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Notes to Accounts of Malwa Cotton Spinning Mills Ltd.

Mar 31, 2015

1. Corporate Information

Malwa Cotton Spinning Mills Limited (the company) domiciled in India and incorporated under the provisions of Companies Act, 1956. The equity shares of the company are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Yarn and Thread.

2. Terms/rights attached to equity shares

The company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity share is entitled to one vote per share.

The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting and each equity share is entitled for the such dividend. In the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets the company after distribution of all preferential amounts.

The earliest date of redemption was 30th September, 2011

Arrear of fixed cumulative dividend on preference shares as at 31st March, 2015 Rs. 4045.00 Lac (As at 31st March, 2014 Rs. 3800.00 Lac). Cumulative preference shares due for redemption during the year and in the proceeding year but not redeemed are shown as Preference shares capital. The preference share holders have option to convert the defaulted cumulative Redeemable preference shares into equity shares at par in terms of subscription agreement entered into with the company.

3. Shares of the company held by the holding company, the ultimate holding company their subsidiaries and associates.

There is no holding or ultimate holding of the company.

Detail of terms of repayment of short term borrowing and security provided in respect of secured short term borrowings security:

Cash credit is repayable on demand and carries interest @12.75% to 13.25%. Cash credit from banks is secured against :

i) Primary - Pari-passu first charge on the current assets of the company.

Collateral - Pari-passu second charge on the fixed assets of the company (present and future).

ii) Exclusive securities:

a) IFCI/IDBI: The 7,86,700 Equity Shares of promoters pledged & 7,56,150 Equity Shares physically held with IFCI/IDBI for working capital loans outstanding of Rs. 471.25 lacs (previous year Rs. 471.25 lacs).

b) PNB/SBI: Equitable Mortgage of properties at Ludhiana & Barnala on Pari Passu basis to secure its enhanced WC Limits with PNB/SBI exclusively for working capital loans outstanding of Rs. 10842.03lac (previous year Rs. 10942.50 lac.).

iii) Pledge of 24,88,715 equity shares of Promoters as Additional Collateral security for entire CDR debts (existing and fresh) to be shared by all CDR lenders on pari-passu basis.

iv) Equitable Mortgage of immoveable properties situated at Kolkata, Bhilwara, Kanpur, Dehradun and Delhi as Additional Collateral Security for entire CDR debts as long-term loan and short-term loans (Existing and Fresh) to be shared by all CDR Lenders on pari-passu basis.

4) The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market. The above information is certified by actuary.

5) The financial assumption considered for the calculations are as under:

Discount Rate: The discount rate has been chosen by reference to market yield on government bonds as on date of valuation.

Expected Rate of Return: In case of gratuity, the actual return has been taken.

Salary increase: On the basis of past data provided by the company

6) Short term leave encashment liability as on 31.03.2015 was Rs.108.73 lacs (Previous year Rs. 145.54 lacs). During the year the company has recognized an expense of Rs.26.11 lacs as contribution to provident fund (Previous year Rs. 27.58 lacs).

i) The plan assets are maintained with Life Insurance Corporation of India (LIC). The details of Investments maintained by LIC are not available with the company and therefore have not been disclosed.

7. Segment Reporting

Segment information as required by Accounting Standard (AS)-17 on "Segment Reporting" issued by the Companies (Accounting Standared) Rules, 2006 has been complied on the basis of the financial statements and is disclosed below:

The Company has identified two segments as reportable segments viz. Yarn and Thread. The yarn segment comprises manufacturing of various types of yarns and yarn processing activities. The thread segment comprises sewing thread and other industrial thread.

8. Segment Revenue and Expenses

Segment revenue comprises sales to external customer and inter-segment sales. Segment expenses comprise expenses that are directly attributable to the segment and expenses relating to transactions with other segment of the enterprise.

9. Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist of cash and bank balances, debtors, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include deferred income taxes.

10. Inter Segment Transfer

Inter segment transfer are accounted for at prevailing market prices. These transfers are eliminated on consolidation.

11. Related Party Disclosures

a) Disclosure of Related Parties with whom Business transactions took place during the year and relationship between parties.

Key Management Personnel : Mr. Jangi Lal Oswal

12. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR) - No cash outflow is expected

i) Contingent Liabilities: (Rs Lacs)

Particulars As at 31.03.15 As at 31.03.14

a) Claims against company not 1.16 1.16 acknowledged as debts

b) Guarantees given by Company on behalf 3850.00 3850.00 of others utilized to the extent of Rs.498.92 lacs (Previous year Rs.465.14 lacs)

c) Bank Guarantees and letters of credit - - outstanding

d) Other monies for which the company is contingently liable :

The Company has contested the additional demands of Excise duty, service tax, sales tax and entry tax amounting to Rs 962.54 lacs (Gross) (Previous year Rs. 948.17 lac). Out of this a sum of Rs 183.61 lac (Previous year Rs. 178.95 lac) has been deposited with the concerned authorities under Protest. No provision has been made in the books of Account as company is confident to get desired relief at the appellate level. The said amount stands included in advances receivable in cash or in kind for value to be received.

ii) Commitments: Rs. Lacs

Particulars As at As at 31.03.15 31.03.14

a) Estimated amount of contracts remaining 456.10 456.10 to be executed on capital account

b) The Company has executed excise duty bond 1670.00 1670.00 in favour of President of India under the Central Excise Act, 1944. There is no likelihood of any outflow on account of executed excise duty bond.

c) Export obligation outstanding against import 37.97 211.98 of raw material.

13. Export entitle benefits

The Company is entitled to benefit under Focus Market Scheme (FMS)/Duty Drawback /SHIS on export sales made during the year. SHIS benefit availed can be transferred in the open market. The Company has realized Rs.50.85 lac amount (Previous year Rs.20.52 lac) in respect of export entitle benefits during the year.

14. Impairment of assets

In accordance with Accounting of Accounting Standard (AS)-28 on "Impairment of Assets" issued by the Companies (Accounting Standard) Rule 2006, the company has assessed as on balance sheet date, whether there are any indications (listed on paragraphs 8 to 10 of the standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.

15. Disclosure regarding the foreign currency exposure of the company.

a) The company has entered into forward contracts to hedge its risk associated with fluctuations in foreign currency transactions. The company does not use forward contracts for speculative purpose. There is no forward contract (Previous year Nil ) against export outstanding as at the close of the year.

b) The foreign currency exposures remaining unhedged at the year end Nil (Previous year Nil). The company has negotiated all the export bills with banks.

16. Trade Payables and Trade Receivables are shown net of advances.

17. Trade Receivables, Trade Payables and advances amounting to Rs.4144.31 lac (previous year Rs.5806.68 lac) are subject to confirmation on account of certain commercial disputes. The company is in the process of settling disputes with parties and hopeful of recovery.

18. The company has accumulated losses of Rs.25762.83 lacs as at 31st March 2015. The total net worth as on date is minus Rs.22247.93 lacs. The consortium banks who had lent the money to the company have recalled their debts and taken action under SARFAESI Act, 2002. Although these events or conditions indicates material uncertainty that may cast significant doubt about the company's ability to continue on going concern. Based on detailed evaluation of its current situation and plans formulated and active discussion with prospective investor, the management is confident of raising adequate finance for its revival.

It has also filed application with BIFR and reference is registered as case no. 27/2013 on 24.05.2013. Therefore management holds the view that the company will realize its assets and discharge liabilities in the normal course of business.

Accordingly the financial statements have been prepared on the basis that company is going concern and that no adjustments are required to the carrying value of assets and liabilities.

19. The consortium banks have recalled their entire outstanding loans and taken action under SARFAESI ACT, 2002 during the year 2013-14. The company has contested such action before appropriate forums. Accordingly, the borrowing outstanding to the consortium banks as at March31, 2015 have been classified as long term and current liabilities without taking into cognizance of the recall but as per schedule of repayments stipulated.

Therefore, the interest accrued on long term and short term borrowings amount to Rs.5913.60 lacs for the period from 1st April,2013 to 31st March,2015 has not been provided in the statement of profit and loss account as these loans have been recalled by the banks and financial institutions.

20. Pursuant to applicability of Companies Act, 2013 for accounting period commencing from 1st April, 2014, the company has provided for the depreciation based on useful life of assets as prescribed in the Schedule II of the Companies Act, 2013. In case where assets' life has been completed as on 31.03.2014, the carrying amount of the same has been adjusted in Surplus/(deficit) under the head Reserve & Surplus and the effect of the same has been resulted in increase in deficit by Rs. 189.72 lacs. Also providing the depreciation as per the Schedule II of the Companies Act, 2013 has resulted in decrease in depreciation for Rs.38.88 lacs in twelve months period ended on 31.03.2015.

21. Previous year's figures

Previous year figures have been regrouped/reclassified wherever necessary to correspond with current year classification/disclosure.


Mar 31, 2014

1. Corporate Information

Malwa Cotton Spinning Mills Limited (the company) domiciled in India and incorporated under the provisions of Companies Act, 1956. The equity shares of the company are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Yarn and Thread.

2. Gratuity and other post-employment benefit plans

The summarized position of post-employment benefits and long term employee benefits recognized in the statement of profit and loss and balance sheet in accordance with Accounting Standard AS-(15) - "Employee Benefits" issued under the Companies (Accounting Standard) Rules, 2006 is as under:- (a) Changes in the present value of the defined benefit obligation.

e) Principal actuarial assumption at the balance sheet date (expressed as weighted average)

f) The estimates of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market. The above information is certified by actuary.

g) The financial assumption considered for the calculations are as under:

Discount Rate: The discount rate has been chosen by reference to market yield on government bonds as on date of valuation.

Expected Rate of Return: In case of gratuity, the actual return has been taken.

Salary increase: On the basis of past data provided by the company

h) Short term leave encashment liability as on 31.03.2014 was Rs.145.54 lacs (Previous year Rs. 154.77 lacs). During the year the company has recognized an expense of Rs.27.58 lacs as contribution to provident fund (Previous year Rs. 120.43 lacs).

i) The plan assets are maintained with Life Insurance Corporation of India (LIC). The details of Investments maintained by LIC are not available with the company and therefore have not been disclosed.

3. Segment Reporting

Segment information as required by Accounting Standard (AS)-17 on "Segment Reporting" issued by the Companies (Accounting Standard) Rules, 2006 has been complied on the basis of the financial statements and is disclosed below:

The Company has identified two segments as reportable segments viz. Yarn and Thread. The yarn segment comprises manufacturing of various types of yarns and yarn processing activities. The thread segment comprises sewing thread and other industrial thread.

Segment Revenue and Expenses

Segment revenue comprises sales to external customer and inter-segment sales. Segment expenses comprises expenses that are directly attributable to the segment and expenses relating to transactions with other segment of the enterprise. Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist of cash and bank balances, debtors, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include deferred income taxes.

Inter Segment Transfer

Inter segment transfer are accounted for at prevailing market prices. These transfers are eliminated on consolidation.

4. Related Party Disclosures

a) Disclosure of Related Parties with whom Business transactions took place during the year and relationship between parties.

i) Key Management Personnel : Mr. Jangi Lal Oswal

5. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR) - No cash outflow is expected

i) Contingent Liabilities: (Rs Lacs)

Particulars As at 31.03.14 As at 31.03.13

a) Claims against company not acknowledged as 1.16 1.16 debts

b) Guarantees given by Company on behalf of 3850.00 3850.00 others utilized to the extent of Rs465.14lacs (Previous year Rs.488.50 lacs)

c) Bank Guarantees and letters of credit outstanding - 12.00

d) Other monies for which the company is contingently liable :

The Company has contested the additional demands of Excise duty, service tax, sales tax and entry tax amounting to Rs 948.17 lacs (Gross) (Previous year Rs. 740.31 lac). Out of this a sum of Rs 178.95 lac (Previous year Rs. 155.49 lac) has been deposited with the concerned authorities under Protest. No provision has been made in the books of Account as company is confident to get desired relief at the appellate level. The said amount stands included in advances receivable in cash or in kind for value to be received.

ii) Commitments: Rs. Lacs

Particulars As at As at 31.03.14 31.03.13

a) Estimated amount of contracts remaining to be executed 456.10 461.10 on capital account

i) The Company has executed excise duty bond in favour of 1670.00 1670.00 President of India under the Central Excise Act, 1944. There is no like -lihood of any outflow on account of executed excise duty bond.

ii) Export obligation outstanding against import of raw material. 211.98 824.76

6. Export entitle benefits

The Company is entitled to benefit under Focus Market Scheme (FMS)/Duty Drawback /SHIS on export sales made during the year. SHIS benefit availed can be transferred in the open market. The Company has realized Rs.20.52 lac amount (Previous year Rs35.08 lac) in respect of export entitle benefits during the year.

7. Leases

The company has leased facilities under cancelable and non cancelable operating leases agreements with the lease terms ranging from less than year to later than one year but not later than five years which are subject to renewal at mutual consent thereafter. The lease rent expenses recognized during the year amounting to Rs.103.73 lac (Previous year Rs.118.77 lac). The future minimum lease payment under non cancelable operating leases for each of the following period:

As at 31.03.14 As at 31.03.13

i) Not later than one year Rs 65.56 lac Rs 48.90 lac

ii) later than one year but not later than five years Rs.86.38 lac Rs. 29.17 lac

iii) later than five years - -

8. Impairment of assets

In accordance with Accounting of Accounting Standard (AS)-28 on "Impairment of Assets" issued by the Companies (Accounting Standard) Rule 2006, the company has assessed as on balance sheet date, whether there are any indications (listed on paragraphs 8 to 10 of the standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.

The above in detail have been determined to the extent parties have been determined on the basis of information extracted by the management. This has been relied upon by the auditors.

9. Disclosure regarding the foreign currency exposure of the company.

a) The company has entered into forward contracts to hedge its risk associated with fluctuations in foreign currency transactions. The company does not use forward contracts for speculative purpose. There is no forward contract (Previous year Nil) against export outstanding as at the close of the year.

b) The foreign currency exposures remaining unhedged at the year end Nil (Previous year Nil). The company has negotiated all the export bills with banks.

10. Trade Payables and Trade Receivables are shown net of advances.

11. Trade Receivables, Trade Payables and advances amounting to Rs.5806.68 lac (previous year Rs.6591.94 lac) are subject to confirmation on account of certain commercial disputes. The company is in the process of settling disputes with parties and hopeful of recovery.

12. The company has accumulated losses of Rs. 21885.45 lacs as at 31st March 2014. The total net worth as on date is minus Rs.18370.55 lacs. The consortium banks who had lent the money to the company have recalled their debts and taken action under SARFAESI Act, 2002. Although these events or conditions indicates material uncertainty that may cast significant doubt about the company''s ability to continue on going concern. Based on detailed evaluation of its current situation and plans formulated and active discussion with prospective investor, the management is confident of raising adequate finance for its revival.

It has also filed application with BIFR and reference is registered as case no. 27/2013 on 24.05.2013.Therefore management holds the view that the company will realize its assets and discharge liabilities in the normal course of business.

Accordingly the financial statements have been prepared on the basis that company is going concern and that no adjustments are required to the carrying value of assets and liabilities.

13. The consortium banks have recalled their entire outstanding loans and taken action under SARFAESI ACT, 2002 during the year. The company has contested such action before appropriate forums. Accordingly, the borrowing outstanding to the consortium banks as at March31,2014 have been classified as long term and current liabilities without taking into cognizance of the recall but as per schedule of repayments stipulated.

Therefore, the interest accrued on long term and short term borrowings amount to Rs.2935.08 lacs for the period from 1st April,2013 to 31st March,2014 has not been provided in the statement of profit and loss account as these loans have been recalled by the banks and financial institutions.

14. The information required by paragraph 5 of general instructions for preparation of the statement of profit and loss as per revised schedule-VI of the Companies Act, 1956:

15. Previous year''s figures

Previous year figures have been regrouped/ reclassified wherever necessary to correspond with current year classification/disclosure.


Mar 31, 2013

1. Corporate information

Malwa Cotton Spinning Mills Limited (the company) domiciled in India and incorporated under the provisions of Companies Act, 1956. The equity shares of the company are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Yarn and Thread.

2. Segment reporting

Segment information as required by Accounting Standard (AS)-17 on "Segment Reporting" issued by the Companies ( Accounting Standared) Rules, 2006 has been complied on the basis of the financial statements and is disclosed below:

The Company has identified two segments as reportable segments viz. Yarn and Thread. The yarn segment comprises manufacturing of various types of yarns and yarn processing activities. The thread segment comprises sewing thread and other industrial thread.

Segment revenue and expenses

Segment revenue comprises sales to external customer and inter-segment sales. Segment expenses comprises expenses that are directly attributable to the segment and expenses relating to transactions with other segment of the enterprise.

Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist of cash and bank balances, debtors, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include deferred income taxes.

Inter-segment transfer

Inter segment transfer are accounted for at prevailing market prices. These transfers are eliminated on consolidation.

3. Export entitle benefits

The Company is entitled to benefit under Focus Market Scheme (FMS)/Duty Drawback /SHIS on export sales made during the year. SHIS benefit availed can be transferred in the open market. The Company has realized Rs.35.08 lac amount (Previous year Rs117.51 lac) in respect of export entitle benefits during the year.

4. Impairment of assets

In accordance with Accounting of Accounting Standard (AS)-28 on "Impairment of Assets" issued by the Companies (Accounting Standard) Rule 2006, the company has assessed as on balance sheet date, whether there are any indications (listed on paragraphs 8 to 10 of the standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.

The above in detail have been determined to the extent parties have been determined on the basis of information extracted by the management. This has been relied upon by the auditors.

5. Disclosure regarding the foreign currency exposure of the company.

a) The company has entered into forward contracts to hedge its risk associated with fluctuations in foreign currency transactions. The company does not use forward contracts for speculative purpose. There is no forward contract (Previous year Nil ) against export outstanding as at the close of the year.

b) The foreign currency exposures remaining unhedged at the year end Nil (Previous year Nil). The company has negotiated all the export bills with banks.

6. Trade Payables and Trade Receivables are shown net of advances.

7. Trade Receivables, Trade Payables and advances amounting to Rs.6591.94 lac (previous year Rs.5079.45 lac) are subject to confirmation on account of certain commercial disputes. The company is in the process of settling disputes with parties and hopeful of recovery.

8. During the year the company had sold old items of inventories and slow moving not useable and not readily saleable items of inventories at loss. Slow moving items of inventories amounting to Rs. 236.14 lacs have been valued at cost in absence of availability of net realizable value of these inventories.

9. The company has received notice from IFCI, the Preference shareholder, for conversion of defaulted amount of Cumulative Redeemable Preference Shares due on 15-10-2011 into equity shares at par. The company is seeking legal opinion for conversion and issuance of equity shares at par.

10. The company has incurred a net loss of Rs.16171.67 lacs during the year ended 31st March, 2013, which together with brought forward losses of Rs.848.11 lacs exceeds the net worth of the company, and as of that date, the company''s current liabilities exceeded its current assets by Rs.6972.79 lacs and its total liabilities exceeded its total assets by Rs. 13504.88 lacs. As the total net worth of the company has eroded, the company is in the process of referring to the Board for Industrial and Financial Reconstruction with suitable plan.

11. Previous year''s figures

Previous year figures have been regrouped/reclassified wherever necessary to correspond with current year classification/ disclosure.


Mar 31, 2012

1. Corporate information

Malwa Cotton Spinning Mills Limited (the company) domiciled in India and incorporated under the provisions of Companies Act, 1956. The equity shares of the company are listed on two stock exchanges in India. The company is engaged in the manufacturing and selling of Yarn and Thread.

a. Terms/rights attached to equity shares

The company has only one class of equity shares having a par value of Rs 10 per share. Each holder of equity share is entilted to one vote per share. The dividend proposed by the board of directors is subject to the approval of the shareholders in the ensuing annual general meeting and each equity share holder is entitled for the such dividend. In the event of liquidation of the company, the holder of equity shares will be entitled to receive remaining assets of the company after distribution of all prevention amounts.

b. Terms/rights attached with cumulative redeemable preference shares

The company has presently issued 9% cumulative redeemable preference shares. These preference shares are redeemable at a premium of 5% payable at the time of redemption.

The earliest date of redemption was 30th September, 2011 Arrear of fixed cumulative dividend on preference shares as at 31st March,2012 Rs. 3310 00 Lac { As at 31st March, 2011 Rs.3065 00 Lac).

Cumulative preference shares due for redemption during the year but not redeemed are shown as Preference shares capital,

c. Shares of the company held by the holding company, the ultimate holding company their subsidiaries and associates. There is no holding or ultimate holding of the company.

Security:

i) Primary - Pari-passu first charge on fixed assets of the Company (present and future).

Collateral - Pari-passu second charge on the current assets of the Company. ii) Exclusive securities:

a) IFCI/IDBI: The 7,86,700 Equity Shares of promoters pledged & 7,56,150 Equity Shares physically held with IFCI/ IDBI for term loan outstanding of Rs. 9834.95 lacs.

b) PNB/SBI: Equitable mortgage of immovable properties situated at Ludhiana and Barnala as additional collateral security for long term loans out standing of Rs 5630.90 lac.

iii) Pledge of 24,88,715 equity shares of Promoters as Additional Collateral security for entire CDR debts (Existing and fresh) to be shared by all CDR lenders on pari-passu basis.

iv) Equitable Mortgage of immovable properties situated at Kolkata. Bhilwara, Kanpur, Dehradun and Delhi as Additional Collateral' Security for entire CDR debts (Existing and Fresh) to be shared by all CDR Lenders on pari-passu basis.

v) Personal Guarantee of three Promoter Directors of the Company.

i) Primary - Pari-passu first charge on the current assets of the company.

Collateral - Pari-passu second charge on the fixed assets of the company (present and future). .

ii) Exclusive securities:

a) IFCI/IDBI: The 7,86,700 equity shares of promoters pledged & 7,56,150 equity shares physically held with IFCI/IDBI for working capital loans outstanding of Rs. 456.54 lacs.

b) PNB/SBI: Equitable mortgage of properties at Ludhiana & Bamala on pari-passu basis to secure its enhanced WC Limits with PNB/SBI exclusively for working capital loans of outstanding of Rs. 7623.19 lac.

iii) Pledge of 24,88,715 equity shares of Promoters as additional collateral security for entire CDR debts (existing and fresh) to be shared by all CDR lenders on pari-passu basis.

iv) Equitable mortgage of immovable properties situated at Kolkata, Bhilwara, Kanpur, Dehradun and Delhi as additional collateral security for entire CDR debts as long-term loan and short-term loans (existing and fresh) to be shared by all CDR Lenders on pari-passu basis.

2. Gratuity and other post-employment benefit plans

The summarized position of post-employment benefits and long term employee benefits recognized in the statement of profit and loss and balance sheet in accordance with Accounting Standard AS-(15) - "Employee Benefits" issued under the Companies (Accounting Standard) Rules, 2006 is as under:-

(f) The estimates of future salary increases considered in acturial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market. The above information is certified by actuary.

(g) The financial assumption considered for the calculations are as under:

Discount Rate: The discount rate has been chosen by reference to market yield on government bonds as on date of valuation.

Expected Rate of Return: In case of gratuity, the actual return has been taken. Salary increase: On the basis of past data provided by the company. (h) Short-term leave encashment liability as on 31.03.2012 Rs.172.46lacs (Previous year Rs. 124.74 lacs).

During the year the company has recognized an expense of Rs. 125.15 lacs as contribution to provident fund (Previous year Rs. 99.99 lacs). (i) The plan assets are maintained with Life Insurance Corporation of India (LIC). The details of Investments maintained by LIC are not available with the company and therefore have not been disclosed.

3. Segment reporting

Segment information as required by Accounting Standard (AS)-17 on "Segment Reporting" issued by the Companies ( Accounting Standared) Rules, 2006 has been complied on the basis of the financial statements and is disclosed below:

The Company has identified two segments as reportable segments viz. Yarn and Thread. The yarn segment comprises manufacturing of various types of yarns and yarn processing activities. The thread segment comprises sewing thread and other industrial thread.

Segment revenue and expenses

Segment revenue comprises sales to external customer and inter-segment sales. Segment expenses comprises expenses that are directly attributable to the segment and expenses relating to transactions with other segment of the enterprise.

Segment assets and liabilities

Segment assets include all operating assets used by a segment and consist of cash and bank balances, trade receivable, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of trade payables and other liabilities. Segment assets and liabilities do not include deferred income taxes. Enterprise transfer

Inter segment transfer are accounted for at prevailing market prices. These transfers are eliminated on consolidation.

4. Related party disclosures

a) Disclosure of Related Parties with whom Business transactions took place during the year and relationship between parties.

1. Key Management Personnel : Mr.Jangi Lai Oswal

2. Associates : Malwa Industries Ltd.

5. Contingent liabilities and commitments (To the extent not provided for) - No cash outflow is expected

Rs. Lacs Particulars As at As at 31.03.2012 31.03.2011

i.Contingent Liabilities:

a) Claims against company not 1.16 1.16 acknowledged as debts

b) Guarantees given by Company 3850.00 3850.00 on behalf of others utilized to the extent of Rs.479 lacs (Previous Year Rs.479 lacs).

c) Export Bills discounted with Banks 130.41 3271.16 against irrevocable letters of credit.

d) Bank Guarantees and letters of 4085.00 4121.92 credit outstanding.

e) Other monies for which the company is contingently liable :

(i) Convert receivable shown under the head advances recoverable in cash or in kind includes Rs.20!98 lac (Previous Year Rs. 20.98 lac) not allowed by the authorities. The Company has contested and filed an appeal for the recovery of the above amount. Pending decision thereof no provision has been made In this regard.

(ii) The Company has contested the additional demands of excise duty. service tax, sales tax and entry tax amounting to Rs 446.66 lac (Gross) (Previous year Rs. 386.10 lac). Out of this a sum of Rs.161.57 lac (Previous year Rs. 140.02 lac) has been deposited with the concerned authorities under protest. No provision has been made in the books of Account as company is confident to get desired relief at the appellate level. The said amount stands included in advances receivable in cash or in kind for value to be received. ii. Commitments:

a) Estimated amount of contracts 456.11 456.11 remaining to be executed on capital account (Net of advances).

b) The Company has executed excise 1670.00 1670.00 duty bond in favour of President of India under the Central Excise Act, 1944 There is no likelihood of any outflow on account of executed excise duty bond.

c) Export obligation outstanding against 1125.37 1094.24 import of raw material.

6. Export entitle benefits

The Company is entitled to benefit under Duty Entitlement Pass Book (DEPB)/ Focus Market Scheme (FMS)/Duty Drawback on export sales made during the year. DEPB benefit can be availed as input duty credit or can be transferred in the open market. The Company has realized Rs. 115.51 lac amount (Previous year Rs.9.68 lac) in respect of export entitle benefits during the year.

7. Leases

The company has leased facilities under cancelable and non cancelable operating leases agreements with the lease terms ranging from less than year to later than one year but not later than five years which are subject to renewal at mutual consent thereafter. The lease rent expenses recognized during the year amounting to Rs. 114.69 lac (Previous year Rs. 124.64 lac). The future minimum lease payment under non cancelable operating leases for each of the following period:

8. Impairment of assets

In accordance with Accounting of Accounting Standard (AS)-28 on "Impairment of Assets" issued by the Companies (Accounting Standard) Rule 2006, the company has assessed as on balance sheet date, whether there are any indications (listed on paragraphs 8 to 10 of the standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.

9. Disclosure regarding the foreign currency exposure of the company.

a) The company has entered into forward contracts to hedge its risk associated with fluctuations in foreign currency transactions. The company does not use forward contracts for speculative purpose. There is no forward contract (Previous year contract for USD 1.08 lac) against export outstanding as at the close of the year.

b) The foreign currency exposures remaining unhedged at the year end Nil (Previous year Nil). The company has negotiated all the export bills with banks.

10. Trade Payables and Trade Receivables are shown net of advances.

11. Trade Receivables, Trade Payables and advances balances amounting to Rs.5079.45 lac (previous year Rs.4562.82 lac )are subject to confirmation.

12. Slow moving items of inventories amounting to Rs. 2198 lacs have been valued at cost.

13. Previous year's figures

The revised Schedule VI has become effective from 1 st April, 2011 for the preparation of financial statements. Previous year figures have been regrouped/reclassified wherever necessary to correspond with current year classification/disclosure.


Mar 31, 2010

1. CONTINGENT LIABILITIES NOT PROVIDED FOR

a) Bank Guarantees and letters of credit outstanding Rs.4118.80 lac (Previous Year Rs. 4171.29 lac). There is no likelihood of any outflow on account of the issuance of such Bank Guarantees. The Letter of credits are issued against normal non-fund facilities and additional out flow is not expected.

b) Guarantees given by Company on behalf of others Rs. 3850 lac (Previous Year Rs.4350 lac). There is no likelihood of any outflow on account of the issuance of such Guarantees.

c) Export Bills discounted with Banks against irrevocable letters of credit Rs.1229.53 lac (Previous Year Rs 3989.58 lac. There is no likelihood of any outflow on account of such Export Bills discounted with Banks against irrevocable letters of credit.

d) Claims against company not acknowledged as debts Rs.1.16 lac (Previous Year Rs. 1.16 lac). There is no likelihood of any outflow on account of such Claims.

e) Arrears of fixed cumulative dividend in respect of Redeemable Preference Shares Rs. 2820lac (Previous Year Rs. 2575 lac )

2. Estimated amount of contracts remaining to be executed on capital account Rs. 486.61 lac (Previous Year Rs.456.11 lac) (Net of advances).

3. Building includes Rs. 41.18 lac towards consideration value representing ownership of commercial flats . This amount is inclusive of value of 10 fully paid-up equity shares of Rs.507- each total valuing Rs. 500/- of Raheja Chambers Premises Co-Operative Society Ltd., Mumbai.

4. The Company has executed excise duty bond aggregating to Rs. 1670 Lac (Previous Year Rs.1670 Lac) in favour of President of India under the Central Excise Act, 1944. There is no likelihood of any outflow on account of executed excise duty bond.

5. Cenvat receivable shown under the head advances recoverable in cash or in kind includes Rs. 20.98 lac (Previous Year Rs.20.98 lac) not allowed by the authorities. The Company has contested and filed an appeal for the recovery of the above amount. Pending decision thereof no provision has been made in this regard.

6. The Company has contested the additional demands of excise duty, service tax and sales tax amounting to Rs. 392.98 lac (Gross) (Previous year Rs. 244.00 lac). Out of this a sum of Rs.81.44 lac (Previous Year Rs. 81.44 lac) has been deposited with the concerned authorities under protest. No provision has been made in the books of account as company is confident to get desired relief at the appellate level. The said amount stands included in advances receivable in cash or in kind for value to be received.

7. The Company is entitled to benefit under Duty Entitlement Pass Book (DEPB)/ Focus Market Scheme (FMS)/Duty Drawback on export sales made during the year. DEPB benefit can be availed as input duty credit or can be transferred in the open market. The Company has realised a sum of Rs.335.49 lac (Previous Year Rs.600.61 lac) in respect of export entitled benefits during the year and said amount has been accounted for and shown under head turnover. A sum of Rs 83.95 lac (Previous Year Rs. 151.96 lac) being the value of entitlement for export made upto 31.03.2010, yet to be received/sold has also been accounted as part of turnover, as there exists no uncertainty regarding the amount of consideration realizable or its ultimate collection. This treatment is in accordance with the opinion of the Expert Advisory Committee of the Institute of Chartered Accountants of India as published in January 2001 issue of its Journal.

8. On 27th July, 2009, the company had allotted 11,00,000 Convertible equity share warrants on preferential basis as per SEBI guidelines carrying option to the holder of warrants to subscribe to one equity share of Rs.10 each at premium of Rs.10 per share for every warrant held within a period of 18 months from the date of allotment. On 29th March, 2010, the company has allotted out of above for cash 5,50,000 equity shares of Rs.10 each at premium of Rs.10 on conversion of equivalent number of equity share warrants. The proceeds received for such issue has been utilized for the purpose it was issued.

9. The preference share shall be redeemable in eight installment at a premium of 5% as per following schedule.

The earliest date of redemption is 30th September,2011.

10. Disclosure regarding the foreign currency exposure of the company.

a) The co/npany has entered into forward contracts to hedge its risk associated with fluctuations in foreign currency transactions. The company does not use forward contracts for speculative purpose. There are two forward contracts for USD 1.76 lac against export outstanding as at the close of the year.

b) The foreign currency exposures remaining unhedged at the year end,

11. The summarized position of post-employment benefits and long term employee benefits recognized in the profit and loss account and balance sheet in accordance with AS[15] is as under:-

a) The estimated of future salary increases considered in acturial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market. The above information is certified by actuary.

b) The financial assumption considered for the calculations are as under:

Discount Rate: The discount rate has been chosen by refrence to market yield on government bonds as on date of valuation.

Expected Rate of Return: In case of gratuity, the actual return has been taken. Salary increase: On the basis of past data provided by the company.

c) Short term leave encashment liability as on 31.03.2010 Rs.121.16 lac (Previous year Rs.101.77 lac). During the year the company has recognized an expense of Rs. 119.05 lac as contribution to provident fund (Previous year Rs. 117.10 lac)

d) The plan assets are maintained with Life Insurance Corporation of India (LIC). The details of Investments maintained by LIC are not available with the company and have not been disclosed.

12. Segment Reporting

Segment information as required by Accounting Standard (AS)-17 on "Segment Reporting" issued by the Companies ( Accounting Standared) Rules, 2006 has been complied on the basis of the financial statements and is disclosed below:

The Company has identified two segments as reportable segments viz. Yarn and Thread. The yarn segment comprises manufacturing of various types of yarns and yarn processing activities. The thread segment comprises sewing thread and other industrial thread.

Segment Revenue and Expenses

Segment revenue comprises sales to external customer and inter-segment sales. Segment expenses comprises expenses that are directly attributable to the segment and expenses relating to transactions with other segment of the enterprise.

Segment Assets and Liabilities

Segment assets include all operating assets used by a segment and consist of cash and bank balances, debtors, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include deferred income taxes.

Inter Segment Transfer

Inter segment transfer are accounted for at prevailing market prices. These transfers are eliminated on consolidation.

b) Secondary segment information

13. Related Party Disclosures

Details of transactions entered into with the related parties during the year as required by Accounting Standard (AS) - 18 on "Related Party Disclosures" notified by the Companies (Accounting Standards) Rules 2006 are as under :-

14. The company has leased facilities under cancelable and non cancelable operating leases agreements with the lease terms ranging from less than year to later than one year but not later than five years which are subject to renewal at mutual consent thereafter. The lease rent expenses recognized during the year amounting to Rs. 120.22 lac. The future minimum lease payment under non cancelable operating leases for each of the following period:

15. (a) Deferred Tax Liability/Asset (net) as on 31st March, 2010 is as follows:

The company has not recognized the deferred tax asset amounting to Rs. 1308.07 lac being the asset arising on account of expenditure allowable on payment basis. In the opinion of management sufficient future taxable income would not be available against which such deferred tax asset can be realized.

16. In accordance with Accounting of Accounting Standard (AS) 28 on "Impairment of Assets" issued by the Companies (Accounting Standard) Rule 2006, the company has assessed as on balance sheet date, whether there are any indications (listed on paragraphs 8 to 10 of the standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account.

17. Managerial Remuneration paid to the Chairman-cum-Managing Director amounting to Rs. 25.94 lac. This represents the minimum remuneration approved by the members in accordance with the provisions of schedule XIII to the Companies Act, 1956. The details are as under:-

Remuneration does not include contribution to gratuity fund which are actuarially determined on a overall basis.

The above said remuneration has been approved by the shareholders in its meeting held on 29.04.2009 and is the minimum remuneration to be paid in case of no profit or profits are inadequate.

18. The interest paid in respect of working capital borrowings has been netted against interest received from customers.

19. The useful life of intangible assets has been estimated to be 5 years and such assets are being amortized on straight-line method @ 20%.

20. The Company has identified Micro Enterprises and Small Enterprises on the basis of information made available. There are no dues to Micro and Small Enterprises, that are reportable under the Micro, Small and Medium Enterprises Development Act,2006.

21. Creditors and Debtors are shown net of advances.

22. Sundry debtors and advances balances amounting to Rs. 4177.58 lac are subject to confirmation.

23. In the opinion of the Board of Directors, the Current Assets and Loans and Advances are having the value at which they are stated in the Balance Sheet, if realised in the ordinary course of business.

24. Previous years figures have been regrouped / recasted to make them comparable with the current year figures wherever necessary.

25. Schedules 1 to 20 forms an integral part of the Balance Sheet and Profit and Loss Account and have been duly authenticated as such.

26. THE INFORMATION REQUIRED BY PARA3&4 OF PART II OF SCHEDULE VITO THE COMPANIES ACT, 1956.

Note:

The installed capacity is as certified by the management but not verified by the auditors being a technical matter.

 
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