengthen our position in a very competitive market.

Review of the Economic Scenario:

The global economy continues to recover amidst ongoing policy support and the improving financial conditions of consumers and businesses alike. The recovery has been almost as synchronized and unanticipated as was the downward phase of the Great Recession.

The recovery process is led by emerging market economies, especially those in Asia. Advanced economies are expected to grow as well though at a much slower rate. According to IMF, the world economy expanded at an annual rate of over 5 per cent during the first quarter of 2010, primarily driven by the growth in Asian economies. World growth is projected at about 4.5% in 2010 and 4.25% in 2011. GDP forecasts for Asia have been revised upward for 2010, from about 7% to 7.5%.

The global economy however continues to face several challenges. The likely exit from expansionary monetary and fiscal policies in 2011 may be the biggest risk facing the global recovery. Developed nations are facing high levels of unemployment (around 10% in the US and the Euro area), poor credit growth and lethargic financial markets. Despite signs of renewed activity in manufacturing and signs of improvement in retail sales, the prospects of economic recovery particularly in Europe are clouded by acute fiscal strains and default-risks in some countries.

Indias recovery after the slow-down is well under way. Growth is projected to recover to 8-9% in the next two years. Rising interest rates, rupee appreciation, high inflation, volatility in capital flows and continued low growth in high income nations could somewhat slow the recovery but are unlikely to derail it.Consumerand business confidence is very strong and are reasonably balanced across the country. The confidence is supported by fast growing disposable income and corporate earnings. Manufacturing is expected to be a major driver of growth over the next few years. Exports have been expanding since October, 2009, a trend that is expected to continue.

On the back of 15.1% growth by the manufacturing sector, the Indian economy expanded by 9.0% in the first three months of 2010. In the current fiscal the government projects the economy will grow by 8.5% (vs 7.4% in 2009-10).

Inflation in food products, measured by the Wholesale Price Index (WPI), rose to 16.8% in 2009-10 from10% in 2008-09. With the wholesale price-based inflation still above 9.5%, the RBI may further tighten money supply, which will result in higher interest rates. With the unclear prospects for the monsoon, high inflation and the policy responses it may bring, are possibly the biggest hurdles to the economic growth.

Chinas announcement of a flexible policy for its currency may result in some appreciation against the dollar but may not have much impact on India. Its rapidly increasing wage rate on the other hand is having a positive impact on many Indian manufacturers including PFY manufacturers by improving their relative cost competitiveness.

Industry Review:

Globally synthetic fibres, led by polyester (polyester staple fibre and polyesterfilamentyarn) have been growing rapidly owing to a growing demand for fiber and the continuing replacement of natural fibres in a world short of agricultural acreage.

The proportion of synthetics in total fibre consumption worldwide has risen from 47% to 57% in the last 15 years while cotton has reduced from 42% to 36%. Moreover the percentage of polyester in global synthetics market has gone up from 58% to 79% in this period (source Oerlikon: Fibre Year 2010). In India polyester has been steadily replacing natural fibres as well. However since past government policies have led to a much higher ratio of natural (especially cotton) fibres to synthetics the potential for polyester growth is correspondingly higher. India has overtaken Taiwan and Korea to become the largest producer of polyester yarn (including PFY) outside of China.

The demand for polyester filament yarn in India grew by around 14% in 2009-10, faster than all other major yarn categories. Exports of PFY based textile products have also shown good growth unlike exports of other textile products.

As per CRISIL estimates, the domestic textile market (ready-made garments and home textiles) is expected to grow at a CAGR of 6-7% between FY 2008-09 and FY 2013-14. International experts have estimated a much higher growth rate. Rising income levels and increased growth in rural spending on textile products will translate into growth in domestic demand for fabric. Moreover Indias improved competitive position vis-a-vis China should help in good growth of chips and yarn exports.

In the year 2009-10 the growth in the Indian PFY industry was positive, despite a severe shortage of PTA raw material owing to delayed start-up of a large new Indian PTA plant. It is expected that the recent start-up of this plant will result in healthy growth of the industry in the remaining months of the year. The recent successful start-up of the IOC MEG plant will also significantly reduce the import dependency of MEG in India.

In the years ahead relatively easier availability of raw materials, growing local and international demand and improved cost competitiveness of Indian manufacturers vis-a-vis their global competitors should permit strong growth in the PFY industry.

The general weaving/fabric processing segment of the PFY industry suffered production losses due to labour shortage. The market seems to be consolidating from its super fragmented nature. Very small weavers who traditionally were job workers are shutting shop, and medium large scale weavers are augmenting capacity particularly in automatic looms.

Opportunities, Strengths and Outlook:

When oil prices were at $147 and costs of polyester raw materials were at a peak, and when the economy was in the grip of a severe slowdown, your Company has shown robust profitability reestablishing its credentials as a relatively low- risk company. During the financial crisis Indian consumers skewed their spending toward value-products like PFY textiles.

The growth of the rural market has played a major role in the resilient growth of PFY in good times and bad. It is expected that rural markets will play an increasingly important role in the economy which offers a major opportunity for growth in the polyester industry. The price of cotton has gone up considerably putting it out of reach of many consumers thus improving the competitive positioning of PFY.

Per capita consumption of polyester in India is exceedingly low by world standards so there is great scope for local demand growth. Moreover we believe India will play an increasingly important role as an exporter of high quality polyester filament chips and yarn. Your Company is well positioned to take advantage of both local and global demand growth.

Your Company occupies a leadership position in the manufacturer of Polyester Filament Yarn (PFY)-based textiles in India. It has the distinction of being the largest manufacturer of PFY-based fabrics in the country. It is also the leading manufacturer of fully drawn flat filament yarn and textile-grade chips. The Company is also a significant producer of differentiated Partially Oriented Yarn (POY), draw- warped yarn, draw-twisted yarn, draw-textured yarn, sized yarn and twisted yarn. Your Company is the second largest specialty yarn maker and the largest specialty chip maker in India.

Your Company is considered to be a market leader in quality and enjoys a solid reputation with its customers who give it a price-premium across its product range. Its market position gives it the ability to grow fast and profitably. Its specialty range allows it to differentiate itself in the market and will enable it to successfully withstand competitive pressures in times to come. The specialty market is growing and so is the need for quality, providing a great opportunity for your Companys growth.

Your Company is expected to increase its exports substantially this financial year. While China is still the largest and most cost-competitive country in PFY-based clothing, the scarcity of labour and high rate of wage growth in China is making your Company relatively more cost competitive in the international markets. Your Company is becoming a sizeable exporter of chips and yarn and is sometimes exporting to China, too.

Garden is an integrated player in the polyester chain whose products stem from chips to POY to processed yarn, preparatory yarn, to finished, dyed and printed fabric. This integration helps insulate it from the vagaries of the market and gives it leading information on which to base decisions across the chain.

The introduction of GST will be beneficial to your Companys performance as it will create a level playing field vis-a-vis its some of competitors who presently have central sales tax exemptions.

The general economic expansion is expected to contribute further to the upbeat trend. Your Company plans to exploit this opportunity through a disciplined policy of long-term investment thereby achieving higher returns and enhancing shareholder value. The Company will especially address opportunities to leverage domains of market leadership.

Risks and Concerns:

The next 1 -2 years are likely to see a large expansion in PFY, both POY and FDY. This may result in a reduction in margins in the yarn business. The margins in chips may not decline much, however, owing to the expected increase in yarn production.The Companys growth in chip and yarn sales will help offset the reduction in margins. The Companys thrust on specialties, high quality and customer relationships will help support margins.

The developed world faces the less likely but real risk of a double-dip recession which will have a slowing effect on the Indian economy as well. Yet this is unlikely to affect your Company adversely as it has done well in probably far worse conditions.

To curb the high inflation in the country the RBI may increase interest rates. This may have a negative effect on your Companys cost of borrowing.

Your Company takes risk management very seriously. The risk management practice inter alia provides for review of risk assessment and mitigation procedures, with guidelines to regularly update the management and the Board of risk status.

Duringthe year, the AuditCommittee, which has been designated by the Board, reviewed the adequacy of the risk management framework of the Company, the key risks associated with the businesses of the Company and the measures and steps in place to mitigate the same. The details were thereafter presented to and discussed at the Board Meeting.

Project execution is largely dependent upon timely delivery by the equipment suppliers, project management skills, and adherence to schedule by civil contractors. Any delay in project implementation will impact revenue and profit for that period.

The volatility witnessed in the global markets has reiterated the need for robust forex management systems and prudent investment practices. Your Company has conservative forex management processes, which ensure that forex exposures are hedged immediately upon the occurrence of an exposure. Currently the Company uses only forward contracts to hedge both its imports and exports and continues to maintain the philosophy of protecting cash flows. The Company does not speculate in the forex market.

Your Company is exposed to the risk of price fluctuation on major raw materials-PTA and MEG. While in regular course of business price fluctuations are passed on to customers sudden price reductions can result in freezing up of sales and consequent inventory losses.

Finance and Investment:

The Company, during the year under review, has successfully mobilized additional resources to fund its long-term and project-related financial requirements. The capex program of the Company is being funded by a combination of internal accruals and long-term borrowings from banks. The Company has spent an aggregate amount of Rs.186.49 crore on ongoing projects until year-ended 31st March, 2010.

Your Company availed term loans of Rs. 195.53 crore during the year to part-finance the capital expenditure program.The working capital requirements are met through borrowings from a consortium of banks, and placement of Commercial Papers and availing buyers credit from raw material suppliers. The Company repaid long-term loans of Rs. 124.67 crore (including prepayment of Rs. 1.47 crore to a foreign bank) to the banks and institutions towards its term loan obligations for the year 2009-10.

The Company continues to maintain adequate liquidity to meet unanticipated expenditures and accordingly invests surplus funds available in rated debt mutual funds and fixed deposits of reputed banks. As in the past, the Company enjoyed the confidence of its bankers and has been able to avail various banking facilities at favourable terms.

Interest cost has gone up during the year largely on account of additional borrowings for the new projects which commenced during the year. Your Company with better working capital management maintained lower interest costs inspite of higher working capital utilization during the year as compared to previous year.

Banks have switched over to the system of Base Rate from 1st July, 2010. It is expected that the Base Rate system will enhance transparency in lending rates. The switchover to base rate system will not have major impact on the Company.

Credit rating:

The Company continues to have the highest credit rating of "PR1+" (PR One Plus) from Credit Analysis & Research Ltd. (CARE) to the Commercial Paper (CP) / Mibor linked Short-Term unsecured NCD etc. of the Company, aggregating to Rs.185 crore for a maturity up to six months. Strong credit ratings by Credit Rating agencies reflect the Companys financial discipline and performance.

Corporate Governance:

Your Company continues to be committed to good Corporate Governance aligned with good practices. Your Company is in compliance with the standards set out by Clause 49 of the Listing Agreement with the Stock Exchanges. A separate Report on Corporate Governance along with the Auditors certificate on compliance with the Corporate Governance as stipulated in Clause 49 is set out in this Annual Report and forms part of this Report.

Directors:

In accordance with the provisions of the Companies Act, 1956 and the Companys Articles of Association, Mrs. Shilpa P. Shah, Mr. Rajen P. Shah, Mr. Alok P. Shah and Mr. Yatish Parekh retire from the Board by rotation and are eligible for re-appointment at the forthcoming Annual General Meeting. The Board recommends their re-appointment. The Notice convening the Annual General Meeting includes the proposals for re-appointment of Directors,

Directors responsibility statement:

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956, in relation to financial statement for the year 2009-10, the Board of Directors of the Company hereby state and confirm that:

i. in the preparation of the annual accounts, the applicable Accounting Standards have been followed and there has been no material departures;

ii. the selected accounting policies were applied consistently and the Directors made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2010 and of the profits of the Company for the year ended on that date;

iii. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv. the annual accounts have been prepared on a going- concern basis.

Auditors:

The statutory auditors of the Company, M/s. Natvarlal Vepari & Co., Chartered Accountants, hold office until the conclusion of the ensuing Annual General Meeting. Certificate from the auditors has been received to the effect that their re-appointment, if made, would be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956.

The Audit Committee and the Board of Directors therefore recommend their re-appointment as statutory auditors of the Company for 2010-11 for the approval of shareholders.

Auditors Report:

Notes to the accounts, as referred in the auditors report, are self explanatory and a practice consistently followed, and therefore do not call for any further comments and explanations.

Cost Audit:

As per the requirement of the Central Government and pursuant to Section 233B of the Companies Act, 1956, your Company carries out an audit of cost accounts relating to the product Polyester every year. Subject to the approval of Central Government, the Company has appointed Mr. V. Srinivasan, cost accountants, as auditors to audit the cost accounts of the Company for the Financial Year 2010-11.

Internal Control Systems:

Your Company has adequate internal control procedures commensurate with the size of operations and the nature of the business. These controls ensure efficient use and protection of Companys financial and non-financial resources. They also have ensured compliance of stipulated policies, procedures and statutes, ensuring accuracy of accounting records and corporate governance.

Regular internal audits and checks ensure that responsibilities are executed effectively. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them, from time to time.

Human Resources and Industrial Relations:

Good human resource management plays a key role in company performance. The employee relations during the year have remained cordial and satisfactory. Attracting and retaining dedicated and skilled human resource, offering them a conducive work environment and excellent career development opportunities are currently prime HR priorities.

Health, Safety and Environment Measures:

Your Company is aware of its responsibilities as a good corporate citizen, in health, safety and environmental management. Your Company contributes to community welfare activity and takes up initiatives and measures related to education and health. The Company recognises protection and management of environment as one of its highest priorities and every effort is made to conserve and protect the environment.

The Company continues to focus on maintenance and performance improvement of related pollution control facilities like effluent treatment plant and waste disposal facility at its manufacturing locations. The Company has put in place co-generation systems that keep carbon emissions to the minimum.

Your Company continued its focus in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staff and labour for maintaining hygienic and green surroundings.

Cash Flow Analysis:

The Cash Flow Statement for the year under reference in terms of Clause 32 of the Listing Agreement with the stock exchanges forms part of the Annual Report.

Investor Education & Protection Fund:

During the year, the Company has transferred a sum of Rs.l 2,63,825 to Investor Education & Protection Fund, the amount of Dividend pertaining to financial year 2001-02 which remained unclaimed and unpaid for a period of seven years, as provided in Section 205C(2) of the Companies Act, 1956.

Reward, Recognition & Quality Systems Certification:

Your Company continues to have the status of "Star Export House" by the Office of Joint Director General of Foreign Trade, Ministry of Commerce & Industry, Government of India on achieving the required Export targets.

The Companys Vareli Plant enjoys the unique distinction of being the first in polyester weaving industry to achieve ISO 9002:1994 certification by Bureau Veritas Quality International (BVQI). The processes certified are Draw Warping and Texturising,Twisting, Sizing, Warping and Weaving.The scope of audit includes "Manufacture of Woven Greige Fabrics and Processed Yarns".

The manufacturing of Texturised, Flat Polyester Filament, Polyester Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.

Fixed Deposits:

Your Company has not accepted or renewed any fixed deposits under Section 58A of the Companies Act, 1956 and as such no amount of principal or interest was outstanding as on 31st March, 2010.

Disclosure of Particulars:

Information as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, relating to Conservation of Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo is provided in Annexure A forming part of this Report.

Personnel:

The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made thereunder, is provided in an Annexure forming part of this Report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid Annexure. Any shareholder interested in obtaining copy of the same may write to the Company Secretary.

Depository System:

The Companys shares are compulsorily tradable in electronic form. As on 31st March, 2010, 94.49% of the Companys total paid-up capital representing 36,17,9323 shares are in dematerialised 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 on either of the depositories.

Cautionary Statement:

Statement in this Directors Report & Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include raw material availability and prices, cyclical demand and pricing in the Companys principal market, changes in Government regulations, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.

The Company assumes no responsibility in respect of the forward-looking statements herein, which may undergo changes in future on the basis of subsequent developments information or events.

Acknowledgement:

Your Directors take this opportunity to thank the Banks, Financial Institutions, Central and State Government authorities, Regulatory authorities, Customers, Suppliers, shareholders and investors at large for their continued support to the Company and look forward to having the same support in the years to come.

Your Directors would like to express their appreciation to all employees for their outstanding contribution to the operations of the Company during the year.

For and on behalf of the Board PrafulA.Shah

Chairman & Managing Director

Surat, 7th July, 2010

 
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