Notes to Accounts of Kemrock Industries & Exports Ltd.

Sep 30, 2013

1. Basis of Preparation of Financial Statements

The Financial Statements are prepared as per historical cost convention and in accordance with the Generally Accepted Accounting Principles (GAAP) in India, the provision of the companies Act, 1956 and the applicable Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended). All Incomes and Expenditure having material bearing on the Financial Statements are recognized on accrual basis.

Expenditure on R & D, Trademark, development of markets, which are determined to have a useful life spanning more than one year are amortized over its useful life.

2. Terms/rights, preferences and restrictions attached to securities - Equity Shares:

The Company has one class of equity shares having a par value of Rs. 10/- each. Each shareholder is eligible for one vote per share held except share represented by GDRs. The dividend that may be proposed by the board of directors is subject to the approval of shareholders in the ensuing Annual General meeting, except in case of interim dividend. In the event of liquidation, the equity share holders are eligible to receive the remaining assets of the company after distribution of all preferential dues, in proportion to their shareholding.

During the year ended 30th September, 2013, the amount of per share dividend recognized for distribution to equity shareholders is Rs. Nil (P.Y. 30th June, 2012 Rs. Nil)

3. The Company has provided for the premium payable on FCCBs for the current year which has been adjusted against balance of Security Premium as per Section 78 of the Companies Act, 1956.

Loans and advances from related parties

The company has taken interest free loans from subsidiaries and joint ventures. The Repayments schedule for the same is not fixed and the amount is repaid depending on the surplus funds, liquidity and financial requirement of the company. Accordingly, management is of the view that these loans are generally repayable after a period of 12 months.

Packing Credit from banks are secured by way of first pari passu charge on current assets and second pari passu charge on fixed assets of the company. Carrying interest on Working capital is at 12% to 14%.

Whatever information the company could identify as above were possible at the year ended only, and in view of this according to the company, it could not identify payments beyond due date during the year and to make interest provisions to that extent, due to numerous transactions concluded during the year as per the agreed terms with the suppliers. However the company has made due interest provisions over the requisite year end balances.

4. Earlier Short Term Loans from banks which has been presented as a current liability as at 30.09.2013, are secured against hypothecation of current assets of the company. The loan is further secured by personal guarantee of Managing Director. The Short Term Loans (current liability as at 30.09.2013) are repayable on demand and carrying interest at 12% to 14%.

5. *Liability towards Investor Education and Protection Fund under Section 205C of the Companies Act,1956, Rs. Nil (Not Due as on 30.09.2013/30.06.2012).

6. Working Capital from banks are secured by way of first pari passu charge on current assets and second pari passu charge on fixed assets of the company. Carrying interest on Working capital is at 12% to 14%.

7. Term Loan: Earlier Term Loan in Foreign currency from ICICI Bank which has been presented as a current liability as at 30.09.2013, are secured by way of First hypothecation charge on pari passu basis over the fixed assets of the company and second pari passu charge on current assets of the Company. The loan is further secured by personal guarantee of Managing Director. Term Loan is carrying Rate of Interest (at present) at the rate of 4.57%.

Earlier Term Loan in Foreign currency from PNB international Ltd and Syndicate Bank which has been presented as a current liability as at 30.09.2013, are secured by way of Pledge of Equity Shares of Top Glass S.p.A, Italy and second pari passu charge on fixed assets of the Company. The loan is further secured by personal guarantee of Managing Director. Term Loan is carrying Rate of Interest (at present) from 3.75% to 5.75%.

Vehicle Loan: Earlier Vehicle Loan from banks which has been presented as a current liability as at 30.09.2013 are secured by way of hypothecation of vehicles and are repayable over a period of 4 years. Vehicle loan is carrying Rate of Interest(at present) from 8.91% to 13.25%.

From Financial Institution: Earlier Term Loan from L&T finance limited which has been presented as a current liability as at 30.09.2013, is secured by way of hypothecation charge on pari passu basis over the fixed assets and current assets of the company. Term Loan (current liability as at 30.09.2013) is carrying Rate of Interest (at present) at the rate of 12.5%.

Earlier Term Loan which has been presented as a current liability as at 30.09.2013, in Rupee Currency are secured by way of First hypothecation charge on pari passu basis over the fixed assets of the company and second pari passu charge on current assets of the company. The loan is further secured by personal guarantee of Managing Director. Term Loan (current liability as at 30.09.2013) is carrying Rate of Interest (at present) from 12% to 14%.

During the period, Review/Restructuring Scheme has been done by the Allahabad Bank with the Support of consortium member Banks and repayment schedule has been given to the company for repayment of outstanding dues. All such loans are secured.

The amounts of loan from Financial Institutions (Secured, Unsecured, Term Loan, Short Term Funding etc.) have been categorized under Current Liabilities'' as the Company has defaulted in honoring the repayments on Scheduled Dates and as on the date of the Balance Sheet, the entire sums stood categorized as Non-Performing Assets by the said Financial Institutions and hence ''Payable Immediately'' (Demand Loan).

The outstanding balance is presented as a current liability as at 30.09.2013.

Interest payments on outstanding dues on the Company''s Borrowings which are shown under the current liability was overdue during the period and the Management expects that the Company will be able to meet all contractual obligations from borrowing in the near future.

During the year under report, the Company has acquired further 51% equity shares in Kemrock Resins Private Limited. The 51:49 Joint Venture between "GP Chemicals International Holding S.a.r.l" and "Kemrock Industries and Exports Limited" set up under the name of "Georgia-Pacific Kemrock International Private Limited" (entity) has been discontinued w.e.f., 12th March, 2013, with the mutual agreement of both the partners. The said entity, now being a wholly owned subsidiary of the Company, has been renamed as "Kemrock Resins Private Limited".

*The Inventory of Raw Materials, stores & Spares, Work in Progress and Finished goods has been taken, valued and certified by the management. The Inventory of Work in Progress has been verified and valued by Government approved technical agency as the valuation is technical in nature.

The Company has made project exports for Fiber Reinforced Polymer (FRP) in various countries. The Company has made total exports for the same to the extent of Rs. 11,041.36 Lacs. However the Company has not made reference to appropriate authorities for non-receipt of earnings from exports of Rs. 9,781.75 lacs since last six months from the date of Financial statement. Company is of the view that these earning are recoverable and good and hence no reference to appropriate authorities or provision in books of accounts is made.

** Margin Money deposits with a caring amount of Rs. 184.43 lacs (P.Y. Rs. 3,268.49 lacs) are given as margin against Letter of Credit opened with bank.

8. CONTINGENT LIABILITIES AND COMMITMENTS (to the extent not provided for)

(Rs.in Lacs)

Particulars As at As at 30th September, 30th June, 2013 2012 Contingent Liabilities

a) Guarantees

Guarantees issued by the bank 106.69 11,721.29 on behalf of the Company.

b) Other money for which Company is contingently liable

Disputed Tax Demands(not acknowledged) against which proceedings are pending before various Tax Authorities. 496.55 315.16

Litigations against the Company 47.28 52.20

Letter of Credit issued by the Bank Nil 14,590.31 on behalf of the Company.

c)Commitments

Estimated amounts of Contracts 227.01 309.60 remaining unpaid on Capital Account

Defined Benefit Plan

The Company has adopted Accounting Standard 15 (AS-15) (Revised) "Employee Benefits" which is mandatory from accounting periods starting from 7th December, 2006. Accordingly, the Company has provided for gratuity and leave encashment based on actuarial valuation done as per Projected Unit Credit Method.

The estimate of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

9. Borrowing Costs directly attributable to creation of assets has been capitalized. The relevant amount is Rs. NIL (Previous Year Rs. 5,433.16 lacs).

10. Balanace of Unsecured Loans, Trade Payables, Trade Receivables, Loans & Advances, Other Parties, Buyer''s Credit and Letter of Credit are subject to their confirmations and reconciliation, due adjustment, if necessary, will be made on receipt thereof. In the opinion of management, all known liabilities are accounted for and there are no contingent liabilities other than those disclosed.

11. Segment Reporting

As per Accounting Standard 17, Business Segment has been identified as per the primary segment and geographical segment has been identified as the secondary segment as reportable segments of the company. Primary Segment Information - Business.

Notes :

12. Geographical Segments considered for disclosures are as follows:

* Sales within India includes Sales to Customers located within India.

* Sales Outside India includes Sales to Customers located outside India.

13. Opening balances have been considered on the basis of the last year audited balance sheet and the figures of previous year were audited by a firm of Chartered Accountants other than our firm. Opening balances have been regrouped/rearranged wherever necessary while reporting current year financial statements.

14. Certain Balance of Trade Receivable, Trade Payable, Loans & Advances for Capital Expenditures are non- moving/sticky since more than 3 years. However, in view of management, the same is recoverable/payable and hence no provision for the same is made in the books of accounts.

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Jun 30, 2010

1. Figures of previous year have been regrouped / reworked wherever necessary. The Company has extended its financial year by a period of 3 months beyond 31 st March, 2010 to 30th June, 2010. Accordingly, the financial results have been prepared for the period of 15 months from I st April, 2009 to 30th June, 2010 and therefore are not comparable.

2. Contingent Liabilities not provided for: (Amt. in Rupees)

Particulars 15 Months ended As at 31.03.2009 30.06.2010

Letters of Credit issued by Bank on behalf of the Company 118,922,738 503,232,079

Guarantees issued by Bank on behalf of the Company 99,633,485 5,817,771

Estimated amounts of Contracts remaining unpaid on Capital Account 79,059,007 417,235,898

Disputed Income Tax Demands (not acknowledged) against which proceedings are 6,223,000 1,675,103 pending before Income Tax Authorities

Litigations against the Company 2,185,038 2,185,038

3. (a) The Company has purchased certain assets on deferred credit from foreign suppliers which is to be paid over a period of 7 years, where, as per the terms of credit, no interest is payable.

(b) Borrowing Costs directly attributable to creation of assets has been capitalized. The relevant amount is Rs. 499,330,191/- (Previous Year Rs. 64,641,498/-)

4. (a) Deferred Revenue Expenditure carried over from the previous year is deferred and amortized over the period for which the benefit is estimated to accrue. During the year the amount charged to Profit and Loss Account is Rs. 970,596/- (Previous Year Rs. 1,222,496/-)

(b) As per section 78 of the Companies Act, 1956, the Securities Premium Account has been applied in writing off the expenses in connection with issue of shares to the extent of Rs. 23,670,007/-(Previous Year Rs. 97,347,306/-)

B. Defined Benefit Plan:

The employees gratuity fund scheme managed by a Trust is a Defined Benefit Plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

5. (a) Balances are subject to confirmation and in the opinion of management, all known liabilities are accounted for and there are no contingent liabilities other than those disclosed. (b) All loan and advances, debtors on the balance sheet are good and recoverable in the opinion of the management and hence no provision there against is made.

6. (a) During the period, Dividend of Rs. 49,24,81II- (Previous year Rs. 40,54,288/-) pertaining to Financial Year 2008-09 was remitted outside India to 4 non-resident shareholders holding 32,83,208 shares in the Company. (b) Further, Interim Dividend of Rs. 32,83,208/- (Previous Year Nil) pertaining to Financial Year 2009-10 was remitted outside India to 4 non-resident shareholders holding 32,83,208 shares in the Company.