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Directors Report of Kandagiri Spinning Mills Ltd.

Mar 31, 2015

Dear Members,

The directors have pleasure in submitting their 39th Annual Report together with the audited accounts for the year ended March 31, 2015 (the year).

Performance Highlights

2014 - 15 2013 - 14

(Rupees in Lakhs)

Export - Direct 224 389

- Merchandise 12706 13012

Domestic Sales 5993 5945

Other operating income 13 15

Total Turnover 18936 19361

Gross profit (i.e., Profit before 2096 2541 interest and depreciation)

Cash profit (i.e., Profit / before 981 1408 depreciation)

Profit before exceptional Item and tax 227 625

Exceptional Item - provision for diminution - 45 in investments

Profit after exceptional Item (before tax) 227 580 - PBT

Profit after exceptional Item and tax - PAT 156 382

Earnings per share - basic and diluted Rs. 4.04 9.92

Dividend

In view of the carried over losses as at March 31, 2015, no dividend is recommended by your board of directors for the financial year 2014-15.

Reserves and Surplus

The current year profit after tax of Rs.155.67 lakhs has been added to the surplus/(deficit) at the beginning of the year of (Rs.262.16 lakhs). The written down value of fixed assets of Rs.18.37 lakhs, whose lives have been expired as at April 1,2014, have been adjusted net of tax, in the opening balance of profit and loss account. As such surplus/(deficit) as at the end of the year amounts to (Rs.124.86 lakhs).

Financial Performance with respect to Operational Performance:

During the year under review, your company's turnover was reduced by Rs. 425 lakhs mainly because of decrease in yarn prices. However your company's production was increased to 93.58 lakh kgs of yarn from 84.00 lakh kgs of yarn as compared to previous year. During the year under review there was high volatility in the cotton and yarn prices in both domestic and global markets. Power tariff rate was also increased during the month of Jan' 2015 which resulted in additional burden to the Company. Due to the aforesaid adverse effects, your Company's profit was lowered to Rs. 227 lakhs as against Rs. 625 lakhs of the previous year.

Your company successfully commissioned the dedicated feeder line for its unit III & unit II by the month end of October 2014 and March 2015 respectively and because of this feeders, and purchase of third party power there was optimum utilisation of GENSET power and uninterrupted power supply was available to our company which resulted in the substantial reduction in the power costs inspite of increased power tariff rate by TANGEDCO. Commissioning of Dedicated feeder line for Unit I is under progress and expected to get completed by the month end of August 2015.

Extract of Annual Return

The extract of annual return in Form MGT - 9 has been annexed with this report and form part of this report.

Number of Board Meetings

The details pertaining to meetings of the Board has been explained under Corporate Governance Report annexed to the director's report and forms part of this report.

Establishment of Vigil Mechanism

The Company has established a vigil mechanism for Directors and employees to report their genuine concerns. The policy has been uploaded on the Company's website under the web-link: http://www.kandagirimills.com/investors/ksml2014-wbp.pdf

Declaration by Independent Directors

Independent directors of the Company have submitted a declaration that each of them meets the criteria of independence as provided in Sub-Section (6) of Section 149 of the Act and revised Clause 49 of the Listing Agreements. Further, there has been no change in the circumstances which may affect their status as Independent director during the year.

Secretarial Audit Report

The Company appointed M/s B.K. Sundaram & Associates, Practising Company Secretaries as Secretarial Auditors, to conduct Secretarial Audit particularly with reference to compliance with Companies Act, 1956/2013, Listing Agreement and relevant SEBI Regulations for the financial year 2014-15. The report of the Secretarial Audit for the financial year 2014-15 in FORM MR-3 is annexed to this report and forms part of this report.

Audit Committee

Details of Composition of Audit Committee are covered under Corporate Governance Report annexed with this report and forms part of this report. Further, during this year none of the recommendations of the Audit Committee has been rejected by the Board.

Policy of Directors Appointment and Remuneration

Company's policy on Directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under section 178(3) of the Act are covered under Nomination and Remuneration Policy covered under Corporate Governance Report and forms part of this report. Further, information about elements of remuneration package of individual directors is provided in the extract of Annual Return as provided under Section92(3) of the Act, prescribed form MGT-9 annexed with this report and forms part of this Report.

Auditors and Secretarial Auditors Report

There are no disqualifications, reservations or adverse remarks or disclaimers in the Auditors and Secretarial Auditors Report.

Particulars of Employees

The information required under section 197 of the Act and rules made there under, in respect of employees of as shown below:

(a) Employed throughout the year and in receipt of remuneration aggregating to Rs.60,00,000 or more - Nil

(b) Employed for part of the year and in receipt of remuneration of Rs.5,00,000 or more per month - Nil

Note : Remuneration includes salary and value of perquisites and nature of employment is contractual.

Managerial Remuneration

Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed with this report and forms part of this report.

Related Party Transactions

Transactions entered with related parties have been explained in Form AOC -2 annexed with this report and forms part of this report. Further, Policy on dealing with Related Party Transactions has been uploaded on the Company's website, under the web link:http://www.kandagirimills.com/investors/ksml2014-rptp.pdf

Board Evaluation

The board of directors had carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of the Companies Act, 2013 and clause 49 of the SEBI listing agreement.

In the separate meeting of the Independent directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated taking into account the views of executive directors and non-executive directors. The same was discussed at the next Board Meeting followed the meeting of the Independent directors and the Independent Directors were evaluated without the presence of the director getting evaluated and also the performance of the Board, its Committees and individual directors were also discussed by the Board. The individual directors and the board as a whole in accordance with the performance Evaluation Policy guidelines were evaluated mainly on the basis of the criteria such as attendance, participation, contribution and the benefits derived by the Company. The Chairman was evaluated on the key aspects of his role. The performance of the committees was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Performance Evaluation policy is uploaded in the Company's website.

None of the Independent directors are due for reappointment.

Familiarisation Programme of the Independent Directors

Seminars and Site visits to plant locations are organized for the Independent directors to enable them to familiarize with the strategy, operations and functions of the Company. Periodic presentations are made by Senior Management, Statutory and Internal Auditors at the Board/Committee meetings on business and performance updates of the Company, global business environment, business risks and its mitigation strategy, impact of regulatory changes on strategy etc. Updates on relevant statutory changes encompassing important laws are regularly intimated to the Independent directors.

Deposits

The following are the details of deposits covered under Chapter V of the Act

i. Deposits Accepted from shareholders during the year (2013 - 14) : Rs. 255.87 lakhs

ii. Remained unpaid or unclaimed as at the end of the year : NIL

iii. Any default in repayment of deposits or payment of interest thereon during the year : NIL Cost Audit Report

As per the directions of the Cost Audit Branch of the Ministry of Corporate Affairs, M/s. S. MAHADEVAN & CO., Cost Accountants, was appointed as Cost Auditors for audit of Cost Accounts of the Company and his report for the year ended 31st March 2014 was submitted on 24.09.2014 to the Ministry of Corporate Affairs (VIDE SRN S31227200 dated 17.09.2014). Due date for submission of Cost Audit Report in XBRL format was 180 days from the date of end of the financial year.

M/s. S. Mahadevan & Co. were again reappointed for Audit of Cost Accounts of the Company for the year ended 31.3.2015. In view of the Company maintaining the Cost Records continuously, and in order to provide the comparable audited figures for the year 2014-15, in the cost audit report for the year 2015-16, the Board decided to continue the cost audit for the year 2014-15 on a voluntary basis. The Cost Auditor will submit the report to the Board of Directors for the year 2014-15, after duly certifying the cost records, in due course.

Directors

Sri Kameshwar M. Bhat and other existing independent directors Sri P. S. Anathanarayanan, Dr V. Gopalan, Sri S. Gnanasekharan and Sri N. Asoka were appointed as Independent directors for a period of five consecutive years at the last AGM held on 28.09.2014. Non- Executive directors Sri M. Rajamani and Dr. A. Sarayu were also appointed at the last AGM held on 28.09.2014 and they are liable to retire by rotation. Sri S. Vijay Shankar resigned from the post of Joint Managing Director and continued as non- executive director from 01.04.2014 and also designated as Chief Financial Officer from 01.04.2014 and Sri S. Vijay Shankar retires by rotation this year and being eligible offers himself for reappointment. Company's Code of Conduct applicable to the board has been adopted by the board and all directors of the company have confirmed compliance with the Code of Conduct.

The present term of Chairman and Managing Director expires on 30th September, 2015. Nomination and Remuneration Committee at its meeting held on 26.05.2015 has recommended the reappointment of Chairman and Managing Directors for a period of three years. Board of Directors of the Company has included the resolution for the reappointment of the Chairman and Managing Director in the notice of the ensuing AGM for the approval of the members.

Key Managerial Personnel

Nomination and Remuneration Committee at its meeting held on 26.05.2015 had recommended the increase in the remuneration of Chief Financial Officer Sri S. Vijay Shankar with effect from 01.10.2015 which was subsequently approved by the Audit Committee and the Board at their respective meetings and accordingly Board of Directors has placed the proposal for the approval of the members.

Auditors

The auditors, M/S M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the ensuing annual general meeting and have confirmed their eligibility and willingness to accept office, if appointed. On the recommendation of the Audit Committee your Company's board is placing the resolution u/s 139(2) of the Company's Act, 2013 for appointing him as the statutory Auditor of the Company for the current financial year.

Particulars of Loans, Guarantees or Investments Under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in Note 3.19 of the Notes to the financial statements.

Disclosure as per Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. The Company has set up a Committee for addressing issues related to women and during the financial year 2014-15, there were no complaints received on sexual harassment.

Performance of Associate Companies

Your Company has an associate M/s SPMM Healthcare Services Private Limited within the meaning specified under Section 2 (6) of Companies Act, 2013. M/s SPMM Healthcare services private Limited has recorded a total revenue of Rs. 3,92,43,57/- during the year 2014-15 as against Rs. 3,85,73,790/- in the previous year and profit after tax of Rs.43,63,920/- during the year 2014-15 as against Rs.9,89,364/- in the previous year. A separate statement containing the salient features of the financial statement of the associate in FORM AOC -1 has also been annexed with this report as per the requirements of provisions of section 129 of the Companies Act, 2013 and forms part of this report.

Material Changes and Commitments during the year, if any

There were no material changes and commitments between the end of the period under review and the date of this report which could have an impact on the Company's operation in the future or its status as a "going concern".

Significant And Material Orders Passed By The Courts Or Tribunals Impacting The Company

NIL

Shares

Your Company's Shares are traded only in Bombay Stock Exchange.

Annexures to this Report

The following are the annexures to this report

1. Director's Responsibility Statement in Annexure 1

2. Conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo in Annexure 2

3. Statement containing salient features of the financial statement of associate company (Form AOC - 1) in Annexure 3

4. Form AOC - 2 in Annexure 4

5. Extract of Annual Report (Form MGT-9) in Annexure 5

6. Secretarial Audit Report (Form MR-3) in Annexure 6

7. CSR Policy in Annexure 7

8. Particulars of Remuneration in Annexure 8

9. Corporate Governance Report in Annexure 9

Cautionary Note

Statements in the Directors' report and the management discussion and analysis describing the Company's objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results might differ materially from those either expressed or implied in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other related factors such as litigation and industrial relations.

Appreciation

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, Customers, Suppliers, Bankers and other stakeholders for their continued support during the year. Your Company's consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

The directors of your company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, Central/State Governments and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board

Salem R. Selvarajan May 28, 2015 Chairman and Managing Director


Mar 31, 2014

Dear Members,

The directors have pleasure in submitting their 38th Annual Report together with the audited accounts for the year ended March 31, 2014 (the year).

Performance highlights

2013-14 2012-13

(Rs. in lakhs)

Export - Direct 389 -

- Merchandise 13012 6584

Domestic Sales 5945 9453

Other operating income 15 17

Total Turnover 19361 16054

Gross profit (ie. profit before interest and depreciation) 2541 2886

Cash profit/ (ie. Profit / before depreciation) 1408 1649

Profit before exceptional Item and tax 625 828

Exceptional Item - provision for diminution in investments 45 -

Profit after exceptional Item (before tax) - PBT 580 828

Profit after exceptional Item and tax - PAT 382 585

Earnings per share -basic and diluted Rs. 9.92 15.20

Dividend

In view of the carried over losses as at March 31, 2014, no dividend is recommended by your board of directors for the financial year 2013-14.

Financial Performance with respect to Operational Performance:

During the year under review, your company achieved a turnover of Rs. 19361 lakhs as against Rs. 16054 lakhs during the previous year, registering an increase of nearly 21%. However the profit before tax was lowered to Rs. 625 lakhs as against Rs. 828 lakhs mainly due to increase in cotton price and backing out of 40% of power generated through windmill by TANGEDCO. Your company was able to retain this level of profitability through dedicated efforts aimed at improving operational efficiency, timely purchase of cotton though there is an uncertainty in its prices and focus on optimal product mix and effective cost reduction measures. Your company successfully installed and commissioned the dedicated feeder line for its unit II by the end of March 2014. The benefits arising out of this dedicated power line, such as usage of third party power in the power cut period, optimum utilisation of GENSET power and uninterrupted power supply will be available to our company in the coming years.

COST AUDIT REPORT

As per the directions of the Cost Audit Branch of the Ministry of Corporate Affairs, M/s. S.MAHADEVAN & CO., Cost Accountants Coimbatore, was appointed as Cost Auditor for audit of Cost Accounts of the Company and his report for the year ended 31st March 2013 was submitted on 24.09.2013 to the Ministry of Corporate Affairs (VIDE SRN: S22477152, dated 24.09.2013). Due date for submission of Cost Audit Report in XBRL format was 27.09.2013.

M/s. S.Mahadevan & Co. were again reappointed for Audit of Cost Accounts of the Company for the year ended 31.3.2014. Their reports for the year ended 31.3.2014 will be filed before the due date.

DIRECTORS

Mr. V.Mahadevan, Independent Director did not attend the meetings of the Board and the Audit Committee held during the year on account of his continued illness. He submitted his resignation which was accepted at the Board Meeting held on 14.02.2014. Board appointed Mr. S.Gnanasekharan, a Practising Company secretary, as an independent director in the place of Mr. V.Mahadevan.

Sri S. Vijay Shankar had resigned as Joint Managing Director and continues as non-executive director with effect from 01.04.2014. Board designated Sri S.Vijay Shankar as Chief Financial Officer at the Board Meeting held on 01.04.2014.

In accordance with the provisions of section 196(3) of the Companies Act, 2013, the Nomination and Remuneration Committee recommended to the Board for the continuation of Sri R. Selvarajan as Chairman and Managing Director for his remaining tenure i.e. up to 30.09.2015 eventhough he attains the age of seventy on 01/10/2014 keeping in view of his experience.

The Company had, pursuant to the provisions of clause 49 of the listing agreements entered into with Stock Exchanges appointed Dr. V.Gopalan, Mr. P.S.Anathanarayanan, Mr. N.Asoka and Mr. S.Gnanasekharan as Independent Directors of the Company. In accordance with the provisions of section 149 of the Companies Act, 2013, these directors are being appointed as Independent directors for five consecutive years commencing from the date of the forthcoming Annual General Meeting of the Company and they are not liable to retire by rotation.

Sri S.Devarajan, Director, retires by rotation and he is eligible for reappointment. Sri S.Sivakumar also retires by rotation but he desires not to get reelected. Board recorded its appreciation for the valuable services rendered by Mr. S.Sivakumar to the company during the tenure of his office.

Company''s Code of Conduct applicable to the board has been adopted by the board and all directors of the company have confirmed compliance with the Code of Conduct.

AUDITORS

Auditors, M/S M.S.Krishnaswami & Rajan, Chartered Accountants, retire at the ensuing annual general meeting and have confirmed their eligibility and willingness to accept office, if appointed. On the recommendation of the Audit Committee your Company''s board is placing the resolution u/s 139(2) of the Companies Act, 2013 for appointing him as the statutory Auditor of the Company for the current financial year.

ANNEXURE

Annexure to this report details Statement on directors'' responsibility, conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo.

APPRECIATION

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, Customers, Suppliers, Bankers and other stakeholders for their continued support during the year. Your Company''s consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

The directors of your company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, the Government of Tamil Nadu and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board Salem R. Selvarajan August 13, 2014 Chairman and Managing Director


Mar 31, 2013

The directors have pleasure in presenting their 37th Annual Report together with the audited accounts for the year ended March 31, 2013 (the year).

Performance Highlights 2012-13 2011-12

Turnover (Rupees lakhs)

Export - Direct 137

- Merchandise 6584 4641

Domestic Sales 9453 7856

Other operating income 17 4

Total Turnover 16054 12638

Profit

Gross profit (ie. profit before Interest, 2886 194 depreciation and tax)

Cash profit/(loss) 1649 (1205)

(i.e. profit/(loss) before depreciation and tax)

Profit/floss) before tax (PBT) 828 (2008)

Profit/(loSs- after tax (PAT) 585 1298

Earnings per share - basic and diluted (Rupees) 15.20 (33.72)



Dividend

In view of the carried over losses as at March 31, 2013, no dividend is recommended by your board of directors for the financial year 2012-13.

Financial Performance with respect to Operational Performance:

During the year under review, your company was able to effect a turnaround in performance through dedicated efforts aimed at improving operational efficiency, timely purchase of cotton in the market, remunerative prices and good demand for yarn, focus on optimal product mix and effective cost reduction practices, all of which resulted in improved sales and return to profitability. Your Company achieved a sales turnover of Rs. 16054 lakhs as against Rs. 12638 lakhs recorded in the previous year, registering an increase of about 27% over the previous year. Your Company has earned profit before tax of Rs.828 lakhs during the year as against loss of Rs.2008 lakhs in the previous year, despite the severe power cut which lead to abnormal increase in the power cost and high interest cost during the year.

Your Company''s Wind Electric Generators (WEGs) recorded very good generation of electricity of the value of Rs.1094 lakhs during the year (as against Rs.671 lakhs during 2011-12) - 63% increase over the previous year, resulting in considerable savings in power cost.

COST AUDIT REPORT

As per the directions of the Cost Audit Branch of the Ministry of Corporate Affairs, M/s. S. MAHADEVAN & CO., Cost Accountants, Coimbatore, has been appointed Cost Auditor for audit of Cost Accounts of the Company and their report for the year ended 31st March 2012 has been submitted on 25.01.2013 to the Ministry of Corporate Affairs (VIDE SRN No.S20009809, dated 25-01-2013). Due date for submission of that Cost Audit Report was 31.01.2013.

M/s. S. Mahadevan & Co. have been reappointed for Audit of Cost Accounts of the Company for the year ended 31.3.2013. Their reports for the year ended 31.3.2013 will be filed well before the due date.

Directors

Sri N.Asoka and Sri V.Mahadevan retire by rotation and they are eligible for reappointment. Your Company''s Code of Conduct applicable to the board has been adopted by the board and all the directors of the company have confirmed due compliance with the Code of Conduct.

Auditors

The auditors, M/s. M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the end of the ensuing annual general meeting and they have confirmed their eligibility and willingness to accept office, if appointed.

Annexure

Annexure to this report details Statement on Directors'' responsibility, conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo.

Compliance Certificate u/s 383A

Compliance Certificate pursuant to Section 383A of the Companies Act, 1956 obtained from M/s. B.K. Sundaram Associates, Practicing Company Secretaries, is also annexed to this report.

Appreciation

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, Customers, Suppliers, Bankers and other stakeholders for their continued support during the year. Your Company''s consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

Directors of your Company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, the Government of Tamil Nadu and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board

Salem R. Selvarajan

May 27, 2013 Chairman and Managing Director


Mar 31, 2012

The directors have pleasure in submitting their 36th Annual Report together with the Audited Statement of Accounts for the year ended March 31, 2012 (the year).

Performance Highlights 2011-12 2010-11 (Rupees lakhs)

Gross sales/income from operations Export

- Direct 137 289

- Merchandise 4641 5903

4778 6192

Domestic Sales 7856 8981

Other income 4 4

Total Turnover 12638 15177

Gross profit (ie. profit before interest and depreciation) 194 3311

Cash profit/(loss) (ie. profit/(loss) before depreciation) (1205) 2188

Profit/(loss) before tax (2008) 1404

Profit/(loss) after tax (1298) 926

Earnings per share

-basic and diluted Rs. (33.72) 24.06

Dividend

In view of the loss incurred during the year, no dividend is recommended by your board of directors. Operating and Financial Performance

Your company's revenue from operations during the year has fallen from Rs.15177 lakhs to Rs.12638 lakhs due to the steep fall in yarn prices triggered by the crashing of yarn prices in take first quarter of 2011-12. In view of the imparity of cotton prices with yarn price coupled with power cut by nearly 60%, your company incurred loss of Rs.2008 lakhs as against profit of Rs.1404 lakhs recorded in the previous year.

Your company's Wind energy converters (WEC) generated power of the value of Rs.671 lakhs (Rs.787 lakhs in 2010-11) resulting in savings in power cost.

Management discussion and analysis

The core business of the company is manufacture and sale of cotton yam. The management discussion and analysis given below discusses the key issues of the cotton yarn spinning sector.

(a) Industry performance

(i) The last couple of years have seen almost all the economies of the world go through tumultuous times and India has been no exception to the troubled economic situation. With slackening global demand, tight liquidity situation, and the monetary tightening measures taken by Reserve Bank of India to tame inflation, the Indian industries experienced dampening economic activity.

(ii) The year under review was quite challenging for Textile Industry. Sharp rise in the price of Cotton and Yarn in the beginning of the year and sudden and steep fall in the price of cotton within a few weeks in April 2011 coupled with ban on Export of Yarn during the quarter of the previous Financial Year impacted the yam market and there was virtual standstill during the next few months. The spinning sector was overburdened with high cost raw material carried in stock as at the end of the previous year and the inability of the market to absorb that cost resulted in huge loss to almost all companies in the Spinning Industry. Even though Cotton price started stabilizing in the second half of 2011-12, Yarn market did not recover throughout the year.

(iii) Power shortage in Tamil Nadu became severe during the second half of 2011-12 necessitating increased use of gensets to meet the shortfall resulting in increased cost of production during that period.

(iv) Bank interest rates were increased by almost 3% during the year as per the Reserve Bank of India's monitory tightening measures, which resulted in abnormal increase in Financial Cost during the year.

(b) Outlook

Since the cotton price has almost stabilized, the industry expects to improve its margin during the year. Demand for your Company's product is quite appreciable in domestic market. Inspire of depreciating rupee, the export market is not picking up due to present crisis in the European and US Markets. Your directors do not foresee much improvement in the export market, However, it is hoped the Government of India will intervene with some relief packages to improve the exports. Baring the above situation, the Company's performance will be good in the coming years.

(c) Strategies and Future plans

As part of future plans the deferred expansion will be taken up for implementation, at the appropriate time once the textile industry comes to a recovery path. The Company is also actively examining the possibility of reducing costs at all levels and evaluating new value added products, which will have fresh demand in domestic as well as international markets.

(d) Internal control and systems

The Company has in place well established internal control procedures covering various areas such as procurement of raw materials, production planning, quality control, maintenance planning, marketing, cost control and debt servicing. Necessary checks and balances have been instituted for timely correction.

(e) Human resources management

Employees are your company's most valuable resource. Your Company continues to create a favourable environment at work place. Your Company has various welfare measures both government sponsored and privately envisaged. The company also recognises the importance of training and consequently deputes its work force to various work related courses/seminars including important issues like Total Quality Management (TQM). The fact that the relationship with the employees continued to be cordial is testimony to the company's ability to retain high quality workforce. In view of the above no man days were lost during the year under report.

(f) Corporate Social Responsibility

Your company's main activity may be centered around making quality yarn but its concerns reach out beyond the above stated business, to the welfare of your company's employees and to the society at large to which your company owes its growth. Your Company, along with your group's associate Company Sambandam Spinning Mills Limited, is collaborating with two Multi Speciality Hospitals in Salem which, apart from rendering medical service to your company's employees and their families are also offering medical relief to the public at large at subsidized rates. Besides your Company has been taking care of the food requirements of The Tamilnadu Association for the Blind School, Ayothiyapattinam, Salem District.

(g) Cautionary note

Statements in the Directors' report and the management discussion and analysis describing the Company's objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results might differ materially from those either expressed or implied in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other related factors such as litigation and industrial relations.

COST AUDIT REPORT:

As per the directions of the Cost Audit Branch of the Ministry of Corporate Affairs, M/s.S.MAHADEVAN & CO., Cost Accountants Coimbatore, was appointed Cost Auditor for audit of Cost Accounts of the Company and his report for the year ended 31st March 2011 was submitted on 14.9.2011 to the Ministry of Corporate Affairs (VIDE SRN B 20301032 dated 14.9.2011). Due date for submission of that Cost Audit Report was 27.9.2011

M/s. S. Mahadevan & Co. were again reappointed for Audit of Cost Accounts of the Company for the year ended 31.3.2012. Their reports for the year ended 31.3.2012 will be filed before the due date, i.e. 27.9.2012.

Directors

Sri P.S.Ananthanarayanan and Dr.V.Gopalan. retire by rotation and are eligible for reappointment.

The Companies Code of Conduct applicable to the board has been adopted by the board and all directors of the company have confirmed compliance with the Code of Conduct.

Auditors

The auditors, M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the ensuing annual general meeting and have confirmed their eligibility and willingness to accept office, if appointed.

Annexure

Annexure to this report details Statement on directors' responsibility, conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo.

Compliance Certificate u/s 383A

Compliance Certificate pursuant to Section 383A of the Companies Act, 1956 obtained form M/s B.K.Sundaram Associates, Practicing Company Secretaries, Tiruchirapalli, is also annexed to this report.

Appreciation

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, Customers, Suppliers, Bankers and other stakeholders for their continued support during the year. Your Company's consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

The directors of your company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, the Government of Tamil Nadu and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board

Salem R. Selvarajan

May 30, 2012 Chairman and Managing Director


Mar 31, 2011

Dear Members,

The directors have pleasure in submitting their 35th Annual Report together with the Audited Statement of Accounts for the year ended March 31, 2011 (the year).

Financial Results 2010-11 2009-10 (Rupees lakhs)

Gross sales/Income from operations

Export - Direct 288 623

- Merchandise 5903 3526

6191 4149

Domestic 9279 6599

Conversion charges earned - 3

15470 10751

Less sales tax and cess recovery 282 187

Net sales/Income from operations 15188 10564

Gross profit (ie. profit before interest and depreciation) 3172 2143

Cash profit (ie. profit before depreciation) 2188 1228

Profit before tax 1404 449

Profit after tax 926 334

Earnings per share - Basic Rs. 24.06 8.67

Dividend

Board of Directors of your Company declared an interim dividend of Rs.2 per equity share of Rs.10 each at the Board Meeting held on January 29, 2011. Further your directors are pleased to recommend a final dividend of Rs.2 per equity share of Rs.10 each. The interim and the proposed final dividend will entail a cash outflow of Rs. 1,79,24,514/-.

Operating and Financial Performance

Your Company has had very steady performance in 2009-10. This year's annual results has shown growth in turnover of over 44% driven by strong domestic and merchandise export market for yarn compared to previous year's growth of 20%. Despite the steady increase in cotton price, yarn selling prices also increased correspondingly. On account of timely purchase of cotton, supported by good demand for yarn in the domestic and merchandise export market, your Company could achieve an operating profit of Rs.3172 lakhs for the year with an increase of 48% over previous year and profit before tax of Rs.1404 lakhs with an increase of 212%. Your Company's decision to buy power from third party has reduced the power cost (net) by almost 1%.

Your Company's Wind Energy Converters (WEC) generated power of the value of Rs.787 lakhs as against Rs.772 lakhs in the previous year.

Management discussion and analysis

Core business of your Company is manufacture and sale of cotton yarn. The management discussion and analysis given below discusses the key issues of the cotton yarn spinning sector.

(a) Industry performance

Indian economy in general is on a steady growth mode and has shown more resilience than some of the other developed economies around the world. Yarn production in India has been steady. Yarn prices registered increase during the year due to increased demand from domestic and international markets. Fiscal and other initiatives taken by the Government of India have eased the pressures in the economy leading to revival of textile industry. However raw material cost continued to remain high and continuance of power cut and restrictions on power supply during peak hour affected the performance of textile industry in Tamilnadu.

(b) Outlook

Even though cotton price is highly volatile and speculative at present, your directors are of opinion that it would stabilize in the coming months. The domestic and international markets were not encouraging in the first quarter of 2011-12. Divergent interests of different sectors of the textile industry need to be properly balanced and timely intervention by Central Government to ensure that is necessary. Barring unforeseen circumstances, your directors are confident that during the current financial year also your Company will be in a position to maintain its productivity and profitability at an improved level.

(c) Strategies and Future plans

As part of future plan, your directors are exploring the possibilities to take up modernization of spinning unit I and manufacture of value added yarn like slub yarn, provided the prevailing situation continues to improve. Your Company is also actively examining the possibility of entering non-woven textiles market. Plans are afoot to intensify efforts in the area of: Research and Development and towards this end, a new team of young in house technocrats has been formed and these efforts are expected to result in various measures like cost reduction and new product development in the near future.

(d) Internal control and systems

Your Company has in place well established internal control procedures covering various areas such as procurement of raw materials, production planning, quality control, maintenance planning, marketing, cost control and debt servicing. Necessary checks and balances have been instituted for timely correction.

(e) Human Resources Management

Employees are your Company's most valuable resource. Your Company continues to create a favourable environment at work place. Your Company has various welfare measures both government sponsored and privately envisaged. The Company also recognises the importance of training and consequently deputes its work force to various work related courses/seminars including important issues like Total Quality Management (TQM). Because of these, your Company is able to attract and retain well trained and dedicated workforce. The fact that the relationship with the employees continued to be cordial is testimony to the Company's ability to retain high quality workforce. In view of the aforesaid relationship no man days were lost during the year under report.

(f) Corporate Social Responsibility

Your Company's main activity may be centered around making quality yarn but its concerns reach out beyond the above stated business, to the welfare of your Company's employees and to the society at large to which your Company owes its growth. With this initiative, your Company has been imparting comprehensive training to the new entrants to the Company's fold, simultaneously continuing technical education to the existing staff and workforce. Your Company's along with your group's associate Company Sambandam Spinning Mills Limited, is collaborating with two multi speciality hospitals in Salem which, apart from rendering medical service to your Company's employees and their families are also offering medical relief to the public at large at subsidized rates. Besides your Company has been taking care of the food requirements of The Tamilnadu Association for the Blind School, Ayothiyapattinam, Salem District.

(g) Cautionary note

Statements in the Directors' report and the management discussion and analysis describing the Company's objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results might differ materially from those either expressed or implied in the statement. Important factors that could influence the Company's operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other related factors such as litigation and industrial relations.

Homage to Founder Director

Your directors note with deep regret the sad demise of Sri S.P. Ratnam, founder director and chairman Emeritus of the Company. Your directors place on record their deep sense of appreciation for the valuable services rendered by him to the Company during the tenure of his office.

Directors

Sri S. Devarajan retires by rotation and is eligible for reappointment. Sri M. Rajamani also retires by rotation but he expressed his unwillingness to be reappointed due to his other preoccupations. Board records its appreciation for the valuable services rendered by him to the Company during the tenure of his office.

Your Company's Code of Conduct applicable to the board has been adopted by the board and all the directors of the Company have confirmed compliance with the Code of Conduct.

Auditors

The auditors, M/s. M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the ensuing annual general meeting and have confirmed their eligibility and willingness to accept office, if re-appointed.

Annexure

Annexure to this report details Statement on directors' responsibility, conservation of energy, technology absorption, Research and Development and foreign exchange earnings and outgo.

Compliance Certificate u/s 383A

Compliance Certificate pursuant to Section 383A of the Companies Act, 1956 obtained from M/s.B.K.Sundaram Associates, Practising Company Secretaries, Tiruchirapalli, is also annexed to this report.

Appreciation

Directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, Customers, Suppliers and Bankers and other stakeholders for their continued support during the year. Your Company's consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

Directors of your Company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, Government of Tamil Nadu and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board R. Selvarajan Chairman and Managing Director

Salem May 23, 2011


Mar 31, 2010

The directors are pleased to present their 34th Annual Report and Audited Accounts for the year ended March 31, 2010 (the year).

Financial results 2009-10 2008-09

(Rs. lakhs)

Gross sales/Income from operations

Direct exports 623 547

Merchandise exports 3433 2626

4056 3173

Domestic Sales 6692 5553

Conversion charges earned 3 1

10751 8727

Less sales tax and cess recovery 187 142

Net sales/Income from operations 10564 8585

Gross profit (ie. profit before interest and depreciation) 2143 1243

Cash profit (ie. profit before depreciation) 1228 344

Profit/loss) before tax 449 (385)

Profit/floss) after tax 334 (266)

Earnings per share - Basic Rs. 8,67 (6.92)

Dividend

With a view to conserving the reserves and aiso to meet the increase in requirements of working capital, the directors of your company do not recommend any dividend for the year ended March 31, 2010.

Directors

Sri V. Mahadevan and N. Asoka retire by rotation and are eligible for reappointment.

The Companys Code of Conduct applicable to the board has been adopted by the board and all the directors of the Company have confirmed compliance with the Code of Conduct.

Auditors

The auditors, M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the ensuing annual general ¦ meeting and have confirmed their eligibility and willingness to accept office, if appointed.

Annexure

Annexure to this report details Statement on directors responsibility, conservation of energy, technology absorption, Research and Development and foreign exchange earnings and Qutgo.

Compliance Certificate u/s 383A

The compliance certificate pursuant to section 383A of the Companies Act, 1956 obtained from M/s. B.K. Sundaram & Associates, practising Company secretaries, Tiruchirapalli, is also annexed to this report.

Appreciation

The directors of your Company record their sincere appreciation of the dedication and commitment of all employees in achieving and sustaining excellence in all areas of the business. Your directors thank the Shareholders, customers, suppliers and bankers and other stakeholders for their continued support during the year. Your Companys consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

The directors of your Company thank State Bank of India, Karnataka Bank Limited and Axis Bank Limited, the Government of Tamil Nadu and other government agencies for their support, and look forward to their continued support in future.

For and on behalf of the Board Salem R. Selvarajan

May 29, 2010 Chairman and Managing Director

 
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