Directors Report of Modern Dairies Ltd.

Mar 31, 2014

Dear Members,

The Directors hereby present their 22nd Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2014.

FINANCIALS Rs. in Lacs Year Ended Year Ended 31.03.2014 31.03.2013

Net Sales and other Income 64049 58547

Operating Profit 2114 2676

Finance Cost 1627 1913

Cash Profit 487 763

Depreciation & Amortisation 701 663

Exceptional items (1144) -

Profit before Tax 930 100

Profit/Loss after Tax 944 (103)

PERFORMANCE

During the year under review, the Company achieved Net Sales and Other Income of Rs.640.49 crores against Rs.585.47 crores in the previous year. The Profit after Tax of the Company inclusive of Exceptional Items stood at Rs.9.44 crores as against Loss of Rs.1.03 crores in the previous year. During the year the prices of milk were higher as compared to last year and correspondingly the prices of products also registered an increase in the domestic market. The demand for the dairy products remained stable in the domestic market throughout the year.

CURRENT OPERATIONS

During the quarter ending 30th June, 2014, the Company has achieved Net Sales and other Operating Income of Rs.163.83 crores as against Rs.147.36 crores during the same period last year. The prices of dairy products in the international market have softened. During the first quarter of this year, the Export Sales are Rs.16.15 crores as against Rs.24.28 crores during the same period last year.

Due to weak Monsoon in the beginning, there was concern on the availability of milk this season. As the rainfall has picked up in the later part and the field reports suggest that the availability of milk is expected to be normal during the year. On the sales front, the demand for dairy products continues to be stable.

MILK CESS

As the members are aware that the Company has filed a Special Leave Petition with the Hon''ble Supreme Court against the judgment of Hon''ble Punjab & Haryana High Court challenging imposition of Milk Cess by the Govt. of Haryana. The Hon''ble Supreme Court on 7th September, 2012, directed an interim stay of the High Court judgment and order subject to the Companys depositing 50% of the cess levied and demanded by the Government of Haryana which has been deposited with the Department within the stipulated time.

QUALITY, FOOD SAFETY & ENVIRONMENT STANDARDS

The Company is committed to maintain best of the management practices in its plant. In pursuit of its commitment, the Company''s systems have been certified by DNV Netherlands for Quality Management Systems, Food Safety Systems and Environment Management Systems. The manufacturing facilities continue to maintain ISO 9001:2008, ISO 14001:2004, ISO 22000: 2005, HACCP Certification and Food Safety Systems certification i.e. FSSC 22000 : 2011.

DIRECTORS

Mr. Ashok Kumar Gupta was appointed as Nominee Director of Punjab National Bank w.e.f. 10th February, 2014 in place of Mr. R.K. Goyal whose nomination was withdrawn by Punjab National Bank.

Dr. Pradeep Kumar Jain retired as Director (Admn. & Milk Procurement) of the Company upon completion of his term & was relieved w.e.f. 30th July, 2014.

Mr. Satish Kumar Dua was appointed as Nominee Director of Punjab National Bank w.e.f. 11th August, 2014 in place of Mr. Ashok Kumar Gupta whose nomination was withdrawn by Punjab National Bank.

Mr. Ashwani Kumar Aggarwal, Director of the Company shall retire by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment.

Your Directors propose the appointment of Dr. B.N. Mathur, Prof. Satish Kapoor and Dr. A. K. Vashisht as Independent Directors of the Company for five consecutive years w.e.f. the Annual General Meeting.

The Company has received requisite notices in writing from members proposing Dr. B.N. Mathur, Prof. Satish Kapoor and Dr. A. K. Vashisht for appointment as independent directors.

The Board appointed Mr. Krishan Kumar Goyal as Chairman & Managing Director of the Company for a period of three years w.e.f. 1st April, 2014, subject to the approval of the shareholders in terms of the provisions of Companies Act, 2013.

The Board appointed Mr. Ashwani Kumar Aggarwal as Executive Director of the Company for a period of three years w.e.f. 1st April, 2014, subject to the approval of the shareholders in terms of the provisions of Companies Act, 2013.

The board places on record deep appreciation for able guidance and inputs provided by the retiring directors during their respective tenures.

AUDITORS

M/s. Walker Chandiok & Co LLP, Statutory Auditors of the Company hold office until the conclusion of forthcoming Annual General Meeting and being eligible have offered themselves for appointment as the Company''s Auditors in accordance with the provisions of the Companies Act, 2013.

AUDITOR''S REPORT

All the comments of the Statutory Auditors on the Annual accounts are self explanatory and require no further explanation.

FIXED DEPOSITS

Your Company did not invite or accept any fixed deposit pursuant to provisions of Section 58A of the Companies Act, 1956, during the year.

CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION & ANALYSIS

A separate report on Corporate Governance and Management Discussion & Analysis is attached to this report.

HUMAN RESOURCES

Harmonious employee relations prevailed throughout the year. Your Directors place on record their appreciation for all categories of employees for their hard work and dedication.

There were no employees employed throughout the financial year or part thereof drawing remuneration as

prescribed under Section 217(2A) of the Companies Act, 1956 read with the Disclosure of Particulars in the Report of Board of Directors Rules, 1988, as amended.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO.

Information as per Section 217(1)(e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the report of Board of Directors) Rules 1988, is given in the Annexure ''A'' and forms part of this report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) In the preparation of the annual accounts for the financial year ended 31st March, 2014, the applicable accounting standards have been followed and that there were no material departures.

(ii) The accounting policies selected by them have been applied consistently, and they have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of the Company as on 31st March, 2014 and Profit/Loss of the Company for the year ended 31st March, 2014.

(iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

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

APPRECIATION

Your Directors wish to place on record their sincere appreciation for the continued support from its business associates and stakeholders of the Company.

For & on behalf of the Board

Place: Chandigarh Krishan Kumar Goyal Dated: 11th August, 2014 Chairman & Mg. Director

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Mar 31, 2013

Dear Members,

The Directors hereby present their 21st Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2013.

FINANCIALS

Rs. in Lacs

Year Ended Year Ended 31.03.2013 31.03.2012

Net Sales and other Income 58547 49403

Operating Profit/(Loss) 2611 275

Interest 1848 1618

Cash Profit/ (Loss) 763 (1343)

Depreciations Amortisation 663 697

Prafit/(Loss) before Tax 100 (2040)

Net(Loss) (103) (1820)

PERFORMANCE

During the year under review, your Company was able to improve its sales performance. Members may recall that the Company''s product Casein was under export ban. The said ban was lifted by the Government w.e.f. 1" May, 2012. This has shown a positive impact on the sales of the Company and the net sales and other income for the year ended 31*'' March, 2013 stood at 7 585.47crores as against 7 494.03 crores previous year. The Company''s export turnover increased to 7102.66 crores as compared to last year''s ofRs. 14.74 crores.

CURRENT OPERATIONS

During the quarter ending 30m June, 2013, the Company has achieved net sales and other operating income of 7 147.36 crores as against 7 122.86 crores during the same period last year.

On the export front, the demand was good and the export sales during the 1st quarter are 7 24.28 crores as against 7 10.84 crores during the same period last year. With the onset of good Monsoon in the Country the milk availability is expected to be good during the year.

MILK CESS

As the members are aware that the Company has filed a Special Leave Petition with the Hon''ble Supreme Court against the judgment of Hon''ble Punjab & Haryana High Court challenging imposition of Milk Cess by the Govt, of Haryana. The Hon''ble Supreme Court on 7th Sept, 2012, directed an interim stay of the High Court judgment and order subject to the Company depositing 50% of the cess levied as demanded by the Government of Haryana. The same has been deposited with the Government.

ALLOTMENT OF OPTIONALLY CONVERTIBLE DEBENTURES (OCDS)

In terms of the rework package, your Company allotted 49,65,30,325 Optionally Convertible Debentures of 7 1 each, in favour of the lenders on 3rd April, 2013.

UPDATE ON BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR)

Your Company has submitted Draft Rehabilitation Scheme (DRS) to PNB being the operating agency and the said DRS is undertheir consideration.

QUALITY, FOOD SAFETY & ENVIRONMENT STANDARDS

The Company is committed to maintain best of the management practices in its plant. In pursuit of its commitment, the Company''s systems have been certified by DNV Netherlands for Quality Management Systems, Food Safety Systems and Environment Management Systems. The manufacturing facilities continue to maintain ISO 9001:2008, ISO 14001:2004, HACCP Certification and Food Safety Systems certification i.e. FSSC22000:2011.

DIRECTORS

During the year Mr. Mohan Lai Sharma was appointed as BIFR nominee on the Company''s Board w.e.f. 8th February, 2013.

During the year the nomination of Mrs. Kalpana Gupta was withdrawn by Punjab National Bank, accordingly she ceased to be a Director w.e.f. 30*'' May, 2013. Your Directors place on record their high appreciation for the contribution made by Mrs. Kalpana Gupta, Nominee Director during hertenure as Director of the Company.

Punjab National Bank nominated Mr. R. K. Goyal as its nominee on the Company''s board. Accordingly Mr. Goyal was appointed as a Nominee Director on the Board w.e.f. 30* May, 2013.

Prof. Satish Kapoor, Director of the Company shall retire by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment.

Dr. B. N. Mathur, Director of the Company shall retire by rotation at the ensuing Annual General Meeting and being eligible has offered himself for reappointment.

AUDITORS

M/s. Walker Chandiok & Co., Statutory Auditors of the Company hold office until the conclusion of forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.

Your Directors have appointed M/s. Aggarwal Vimal & Associates as Cost Auditors of the Company for the year 2013-14, to conduct the cost audit subject to the approval of the Central Government.

AUDITORS REPORT

All the comments of the Statutory Auditors on the Annual accounts are self explanatory and require no further explanation.

FIXED DEPOSITS

Your Company did not invite or accept any fixed deposit pursuant to provisions of Section 58A of the Companies Act, 1956, during the year.

CORPORATE GOVERNANCE & MANAGEMENT DISCUSSION &ANALYSIS

A separate report on Corporate Governance and Management Discussion & Analysis is attached to this report.

HUMAN RESOURCES

Harmonious employee relations prevailed throughout the year. Your Directors place on record their appreciation for all categories of employees for their hard work and dedication.

There were no employees employed throughout the financial year or part thereof drawing remuneration as prescribed under Section 217(2A) of the Companies Act, 1956 read with the Disclosure of Particulars in the Report of Board of Directors Rules, 1988, as amended.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO.

Information as per Section 217 (1) (e) of the Companies Act, 1956, read with Companies (Disclosure of particulars in the report of Board of Directors) Rules 1988, is given in the Annexure ''A'' and forms part of this report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) In the preparation of the annual accounts for the financial year ended 31s'' March, 2013, the applicable accounting standards have been followed and that there were no material departures.

(ii) The accounting policies selected by them have been applied consistently, and they have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of the Company as on 31a March, 2013 and Profit/ Loss of the Company for the year ended 31s'' March, 2013.

(iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

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

APPRECIATION

Your Directors wish to place on record their sincere appreciation for the continued support from its Bankers and to all business associates of the Company. For & on behalf of the Board

Place: Chandigarh Krishan Kumar Goyal

Dated: 13thAugust, 2013 Chairman &Mg. Director

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Mar 31, 2010

The Directors hereby present their 18th Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2010.

FINANCIALS Rs. in Lacs

Year Ended Year Ended

31.03.2010 31.03.2009

Net Sales and other Income 44684 46108

Operating Profit/(Loss) 1409 (1238)

Interest 1001 1126

Cash Profit/(Loss) 408 (2364)

Depreciation 710 743

(Loss) before Tax (302) (3107)

Net (Loss) (177) (2600)

PERFORMANCE

During the year under review, the net sales and other income isRs.446.84 crores againstRs.461.08 crores in the previous year. The operating profit in the year areRs.14.09 crores as against loss ofRs.12.38 crores last year. The Companys exports areRs.45.83 crores against? 95.26 crores in the previous year. During the year 2009-10, due to the delayed monsoon and deficit rainfall, the milk season started on a poor note. The milk availability was below expectations. Later on, the availability improved but it had an impact on the raw milk prices. The demand for companys products remained firm in the domestic market but the margins remained under pressure as the rise in selling prices was not in proportion to the increase in milk prices.

On the exports front, the market remained difficult. The Global recession that started in the middle of the last fiscal, continued in the year of 2009-10. The first two quarters of the financial year were the worst hit which started recovering in the later part of the year. Due to continued recession impact on demand in the international market, Unit II operations were affected. This resulted into lower exports of nutritional ingredients i.e. acid casein and rennet casein during this year.

Your Company entered into a manufacturing contract with a Food Major for supply of Set Curd (Plain) in their Brand for Delhi Metro and other towns of Punjab and Haryana. The commercial production commenced in November 2009. The product has been well accepted in the market.

CURRENT OPERATIONS

The first half of the current year 2010-11 continued to be difficult. The Company achieved Net sales and other Operating Income of? 193.43 crores as againstRs.159.75 crores during the same period last year. The export sales areRs.24.89 crores as againstRs.11.99 crores during the same period last year. The domestic market products sale remained firm but the export volumes remained much lesser than expected. The exports continued to remain weak due to the unremunerative selling price against the cost of raw milk and the cost of production. Further, the strengthening of Indian Rupee against the US Dollar has also adversely impacted the companys export operations.

Currently, the milk availability has started improving due to the onset of flush season. As the rainfall have been good this year, it is anticipated that the over all availability of milk in the coming flush season shall be better than the previous year.

QUALITY, FOOD SAFETY & ENVIRONMENT STANDARDS

(ISO 9001:2008, ISO 14001:2004 and HACCP Certifications) In its commitment to maintain best of the management practices, your Companys manufacturing facilities were upgraded to the latest version of ISO 9001:2008 from ISO 9001 : 2000 in January 2010. The facilities continue to maintain ISO 14001:2004 and HACCP Certification. In line with the policy for continual improvement in Quality & Food Safety Systems the Company is also certified as ISO 22000:2005 from July 2010 onwards by DNV Netherlands, a leading International Certification Company.

DIRECTORS

Punjab National Bank has appointed Mr. V. Srinivasan as its Nominee on the Companys Board w.e.f 19,hFebruary,2010.

Mr.AmarjitGoyal and Prof. Satish Kapoor, Directors of the Company shall retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. Dr. A. K. Vashisht has been appointed as an Additional Director by the Board of Directors in its meeting held on 2nd November, 2010 and as such he holds office till the conclusion of forthcoming Annual General Meeting. A notice under section 257 of the Companies Act, 1956 has been received proposing the name of Dr. A.K. Vashisht as Director, liable to retire by rotation.

AUDITORS

M/s. Walker Chandiok & Co., Statutory Auditors of the Company hold office until the conclusion of forthcoming Annual General Meeting and being eligible, offer themselves for reappointment. Your Directors have appointed M/s. V. Kumar & Associates as Cost Auditors of the Company for the year 2010-11 to conduct the cost audit and the Company has got approval from the Central Government for the same.

AUDITORS REPORT

All the comments of the Statutory Auditors on the Annual accounts are self explanatory and requires no further explanation.

FIXED DEPOSITS

The outstanding deposits at the end of the fiscal year under review amount toRs.446.01 Lacs (Previous yearRs.340.78 Lacs). There are no overdue deposits.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS

A separate report on Corporate Governance and Management Discussion & Analysis is attached to this report.

HUMAN RESOURCES

Harmonious employee relations prevailed throughout the year. Your Directors place on record their appreciation for all categories of employees for their hard work and dedication.

The statement showing particulars of employees as required under Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended is enclosed as Annexure A and forms part of this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as per Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the report of Board of Directors) Rules 1988, is given in the AnnexureBand forms part of this report.

DIRECTORSRESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:

(i) In the preparation of the annual accounts for the financial year ended 31s1 March, 2010, the applicable accounting standards have been followed and that there were no material departures.

(ii) The accounting policies selected by them have been applied consistently, and they have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of the Company as on 31s March, 2010 and Loss of the Company for the year ended 31 "March, 2010.

(iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities.

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

APPRECIATION

Your Directors wish to place on record their sincere appreciation for the continued support from its Bankers and to all business associates of the Company.

For & on behalf of the Board

Place: Chandigarh Krishan Kumar Goyal

Dated: 2nd November, 2010 Chairman & Mg. Director