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Notes to Accounts of Maral Overseas Ltd.

Mar 31, 2015

A) Terms/rights attached to Equity Shares

Company has only one class of equity shares having a par value of '' 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The holder of equity shares is entitled to receive dividend only after distribution of dividend to the holders of preference shares.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

B) Terms/rights attached to Preference Shares

Company has only one class of Cumulative Redeemable Preference Shares (CRPS) having a par value of Rs. 100/-. There are two series of CRPS, carrying differential dividend coupon rates.

First series of preference shares carrying a dividend coupon rate of 8%, allotted to the various banks and financial institutions, pursuant to the Corporate Debt Restructuring (''CDR'') Package, are redeemable in four equal annual installments from 2016 to 2019. Second series of preference shares carrying a dividend coupon rate of 3%, allotted to promoters, against infusion of funds by them, pursuant to the Corporate Debt Restructuring (''CDR'') Package, are redeemable on 31st March, 2019. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

Each holder of preference shares is entitled to one vote per share only on resolutions placed before the Company which directly affect the rights attached to preference shares.

The holders of preference shares are entitled to a preferential right of repayment of capital on winding up vis-a-vis the holders of equity shares. The distribution will be in proportion to the number of shares held by the shareholders.

1.1.2 Trade Payables

The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 ("the Act") has been determined to the extent such parties have been identified by the Company, on the basis of information and records available with them. This information has been relied upon by the auditors. Disclosure as required under Section 22 of the Act, is as under. Disclosure in respect of interest due on delayed payment has been determined only in respect of payments made after the receipt of information, with regards to filing of memorandum, from the respective suppliers.

a) In respect of MAT credit entitlement, management, based on present profitability trend as well as future profit projections, is of the view that there is convincing evidence for utilization of MAT credit assets in future periods.

b) Direct taxes refundable represent amounts recoverable from the Income Tax Department for various assessment years. In respect of disputed demands, Company has filed appeals which are pending at various levels and for assessment years where the issues have been decided in favour of the Company, Company is in the process of reconciling / adjusting the same with the department. Necessary value adjustments shall be made on final settlement by the department.

1.1.2 Contingent Liabilities not provided for in respect of :

Rs. / Lacs

As at As at 31.03.2015 31.03.2014

a) Claims against the Company not acknowledged as debts 14.04 13.00

b) Income tax matters in dispute 392.64 72.64

c) Excise / customs / service tax matters in dispute 400.21 311.04

d) Non Solar renewable energy obligations - 108.50

e) Pending litigations

Miscellaneous labour cases involving claims for reinstatement, back wages etc 71.51 60.17

Based on legal advice, discussions with the solicitors, etc., the management believes that there is fair chance of decisions in the Company''s favour in respect of all the items listed at (a) to (e) above and hence no provision is considered necessary against the same. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and results of operations.

1.1.3 a) Response to letters sent by the Company requesting confirmation of balances has been insignificant. In the management''s opinion, adjustments on reconciliation of the balances, if any required, will not be material in relation to the financial statements of the Company and the same will be adjusted in the financial statements as and when the confirmations are received and reconciliations completed.

b) Inventories, loans & advances, trade receivables and other current / non-current assets are reviewed annually and in the opinion of the management do not have a value on realization in the ordinary course of business, less than the amount at which they are stated in the Balance Sheet.

1.1.4 Employee Benefit Obligations Defined Contribution Plans

The Company makes contributions towards provident fund and superannuation fund, to defined contribution retirement benefit plans for qualifying employees. The provident fund plan is operated by the Regional Provident Fund Commissioner and the superannuation fund is administered by the Trustees of the ''Maral Overseas Limited Senior Executive Superannuation Fund''. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits.

Defined Benefit Plan

The Company makes annual contributions to the Employees'' Group Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance Company Limited, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards.

The discount rate is based on prevailing market yields of Indian government bonds, as at the balance sheet date, consistent with the currency and estimated term of the post employment benefit obligations.

The expected rate of return on plan assets is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

1.1.5 Related Party Disclosures

Following information regarding related parties has been determined on the basis of criteria specified in AS-18 "Related Party Disclosures".

a) Related parties with whom transactions have taken place

i) Key Management Personnel

- Shri Ravi Jhunjhunwala, Chairman

- Shri Shekhar Agarwal, Managing Director

ii) Relatives of Key Management Personnel

- Smt Shashi Agarwal

- Shri Shantanu Agarwal

- Shekhar Agarwal (HUF)

iii) Enterprises in respect of which the reporting enterprise is an associate

- M/s Agarwal Trademart Private Limited

- M/s BMD Private Limited

iv) Enterprises owned or significantly influenced by key management personnel or their relatives

- M/s RSWM Limited

- M/s HEG Limited

- M/s BSL Limited

- M/s Cheslind Textiles Limited (Amalgamated with M/s RSWM Limited)

1.1.6 Segment Information

The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Company''s business segments offer different products and require different technology and marketing strategies.

Yarn includes bought out yarn as well as production of cotton yarn over a wide range of counts, which besides being sold, is also used for further value addition in fabric. It also includes surplus captive & standby power. Fabric includes both bought out fabric as well as the value added activities relating to knitting, dyeing and processing. Textile Made-ups, comprise of made-ups made for renowned international brands.

The accounting principles used in preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments and are as set out in the note on significant accounting policies.

Transfer prices for inter segment revenues are generally set on an arm''s length basis and are eliminated in consolidation.

Revenue and direct expenses in relation to segments are categorized based on items that are individually identifiable or allocable on a reasonable basis to that segment. Revenue and expenses, besides financial costs and taxes that are not allocated to operating segments, are included under "inter segment & unallocated items".

Assets and liabilities represent assets (both tangible and intangible) employed in operations and liabilities owed to third parties that are individually identifiable or allocable on a reasonable basis to that segment. Assets and liabilities excluded from allocation to operating segments, are included under "inter segment & unallocated items". Capital expenditure includes expenditure incurred during the period on acquisition of segment fixed assets.

The Company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and west), Ireland and the United Kingdom; Africa includes Mauritius; Asian continent has been segregated into the Middle East & Gulf countries while the rest of Asia, other than India has been covered under Far East & South East Asia; Rest of the World comprises all other places except those mentioned above and India.

1.1.7 Previous period''s figures have been regrouped and recast wherever considered necessary.


Mar 31, 2014

1 Basis of Preparation

The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Financial Statements have been prepared to comply in all material respects with the accounting standards notified under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of Financial Statements are consistent with those of previous year.

a) Terms/rights attached to Equity Shares

Company has only one class of equity shares having a par value of Rs. 10/-. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The holder of equity shares is entitled to receive dividend only after distribution of dividend to the holders of preference shares.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

b) Terms/rights attached to Preference Shares

Company has only one class of Cumulative Redeemable Preference Shares (CRPS) having a par value of Rs. 100/-. There are two series of CRPS, carrying differential dividend coupon rates.

First series of preference shares carrying a dividend coupon rate of 8%, allotted to the various banks and financial institutions, pursuant to the Corporate Debt Restructuring (''CDR'') Package, are redeemable in four equal annual installments from 2016 to 2019. Second series of preference shares carrying a dividend coupon rate of 3%, allotted to promoters, against infusion of funds by them, pursuant to the Corporate Debt Restructuring (''CDR'') Package, are redeemable on 31st March, 2019. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

Each holder of preference shares is entitled to one vote per share only on resolutions placed before the company which directly affect the rights attached to preference shares.

The holders of preference shares are entitled to a preferential right of repayment of capital on winding up vis-a-vis the holders of equity shares. The distribution will be in proportion to the number of shares held by the shareholders.

The aforesaid disclosure is based upon percentages computed separately for each class & series of shares outstanding, as at the balance sheet date. As per records of the Company, including its register of shareholders/members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

c) The Company has not allotted any fully paid up shares pursuant to contract(s) without payment being received in cash nor has allotted any fully paid up shares by way of bonus shares nor has bought back any class of shares during the period of five years immediately preceding the Balance Sheet date.

d) The CDR package grants a right to the various banks and financial institutions to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter i.e March 26, 2009 into equity shares, as per SEBI guidelines / loan covenants, whichever is applicable.

Notes:

a. Term loans from both banks & financial institutions are secured by first mortgage and charge created / to be created on all the present and future immovable & movable properties (other than current assets) of the Company, ranking pari-passu, and second pari-passu charge on current assets of the Company.

Forex derivative loss loan is secured by way of residual charge on the fixed assets and current assets of the Company.

Term loans from both Banks & Financial Institutions, alongwith working capital facilities from banks, are secured by pledge of stipulated promoter''s equity shareholding, constituting 36% of the present equity capital, in favour of the lenders on pari- passu basis.

a) Unsecured loan from related party is repayable on 31st March, 2019.

b) The Company''s financial restructuring package was approved under the Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group vide their letter dated March 26, 2009 (''CDR letter'') and subsequent approvals from the various Financial Institutions and Banks received.

The CDR scheme included interalia reduction of interest rate on loans, rescheduling of loan repayments, conversion of interest payable into funded interest term loan, conversion of certain portion of the working capital into term loan and conversion of part term loan into preference shares. The restructuring package also stipulated conditions to be complied with by the Company and its promoters relating interalia to disposal of surplus assets, fresh infusion of additional equity by promoters, arrangement for additional infusion of term loan and working capital from existing lenders and bringing in funds by promoters to bridge shortfall of funding if any. The Company is confident that all the conditions as stipulated will be complied with in agreement with the CDR Monitoring Committee.

c) Some of the lenders follow the practice to recover suo motto, payment of both principal as well as interest from the working capital facility advanced by them, where applicable, or from the current account under instructions from the Company. It is regarded as accepted practice that the due date for payment shall be the date next following the date when interest is charged. Any delay on part of the lender to recover payment, either in line with past practice or specific instructions given in this regard by the Company, is not attributable to default on part of the Company. Accordingly, there is no continuing default in repayment of the principal loan and interest amounts.

Recognition of deferred tax assets has been restricted to the extent of deferred tax liabilities available. Based on schedule of reversal of timing differences giving rise to deferred tax liabilities, the management believes there is requisite degree of virtual certainty that the deferred tax assets, to the extent recognized, would be realised.

Loans repayable on demand, comprise of working capital facilities from banks and are secured by way of hypothecation first charge, ranking pari-passu, on stocks of raw material, stock in process, finished goods, book debts / receivables and all current assets stored in the Company''s factory premises, at all plants and / or elsewhere including those in transit covered by documents of title thereto, local and export usance bills and second pari-passu charge on the entire movable and immovable assets of the Company (fixed assets), both present and future.

Loans repayable on demand from Banks, along with term loans from both Banks & Financial Institutions are secured by pledge of stipulated promoter''s equity shareholding, constituting 36% of the present equity capital, in favour of the lenders on pari-passu basis.

The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 ("the Act") has been determined to the extent such parties have been identified by the Company, on the basis of information and records available with them. This information has been relied upon by the auditors. Disclosure as required under Section 22 of the Act, is as under. Disclosure in respect of interest due on delayed payment has been determined only in respect of payments made after the receipt of information, with regards to filing of memorandum, from the respective suppliers.

a. Buildings include Rs. 0.02 lacs representing cost of unquoted fully paid shares held in co-operative housing society.

b. Buildings include certain portion given on operating lease. It is not practicable to give separate disclosure of gross block, depreciation charge for the year, accumulated depreciation and net block in respect of the same.

c. Opening balance of gross block, depreciation and net block are adjusted for reclassification of asset categories inter se. These do not have any impact on the aggregate depreciation charge / provision.

Direct taxes refundable represent amounts recoverable from the Income Tax Department for various assessment years. In respect of disputed demands, Company has filed appeals which are pending at various levels and for assessment years where the issues have been decided in favour of the Company, Company is in the process of reconciling / adjusting the same with the department. Necessary value adjustments shall be made on final settlement by the department.

After commissioning of captive thermal power plant in the year 2007, the HFO fuelled Wartsila Power Generators were retained as standby. In view of uneconomical cost of power generation, Company has during the year decided to retire them from active use with eventual disposal.

Resultant, loss of Rs. 416.90 lac being difference of WDV and estimated realisable value of these generators has been charged to Statement of Profit and Loss. Realisable value of the generators Rs. 166.25 lac has been shown under "Assets Held For Sale" as at year end, pending their final disposal.

a) The Company has been treating plant & machinery of spinning unit as continuous process plant and providing depreciation accordingly. This practice has consistently been a subject matter of audit observation. Review of industry practice indicates that such machinery are depreciated based on an estimated useful life corresponding to rates prescribed for triple shift operation.

Company has revised the estimated useful life of such plant & machinery to correspond to the rates prescribed, for triple shift operations, in Schedule XIV of the Companies Act, 1956. Accordingly, depreciation has been charged by depreciating the remaining unamortised depreciable amount prospectively over the remaining useful life.

Resultantly, charge on account of depreciation for the year is higher by Rs. 1765 lac and Profit before tax for the year is lower by even amount.

b) During the year, in order to align depreciation policy with the current replacement cycle, taking into consideration various factors such as technology up-gradation and industry best practices, the Company has revised the estimated useful life of the plant & machinery deployed in the garment division to 10 years.

Consequent to above, charge on account of depreciation for the year is higher by Rs. 112 lac and Profit before tax for the year is lower by even amount.

Potential equity options may arise in the event of default in payment due on loan funds. Potential options also exist in the form of right of CDR lenders to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter into equity capital, more fully explained in Note 2.1.1.

2. Contingent Liabilities not provided for in respect of : (Rs. Lacs)

As at As at 31.03.2014 31.03.2013

a) Claims Against the Company not Acknowledged as debts 13.00 13.00

b) Income Tax Matters in Dispute 72.64 27.64

c) Excise / Customs / Service Tax Matters in Dispute 311.04 392.81

d) Non Solar Renewable Energy Obligations 108.50 60.33

Based on legal advice, discussions with the solicitors, etc., the management believes that there is fair chance of decisions in the Company''s favour in respect of all the items listed at (a) to (d) above and hence no provision is considered necessary against the same. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and results of operations.

3. a) The response to letters sent by the Company requesting confirmation of balances has been insignificant. In the management''s opinion, adjustments on reconciliation of the balances, if any required, will not be material in relation to the Financial Statements of the Company and the same will be adjusted in the Financial Statements as and when the confirmations are received and reconciliations completed.

b) Inventories, loans & advances, trade receivables and other current / non-current assets are reviewed annually and in the opinion of the management do not have a value on realization in the ordinary course of business, less than the amount at which they are stated in the Balance Sheet.

4. Employee Benefit Obligations

Defined Contribution Plans

The Company makes contributions towards Provident Fund and Superannuation Fund, to defined contribution retirement benefit plans for qualifying employees. The Provident Fund Plan is operated by the Regional Provident Fund Commissioner and the Superannuation Fund is administered by the Trustees of the ''Maral Overseas Limited Senior Executive Superannuation Fund''. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits.

Defined Benefit Plan

The Company makes annual contributions to the Employees'' Group Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance Company Limited, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each Balance Sheet date.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards.

The discount rate is based on prevailing market yields of Indian government bonds, as at the Balance Sheet date, consistent with the currency and estimated term of the post employment benefit obligations.

The expected rate of return on plan assets is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

5. Segment Information

The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Company''s business segments offer different products and require different technology and marketing strategies.

Yarn includes bought out yarn as well as production of cotton yarn over a wide range of counts, which besides being sold, is also used for further value addition in fabric. It also includes surplus captive & standby power. Fabric includes both bought out fabric as well as the value added activities relating to knitting, dyeing and processing. Textile Made-ups, comprise of made-ups made for renowned international brands.

The accounting principles used in preparation of the Financial Statements are consistently applied to record revenue and expenditure in individual segments and are as set out in the note on significant accounting policies.

Transfer prices for inter segment revenues are generally set on an arm''s length basis and are eliminated in consolidation.

Revenue and direct expenses in relation to segments are categorized based on items that are individually identifiable or allocable on a reasonable basis to that segment. Revenue and expenses, besides financial costs and taxes that are not allocated to operating segments, are included under "inter segment & unallocated items".

Assets and Liabilities represent assets (both tangible and intangible) employed in operations and liabilities owed to third parties that are individually identifiable or allocable on a reasonable basis to that segment. Assets and Liabilities excluded from allocation to operating segments, are included under "inter segment & unallocated items". Capital expenditure includes expenditure incurred during the period on acquisition of segment fixed assets.

The Company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specified by location of customers while the other geographic information is specified by location of the assets. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and west), Ireland and the United Kingdom; Africa includes Mauritius; Asian continent has been segregated into the Middle East & Gulf countries while the rest of Asia, other than India has been covered under Far East & South East Asia; Rest of the World comprises all other places except those mentioned above and India.

6. Previous period''s figures have been regrouped and recast wherever considered necessary.


Mar 31, 2013

1. Basis of Preparation

The Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP).The fnancial statements have been prepared to comply in all material respects with the accounting standards notifed under the Companies (Accounting Standards) Rules, 2006, (as amended) and the relevant provisions of the Companies Act, 1956. The Financial Statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of Financial Statements are consistent with those of previous year.

2.1.1 a) The response to letters sent by the Company requesting confrmation of balances has been insignifcant. In the management''s opinion, adjustments on reconciliation of the balances, if any required, will not be material in relation to the Financial Statements of the Company and the same will be adjusted in the Financial Statements as and when the confrmations are received and reconciliations completed.

b) Inventories, loans & advances, trade receivables and other current / non-current assets are reviewed annually and in the opinion of the management do not have a value on realization in the ordinary course of business, less than the amount at which they are stated in the Balance Sheet.

2.1.2 lease commitments

a) The Company leases space for offce and other facilities under various operating leases for periods ranging between three to fve years along with options that permit renewals for additional periods. There were no future minimum commitments in respect of the operating leases.

b) The Company has taken motor cars on operating lease, which are non-cancelable for tenure of four years. The total amount recognised in the Statement of Proft and Loss on account of rental expense for these operating leases, for the year, is Rs. Nil (Previous period - Rs. 1.93 Lacs). There were no future minimum commitments in respect of the operating lease.

2.1.3 Employee Beneft Obligations

Defned Contribution Plans

The Company makes contributions towards Provident Fund and Superannuation Fund, to defned contribution retirement beneft plans for qualifying employees. The Provident Fund plan is operated by the Regional Provident Fund Commissioner and the Superannuation Fund is administered by the Trustees of the ‘Maral Overseas Limited Senior Executive Superannuation Fund''. Under the schemes, the Company is required to contribute a specifed percentage of payroll cost to the retirement beneft schemes to fund the benefts.

Defned Beneft Plan

The Company makes annual contributions to the Employees'' Group Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance Company Limited, a funded defned beneft plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of fve years of service.

The present value of the defned beneft obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each Balance Sheet date.

2.1.4 Related Party Disclosures

Following information regarding related parties has been determined on the basis of criteria specifed in AS-18 "Related Party Disclosures".

a) Related Parties with whom transactions have taken place:

i) Key Management Personnel

Shri Ravi Jhunjhunwala, Chairman

Shri Shekhar Agarwal, Managing Director ii) Relatives of Key Management Personnel

Smt. Shashi Agarwal

Shri Shantanu Agarwal

Shekhar Agarwal (HUF) iii) Enterprises in respect of which the reporting enterprise is an associate

Agarwal Trademart Private Limited

BMD Private Limited iv) Enterprises owned or signifcantly infuenced by Key Management Personnel or their relatives

RSWM Limited

HEG Limited

BSL Limited

2.1.5 Segment information

The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Company''s business segments offer different products and require different technology and marketing strategies.

Yarn includes bought out yarn as well as production of cotton yarn over a wide range of counts, which besides being sold, is also used for further value addition in fabric. It also includes surplus captive & standby power. Fabric includes both bought out fabric as well as the value added activities relating to knitting, dyeing and processing. Textile Made-ups, comprise of made-ups made for renowned international brands.

The accounting principles used in preparation of the fnancial statements are consistently applied to record revenue and expenditure in individual segments and are as set out in the note on signifcant accounting policies.

Transfer prices for inter segment revenues are generally set on an arm''s length basis and are eliminated in consolidation.

Revenue and direct expenses in relation to segments are categorized based on items that are individually identifable or allocable on a reasonable basis to that segment. Revenue and expenses, besides fnancial costs and taxes that are not allocated to operating segments, are included under "inter segment & unallocated items".

Assets and liabilities represent assets (both tangible and intangible) employed in operations and liabilities owed to third parties that are individually identifable or allocable on a reasonable basis to that segment. Assets and liabilities excluded from allocation to operating segments, are included under "Inter Segment & Unallocated Items". Capital expenditure includes expenditure incurred during the period on acquisition of segment fxed assets.

The Company''s secondary segments are the geographic distribution of activities. Revenue and receivables are specifed by location of customers while the other geographic information is specifed by location of the assets. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and west), Ireland and the United Kingdom; Africa includes Mauritius; Asian continent has been segregated into the Middle East & Gulf countries while the rest of Asia, other than India has been covered under Far East & South East Asia; Rest of the World comprises all other places except those mentioned above and India.

2.1.6 Previous period''s fgures have been regrouped and recast wherever considered necessary.


Mar 31, 2010

As at 31.03. 2010 As at 30.09. 2009 Rs / Lac Rs / Lac

1) Contingent liabilities not provided for in respect of :

i) Counter guarantees given in respect of Guarantees given by the Companys bankers 203.75 230.41

ii) Duties & tax liabilities disputed by the Company 396.78 377.53

iii) Claims not acknowledged by the Company 50.40 41.15

iv) Unexpired Letters of Credit, for which counter guarantee given by the Company 418.26 452.10

2) The Government of Madhya Pradesh had imposed electricity cess on captive generation of electricity vide the Madhya Pradesh Upkaar (Dwitiya Sanshodhan) Adhiniyam, 2005. The imposition of cess was challenged by the Company along with other industrial units before the Honble High Court of Madhya Pradesh. In the meanwhile the State Government passed legislation revoking imposition of the cess effective 17.8.2007. The Honble High Court dismissed the petition and issue is now pending before the Supreme Court for final decision. Pending disposal of the case, Company feels that no provision is considered necessary in respect of above matter. Amount involved Rs.408 lacs (Previous year Rs.408 lacs), not included under note no. B (1) (ii) of this Schedule.

3) Upto financial year 1999-2000, Company was treating plant & machinery of spinning unit as continuous process plant and accordingly charging depreciation based on an estimated useful life of 18 years. The estimated useful life was then revised to 13 years on basis of the then available technology indicators.

From 2008-2009, based on usage, technology and efficiency parameters, the Company, in order to reflect a more appropriate preparation/ presentation of financial statements, revised the estimated useful life of such plant & machinery by reinstating the same to 18 years. Had the depreciation been provided at rates applicable for triple shift operations, the depreciation charge for the period would have been higher by Rs.112.20 lacs (Previous year - Rs.360.29 lacs)

4) (i) The Companys financial restructuring package was approved under the Corporate Debt Restructuring mechanism (CDR) by the CDR Empowered group vide their letter dated March 26, 2009 (CDR letter) and subsequent approvals from the various financial institution and banks received .

The CDR scheme included interalia reduction of interest rate on loans with effect from July 1, 2008 (Cut Off Date), rescheduling of loan repayments, conversion of interest payable into funded interest term loan, conversion of certain portion of the working capital into term loan and conversion of part term loan into preference shares. The restructuring package also stipulated conditions to be complied with by the Company and its promoters relating interalia to disposal of surplus assets, fresh infusion of additional equity by promoters, arrangement for additional infusion of term loan and working capital from existing lenders and bringing in funds by promoters to bridge shortfall of funding if any.

The Company has initiated necessary action to ensure compliance with the above conditions, and is confident that all the conditions as stipulated will be complied with in agreement with the CDR Monitoring Committee of the lenders. Since some of the lenders were yet to give full effect to the CDR package as at end of the year, the Company has incorporated impact of the CDR scheme, as approved vide the aforesaid CDR letter and subsequently accepted by the various lenders, in these financial statements as below.

This has been relied upon by the auditors. The impact of the CDR scheme and related accounts as reflected in these financial statements are subject to final adjustments that may arise on settlement of pending issues and reconciling items with the various lenders.

Profit and Loss Account

a) Interest to banks and financial institutions has been accounted for at the rates as per the restructuring package with effect from the cut off date.

Balance Sheet

b) Interest payable from the cut off date upto March 31, 2009 to the various lenders has been transferred to funded interest term loan.

c) 8 per cent Cumulative Redeemable Preference Shares (8%CRPS) of Rs. 100 each, aggregating Rs. 1885.40 lakhs have been allotted on 30th September, 2009 to the various banks and financial institutions.

d) Forex derivative loss payable to Yes Bank Ltd has been transferred to term loan of Rs. 9.50 crore with residual charge on the fixed assets and current assets of the Company.

e) Unsecured loan aggregating to Rs 1975 Lacs, from a promoter group company, has been converted into equity capital, on a preferential basis at a price of Rs 10/- per share.

f) 3 per cent Cumulative Redeemable Preference Shares (3%CRPS) of Rs. 100 each, aggregating Rs. 800 lakhs have been allotted to the promoters against infusion of capital, as required under the CDR package.

The CDR package also grants a right to lenders to convert defaulted interest / principal into equity, as well as the right to CDR lenders to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter into equity shares, as per SEBI guidelines/ loan covenants, whichever is applicable. (ii) Some of the lenders have been following the practice to recover suo motto, payment of both principal as well as interest from the working capital facility advanced by them, where applicable, or from the current account under instructions from the Company. It is regarded as accepted practice that the due date for payment shall be the date next following the date when interest is charged. Any delay on part of the lender to recover payment, either in line with past practice or specific instructions given in this regard by the Company, is not attributable to default on part of the Company.

5) Miscellaneous expenses include provision for diminution in value of investments made of Rs. Nil (Previous Period - Rs.0.46 lacs). Miscellaneous income includes provision for diminution in value of investments written back during the year of Rs. 2.86 lacs (Previous Period - Rs. Nil).

6) The information as required to be disclosed under The Micro, Small and Medium Enterprises Development Act, 2006 ("the Act") has been determined to the extent such parties have been identified by the Company, on the basis of information and records available with them. This information has been relied upon by the auditors. Disclosure as required under section 22 of the Act, is as under. Disclosure in respect of interest due on delayed payment has been determined only in respect of payments made after the receipt of information, with regards to filing of memorandum, from the respective suppliers.

7) During 2007-08, the Company closed its garment division at the Sarovar unit. Major part of the machinery has since been relocated to another manufacturing facility.

Company had closed the garment division as per provisions of the Industrial Disputes Act, 1947 after ensuring due compliance with all stipulated regulatory provisions. The Companys action for closure was challenged by the District Labour Officer before the local civil court. Company in the meanwhile obtained stay from the Honble High Court of Madhya Pradesh precluding the local authorities from initiating any action for recovery of wages after the date of closure. The Honble High Court has referred matter to the Industrial Tribunal. The Companys petition before the Honble High Court challenging the terms of reference to the Industrial Tribunal was dismissed. The Company filed a Special Leave Petition before the Honble Supreme Court and obtained stay on further proceedings of the Industrial Tribunal Court. Company does not foresee any further liability on the above accounts.

8) In July, 2006, the Board of Directors had resolved substantive downsizing of the Companys manufacturing facility at Jammu in the State of Jammu & Kashmir. After obtaining necessary approval for closure from the state regulatory authorities in March, 2007, the Board of Directors formally approved closure of the unit and relocation/disposal of its assets in May, 2007.

9) Adjustment relating to previous year includes Expenses Rs.3.22 lacs and Income Rs. Nil (Previous period Expenses Rs.202.20 lacs and Income Rs.10.44 lacs).

10) Deferred Taxes

Deferred taxes arise because of difference in treatment between financial accounting and tax accounting, known as "Timing differences". The tax effect of these timing differences is recorded as "deferred tax assets" (generally items that can be used as a tax deduction or credit in future periods) and "deferred tax liabilities" (generally items for which the Company has received a tax deduction, but have not yet been recorded in the statement of income).

Recognition of deferred tax assets has been restricted to the extent of deferred tax liabilities available. Based on schedule of reversal of timing differences giving rise to deferred tax liabilities, the management believes there is requisite degree of virtual certainty that the deferred tax assets, to the extent recognized, would be realised.

11) Lease Commitments

a) The Company leases space for office and other facilities under various operating leases for periods ranging between three to five years along with options that permit renewals for additional periods.

b) The Company has taken motor cars on operating lease, which are non-cancelable for tenure of four years. The total amount recognised in the profit & loss account on account of rental expense for these operating leases, for the period, is Rs. 2.14 Lacs (Previous year - Rs. 8.81 Lacs).

12) Employee benefit obligations

Defined contribution plans

The Company makes contributions towards provident fund and superannuation fund, to defined contribution retirement benefit plans for qualifying employees. The provident fund plan is operated by the Regional Provident Fund Commissioner and the superannuation fund is administered by the Trustees of the Maral Overseas Limited Senior Executive Superannuation Fund. Under the schemes, the Company is required to contribute a specified percentage of payroll cost to the retirement benefit schemes to fund the benefits.

Defined benefit plan

The Company makes annual contributions to the Employees Group Gratuity-cum-Life Insurance Scheme of ICICI Prudential Life Insurance Company Limited, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary (last drawn salary) payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

The Company evaluates these assumptions annually based on its long-term plans of growth and industry standards.

The discount rate is based on prevailing market yields of Indian government bonds, as at the balance sheet date, consistent with the currency and estimated term of the post employment benefit obligations.

The expected rate of return on plan assets is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.

The Company adopted AS 15 (Revised) from April 1, 2007 and has accordingly given the following disclosure prospectively from this date:

13) Earnings Per Share

Basic earning per share is computed by dividing the net profit or loss for the year available to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the net profit or loss for the year by the weighted average number of equity shares in issue, adjusted for the effect of all dilutive potential equity shares that were outstanding during the year. Dilutive potential equity shares are weighted for the period they were outstanding and are deemed converted as of beginning of the year, unless they have been issued at a later date.

Potential equity options exist in the form of right of CDR lenders to convert 20% of their debt outstanding beyond seven years from the date of CDR Letter into equity capital, more fully explained in Note 5 of this schedule. Potential options may also arise in the event of default in payment due on loan funds.

14) Related Party Disclosures

Following information regarding related parties has been determined on the basis of criteria specified in AS-18 "Related Party Disclosures". a) Related parties

i) Key management personnel

- Mr. Ravi Jhunjhunwala, Chairman

- Mr. Shekhar Agarwal, Managing Director

ii) Relatives of key management personnel

- Mr. L.N. Jhunjhunwala

- Mrs. Shashi Agarwal

- Mr. Shantanu Agarwal

- Shekhar Agarwal (HUF)

iii) Enterprises over which any person described in (i) & (ii) above is able to exercise significant influence

- RSWM Ltd.

- HEG Ltd.

- BMD (P) Ltd

- Agarwal Trademart (P) Ltd.

- Mayur Knits (P) Ltd.

- Ultramarine Impex (P) Ltd

- Apeksha Vyapar (P) Ltd

- Indo Canadian Consultancy Services Ltd

- BSL Ltd

- Bhilwara Spinners Ltd

15) Segment Information

The Company is currently organized into three business operating segments: Yarn, Fabric and Textile Made-ups. The Companys business segments offer different products and require different technology and marketing strategies.

Yarn includes bought out yarn as well as production of cotton yarn over a wide range of counts, which besides being sold, is also used for further value addition in fabric. It also includes surplus captive & standby power. Fabric includes both bought out fabric as well as the value added activities relating to knitting, dyeing and processing. Textile Made-ups, comprise of made-ups made for renowned international brands.

The accounting principles used in preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments and are as set out in the note on significant accounting policies.

Transfer prices for inter segment revenues are generally set on an arms length basis and are eliminated in consolidation.

Revenue and direct expenses in relation to segments are categorized based on items that are individually identifiable or allocable on a reasonable basis to that segment. Revenue and expenses, besides financial costs and taxes that are not allocated to operating segments, are included under "inter segment & unallocated items".

Assets and liabilities represent assets (both tangible and intangible) employed in operations and liabilities owed to third parties that are individually identifiable or allocable on a reasonable basis to that segment. Assets and liabilities excluded from allocation to operating segments, are included under "inter segment & unallocated items".

Segment assets employed in the Companys various business segments are all located in India. Capital expenditure includes expenditure incurred during the period on acquisition of segment fixed assets.

Geographical revenues are segregated based on location of the customer who is invoiced. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and west), Ireland and the United Kingdom; Africa includes Mauritius; Asian continent has been segregated into the Middle East & Gulf countries while the rest of Asia, other than India has been covered under Far East & South East Asia; Rest of the World comprises all other places except those mentioned above and India.

16) Additional information pursuant to Schedule VI to the Companies Act, 1956: a) Installed Capacity*

* As certified by the Management. Since the Companys installations can technically be considered as multi-purpose plants, their capacity is variable in line with process improvements and the product mix adopted from time to time. The figures given in relation to installed capacities, are therefore, approximate and refer to an assumed product mix.

17) a) Figures in brackets, wherever given, are in respect of previous year.

b) Figures for the Current Period are of six months ended 31st March, 2010 and hence are not strictly comparable with those of previous period, which were of eighteen months ended 30th September, 2009

c) Previous years figures have been regrouped and recast wherever considered necessary.

The Schedules referred to in Balance Sheet and Profit & Loss Account form an integral part of the accounts.

 
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