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Directors Report of Patspin India Ltd.

Mar 31, 2015

To the Members,

The Directors present the TWENTY FOURTH Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2015

FINANCIAL RESULTS

(Rs in lacs) PARTICULARS Year Ended 31.3.2015 31.3.2014

REVENUE

Income from operations 55442 60961

Other income 118 104

Changes in Inventories (303) 1675

Total 55257 62740

EXPENSES

a) Cost of materials 41004 46230

b) Employee benefits expense 2940 2630

c) Other expenses 7809 7960

Total 51753 56820

OPERATING PROFIT 3504 5920

Finance Costs 3083 3464

PROFIT/(LOSS) BEFORE DEPRECIATION, 421 2456

AMORTISATION & TAX EXPENSES

Depreciation and Amortisation Expenses 1243 1899

PROFIT/(LOSS) BEFORE TAX (822) 557

Tax Expenses

Deferred Taxation 174 132

PROFIT/(LOSS) AFTER TAX (648) 425

DIVIDEND

As explained in detail under performance review, your company has incurred loss for the year and hence the Board is unable to recommend a dividend for the financial year ended 31st March, 2015.

PERFORMANCE REVIEW

As reported in previous year's Directors' Report, the company continued to perform reasonably in the two quarters of the year under review, but due to variety of reasons, from the 3rd quarter of FY 2014-15 the industry went into tailspin and started incurring substantial losses. The major causes were as follows:-

- Raw cotton prices crashed and the benchmark New York Futures plunged from over 90 cents a pound in July 2014 to below 60 cents by Oct / Nov 2014. Similarly, the Indian cotton prices also crashed steeply. For example, Gujarat Shankar 6 prices which was ruling at over Rs.43,000/- per candy in July 2014 came down to Rs.31,000/- per candy in Feb. 2015.

- Spinning mills, specially export oriented Mills always keep several months' of stock of cotton due to quality reasons. Such Mills were left with high-priced cotton with resultant value losses.

- The prime factor in causing the cotton price crash was the change in Chinese Cotton Procurement policies, which in the past had kept the global prices buoyant.

- Consequently, the yarn prices also plunged significantly, specially in fine and superfine yarns.

- The cotton yarn exports to China came down by nearly 23% in 2014-15 as compared to 2013-14. Globally India exported nearly 14% lower in 2014-15 compared to 2013-14. These factors had a bearish effect on demand and realization resulting in Mills' obliged to carry substantial unsold inventories.

- Due to excessive production of cotton yarn and lack of demand resulted in the mills obliged to carry unsold inventories of finished goods putting extreme pressure on prices and margins.

- Due to adverse financial performance of most of the Mills and strain on working capital, they could not procure and stock raw cotton as they used to do in the past. As a result, the Cotton Corporation of India (CCI) was asked by the Government to undertake wide-spread Minimum Support Price operations and so far they have procured nearly 9 Million bales of Indian Cotton. As a result, the Indian cotton prices have once again firmed up by nearly 10-12% since beginning of the season in Nov/Dec. 2014 and now.

As regards financial performance of the year under review, in spite of several adverse factors as mentioned above, due to your company's strong presence in the International market resulted a total revenue of Rs. 555.60 crores as against Rs.610.65 crores in the previous year. The operating profit was lower at Rs.35.04 crores as against Rs.59.20 crores in the previous year. After meeting finance cost of Rs.30.83 crores, the profit before depreciation, amortization and tax expenses was Rs.4.21 crores and net loss after provision of depreciation and deferred taxation at Rs.6.48 crores.

Under the circumstances, your company has been reviewing various options to tide over the liquidity constraints caused by the extreme market changes, in consultation with Banks and financial institutions who have given financial assistance. It is proposed to approach them with a revitalization proposal which will seek to securitize the long term exports of the company and will result in economizing the cost of borrowing

In the current year, the industry is hopeful that cotton yarn export demand will emerge from China and other Asian countries. We also hope that the parity between raw cotton and finished yarn prices may stabilize and normal trading conditions will return soon.

MODERNISATION, UPGRADATION AND MARGINAL EXPANSION PLANS:

Your Directors are glad to report that your Company has implemented the remaining project in respect of modernization, upgradation, and marginal expansion plans at Kanjikode Unit and addition of balancing equipment to enhance the output at Ponneri Unit at a project cost of Rs.42.41 crores as on 31st March, 2015.

PROPOSAL FOR SALE OF WIND MILL DIVISION OF THE COMPANY

The shareholders have already approved the proposed sale of Wind Mill Division and your Directors have initiated steps to conclude the same

POTENTIALLY SICK COMPANY UNDER THE PROVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985

As explained in the performance review, financial position of your Company has not been improved and your company continued to be classified as a "potentially sick company" under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 as at

the close of 31st March, 2015.

Your Directors have taken effective steps and are striving hard to come out from the above provisions and hope that the Company achieves better results in the coming years.

CORPORATE GOVERNANCE REPORT, MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER INFORMATION REQUIRED UNDER THE COMPANIES ACT, 2013 AND LISTING AGREEMENT

As per Clause 49 of the Listing Agreement entered into with the Stock Exchanges, Corporate Governance Report with Auditors Certificate thereon and Management Discussion and Analysis are attached and form part of this report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 134 (5) of the Act, and based on the representations received from the management, the directors hereby confirm that :

i) In the preparation of the annual accounts for the financial year 2014-15, the applicable accounting standards have been followed and there are no material departures;

ii) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for the financial year.

iii) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act. They confirm that there are adequate systems and controls for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

iv) they have prepared the annual accounts on a going concern basis.

v) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and operating effectively; and

vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review, in accordance with the provisions of the Companies Act, 2013 and Company's Articles of Association, Shri B.K. Patodia retires by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for reappointment. The Board recommends the same for your approval.

Smt. Pamela Anna Mathew has been inducted as an Additional Director effective from 17.3.2015 and hold office only up to the date of forthcoming Annual General Meeting of the company. Based on the recommendation of Nomination and Remuneration Committee, the Board recommends and seeks shareholders approval for appointment of Smt. Pamela Anna Mathew as an Independent Director for a period of 5 years.

Pursuant to the provisions of Section 203 of the Act, the appointment of Shri. Umang Patodia, Managing Director,Shri. N.N. Venkitasubramanian, Chief Financial Officer and Shri. Abhilash N.A, Company Secretary were formalized by the Board at its

meeting held on 15.5.2014 as the Key Managerial Personnel of the Company.

Further, Shri. Abhilash N.A. has resigned from the post of Company Secretary with effect from 31.3.2015 and in his place Shri. Dipu George has been appointed as Assistant Company Secretary and Key Managerial Personnel of the Company, effective from 9.4.2015

AUDITORS AND SECRETARIAL AUDIT

Pursuant to the provisions of Section 139 of the Companies Act,

2013 and the rules framed thereunder, M/s. M S Jagannathan & Visvanathan, Chartered Accountants, Coimbatore, were appointed as Statutory Auditors of the Company from the conclusion of the 23rd Annual General Meeting (AGM) of the Company held on 19th September, 2014 till the conclusion of the 26th Annual General Meeting to be held in the year 2017, subject to ratification of their appointment at every AGM

Further, pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made thereunder, the Company has appointed Shri. MRL Narasimha, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The same is attached as Annexure I and forms an integral part of this Report

There is no disqualification, reservations or adverse remarks or disclaimers in the Auditors and Secretarial Auditor"s Report

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

Information required under section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules,

2014 is given in the Annexure II forming part of this report

CORPORATE SOCIAL RESPONSIBILITY

Even though the provisions of Companies Act, 2013 regarding Corporate Social Responsibility are not attracted to the Company yet the company has been, over the years, pursuing as part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the Company itself in an environment of partnership for inclusive development

BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration of the various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties obligations and governance.

The performance evaluation of the Independent directors was completed. The performance evaluation of the Chairman and the Non - Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

FAMILIRISATION PROGRAMME FOR DIRECTORS

At the time of appointing a Director, a formal letter of appointment is given to him, which interalia explains the role, function, duties and responsibilities expected of him as a Director of the Company. The Director is also explained in detail the Compliance required from him under the Companies Act, 2013, Clause 49 of the Listing Agreement and other relevant regulations and affirmation taken with respect to the same.

The Chairman along with the management has also one to one discussion with the newly appointed Director to familiarize with the Company's operations.

NUMBER OF MEETINGS OF THE BOARD

The details of the number of meetings of the Board held during the Financial Year 2014-15, forms part of the Corporate Governance Report

INDEPENDENT DIRECTORS' DECLARATION

The Non Executive Independent Directors fulfill the conditions of independence specified in Section 149 (6) of the Companies Act, 2013 and Rules made thereunder and meet with requirement of Clause 49 of the Listing Agreement entered into with the Stock Exchanges. A formal letter of appointment to Independent Director as provided in Companies Act, 2013 and the Listing Agreement has been issued and disclosed on the website of the Company viz. www.patspin.com

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY

Details of loans, guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to Financial Statements

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism / whistle Blower policy for Directors and employees to report genuine concerns or grievances. The Whistle Blower policy has been posted on the website of the Company (www.patspin.com).

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an effective internal control and risk mitigation system, which has consistently assessed and strengthened with standard operating procedure. Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same.

The Audit Committee of the Board of Directors, statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. To maintain its objectivity and independence, the internal audit function reports to the Chairman of the Audit Committee

RISK MANAGEMENT

The Risk Management is a very important part of business. The main aim of risk management is to identify, monitor and take precautionary measures in respect of the events that may pose risks for the business. The Company is having a business risk management framework in place, which defines the risk management approach of the company and includes periodic review of such risks and mitigating controls and reporting mechanism of such risks.

NOMINATION & REMUNERATION POLICY

The Board of Directors has framed a policy which lays down a frame work in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members.

RELATED PARTY TRANSACTIONS

The transactions entered with related parties for the year under review were on arm's length basis and in the ordinary course of business. The disclosure under form AOC-2 for transactions with related party during the year under review is attached as Annexure III.

The Company has developed a Related Party Transactions framework for the purpose of identification and monitoring of such transaction.

A Statement giving details of Related party transactions are placed before the Audit Committee as also to the Board for review and approval on a quarterly basis.

DEPOSIT FROM PUBLIC

The Company has not accepted any deposits from public and as such no amount on account of principal or interest on deposit from public was outstanding as on the date of the Balance sheet

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in Form MGT-9 as per Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of Companies (Management & Administration) Rules, 2014 is annexed hereto as Annexure IV and forms part of this report.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 134 (3) (q) OF THE COMPANIES ACT, 2013 READ WITH RULE 5 (1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

The information required pursuant to Section 134 (3) (q) of the Companies Act, 2013 read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company in this regard

PERSONNEL & INDUSTRIAL RELATIONS

Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of Section 134(3)(q) of the Companies Act,2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial personnel) Rules, 2014

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, Export-Import Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable customers, Employees and Shareholders for their assistance, support and co-operation provided to the Company.

For and on behalf of the Board

Place : Kochi, B.K PATODIA Date : 27.5.2015 Chairman


Mar 31, 2014

Dear Members,

The Directors present the TWENTY THIRD Annual Report together with the Audited Statements of Account for the year ended 31st March, 2014.

FINANCIAL RESULTS

(Rs in lacs)

PARTICULARS Year Ended Year Ended 31.03.2014 31.03.2013

REVENUE

Income from operations 60961 46197

Other income 104 99

Changes in Inventories 1675 (1053)

Total 62740 45243

EXPENSES

a) Cost of materials 46230 34383

b) Employee benefits expense 2630 1830

c) Other expenses 7960 6418

Total 56820 42631

OPERATING PROFIT 5920 2612

Finance Costs 3464 2904

PROFIT/(LOSS) BEFORE DEPRECIATION, 2456 (292) AMORTISATION & TAX EXPENSES

Depreciation and Amortisation Expenses 1899 2032

PROFIT/(LOSS) BEFORE TAX 557 (2324)

Tax Expenses

a) Current Tax (MAT) - -

b) MAT credit entitlement - -

c) Deferred Taxation 132 (742)

PROFIT/(LOSS) AFTER TAX 425 (1582)

DIVIDEND

In view of accumulated losses, your Directors regret their inability to recommend dividend for the financial year ended 31st March, 2014.

PERFORMANCE REVIEW

As mentioned in the last year''s Directors'' Report, there has been steady demand recovery in textile business from second half of FY 2012-13, both in international as well as domestic market. Accordingly, the year under review witnessed overall improvement in performance of your Company, with sales, operating margin and cash profit reporting substantial increase. Exports of the Company showed handsome increase of 30% over previous year to Rs. 365 crores, significant part of which came from outsourced yarn business. Amongst various importing countries, demand from China was main factor leading to export led growth of the industry. However, of late, exports to China have been showing a declining trend for various reasons including uncertainty over cotton stocking policies of that country, which has direct impact on our export prices.

Total income during the year was substantially higher at Rs. 627.40 crores as against Rs. 452.43 crores of the previous years. While Operating profit increased to Rs. 59.20 crores from Rs. 26.12 crores, cash profit stood at Rs. 24.56 crores as compared to previous year loss of Rs. 2.92 crores. After charging depreciation of Rs. 18.99 crores, the profit before tax was at Rs. 5.57 crores as against a loss of Rs. 23.24 crores in previous year. After provision for deferred Tax of Rs. 1.32 crores, the Net profit was at Rs. 4.25 crores in comparison to previous year''s Net Loss of Rs. 15.82 crores.

During the year, your Company''s operations for the first quarter were adversely affected due to illegal strike at Kanjikode Plant in Kerala, which started on 23.08.2012 and was withdrawn on 17.05.2013, as mentioned by the directors in their last year''s report. As such, your Company''s performance could have been better, but for the loss of production during the strike. Further, power generation through Company owned windmills was adversely affected throughout the year, due to power evacuation problem faced in the State of Tamil Nadu by TNEB, causing financial loss to your Company. However, after representations from the industry, recently TNEB has assured proper mechanism for evacuation of power generated by the windmills.

Your Directors are glad to inform that the power situation in Tamilnadu has improved considerably and effective from June, 2014, TNEB has withdrawn all power restrictions and load shedding. Your Company is also well covered for raw material for FY 2014-15 and as such in spite of signs of slow down in demand and pressure on prices, the Company is hopeful to perform reasonably well during the current financial year.

MODERNISATION, UPGRADATION AND MARGINAL EXPANSION PLANS:

Your Company had withheld the implementation of project due to illegal strike at Kanjikode Plant last year. After withdrawal of strike, your Company is now implementing the remaining project and we have so far executed the project to the tune of Rs. 26.38 crores as against the total project cost of Rs. 42.41 crores. The project is likely to be completed within this year itself.

CORPORATE DEBT RESTRUCTURING

As reported in the previous Directors'' Report, the Company has complied with all the terms and conditions as required by CDR EG Mumbai, with regard to the restructuring proposal under CDR system. The Promoters and its associates have brought in their contribution of Rs. 2.70 crores and the Share Issue Committee of the Board of Directors have allotted 270000, 0.01% Non Cumulative Redeemable Preference Shares of Rs. 100 each at their meetings held on 30.7.2013 and 13.2.2014, respectively.

POTENTIALLY SICK COMPANY UNDER THE PROVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985.

As reported in the previous Directors'' Report, your Company has been classified as a "potentially sick Company" under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 as at the close of 31st March, 2013 and the shareholders at their Extra Ordinary General Meeting held on 30.7.2013 have approved the Report of Board of Directors regarding the erosion of the peak networth and revival measures being taken as per Section 23 of the SICA, 1985.

Your Directors are striving hard to come out from the above provisions and hope that the Company achieves better results in the coming years.

DISPOSAL OF EQUITY SHARES BY ITOCHU TEXTILE MATERIALS (ASIA) LIMITED

Due to changes in their internal policy, Itochu Textile Materials (Asia) Limited, Hong Kong, one of the Promoter of the Company, had disposed off their share holding of 30 lacs equity shares in the Company to (i) M/s. Beekaypee Credit Private Limited (12,34,300), (ii) M/s. Umang Finance Private Limited (360,000) and (iii) M/s. Patodia Exports and Investments Pvt. Ltd (14,05,700). pursuant to Regulation 10(1)(a) (ii) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

Consequently, Mr. Yoshikazu Ono, their Nominee on the Board and Mr. Keisuke Oba, his alternate has resigned from the Board of the Company. The Board places on record its profound appreciation and gratitude to M/s. ITOCHU for their valuable contribution as co-promoter of the company since its inception. However, your company''s existing sales and marketing arrangement with Itochu will continue as at present.

DIRECTORS'' RESPONSIBILITY STATEMENT

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

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures;

b) appropriate accounting policies have been selected and applied them consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that period;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

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

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

Your Directors affirm their commitments to the Corporate Governance Standards prescribed by the Securities and Exchange Board of India (SEBI).

A Report on Corporate Governance with Management Discussion and Analysis as required under Clause 49 of the Listing Agreement is attached.

FIXED DEPOSITS

The company had no unclaimed deposits outstanding as at the close of the financial year.

DIRECTORS

Pursuant to Section 149 of the Companies Act, 2013, the Board at its meeting held on 30th July, 2014 recommended appointment of Shri. N.K. Bafna, Shri. Prem Malik, Shri. Rajen K Mariwala and Shri. S.Sundareshan as Independent Directors of the Company, not liable to retire by rotation for a period of 5 years from the date of its 23rd Annual General Meeting subject to approval of the members of the Company. These directors have given the declaration to the Board that they meet the criteria of Independence as provided under section 149 (6) of the said Act and also confirm that they will abide by the provisions as mentioned in Schedule IV of the Companies Act, 2013. The Board recommends the Resolutions for your approval for the above appointments.

Shri B.K. Patodia will retire by rotation at the ensuing Annual General Meting and, being eligible, offer himself for reappointment. The Board recommends the same for your approval.

Shri. B.L. Singhal and Shri. R. Rajagopalan, Directors have resigned from the Board effective from 31.7.2014 for personal reasons.

Shri. B.L. Singhal has joined the Board of the Company effective from 20.6.2000 and was with the Board for a long period of 14 years. He was Chairman of "Stakeholders Relationship Committee" and "Nomination and Remuneration Committee", besides a member of the Audit Committee of the Board of Directors.

Shri. R.Rajagopalan has joined the Board of the Company effective from 27.1.2005. He was a member of "Audit Committee" and "Nomination and Remuneration Committee" of the Board of Directors.

The Board places on record its profound appreciation for Shri. B.L. Singhal and Shri. R. Rajagopalan for their valuable contributions as Independent Directors with the Company.

AUDITORS

M/s. M S Jagannathan & Visvanathan, Chartered Accountants, Coimbatore, who are the Statutory Auditors of the Company, hold office till the conclusion of the forthcoming AGM and are eligible for reappointment. Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Rules framed thereunder, it is proposed to appoint M/s. MS Jagannathan & Visvanathan, Chartered Accountants as Statutory Auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the 26th AGM to be held in the year 2017, subject to ratification of their appointment at every AGM.

PERSONNEL & INDUSTRIAL RELATIONS

The plant at Kanjikode Unit re-opened only on 18.5.2013 due to the illegal strike by the workmen. Barring that, Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011 dated 31st March, 2011.

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

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure, attached hereto and forms part of this report.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, Export-Import Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable customers, Employees and Shareholders for their assistance, support and co-operation to the Company.



For and on behalf of the Board

Place : Kochi, B.K PATODIA Date : 30th July, 2014 Chairman


Mar 31, 2013

To the Members,

The Directors present the TWENTY SECOND Annual Report together with the Audited Statements of Account for the year ended 31st March, 2013.

FINANCIAL RESULTS

(Rs in lacs) PARTICULARS Year Ended Year Ended 31.03.2013 31.03.2012 REVENUE Revenue from operations 46197 42586

Other income 99 84

Changes in Inventories (1053) 384

Total 45243 43054

EXPENSES

a) Cost of materials 34383 33718

b) Employee benefits expense 1830 1836

c) Other expenses 6418 6298

Total 42631 41852

OPERATING PROFIT 2612 1202

Finance Costs 2904 2809

PROFIT/(LOSS) BEFORE DEPRECIATION, (292) (1607) AMORTISATION & TAX EXPENSES

Depreciation and Amortisation Expenses 2032 2014

PROFIT/(LOSS) BEFORE TAX (2324) (3621) Tax Expenses

a) Current Tax (MAT)

b) MAT credit entitlement

c) Deferred Taxation (742) (1267)

PROFIT/(LOSS) AFTER TAX (1582) (2354)

DIVIDEND

As explained in detail under Performance Review, your company has incurred loss for the year under review, and hence the Board is unable to recommend a Dividend.

PERFORMANCE REVIEW

Last five years beginning from 2008-09 have been the most challenging period in the history of Indian Textile Industry, which faced multiplicity of adverse factors. Barring the year 2010-11 which reported exceptional recovery, rest of the period was mired in adversities arising from global meltdown, continued slowdown in advanced economies and weakening economic growth in India as well as other developing countries. Business related and political factors also took heavy toll on recovery of the textile industry which witnessed severe power constraints, rising interest rates, wide currency fluctuations, besides considerable mismatch in input / output costs resulting from faulty Government Polices relating to export of cotton and cotton yarn.

The first half of the financial year 2012-13 continued to be affected from some of the above adverse factors, but from the second half of the financial year there was distinct all around improvement and the industry was well on the path of recovery. The Government had announced series of policy measures which included un-hindered export of cotton yarn, continuation of Textile Upgradation Fund Scheme and announcement of Foreign Trade Policy which had many positive features for the textile industry including incentive for incremental exports. Simultaneously demand for cotton yarn has also improved significantly. China became one of the major importers of cotton yarn from India and in the year 2012-13 cotton yarn exports from India for the first time exceeded 1000 Million Kgs. The cotton crop at 34 Million bales was also satisfactory to take care of indigenous consumption and yet leave a sizable exportable surplus. The prices of raw cotton which in the beginning of the crop were lower have since settled down at reasonable levels.

Unfortunately, the workmen at our Kanjikode Plant in Kerala went on an illegal strike from 23rd August, 2012 while negotiations for long term settlement were going on in the conciliation proceedings undertaken by the Regional Joint Labour Commissioner. This has resulted in total loss of production of this unit and consequent adverse financial impact. In the year under review, this unit has already lost over seven months of production upto 31.03.2013 and the strike continued in the current financial year as well.

But for the above prolonged strike in our Kanjikode Plant, company would have fared much better from the second half of the year under review. However, the company continued its vigorous thrust to increase the top line growth by undertaking outsourced yarn exports. As a result, we were able to maintain the top line at Rs.462 crores against Rs.426 crores. The power situation in Tamil Nadu continues to be a cause of concern and the grid power available is hardly sufficient for operating 30% capacity and to operate the plant at full capacity, the company is obliged to buy power from Trading Platforms at substantially higher prices. The impact of higher power cost at our Ponneri Plant itself in the year under review was Rs.8.32 crores. Availability of skilled labour continues to be a challenge at the Ponneri Plant.

In spite of all these adverse factors, the Company was able to report operating profit at Rs.26.12 crores as against Rs.12.03 crores in the previous year. After providing for finance cost, the cash loss is reduced to Rs.2.92 crores as compared to Rs.16.07 crores in the previous year. After providing Rs.20.32 crores depreciation and the effect of deferred taxation, the net loss was reduced to Rs.15.82 crores as against Rs.23.54 crores in the previous year.

We are glad to report that the illegal strike at our Kanjikode Plant in Kerala, which started on 23rd August, 2012, has been withdrawn consequent to a conciliation settlement arrived at between the Trade Unions and the Management at the meeting called by the Labour Commissioner at Trivandrum on 17.05.2013 in the presence of Hon''ble Minister for Labour. The Plant has reopened on 18.05.2013 and will start contributing towards both top line and operating margin. However, the areas of concern for the Kanjikode Plant are ever rising power tariff in Kerala and continued high cost of salaries & wages as compared to industry norms.

With overall improvement in demand for the textile products both in international and domestic markets and relentless efforts put in by the Company, we are confident of achieving better results in the current financial year.

MODERNISATION, UPGRADATION AND MARGINAL EXPANSION PLANS:

As reported in the previous Directors'' Report, your Company had undertaken modernization, upgradation & marginal expansion plans at Kanjikode Unit and addition of balancing equipments to enhance the output at Ponneri Unit at a Project Cost of Rs.42.41 crores. During the year under review, we have so far executed the project to the tune of Rs.21.78 crores. Due to illegal strike at Kanjikode Plant, execution of the project was held up. Further implementation of the project is now being planned as the strike by the workmen has been withdrawn.

CORPORATE DEBT RESTRUCTURING

As reported in the previous Directors'' Report, the Company''s restructuring proposal under CDR System has been approved by CDR-EG, Mumbai during the year under review. The Company and all the lenders have executed Master Restructuring Agreement on 29.12.2012 and have also completed other related documentation in this regard. The lenders have sanctioned Additional Long Term Working Capital Loan of Rs 22.16 Crores to tide over the long term working capital needs of the Company. As per the scheme, the lender''s sacrifice of Rs 10.81 crores has been compensated by way of issue of 0.01% Non Cumulative Redeemable Preference Shares on 29 1 2013. The said Preference Shares are being redeemed in one installment on 31st March, 2022. The Scheme has also proposed promoter''s contribution of Rs.2.70 crores, 50% shall be brought in at the time of implementation and the balance 50% to be brought in within 12 months time. The Promoters and its Associates has already brought in Rs.1.35 crores and the balance Rs.1.35 crores shall be brought in during the current financial year. The Allotment of Redeemable Preference Shares to the Promoters and its Associates are proposed during the current financial year for which enabling resolution is being obtained from the shareholders at the ensuing Annual General Meeting.

As per CDR Scheme, GTN Textiles Limited being the main promoter of the Company has created pledge in respect of 7286405 Equity Shares of Rs 10 each (i.e., 51% of shares held by GTN in Patspin India Ltd) in favour of Central Bank of India (Monitoring Institution for CDR Scheme) on behalf of Company''s lenders.

With all the above, the Company has complied with all the terms and conditions as required by CDR-EG.

POTENTIALLY SICK COMPANY UNDER THE PROVISIONS OF SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985.

As explained above, severe power cuts in Tamilnadu and consequent purchase of High Cost Power from Private Power Producers and the illegal and unjustified strike by the workmen at Kanjikode Plant in Kerala, which lasted for a period of about 9 months up to 17.5.2013 have severely affected the performance of the Company. Consequent to this, your Company has been classified as a "potentially sick company" under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985, as at the close of the financial year.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors confirm that:- (a) in the preparation of the annual accounts, the applicable

Accounting Standards have been followed and that there are no material departures;

(b) appropriate accounting policies have been selected and applied them consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the loss of the Company for that period;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

(d) the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

Your Directors affirm their commitments to the Corporate Governance standards prescribed by the Securities and Exchange Board of India (SEBI).

A Report on Corporate Governance with Management Discussion and Analysis as required under Clause 49 of the Listing Agreement is attached.

FIXED DEPOSITS

The Company had no unclaimed deposits outstanding as at the close of the financial year.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, and the Company''s Articles of Association, Shri B.K Patodia, Shri Yoshikazu Ono and Shri. R. Rajagopalan, Directors, to retire from Office by rotation and are eligible for re-appointment.

AUDITORS

M/s.M S Jagannathan & Visvanathan, Chartered Accountants, Coimbatore, Auditors of the Company will retire at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.

PERSONNEL & INDUSTRIAL RELATIONS

Barring the illegal strike by the workmen at our Kanjikode Unit Kerala, Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011 dated 31st March, 2011.

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

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure, attached hereto and forms part of this Report.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Export-Import Bank of India, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable Customers, Employees and Shareholders for their assistance, support and co-operation to the Company.

For and on behalf of the Board

Place : Kochi, B.K PATODIA

Date : 30th May, 2013 Chairman


Mar 31, 2012

The Directors present the TWENTY FIRST Annual Report together with the Audited Statements of Account for the year ended 31st March, 2012.

FINANCIAL RESULTS

(Rs in lacs)

Particulars Year ended 31.3.2012 31.3.2011

REVENUE

Revenue from operations 42611 42498

Other income 59 355

Changes in Inventories 384 1260

Total 43054 44113

EXPENSES

a) Cost of materials 33718 29100

b) Employee benefits expense 1836 1659

c) Other expenses 6298 5345

Total 41852 36104

OPERATING PROFIT 1202 8007

Finance Costs 2809 2130

PROFIT/(LOSS) BEFORE DEPRECIATION, AMORTISATION & TAX EXPENSES (1607) 5877

Depreciation and Amortisation Expenses 2014 1985

PROFIT/(LOSS) BEFORE TAX (3621) 3892

Tax Expenses

a) Current Tax (MAT) - 432

b) MAT credit entitlement - (432)

c) Deferred Tax (1267) 1358

PROFIT/(LOSS) AFTER TAX (2354) 2534

DIVIDEND

As explained in detail under Performance Review, your company has incurred loss for the year under review, and hence the Board is unable to recommend a Dividend.

PERFORMANCE REVIEW

The textile industry has been facing a major challenge during the past few years in coping up with uncertainties arising from unexpected events led by external factors far beyond its control. The spinning sector which recovered handsomely in 2010-11 after two years of recession and adverse working, was once again plunged into yet another crisis due to lopsided government policies in respect of exports of cotton and cotton yarn, economic crisis in eurozone and consequent demand recession. The Government suddenly suspended cotton yarn exports from January to March 2011 which resulted in a huge piling up of yarn inventory of over 500 million kgs with the Spinning Mills. Eventually when this ill-timed ban was lifted in April 2011, there was a sudden rush to liquidate the yarn stock at any price made from high-priced cotton inventory. The above ban also resulted in international and domestic cotton prices crashing from April 2011 and within a period of 3 months i.e by June 2011, the domestic cotton prices declined to Rs 32,000 per candy for the Gujarat Shanker-6 variety from a peak of Rs 65,000 per candy. Mills were saddled with holding high cost raw material inventory and the yarn prices crashed due to reasons given above, resulting in majority of the Spinning Units incurring cash losses in FY 2011-12. Extreme volatility in the foreign exchange rates also adversely affected the profitability.

Under the circumstances, while your company could maintain its total revenue at Rs430.54 crores for the year as compared to Rs438.34 crores for the previous year, there was a cash loss of Rs16.09 crores as against cash profit of Rs58.77 crores in the last year. As explained earlier, unrealistically higher cotton procurement cost in relation to subdued cotton yarn prices in the international as well as local markets wiped out most of the operating margin. Power cost has also been higher as the company had to buy expensive power from Independent Power Producers due to substantial power cut in Tamil Nadu, besides increase in manpower cost. After charging depreciation, at net level the company incurred a loss of Rs36.23 crores as compared to a profit before tax of Rs38.92 crores in the previous year.

To get over the crisis which are the direct result of lopsided government policies, the industry is persuading the concerned Ministry to offer some fiscal concessions including moratorium in repayment of term loan installments falling due in near future. Hence, for the current year, we have to wait and watch for the situation to return to normalcy.

MODERNISATION, UPGRADATION AND MARGINAL expansion PLANS

Your Directors are glad to report that the modernization, upgradation and marginal expansion plans at Kanjikode Unit as well as addition on balancing equipment to enhance the output at Ponneri Unit at a revised project cost of Rs 42.41 crores is in the final stage of implementation.

With this, installed capacity of Kanjikode unit will marginally go up from the existing 48624 spindles to 53136 spindles, thereby the total installed capacity of the company will be 115439 spindles.

CORPORATE DEBT RESTRUCTURING

Your Directors have approved a proposal to approach Corporate Debt Restructuring (CDR) Cell for a debt restructuring scheme to tide over the huge cash loss suffered during the year under review. As explained, Textile Industry has been passing through a very severe crisis as a result of total mismatch in the international and domestic yarn prices vis-a-vis the raw cotton prices, high interest costs, severe power shortage, etc.

Your Directors seeks support of the lenders to permit holding on operations, correction in interest rates, deferment of principle repayment, sanction of additional long term working capital etc. to tide over the situation.

DIRECTORS' RESPONSIBILITY STATEMENT

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

a) in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there are no material departures;

b) appropriate accounting policies have been selected and applied them consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that period;

c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

d) the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

Your Directors affirm their commitments to the Corporate Governance standards prescribed by the Securities and Exchange Board of India (SEBI).

A Report on Corporate Governance with Management Discussion and Analysis as required under Clause 49 of the Listing Agreement is attached.

FIXED DEPOSITS

The Company had no unclaimed deposits outstanding as at the close of the financial year.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, and the Company's Articles of Association, Shri B.L Singhal and Shri Rajen K Mariwala, Directors, retire from Office by rotation and are eligible for re-appointment.

Shri V Viswanathan, Nominee of KSIDC was appointed as Director effective from 19.07.2011 in place of Shri T Pius Joseph. The Board placed on record its profound appreciation to Shri. T Pius Joseph for his valuable contribution during his tenure as a Director of the Company.

Shri Prem Malik, was appointed as Additional Director effective from 15.05.2012 pursuant to section 260 of the Companies Act,1956. Your Board of Directors recommends his appointment under Section 257 of the Companies Act, 1956.

AUDITORS

M/s. M S Jagannathan & Visvanathan, Chartered Account- ants, Coimbatore, Auditors of the Company will retire at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.

PERSONNEL & INDUSTRIAL RELATIONS

Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011 dated 31st March, 2011.

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

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure, attached hereto and forms part of this Report.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Export- Import Bank of India, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable Customers, Employees and Shareholders for their assistance, support and co-operation to the Company.

For and on behalf of the Board

Place : Kochi, B. K. PATODIA

Date : 23rd May, 2012 Chairman


Mar 31, 2011

The Directors have pleasure in presenting the TWENTIETH Annual Report together with the Audited Statements of Account for the year ended 31st March, 2011.

FINANCIAL RESULTS

(Rs. in lacs)

Year ended 31.3.2011 31.3.2010

INCOME

Net sales / Income from operations 42344 30254

Other Operating Income 21 100

Variation in Stock 1259 (1082)

Total 43624 29272

EXPENDITURE

a) Cost of materials 28733 19105

b) Staff Cost 1659 1388

c) Power Cost 2662 2502

d) Other expenditure 2715 2827

Total 35769 25822

OPERATING PROFIT 7855 3450

Interest 1978 2061

Profit before depreciation and taxation 5877 1389

Depreciation 1985 2000

PROFIT BEFORE TAX 3892 (611)

Provision for current tax (MAT) 432 -

MAT Credit entitlement (432) -

Provision for deferred tax 1358 204

PROFIT AFTER TAX 2534 (407)

Surplus / (Loss) Brought forward from previous year (2504) (2097)

Profit available for appropriations 30 -

Surplus / (Loss) carried forward to Balance Sheet 30 (2504)

DIVIDEND

Even though the Company has reported excellent results and profitability for the financial year 2010-11, after adjusting carried forward loss from earlier years of Rs. 2504 lacs, the net profit recorded was only Rs. 30 lacs. In view of the same, your Board is unable to recommend dividend on both equity and preference shares.

PERFORMANCE REVIEW

Performance of your company during the current year has significantly improved showing a healthy growth in its top line. Post global financial crisis which had impacted the textile industry during 2008-09, most of the economies

across the world have recovered faster than anticipated, giving the much needed impetus to the lagging demand. As mentioned in the previous Directors Report, second half of fiscal 2009-10 witnessed revival in consumer demand for textile products in domestic as well as international markets.

Your Directors are glad to report that the total revenues for the year under review have improved to Rs. 423.44 crores from Rs. 302.54 crores. While operating profit more than doubled to Rs. 78.55 crores from Rs. 34.50 crores, the cash profit quadruplicated to Rs.58.77 crores as against previous years Rs.13.89 crores. As a result, Profit before Tax stood at Rs. 38.92 crores as against a loss of Rs.6.11 crores in the previous year. The year witnessed unprecedented increase in cotton prices as a result of shortfall in crop in several major cotton growing countries. However, due to pro active management action, judicious and timely procurement of cotton could contain the raw material cost within reasonable level. As a result, the company could substantially benefit from increase in yarn prices which remained high during the year in tandem with cotton prices.

During the year under review, both the plants of the company at Tamil Nadu and Kerala were effectively utilized inspite of power and labour shortages. As you are aware, your company had undertaken substantial expansion by more than doubling its capacities to 1.11 lakhs spindles during fiscal 2008-09, which helped output growth leading to smart recovery in the current year.

MODERNISATION, UPGRADATION AND MARGINAL EXPANSION PLANS

Your Board has approved a proposal for modernization, upgradation and marginal expansion plans at Kanjikode unit as well as addition of balancing equipment to enhance the output at Ponneri unit at an approximate project cost of Rs. 46 crores . This project is being implemented under the restructured Technology Upgradation Fund Scheme (TUFS) announced on 28th April, 2011 by the Ministry of Textiles, Government of India.

With this, installed capacity of Kanjikode unit will marginally go up from the existing 48624 spindles to 53136 spindles, there by the total installed capacity of the company will be 115536 spindles.

ISSUE OF REDEEMABLE PREFERENCE SHARES

As approved by the shareholders at the Annual General Meeting held on 31st July, 2009, your Board had allotted 7 lacs 5% Non-Cumulative Redeemable Preference Shares aggregating Rs.700 lacs under Series I to IV. Out of this, 4.50 lacs shares of Rs. 100 each totalling Rs. 450 lacs were issued during the previous year and the balance 2.50 lacs shares of Rs. 100 each totaling Rs. 250 lacs were issued during the year under review under Series III and IV on 31.5. 2010 (Rs. 100 lacs) and on 13.7.2010 (Rs. 150 lacs). These shares shall carry a dividend at the rate of 5% per annum as non-cumulative in nature and shall be redeemed at the

end of 12th year from the date of allotment, or earlier but not earlier than 30.5.2015 and 12.7.2015 respectively at the option of the Board / Committee of the Board of Directors of the Company.

DIRECTORS RESPONSIBILITY STATEMENT

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

(a) in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there are no material departures;

(b) appropriate accounting policies have been selected and applied them consistently and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that period;

(c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

(d) the annual accounts have been prepared on a going concern basis.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

Your Directors affirm their commitments to the Corporate Governance standards prescribed by the Securities and Exchange Board of India (SEBI).

A Report on Corporate Governance with Management Discussion and Analysis as required under Clause 49 of the Listing Agreement is attached.

FIXED DEPOSITS

The Company had no unclaimed deposits outstanding as at the close of the financial year.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, and the Companys Articles of Association, Shri. R. Rajagopalan and Shri. N. K. Bafna, Directors, retire from Office by rotation and are eligible for re-appointment.

Shri Yoshikazu Ono, Nominee of ITOCHU Corporation, Japan was appointed as a Director effective from 28.1.2011 in place of Shri. Yoichi Ikezoe. Shri K.Oba was appointed as Alternate Director by Shri. Yoshikazu Ono effective from 28.1.2011

The Board placed on record its profound appreciation to Shri. Yoichi Ikezoe for his valuable contribution during his tenure as a Director of the Company.

AUDITORS

M/s.M S Jagannathan & Visvanathan, Chartered Accountants, Coimbatore, Auditors of the Company will retire at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.

PERSONNEL & INDUSTRIAL RELATIONS

Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Amendment Rules, 2011 dated 31st March, 2011.

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

The information required under Section 217(1)(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure, attached hereto and forms part of this Report.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Export- Import Bank of India, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable Customers, Employees and Shareholders for their assistance, support and co-operation to the Company.

For and on behalf of the Board

B. K. PATODIA Chairman

Place : Kochi, Date : 10th May, 2011


Mar 31, 2010

The Directors present the NINETEENTH Annual Report together with the Audited Statements of Account for the year ended 31st March, 2010.

FINANCIAL RESULTS

(Rs. in lacs)

Year ended 31.3.2010 31.3.2009

INCOME

Net sales/Income from 30254 21220 operations

Other Operating Income 100 -- (Insurance Claim)

Variation in Stock (1082) 1060

Total 29272 22280 EXPENDITURE

a) Cost of materials 19105 15233

b) Staff Cost 1388 1384

c) Power Cost 2502 2224

d) Other expenditure 2827 2915

Total 25822 21756

OPERATING PROFIT 3450 524

Interest 2061 2270

Profit before depreciation and 1389 (1746) taxation

Depreciation 2000 1872

PROFIT BEFORE TAX (611) (3618)

Provision for current tax -- --

Provision for deferred tax (write 205 (1031) back)

Provision for Fringe benefit tax -- 16

PROFIT AFTER TAX (406) (2603)

Surplus Brought forward from (2097) -- previous year

Transferred from General -- 506 Reserve

Profit / (Loss)balance carried (2503) (2097) forward to Balance Sheet

DIVIDEND

As explained in detail under Performance Review, your company has incurred loss for the year under review, and hence the Board is unable to recommend a Dividend.

PERFORMANCE REVIEW

The first half of the year under review continued to be adversely affected by the global economic downturn following financial turmoil which had emanated from the developed countries. However, the second half witnessed revival in consumer demand for textile products in domestic as well as export markets. This helped your companyto steadily increase its capacity utilization, leading to improvement in financial performance as well. Easing of power situation in Tamil Nadu as well as Kerala also enabled the company to increase production, though by paying higher charges. It is pertinent to mention here that during the previous year, your companys operations were badly affected due to severe power shortage as well, as mentioned in the Directors Report.

With higher plant capacity already in place post substantial expansion cum modernization plans implemented under Technology Upgradation Fund Scheme, your companys turnover spurted to Rs.302.54 crores from Rs.212.20 crores in the previous year. There has been substantial improvement in operating profit at Rs.34.50 crores as against Rs.5.24 crores during previous year. However, as working of the first half of the year was adversely affected as mentioned earlier, the year under review registered a substantially lower net loss of Rs.6.11 crores as against Rs.36.18 crores of the previous year, after providing Rs.20 crores of depreciation for the year.

In the current financial year 2010-11, besides recovery in global economic environment, domestic demand for textile products has been very strong giving the much needed positive thrust to the textile industry.

From 1st April 2010, Tamil Nadu & Kerala State Electricity Boards have put certain restrictions on power consumption and also levied fuel surcharge, which has led to increase in power cost. Besides, the government has done away with certain incentives available to Textile Industry i.e. 7.67% DEPB, 4% Duty Draw Back and 2% interest subvention. Inspite of above, due to improved market conditions and higher sales realization, your company is hopeful of showing better performance in the year 2010-11 as well.

ISSUE OF NON CUMULATIVE REDEEMABLE PREFERENCE SHARES

The Shareholders at the previous Annual General Meeting j had unanimously approved issue of Redeemable Preference Shares of Rs. 100/- each aggregating Rs.700 Lakhs, in one or more tranches to the promoters and its associates pursuant to the Debt Realignment proposal approved by the Banks and Financial Institution with the Company.

Your Directors are glad to report that the Share Issue Committee of the Board of Directors had allotted 3.50 Lakhs 5% Non Cumulative Redeemable Preference Shares aggregating Rs.350 Lakhs under series 1 on 31.07.2009 and 1.00 lakh 5% Non Cumulative Redeemable Preference

Shares aggregating Rs. 100 lakhs under series II on 8.2.2010. These shares shall carry a dividend @5% per annum on non cumulative, in nature, and shall redeem at the end of 12th year from the date of allotment, or earlier but not earlier than 30.07.2014 and 7.2.2015 respectively at the option of the Board/Committee of the Board of Directors of the company.

DIRECTORS RESPONSIBILITY STATEMENT

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

(a) in the preparation of the annual accounts, the applicable Accounting Standards have been followed and that there are no material departures;

(b) they have, selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that period,

(c) 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 your Company and for preventing and detecting fraud and other irregularities.

(d) they have prepared the annual accounts on a going concern basis.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

A report on Corporate Governance is attached to this Report as also a Management Discussion and Analysis Statement.

FIXED DEPOSITS

The Company had no unclaimed deposits outstanding as at the close of the financial year.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956, and the Companys Articles of Association, Shri. B K Patodia and Shri Y. Ikezoe, Directors, retire from Office by rotation and are eligible for re-appointment.

Shri PC Seksaria had resigned from the Board with effect from 26.03.2010. The Board places on record its profound appreciation for his valuable contribution during his tenure as a .Director.

Shri T. Okui", Alternate Director to Shri Y. Ikezoe had resigned from the Board effective from 12.04.2010 and Shri K. Oba was nominated in his place with effect from 13.05.2010. The Board places on record its profound appreciation to Shri T. Okui for his valuable contribution during his tenure as a Director.

AUDITORS

M/s.M S Jagannathan & Visvanathan, Chartered Account- ants, Coimbatore, Auditors of the Company will retire at the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.

PERSONNEL & INDUSTRIAL RELATIONS

Industrial Relations were cordial and satisfactory. A statement showing the particulars of Employees referred to in sub section (2A) of Section 217 of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is given in Annexure I, forming Part of this Report.

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

The information required under Section 217(1 )(e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure II, attached hereto and forms part of this Report.

ACKNOWLEDGEMENT

Your Directors place on record their gratitude to Central Bank of India, State Bank of India, State Bank of Travancore, The Karur Vysya Bank Limited, IDBI Bank Limited, Export- Import Bank of India, Oriental Bank of Commerce, Bank of Maharashtra and Canara Bank and the concerned Departments of the State and Central Government, valuable Customers, Employees and Shareholders for their assistance, support and co-operation to the Company.

For and on behalf of the Board

Place : Kochi, B K PATODIA

Date : 13th May, 2010 Chairman



 
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