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Directors Report of Pokarna Ltd.

Mar 31, 2014

Dear Members,

The Directors are pleased to present the 23rd Annual report together with the audited accounts of your company for the financial year ended 31st March, 2014. The summarized consolidated and standalone financial performance of your company is as under;

(Amount Rs. in Lacs) SUMMARY OF THE FINANCIAL RESULTS

Standalone Particulars 2013- 14 2012-13

Total income 17049.25 16022.87

Less-expenditure 16325.25 15508.99

Profit/(Loss) Before tax and extra- 724.00 513.88

ordinary items

Total tax expenses 236.13 149.37

Extra-ordinary item (refer note. 2.23 - - in consolidated financial statements).

Profit after tax and Extra-ordinary 487.87 364.51 item

Balance of Profit & Loss account, 2877.12 888.14 brought forward.

Amount transferred from FCCB 3035.26 1624.47 redemption Reserve

Amount transferred to General 36.60 - Reserve

Proposed dividend (including tax) 145.10 -

Balance carried to balance sheet 6218.55 2877.12

Particulars Consolidated 2013- 14 2012-13

Total Income 23170.70 20867.02

Less-Expenditure 23643.50 22540.68

Profit/Loss Before Tax and extra (472.80) (1673.66) Ordinary items

Total tax Expenses (892.89) 149.37

Extra ordinary item (refer note 2.23 747.63 1158.75 in consolidated financial statements).

Profit after tax and extra oridnary 1167.72 (664.28) Item

Balance of Profit &Loss account, (4613.58) (5573.77) brought forward.

Amount transferred from FCCB 3035.26 1624.47 redemption Reserve

Amount Transferred to General Reserve 36.60 -

Proposed dividend (including tax) 145.10 -

Balance carried to blance sheet (592.30) (4613.58)

BUSINESS REVIEW

In the Granite Division, during the year 2013-14 your Company has achieved revenues ofRs. 1,549 million and PBIT of Rs. 295 million registering a growth of 10% and 24% respectively. Domestic Export mix stood at Rs. 482 million & Rs. 1067 million respectively with major export contribution coming from USA i.e., Rs. 494 million, contributing 46% to export revenues. During the year 2013-14 your Company executed various projects including supplies to Reliance ADAG Head Quarters - Mumbai, Rajiv Gandhi International Airport - Hyderabad, IREO — Gurgaon, Prestige — Hyderabad, Bengaluru, Chennai, One Market - USA, Barwa Financial District - Qatar, U.S. Consulate - Indonesia.

PESL has achieved revenues ofRs. 615 million and PBIT ofRs. 98 million. Domestic Export mix stood at Rs. 37 million & Rs. 578 million respectively with major export contribution from USA i.e., Rs.440 million contributing 76% to export revenues. During the year 2013 -14 PESL supplied quartz to various projects including Mumbai International Airport (T2), Continental Hospitals - Hyderabad, Dew Flower, Sobha Developers - Bengaluru, Arlington Downs — USA, Marriott Irvine - USA, Amli Ballard - USA, Amway Specialty Suites — USA.

During the year, Apparel Division of the Company achieved revenues ofRs.143 million and PBIT ofRs. (118) million. Entire revenue during the year was achieved from the domestic market.

In granite business, your Company is one of the leading manufacturers & providers of choicest and exclusive range of Indian & Imported granites. Your Company has developed long-term relationships with several niche customers in India & abroad. Over the years, your Company has evolved in response to changing customer demands and aspirations. Aggressive marketing and rational utilization of resources has helped granite division of your Company record improved results for the year under review. In line with outlook for the sector, your company is contemplating undertaking an expansion programme in its granite processing facilities and quarries.The feasibility study for the same is under progress.

Your Company is well known in the trade for prospecting, discovering and mining granite. Your Company has over two decades of experience in scientific and sustainable mining, mine planning and development Your Company-owned and/or operated mines have since its inception, met substantial raw material needs of the Company''s granite processing facilities. Currently, Your Company owns and/or operates granite mines in the States of Telangana, Andhra Pradesh and Tamilnadu.Your Company''s long-term strategy is to have greater control over raw material resources (granite blocks) and to achieve this, your Company has also made several applications for grant of new mining lease(s) in different states.

Apparel business of Your Company continues to be under pressure. In line with the performance and near term outlook, your Company has moderated its Stanza retail stores roll-out plan. Some of the Stanza stores have also been resized with intent to improve store productivity, efficiency and reducing store operation costs. At locations that weren''t performing up to the mark, your company has decided to rationalise spaces by reducing the area or full closure of stores.

Going forward, we will continue to focus on long term value creation in the businesses we know and understand better. In Granite and Quartz, though pleased with our progress, we know there remains abundant opportunity to expand our national and international presence, while continuing to enhance our offering and achieve higher levels of productivity in our operations. It remained a challenging year for your Company''s Apparel business, which suffered from sluggish demand and lower capacity utilization. In essence, the Company''s growth in short to medium term will be driven by the Granite business and subsidiary''s Quartz business will become a key contributor to earnings in future.

SUBSIDIARY & CFS

In view of the general exemption granted by the Ministry of Corporate Affairs in 2011, the annual accounts of the subsidiary of the Company for the financial year ended 31 March, 2014 are not being attached with this Annual Report of the Company and certain financial highlights of the subsidiary are disclosed in the Annual Report, as part of the Consolidated financial statements. The audited Annual Accounts and related information of the subsidiary will be made available, upon request by any shareholder of the Company, for inspection at the registered office.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB''s)

Provision has been retained towards premium payable on redemption of FCCB''s which were matured on 29.03.2012 as per the subsisting terms and conditions. As on date bonds have been redeemed to the extent of 9539 bonds as per the negotiated terms with the said bond holders.The gain / benefit, cost, charges including foreign exchange gain / loss at the close of the year are transferred to Pokarna Engineered Stone Limited (subsidiary) as per the Scheme of Arrangement sanctioned by Hon''ble Andhra Pradesh High Court and agreement thereto.The corresponding receivable arising thereof is disclosed under the head''Loans and Advances to Subsidiary''. The Company expects no further liability other than provided for in the books.

DIVIDEND

Looking into the improved financial performance, the Board of Directors is pleased to recommend dividend of Rs. 2.00 per equity share ofRs. 10 (20%) for the year ended 31.3.2014. The dividend payout for the year under review, inclusive ofTax on Dividend distribution, is Rs. 145.10 Lacs, resulting in a pay-out of 29.74% of the profits of the Company on a stand-alone basis.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors responsibility statement, your directors confirm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;

- such accounting policies have been selected and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;

- proper and sufficient care have been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

- the annual accounts are prepared on a going concern basis.

AUDIT COMMITTEE

In terms of the requirement of clause 49 of the listing agreement with the Bombay Stock Exchange and Section 292A of the Companies Act, 1956 and Section 177 of the Companies Act, 2013, your company has constituted Audit committee.The composition of the committee & other details are given in the corporate governance report which forms part of this annual report.

CORPORATE GOVERNANCE

Your company is committed to maintain the highest standards of corporate governance. As required under Clause 49 of the listing agreement with the Stock exchange, a report on corporate governance as well as Auditors certificate on the compliance of conditions on corporate governance are annexed and form part of this annual report.

All board members and senior management personnel have affirmed compliance with the Code of conduct for the year 2013-14. A declaration to this effect signed by the Chairman & Managing Director of your company is annexed to this annual report.

MANAGEMENT DISCUSSION AND ANALYSIS

''Management''s Discussion and Analysis Report'' is provided in a separate Section and forms part of this annual report.

AUDITORS

Statutory Auditors

The Statutory Auditors of the Company, M/s. S. Daga & Co., Chartered Accountants ( Reg. No. 000669S), retire at the conclusion of the ensuing Annual General Meeting and being eligible offer themselves for re-appointment as per the provisions of the Companies Act, 2013. The Audit Committee and the Board of Directors of the Company recommend the reappointment of S. Daga & Co., Chartered Accountants, as Statutory Auditors of the Company.

The Board has duly reviewed the Statutory Auditors Report on the Accounts.The Auditors without qualifying the report have made some observations, such observations are self explanatory and therefore do not call for any further comments or further explanation by the Board.

Cost Auditors

In terms of Cost Audit Orders issued by Ministry of Corporate Affairs in 2012, M/s. DZR & Co., Cost Accountants were appointed as Cost Auditors of the Company for conducting cost audit of Apparel Division of the Company for the financial year 2013 -14, the Cost Auditor Report for the financial year 2013 — 14 has been submitted to the Board on 09th August, 2014.

The due date for filing of the Cost Audit Report with the Ministry of corporate affairs, for the financial year 2013-14 is 27th September 2014 (as per Rules, report need to be filed within 180 days from the date of closing of respective financial year). Company will ensure that the said report will be filed within due date.

CORPORATE SOCIAL RESPONSIBILITY

In line with the provisions of the Companies Act, 2013 and rules made there under ("the Act"), a Corporate Social Responsibility ("CSR") Committee has been formed by the Board of Directors, Mr. Gautam Chand Jain, Mr. Meka Yugandhar and Mr.Vinayak Rao Juwadi are the members of the CSR Committee.Your Company has identified Health, Sanitation, Education and Environment as thrust areas for CSR activities.

DIRECTORS

Ms.ApurvaJain has been appointed as the Additional Director (whole time) of the Company with effect from August 9th, 2014 and she shall hold office up to the date of the ensuing Annual General Meeting, The Company has received requisite notice in writing from a member proposing Ms.ApurvaJain for appointment as a Whole time Director.

In accordance with the provisions of the Companies Act, 2013 Mr. Rahul Jain, Executive Director of the Company is liable to retire by rotation at the ensuing Annual General Meeting and being eligible, offered himself for re-appointment. Board of Directors recommends his re-appointment.

Further the Board of Directors recommends the re-appointment of all the existing Independent Directors of the Company for a futher period from 15th September, 2014 to 31" March, 2019 pursuant to Section 149 of the Companies Act, 2013.

PARTICULARS OF EMPLOYEES

None of the employees of the company was in receipt of remuneration in excess of limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended till date during the year under report.

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

Disclosure under "Form A" pursuant to Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are applicable to the Apparel division of the company, hence the information pertaining to that division is provided below:

A.Power & Fuel Consumption 2013-14 2012-13

1. Electricity

a) Purchased power

Units 269106 303188

Total amount (In Rupees) 2950193 2362806

Rate per unit (In Rupees) 10.96 7.79

b) Own Generation Through Diesel Generator

Litres of Diesel utilized 3000 15670

Total cost of Diesel utilized (In Rupees) 171446 759513

Units per litre generated 3.69 3.69

Cost Per unit 15.49 13.12

B. Consumption per unit of production (i.e one shirt / one trouser). 2013-14 2012-13

Electricity (in number of units) 3.51 2.82

Note: During the year under review FSA charges ofRs. 5,27,532, have been levied, on the apparel division of the Company.

FORMB

(Disclosure of particulars with respect to technology absorption) RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R&D carried out by the company — Not applicable having regard to the nature of the industry.

2. Benefits derived as a result of the above R&D — Not applicable.

3. Future plan of action — Not applicable.

4. Expenditure on R & D: Nil

Company maintains a high level of information flow with various companies. Through visits of executives to developed countries, your company keeps abreast with the advanced technological developments and through specific program, introduces, adopts and implements them. This has resulted in higher production, accuracy and perfection in excavation of rough granite blocks, processing of random granite slabs, tiles and manufacturing of apparel.

Your company generally exports granite to countries like Algeria, Australia, Bangladesh, Belgium, Canada, China, Colombia, Croatia, Finland, Germany, Hong Kong, Ireland, Italy, Jamacia, Jordan, Libya, Netherlands, New Zealand, Norway, Poland, Qatar, Russia, Slovenia, Switzerland, UK, USA andVietnam.

Your company is continuously exploring possibilities of exporting new markets.

During the year under review, the total standalone foreign exchange earnings was Rs. 10581.42 Lacs and expenditure of your company was Rs. 2187.82 Lacs.

ACKNOWLEDGEMENTS

Your Directors express their appreciation for the support, trust and co operation received from the banks, Government authorities, customers, suppliers, shareholders and other stakeholders during the year under review.The Board is also very thankful to the holders of Foreign Currency Convertible Bonds for their support.

Your Directors acknowledge with gratitude the commitment and dedication of the employees at all levels, which has contributed to the growth and success of the company.

Your Directors look forward to the continued support from all of you in the years to come.

For and on behalf of the Board

Place : Aliabad Gautam Chand Jain Date : 09th August, 2014 Chairman & Managing Director (DIN: 00004775)

Registered Office: 105, First Floor, Surya Towers, S. P. Road, Secunderabad- 500 003. CIN: L14102TG1991PLC013299 Tel: 040-27842182 Fax:040-2784 2121 Email: companysecretary@pokarna.com Website: www.pokarna.com


Mar 31, 2013

Dear Members,

The Directors are pleased to present the 22nd Annual report together with the audited accounts of your company for the f nancial year ended 31st March, 2013. The summarized consolidated and standalone f nancial performance of your company is as under;

(Amount in Lacs) Standalone Consolidated Particulars 2012-2013 2011-2012 2012-2013 2011-2012

Total income 16022.87 14294.12 20867.02 18433.01

Less-expenditure 15508.99 14144.18 22540.68 21477.86

Prof t/(Loss) Before tax and 513.88 149.94 (1673.66) (3044.85)

Extra-ordinary items

Total tax expenses 149.37 48.74 149.37 48.80

Extra-ordinary item (refer note. 2.23 Nil Nil 1158.75 Nil in consolidated financial statements).

Profit after tax and 364.51 101.20 (664.28) (3093.65)

Extra-ordinary item

Balance of Profit brought forward. 888.14 2630.51 (5573.77) (636.55)

Appropriation

FCCB redemption reserve (1624.47) 1843.57 (1624.47) 1843.57

Balance carried to balance sheet 2877.12 888.14 (4613.58) (5573.77)

The company performed reasonably well during the financial year 2012-13. The highlights of the f nancial (standalone) performance is as follows:

- The total income for the f nancial year 2012 - 2013 stood at Rs. 16022.87 Lacs as compared to previous year''s total income ofRs. 14294.12 Lacs registering a growth of 12.09%.

- Net Prof ts for the f nancial year under report increased to Rs.364.51 Lacs as compared to Rs. 101.20 Lacs in the previous year, registering a growth of 260%.

- The Apparel division of your company continued to suf er another rough year, while the Granite division has demonstrated much improved results for the year.

SUBSIDIARY & CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to the General Circular no. 2/ 2011 issued by the Ministry of Corporate Af airs, Government of India, the provisions of Section 212 of the Companies Act, 1956, shall not apply in relation to Pokarna Engineered Stone Limited, wholly owned subsidiary company , in view of your company meeting to all the requirements mentioned in the said circular. The consolidated f nancial statements of the holding and the subsidiary companies have been prepared in strict compliance with applicable accounting standards and the Listing Agreement, which are duly audited by the statutory auditors and form part of this annual report. The audited annual accounts and related detailed information of Pokarna Engineered Stone Limited, wholly owned subsidiary company, shall be made available at any point of time to the shareholders of the company, on request. Further, your company shall furnish hard copies of the details of the accounts of Pokarna Engineered Stone Limited as and when requested. The audited annual accounts shall be kept open at the registered of ce of both companies for inspection by any shareholder of either company.

FOREIGN CURRENCY CONVERTIBLE BONDS (FCCB''s):

During the year under review and during period from 01st April 2013 to till the date of this report, company had redeemed 9539 units of FCCB''s having face value of USD 1000 each at a price of USD 8.244 million. As on the date of this report, 2461 bonds having face value of USD 1000 each are due for redemption.

AUDITORS OBSERVATIONS

The Auditors without qualifying the report have made some observations, such observations are self explanatory and therefore do not call for any further comments or further explanation.

DIVIDEND

The Board of directors of your company has decided not to recommend dividend for the f nancial year 2012 -2013, with a view to conserve the resources.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors responsibility statement, your directors conf rm that:

- in the preparation of the annual accounts, the applicable accounting standards have been followed and no material departures have been made from the same;

- such accounting policies have been selected and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of af airs of the company at the end of the f nancial year and of the prof t of the company for that period;

- proper and suf cient care have been taken 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 fraud and other irregularities;

- the annual accounts are prepared on a going concern basis.

AUDIT COMMITTEE

In terms of the requirement of clause 49 of the Listing Agreement with the Bombay Stock Exchange and Section 292A of the Companies Act, 1956, your company has constituted Audit Committee. The composition of the committee & other details are given in the Corporate Governance Report which forms part of this annual report.

CORPORATE GOVERNANCE

Your company is committed to maintain the highest standards of corporate governance. as required under clause 49 of the Listing Agreement with the Stock exchange, a report on corporate governance as well as auditors certif cate on the compliance of conditions on corporate governance are annexed and form part of this annual report. With a view to strengthen the corporate governance framework, the Ministry of Corporate Af airs has issued a set of voluntary Guidelines in December 2009 for adoption by companies. Your company is already complying with various requirements of the Guidelines and further, will review its corporate governance parameters in the context of the recommendations under the Guidelines for appropriate action.

All board members and senior management personnel have af rmed compliance with the Code of conduct for the year 2012-13. A declaration to this ef ect signed by the Chairman & Managing Director (CEO) of your company is annexed to this annual report.

MANAGEMENT DISCUSSION AND ANALYSIS

A separate section titled ''Management''s Discussion and Analysis Report'' forms part of this Annual Report.

AUDITORS

Statutory auditors

M/s. S. Daga & Co., Chartered accountants (Reg. 000669S), who are the statutory auditors of the company hold of ce until the ensuing annual general meeting. It is proposed to re-appoint them to audit the accounts of the company for the f nancial year 2013-14. As required under the provisions of Section 224 of the Companies Act, 1956, your company has obtained a written certif cate from M/s. S. Daga & Co., Chartered accountants to the ef ect that their re-appointment, if made, would be in conformity with the limits specif ed in the said section.

Members are requested to reappoint auditors for the period from the conclusion of the ensuing annual general meeting till the conclusion of the next annual general meeting and authorize Board to f x their remuneration.

Cost auditors

In pursuance to Central Government Order no. 52/26/CAB – 2010 dated 24th January 2012 read with the provisions of Section 233B of the Companies Act, 1956, your company has appointed M/s DZR & Co, Cost accountants, Hyderabad, as cost auditors of your company to conduct cost audit of the cost accounting records of Apparel division of your company for the f nancial year 2013 - 2014. As required under the provisions of Section 224 of the Companies Act, 1956, your company has obtained a written certif cate from M/s DZR & Co, Cost Accountants to the ef ect that their appointment was in conformity with the limits specif ed in the said section.

The due date for f ling of the cost audit report with the Ministry of corporate af airs, for the f nancial year 2012-13 is 27th September 2013 (as per rule cost audit report need to be f led within 180 days from the date of closing of respective f nancial year). Company will ensure that the said report will be f led within due date.

DIRECTORS

In terms of the provisions of Sections 255 and 256 of the Companies Act, 1956 Mr. Meka Yugandhar, Mr. Thati Venkataswamy Chowdary, Mr. Dhanji Lakhamshi Sawla & Mr. Mahender Chand Chordia, Directors of your company, shall retire at the ensuing Annual General meeting and being eligible, of er themselves for re-appointment. Previous term of Mr. Gautam Chand Jain, Chairman & Managing Director of your company expired on 30th June, 2013, he has been reappointed as Chairman & Managing Director by the Board of directors in the Board meeting held on 22nd May 2013, for a further period of 5 years with ef ect from 01st July 2013, subject to the ratif cation of his reappointment by the shareholders .Board recommends the reappointment of aforementioned Directors.

PARTICULARS OF EMPLOYEES

None of the employees of the company was in receipt of remuneration in excess of limits prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended till date during the year under report.

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

Disclosure under "Form A" pursuant to Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 are applicable to the Apparel division of the company, hence the information pertaining to that division is provided below:

FORM B

(Disclosure of particulars with respect to technology absorption)

RESEARCH AND DEVELOPMENT (R & D)

1. Specific areas in which R & D carried out by the company — Not applicable having regard to the nature of the industry.

2. Benefits derived as a result of the above R&D — Not applicable.

3. Future plan of action — Not applicable.

4. Expenditure on R & D: Nil

Company maintains a high level of information flow with various companies. Through visits of executives to developed countries, your company keeps abreast with the advanced technological developments and through specific program, introduces, adopts and implements them. This has resulted in higher production, accuracy and perfection in excavation of rough granite blocks, processing of random granite slabs, tiles and manufacturing of apparel.

Your company generally exports granite to countries like Austria, Barbados, Bangladesh, Belgium, Bermuda, Brazil, Canada, China, Croatia, Finland, France, Germany, Hong Kong, Indonesia, Italy, Jamaica, Jordan, Libya, Malaysia, Mexico, Netherlands, New Zealand, Norway, Panama, Poland, Russia, Saudi Arabia, Spain, Switzerland, Taiwan, UK, USA and Venezuela.

Your company is continuously exploring possibilities of exporting new markets.

During the year under review, the total standalone foreign exchange earnings was Rs.. 9259 Lacs and expenditure of your company was Rs.. 1570 Lacs.

ACKNOWLEDGEMENTS

Your Directors express their appreciation for the support, trust and co operation received from the banks, Government authorities, customers, suppliers, shareholders and other stakeholders during the year under review. The Board is also very thankful to the holders of Foreign Currency Convertible Bonds for their support.

Your Directors acknowledge with gratitude the commitment and dedication of the employees at all levels, which has contributed to the growth and success of the company.

Your Directors look forward to the continued support from all of you in the years to come.

For and on behalf of the Board

Place : Secunderabad Gautam Chand Jain

Date : 14.08.2013 Chairman & Managing Director

 
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