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Directors Report of Precot Meridian Ltd.

Mar 31, 2015

Dear Members,

The directors hereby present the 53rd Annual Report along with the financial results for the year ended 31st March 2015.

Financial results (Rs Lacs)

31.03.2015 31.03.2014 Revenue from operations 73161 73819

PBIDT 3561 8083

Less: Finance cost 3362 3241

Profit from Operations 199 4842

Other income 248 428

PBDT 447 5270

Less: Depreciation and Amortization 3691 3945

Profit / (Loss) before Tax (3245) 1325

Less: Provision for Income Tax - 322

MAT Credit - (322)

Deferred Tax 19 (992)

Add: Extraordinary Item (net of tax) - 728

Profit After Tax (3264) 3045

Add: Balance brought forward (141) (2677)

Less: Transfer to General Reserve - 228

Add : Depreciation as per transition

provision in Note 7(b) of (28) -

Companies Act, 2013 Less: Provision for proposed dividend (including dividend tax) - 281

Balance carried forward (3433) (141)

Dividend

Since this year's operations have resulted in a net loss, your directors have decided not to declare any dividend.

Economic overview and industry review

The global economic growth during 2014 was at a modest level of 3.4% with positive contributions coming from developing economies. Going by the World Economic Outlook, the growth rate is not expected to be significantly higher and projected to be 3.5% for the year 2015.

The new Indian government is setting the tone for achieving accelerated growth with a focus on manufacturing. Policy reforms, foreign investment inflows and reduced oil prices could play a key role in reaching the GDP target of around 8% in 2015-16 from the current level of 7.3%.

The year under review, 2014-15, was not a good year for the textile industry. Over the past few years, China was the biggest importer of Indian cotton and yarn. A shift in China's cotton policy saw cotton exports from India to China drop significantly. The policy also resulted in increased production of yarn in China using local cotton, which led to a sharp decline in Indian yarn exports. This, coupled with weak demand, created an oversupply of yarn in the domestic market, which resulted in a drop in yarn prices of around 7 - 8% during the year under review.

Review of operations

Despite falling yarn prices your company has managed to achieve a turnover of Rs 732 crores, which is close to that of the previous year. High priced cotton inventory carried from the last season coupled with declining yarn prices contributed to the margins turning negative.

The technical textiles division has started showing signs of growth in terms of turnover. The cost of production continues to remain high due to underutilization of capacity. Our participation in global tenders and at exhibitions has started drawing the attention of global buyers but the process of retailers switching suppliers is a long drawn affair. We expect the division to break even at a cash level in the FY 2015-16.

Outlook for the current year

The current year's cotton production in India is expected to be around 400 lakh bales which will be higher than the previous year. With declining cotton exports, Indian cotton prices should have fallen. But the Cotton Corporation of India has been very active in purchasing cotton and maintaining prices.

This has resulted in Indian cotton prices being higher than international prices which in turn put pressure on yarn exports. Higher input costs like salaries and wages and power are also shrinking margins. Only an overall growth in domestic demand will allow yarn prices to improve.

Your company will continue to be prudent in expenditure and will take all steps to ensure maximum capacity utilization and efficiency.

Opportunities, risks and concerns

Though some of the developed economies are showing signs of recovery, the global economic scenario continues to be weak. European economic stability, oil prices and geopolitical unrests could hold the key for the economic revival and such revival could take some time. While the Indian economic growth forecast is positive, it is largely dependent on the internal policy reforms, monetary policy and pick up in domestic consumption.

The mismatch between raw material and yarn prices along with a lack of availability of skilled labour is a major concern for the industry. Margins are also impacted on account of rising input costs.

Personnel

The company continues to maintain good relations with its labour across its units. The exercise of recruiting, training and deployment of trained labour, at added cost, continues in view of the shortage that has been persistent in Tamil Nadu.

Internal control systems & risk management

The company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed by the audit committee. The committee also reviews the statutory auditors' report, key issues, significant processes and accounting policies.

The company has constituted a risk management committee and adopted a policy on risk management. The audit committee of the board reviews the risk management report periodically.

Postal ballot

During the year, a special resolution was passed through postal ballot under section 180 (1)(a) of the Companies Act, 2013 ('the Act'), with requisite majority for authorising the board to create mortgage, charge or hypothecation of the assets of the company.

Number of meetings of the board

Five meetings of the board were held during the year. For details, please refer to the corporate governance report.

Directors

The independent directors have submitted their disclosures as per section 149 of the Act, so as to qualify themselves as independent directors.

Mr Prashanth Chandran retires by rotation at the ensuing annual general meeting. He is eligible for re-appointment.

Performance evaluation

Pursuant to the provisions of the Companies Act, 2013 and clause 49 of the listing agreement, the board at its meeting held on 06th February 2015, had evaluated its own performance, the directors individually and also the working of its audit, nomination and remuneration, corporate social responsibility, stakeholders' relationship, finance and risk management committees.

The performance evaluation of each director is done by the entire board of directors, excluding the director being evaluated, taking into consideration inputs received from the other directors, covering various aspects of the board's functioning such as active participation and contribution during discussions, effective deployment of knowledge and expertise towards the growth and betterment of the company, impact and influence on the growth of the company and performance of specific duties, obligations and governance.

Independent directors' evaluation was carried out by the entire board and that of the chairman and the non- independent directors was carried out by the independent directors.

Policy on directors' appointment and remuneration

The company's policy on directors' appointment and remuneration and other matters provided in section 178(3) of the Act has been disclosed in the corporate governance report.

Key managerial personnel

During the year under review, as per section 203 of the Act, the following employees were designated as whole-time key managerial personnel by the board of directors.

i) Mr Ashwin Chandran, Managing Director

ii) Mr M R Siva Shankar, Chief Financial Officer, and

iii) Mr R Nithya Prabhu, Company Secretary

Particulars of employees

Statement pursuant to Section 197(12) of the Act, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is as follows:

Employed throughout the year and was in receipt of remuneration not less than Rs 60 lacs per annum.

Note:

1. Nature of employment is contractual.

2. Mr Ashwin Chandran is related to Mr D Sarath Chandran, Chairman and Mr Prashanth Chandran, Joint Managing Director.

Particulars pursuant to rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

a) The ratio of the remuneration of each director to the median employee's remuneration for the financial year and the percentage increase in remuneration of each director, Chief Financial Officer and Company Secretary in the financial year 2014-15:

% increase in Name Ratio remuneration

Mr D Sarath Chandran 17.4 : 1 16

Mr Vijay Mohan 0.3 : 1 50

Mr Sumanth Ramamurthi 0.3 : 1 36

Mr A Ramkrishna 0.7 : 1 36

Dr Jairam Varadaraj 0.4 : 1 100

Mr Ashwin Chandran 28.9 : 1 31

Mr Vijay Venkatasamy 0.6 : 1 35

Mr C N Srivatsan 0.5 : 1 (5)

Mr Suresh Jagannathan 0.3 : 1 300

Mr Prashanth Chandran 23.1 : 1 58

Ms Bhuvaneshwari 0.3 : 1 NA*

Mr M R Siva Shankar (CFO) NA 16

Mr R Nithya Prabhu (CS) NA 10

*Ms Bhuvaneshwari was not a director in the financial year 2013-14

b) The percentage increase in the median remuneration of employees in the financial year was 10%.

c) The company has 1354 permanent employees on the rolls as on 31st March, 2015.

d) Relationship between average increase in remuneration and company performance:

The company's PAT has grown from Rs 20.69 crores in the FY 12-13 to Rs 30.45 crores in the FY 13-14, an increase of 47%, against which the remuneration has been increased by an average of 10% during the FY 14-15 and this is in line with HR policy of the company.

e) Comparison of the remuneration of the Key Managerial Personnel (KMP) against the performance of the company: The remuneration of KMP increased by around 19% in FY 14-15, compared to FY 13-14, in line with the HR policy of the company. The increments and annual bonus payouts of the employees including KMP are linked to individual performance, company's performance, industry benchmark and current compensation trends. The turnover of the company for the FY 14-15 was Rs 732 crores and profit after tax was Rs (33) crores.

f) Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase or decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer:

g) Average percentage increase already made in the salaries of employees other than key managerial personnel in the last financial year was 10%. The average increase in the KMP was 19%. The increments are based on individual performance, company's performance, industry benchmark and current compensation trends.

h) Comparison of remuneration of each of the KMP against the performance of the company:

CTC for % increase Name Designation FY 14-15 (FY 14-15 (Rs in lacs) against 13-14)

Mr Ashwin Chandran Managing Director 63.60 31%

Mr M R Siva Shankar Chief Financial Officer 24.19 16%

Mr R Nithya Prabhu Company Secretary 4.84 10%

Name Turnover PAT (Rs in crores)

Mr Ashwin Chandran

Mr M R Siva Shankar 732 (33)

Mr R Nithya Prabhu

i) The key parameters for any variable component of remuneration availed by the directors: The company does not pay any remuneration to the non-executive directors, as they are paid only sitting fee for attending the meetings. With respect to executive directors, variable component is paid in the form of commission, which is based on the net profit.

j) The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year : Mr Ashok Kulkarni, employee of the company receives remuneration in excess of Mr Ashwin Chandran, Managing Director of the company. The ratio is 1.1 : 1

k) If remuneration is as per the remuneration policy of the company: Yes

Subsidiary companies

The company has three subsidiaries namely 1. Suprem Textile Processing Limited 2. Multiflora Processing (CBE) Limited and 3. Precot Meridian Energy Limited. There are no associate companies within the meaning of section 2(6) of the Act. There has been no material change in the nature of the business of the subsidiaries.

As informed in our earlier report, Benwood Corporation Sdn Bhd, a subsidiary incorporated in Malaysia, has ceased operations and the liquidation process was completed during the year.

The statement pursuant to section 129 (3) of the Act, containing the salient features of the financial statements of subsidiary companies, forms part of this annual report.

The company neither has any material subsidiary whose net worth exceeds 20% of the consolidated net worth of the holding company in the immediately preceding financial year nor has generated 20% of the consolidated income of the company during the previous financial year. The board has approved a policy for determining material subsidiaries which has been uploaded on the company's website www.precot.com.

The annual accounts of the subsidiary companies are kept for inspection by the shareholders at the registered office of the company. The company shall provide the copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Audit committee

The details pertaining to composition of audit committee are included in the corporate governance report.

The company has formulated and published a Whistle Blower Policy to provide vigil mechanism for employees including directors of the company to report genuine concerns on the website of the company www.precot.com. The provisions of this policy are in line with the provisions of section 177(9) of the Act and the revised clause 49 of the listing agreement.

Corporate governance

A report on corporate governance is annexed to this report. This includes certain disclosures required under the provisions of the Companies Act, 2013. The company has complied with the conditions relating to corporate governance as stipulated in clause 49 of the listing agreement.

Corporate social responsibility (CSR)

The board at its meeting held on 30th May 2014 has formed a CSR committee comprising 1. Mr D Sarath Chandran, 2. Mr Ashwin Chandran and 3. Mr A Ramkrishna. The committee at its meeting held on 28th July 2014, has recommended a CSR policy. The CSR policy deals with allocation of funds, activities, identification of programmes, approval, implemen- tation, monitoring and reporting.

For the FY 2014-15, the company is not required to spend on CSR activities because of the average net loss for the immediately preceding three financial years, as computed under the provisions of the Companies Act, 2013.

Particulars of loans, guarantees and investments

The particulars of loans, guarantees and investments have been disclosed in the financial statements.

Auditors' report and secretarial auditors' report

The auditors' report and secretarial auditors' report does not contain any qualifications, reservations or adverse remarks. Report of the secretarial auditor is given as Annexure A which forms part of this report.

Extract of annual return

The extract of annual return pursuant to section 92 read with rule 12 of the Companies (Management and Administration) Rules, 2014, in form MGT 9 is furnished as Annexure B to this report.

Related party transactions

All transactions entered into with related parties as defined under the Act and Clause 49 of the listing agreement during FY 14-15 were in the ordinary course of business and on an arm's length pricing basis. Therefore, it does not attract the provisions of section 188 of the Act and also there are no material contracts or arrangement or transactions and thus disclosure in form AOC-2 is not required.

The board has approved a policy for related party transactions which has been uploaded on the company's website www.precot.com.

Directors' responsibility statement

The directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures, if any

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

(e) The internal financial controls are adequate and are operating effectively

(f) A proper system for ensuring compliance of all the applicable laws are put in place and are operating effectively

Statutory Auditors

M/s Haribhakti & Co. LLP, auditors of the company, retire at the ensuing annual general meeting. The audit committee and the board of directors of the company, pursuant to the provisions of section 139 of the Act and the rules framed thereunder, proposed the appointment of M/s Haribhakti & Co. LLP, as statutory auditors of the company from the conclusion of the forthcoming AGM till the conclusion of the 58th AGM to be held in the year 2020, subject to ratification of their appointment at every AGM. The company has received consent and confirmation from M/s Haribhakti & Co. LLP that, if appointed, it would be within the limits under the provisions of the Act.

During the year, M/s Haribhakti & Co. had been converted into a limited liability partnership (LLP) Accordingly, the audit of the company for FY 14-15 was conducted by M/s Haribhakti & Co. LLP.

Cost Auditors

Pursuant to section 148 of the Act, read with the Companies (Cost Records and Audit) Rules 2014, the board of directors, appointed Mr R Krishnan, as the cost auditor of the company for the FY 15-16.

Accordingly, a resolution seeking member's ratification for the remuneration payable to Mr R Krishnan, cost auditor is included as item no. 4 of the AGM notice.

Fixed Deposits

During the year the company did not accept or renew any fixed deposit and no fixed deposit remained unclaimed with the company as on 31st March 2015.

Material Changes

No material changes or commitments affecting the financial position of the company occurred between the end of the financial year as on 31st March 2015 and the date of this report.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The company has constituted an internal complaints committee to address the complaints regarding sexual harassment. All employees are covered under this policy. The company has not received any such complaints during the financial year under review.

Unclaimed Shares

As on date the company has only 0.63% of the total shares, lying unclaimed. These shares were transferred to the unclaimed suspense account as required under the listing agreement.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The details as required under section 134(3)(m) of the Act, read with rule 8 of the Companies (Accounts) Rules, 2014, is in Annexure C.

Significant and Material orders passed by the regulators or courts or tribunal

There are no significant and material orders passed by the regulators / courts / tribunals which would impact the going concern status and the company's operations in future.

Acknowledgement

Your directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the company.

By order of the board Coimbatore D Sarath Chandran 15th May, 2015 Chairman




Mar 31, 2014

The Directors are pleased to present the 52nd Annual Report along with the financial results for the year ended 31st March 2014.

Financial Results (Rs. Lacs)

31.03.2014 31.03.2013

Revenue from operations 73819 66717

PBIDT 8083 7606 Less: Finance cost 3241 2612

Profit from Operations 4842 4994

Other income 428 755

PBDT 5270 5749

Less: Depreciation and Amortization 3945 3032

Profit Before Tax 1325 2717

Less: Provision for Income Tax 322 228

MAT Credit (322) (164)

Deferred Tax (992) 936

Tax provision for earlier years - 226

Add: Extraordinary Item 728 578

Profit After Tax 3045 2069

Add: Balance brought forward (2677) (4746)

Add: Withdrawn from General Reserve - 94 Less: Provision for proposed dividend

(including dividend tax) 281 (94)

Balance carried forward 87 (2677)

Dividend

Your company, in compliance with the provisions of the Companies (Declaration of dividend out of reserves) Rules 1975, had, during last year, absorbed a part of the loss incurred during the FY 2011-12 and accordingly declared the dividend. The loss relating to FY 2011-12 will get fully absorbed in the current year. Your directors have recommended a dividend of Rs. 2 per equity share of face value Rs. 10 each for the year ended 31st March, 2014, amounting to Rs. 281 lacs (inclusive of tax of Rs.41 lacs). Share Capital

Members, in the Annual General Meeting held on 20"1 September 2013, had granted their approval for raising the Authorised share capital from Rs. 9 crores to Rs. 20 crores and also issue of bonus shares in the ratio of 1:2 to those members whose names appeared in register of members on record date. This has enhanced the paid up share capital of your company from Rs. 8 crores to Rs. 12 crores.

The bonus issue has been completed during the year under review and the bonus shares have been listed in the National Stock Exchange.

Economic overview and Industry review

The growth in global economy which remained subdued in the first half of FY 2013-14 improved in the second half on account of export rebound in emerging market economies. While it is expected that the recovery in advanced economies could lead to a trade growth of around 4.7% in 2014, it would still continue to remain below the 20 year average.

Persistent inflationary pressure, low investments due to policy inaction coupled with high current account deficit saw the Indian GDP growth at sub 5% level.

The FY 2013-14 has been a challenging year for the textile industry due to volatile yarn and cotton prices. Exports of cotton yarn to China have slowed down on the back of Chinese currency depreciation and uncertainties on handling large reserves of cotton in the coming season.

Review of operations

Your company has registered a turnover growth of 10 % over the previous year. Though the yarn prices witnessed an uptrend in the first half of FY 2013-14, in comparison with FY 2012-13, the cotton price increases have neutralized the benefits that accrued out of yarn price increase.

The power situation in Tamil Nadu continued to affect the performance of the company. The company has to rely on higher cost sources like self-generation and third party power. Evacuation of windpower had been an issue contributing to the increased cost in power. The performance of the unit in Andhra Pradesh was affected briefly on account of local political disturbances. There has been a shortage in availability of local labour and hence increased dependency on labour from other states resulted in higher costs.

Technical Textiles

Your directors are pleased to inform that the technical textile unit commenced its commercial operations from June 2013. After a successful trial run, small commercial shipments were done during the year under review to gauge the acceptance level in the international market. Technical improvements are being made based on the inputs from the customers and going forward the plant is expected to achieve a higher level of utilization by the last quarter of the current financial year.

On the marketing front, presently your company has started participating in global tenders with focus on the european market.

Outlook for the current year

The projection of global economic growth, as per International Monetary Fund, is estimated at 3.7% for 2014 and 3.9% for 2015. Though the predictions are good for export yarn market, the cotton rates could have a say in quantum of exports. In the ensuing cotton season, India is likely to be affected by import restrictions in China. In spite of higher domestic production of 385 lakh bales for 2013-14 season, the prices have ruled high.

Even though the outlook for the short term remains uncertain with the various challenges being faced by the companies operating in the industry, the long term outlook remains robust.

The management is continuing to undertake diligent efforts to step up the performance of the Company and it is expected that the reinforced and dedicated efforts would certainly bring about an improvement in operational growth in future.

Opportunities, Risks and the Concerns

The global growth predictions have not been encouraging and the revival of Euro economy is still hazy which continues to be a worrying factor. With regard to the domestic economy, the initial below normal monsoon forecast could have a bearing on agricultural production. Consequent to this and rising input costs, the margins could be strained. The power scenario in Tamil Nadu and Andhra Pradesh is still uncertain and hence reliance will continue to be on third party power and own generation.

With the formation of the new government, the economic and administrative policies are eagerly awaited by the Indian industry.

Personnel

The company maintains its good relations with its labour across its units. The exercise of recruiting, training and deployment of trained labour continues in view of the shortage that has been persistent in Tamil Nadu.

Internal control systems & Risk Management

The company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The audit committee of the board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the company and recommendations made for corrective action through the internal audit reports. The committee reviews the statutory auditor report, key issues, significant processes and accounting policies.

New Companies Act, 2013

The Ministry of Corporate Affairs, with a view to bring in more discipline in the corporate world, has replaced the erstwhile Companies Act, 1956, with the new Companies Act, 2013.

Directors

The Companies Act, 2013 (''the Act'') provides for appointment of independent directors. Sub-section (10) of Section 149 of the Act provides that independent director shall hold office for a term up to five consecutive years on the board of the company and shall be eligible for reappointment on passing a special resolution by the share holders of the company.

Sub-section (11) states that no independent director shall be eligible for more than two consecutive terms of five years. Sub-section (13) states that the provisions of retirement by rotation as defined in sub-section (6) and (7) of Section 152 of the Act shall not apply to such independent directors. According to the above provisions and directors'' retirement policy of the company, the independent directors seeking reappointment are as follows:

Name of the Independent Period of Director Appointment

1. Mr. A Ramkrishna Two years-01.06.2014 to 31.05.2016

2. Mr. Vijay Venkataswamy Three years-01.06.2014 to 31.05.2017

3. Mr. Suresh Jagannathan Four years-01.06.2014 to 31.05.2018

4. Dr. Jairam Varadaraj Five years - 01.06.2014 to 31.05.2019

5. Mr. C N Srivatsan Five years - 01.06.2014 to 31.05.2019

6. Mr. Sumanth Ramamurthi Five years - 01.06.2014 to 31.05.2019

The term of office of Mr D Sarath Chandran - Chairman, Mr Ashwin Chandran - Managing Director and Mr Prashanth Chandran - Executive Director came to an end on 31st March 2014. The Board of Directors, at their meeting held on 30th May 2014, appointed them as the Chairman, Vice Chairman & Managing Director and Joint Managing Director of the company respectively for a period of three years effective from 1st April 2014. Their appointment and remuneration are being placed before you at the ensuing Annual General meeting for your consideration and approval.

The Board of Directors at their meeting held on 30th May 2014, appointed Ms. R. Bhuvaneshwari, as an additional director of the company. The above appointment is subject to the approval of the members at the ensuing annual general meeting.

EXIM Bank has withdrawn their nominee, Mr. KAjit Kumar from the Board of directors of the company with effect from 10th January, 2014. Your directors wish to place on record the valuable contributions by Mr. KAjit Kumar during his tenure as a director of your company.

Subsidiary companies

The Company has four subsidiaries namely 1 .Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited.

As informed in our earlier report, Benwood Corporation Sdn Bhd, the subsidiary incorporated in Malaysia, has already filed its petition for winding up and the process is expected to get completed shortly.

The statement pursuant to section 212 of the Companies Act, 1956, containing details of subsidiary companies, forms part of this annual report.

The Ministry of Corporate Affairs, Government of India, vide its circular dated 8th February 2011 has exempted companies from attaching the annual reports and some particulars of its subsidiary companies along with the annual report of the holding company required under section 212 of the Companies Act, 1956. Therefore, the annual reports of the above subsidiary companies are not attached with this Annual report. Astatement giving certain information as required vide aforesaid circular dated 08th February 2011 is placed along with the consolidated accounts.

The annual accounts of the subsidiary companies are kept for inspection by the shareholders at the registered office of the company. The company shall provide the copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Corporate Governance

The report on corporate governance is annexed. The company has complied with the conditions relating to corporate governance as stipulated in clause 49 of the listing agreement.

Corporate Social Responsibility (CSR)

As per the provisions of the Companies Act, 2013, your company has constituted a CSR committee comprising of Mr. D Sarath Chandran (Chairperson), Mr. Ashwin Chandran and Mr. A Ramkrishna. The committee is responsible for formulating and monitoring the CSR policy of the company.

Directors'' responsibility statement The directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

Auditors

M/s. Haribhakti & Co, auditors of the company, retire at the ensuing annual general meeting. M/s. Haribhakti & Co., have given their consent for re-appointment. The Audit Committee and the board of directors of the company propose the re-appointment of M/s. Haribhakti & Co., as statutory auditors of the company subject to your approval at the forthcoming annual general meeting. The company has received confirmation from M/s. Haribhakti & Co., that, if appointed, it would be within the limits under section 139 of the Companies Act, 2013.

Cost Auditors

Pursuant to Section 148 of the Companies Act 2013, the board of directors, on the recommendation of the Audit committee, appointed M/s K R S & Associates, Cost Accountants, as the cost auditor of the company for the financial year 2014-15.

Fixed Deposits

During the year the company did not accept or renew any fixed deposits and no fixed deposits remained unclaimed with the company as on 31st March 2014.

Unclaimed Shares

As required under Clause 5Aof the Listing agreement, the company has sent 3 reminders to the shareholders whose shares were , lying unclaimed/ undelivered with the company. The company has received a substantial number of requests to claim these share certificates which are released after a thorough due diligence. As on today the company has 79,825 equity shares lying unclaimed. These shares were transferred to the unclaimed suspense account as required underthe listing agreement.

Particulars of Employees

In terms of the provisions of section 217(2A) of the Companies Act 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the directors'' report. Having regard to the provisions of section 219(1 )(b)(iv) of the said act, the annual report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. The annexure is available for inspection by the members at the registered office of the company during business hours on working days up to the date of ensuing annual general meeting. Any member who is interested in obtaining such particulars may write to the company, whereupon a copy would be sent.

Acknowledgement

Your directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the company.

By order of the Board of Directors Coimbatore R Nithya Prabhu

30th May, 2014 Company Secretary


Mar 31, 2013

Dear Shareholders,

The Directors are pleased to present the 51st Annual Report along with the financial results for the year ended 31st March 2013.

Financial Results (Rs. Lacs)

31.03.2013 31.03.2012

Revenue from operations 66717 59404

PBIDT 7606 (2257)

Less:Finance cost 2612 2872

Profit from Operations 4994 (5129)

Other income 755 862

PBDT 5749 (4267)

Less: Depreciation and Amortization 3032 2991

PBT 2717 (7258)

Less:Tax expenses 1226 (1975)

Add : Extraordinary Item (net of tax) 578

PAT 2069 (5283)

Add: Balance brought forward (4746) 537

Add: Withdrawn from General Reserve 94

Less: Provision for proposed dividend (including dividend tax) (94)

Balance carried forward (2677) (4746)

Dividend

While the company has posted a profit in the year under review, it is not adequate to absorb the loss of the previous year. Your Directors have therefore proposed to declare a dividend in line with the provisions of The Companies (Declaration of dividend out of reserves) Rules, 1975. Accordingly, a dividend of 10% (ie., Re 1 per share) is recommended and a sum of Rs. 94 lacs is being withdrawn from the General Reserve for this purpose.

Directors

Mr A Ramkrishna, Mr Vijay Mohan and Mr C N Srivatsan retire by rotation at the ensuing Annual General Meeting. They are eligible for re-appointment.

Subsidiary companies

The Company has four subsidiaries namely 1.Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited.

During the year under review Benwood Corporation Sdn Bhd, a subsidiary incorporated in Malaysia, has ceased its operations and going ahead with the winding up process which is anticipated to be completed in FY 2013-14.

The statement pursuant to section 212 of the companies act 1956, containing details of subsidiary companies, forms part of this Annual report.

The Ministry of Corporate Affairs, Government of India, vide its circular dated 8th February 2011 has exempted companies from attaching the Annual reports and some particulars of its subsidiary companies along with the Annual report of the company required under section 212 of the Companies Act 1956. Therefore, the Annual reports of the subsidiary companies viz 1.Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited are not attached with this Annual report. A statement giving certain information as required vide aforesaid circular dated 08th February 2011 is placed along with the consolidated accounts.

The Annual accounts of the subsidiary companies are kept for inspection by the shareholders at the registered office of the company. The company shall provide free of cost, the copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Corporate Governance

The report on corporate governance is annexed. The company has complied with the conditions relating to corporate governance as stipulated in clause 49 of the listing agreement.

Directors responsibility statement

The directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

Auditors

M/s Haribhakti & Co and M/s KSG Subramanyam & Co, auditors of the company, retire at the ensuing annual general meeting. While M/s Haribhakti & Co have given their consent for re-appointment, M/s

KSG Subramanyam & Co have not opted for re- appointment. The audit committee and the board of directors of the company propose the re-appointment of M/s Haribhakti & Co as statutory auditors of the company subject to approval from the members at the forthcoming annual general meeting. The company has received confirmation from M/s Haribhakti & Co that, if appointed, it would be within the limits under section 224(1B) of the companies act 1956.

The Board would like to place on record their appreciation of the valuable service rendered by M/s KSG Subramanyam & Co for the past 20 years.

Cost Auditors

Pursuant to section 233B(2) of the companies act 1956, the board of directors, on the recommendation of the Audit committee, appointed M/s K R S & Associates, cost accountants, as the cost auditor of the company for the financial year 2013-14. The company has filed the cost audit report for the financial year 2011-12 on 02.04.2013.

Fixed Deposits

During the year the company did not accept or renew any fixed deposit and no fixed deposit remained unclaimed with the company as on 31st March 2013.

Particulars of Employees

In terms of the provisions of section 217(2A) of the companies act 1956, read with the companies (particulars of employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the directors report. Having regard to the provisions of section 219(1)(b)(iv) of the said act, the annual report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. The annexure is available for inspection by the members at the registered office of the company during business hours on working days up to the date of ensuing annual general meeting. Any member who is interested in obtaining such particulars may write to the company secretary at the registered office of the company, whereupon a copy would be sent.

Acknowledgement

Your directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the company.

By order of the Board

Coimbatore D Sarath Chandran

23rd May 2013 Chairman


Mar 31, 2012

The Directors are pleased to present the 50th Annual Report along with the audited accounts for the year ended 31st March 2012.

Financial Results (Rs. Lacs)

2011-12 2010-11

Revenue from operations 59404 57784

PBIDT (2257) 8235

Less : Finance cost 2872 1456

Profit from Operations (5129) 6779

Other income 862 318

PBDT (4267) 7097

Less : Depreciation and Amortization 2991 2696

PBT (7258) 4401

Less : Provision for Income Tax - 872

: MAT Credit - (19)

: Deferred Tax (2225) 288

: Tax provision for previous year 250 -

PAT (5283) 3260

Add : Balance brought forward 537 85

Profit available for appropriation (4746) 3345

Dividend and appropriations

Considering the fact that the Company has incurred a loss during the year under review, your directors have decided not to declare any dividend for the year ended 31st March 2012.

2011-12 2010-11 (Rs. Lacs) (Rs. Lacs)

Proposed Dividend - 695

Tax on Dividend - 113

General Reserve (4746) 2000

Balance carried forward - 537

Economic overview and Industry review

The Indian economy grew steady in the preceding years, averaging 8.0% growth from 2007 to 2011. GDP, after a healthy growth of 7.7% during Apr to Jun 2011, fell sharply in subsequent quarters with the growth slowing down to 6.5% in 2011-12. High inflation, lower industrial growth rate, low government spending and an uncertain global outlook, especially in the Euro zone, have been the major contributory factors impacting the GDP growth. Industrial growth took the biggest hit, mainly due to poor performance of the manufacturing and mining sectors. Total business spending on fixed assets and capital formation

contracted due to high input costs, high interest rates and lack of policy reforms. Domestic fuel price hikes, which are expected to continue, exerted additional upward pressure on inflation which hovered above 9% for 2011-12

For the Textile Industry, 2011-12 was a very difficult year. The year started with uncertainty over yarn exports amid record highs in cotton prices. Global yarn prices were also ruling high due to the shortage created by the restriction on Indian exports since December 2010. Once yarn exports were opened up in April 2011, the huge stock of yarn that had piled up with Indian mills in the preceding months started to flow into the market. This had an adverse effect on yarn prices as supply was far higher than demand. Coupled with poor demand for fabric and garments in both the domestic and export markets, cotton and yarn prices crashed in the next two months.

As a result, spinning mills that were carrying inventories of cotton were burdened with huge write- downs in the value of their cotton stock. In addition, the sudden and sharp drop in domestic and export yarn prices put the textile mills in a situation where cash loss was inevitable. Further, as cotton and yarn prices continued to drop month on month, confidence and sentiment were severely dented and purchasing reduced drastically. This led to high stock holding and reduced capacity utilization for your company until November 2011.

Review of operations

The disparity between the cotton prices and yarn prices prevailed for most part of the year leading to huge losses in the year under review. With the RBI continuing its policy of increasing interest rates, there

was a sharp increase in financing costs. Energy costs continued to remain high in view of the critical power situation that prevailed through the financial year. Salaries and wages continued to escalate in line with increased demand for human capital and increases in the cost of living. All these factors added to the pressure on the bottom line.

The market for fabrics did not maintain the momentum it had during the first quarter of the financial year. During the rest of the period, sales volumes dropped leading to slowing down of production and lower utilization of installed capacity. Your company hopes that during current year market conditions for the fabric would improve.

Though the turnover of your company has shown a marginal improvement of around 2% over the previous year in terms of value, the increased input costs in the form of raw material, labour, power and interest have contributed to an operating loss of Rs. 51 crores as against an operating profit of Rs. 66 crores in the previous year.

Technical Textiles

Technical textiles have gained global importance over the past few years and the sector is set to grow at a fast pace in the immediate future. With a view to gain a foothold in this sector, your company is setting up a greenfield technical textile plant with state-of-the-art technology in the Textile Special Economic Zone at Hassan in the state of Karnataka. Your company, which has been hitherto in the traditional textile products like yarn and fabric, will venture into these value added products, which we consider as an emerging area of opportunity. The plant will produce non-woven products for medical and hygiene care applications.

Necessary statutory approvals have been obtained. Civil work has commenced and the plant is expected to start commercial production from April 2013. The project cost is estimated to be Rs. 165 crores out of which Rs. 125 crores is to be funded through a term loan from ICICI Bank.

Preferential allotment of Equity shares and Convertible share warrants

During the year, the company allotted 525000 equity shares and 525000 convertible warrants at a price of Rs. 98 per share/warrant on a preferential basis to the promoters of the company. The company has raised Rs. 6.43 crores and would further receive Rs. 3.86 crores once the rights on the warrants is exercised by the promoters.

Outlook for the current year

Cotton prices at the commencement of the cotton season 2011 -12 stood at Rs. 39000 per candy and as the season progressed it moderated to Rs. 35000 in January 2012 and further decreased to Rs. 33000 in March 2012. The government's wavering stand on cotton exports resulted in an uncertainty and increased volatility in cotton prices since then. Yarn prices have gradually improved since December and most counts are profitable at an operating level currently.

The overall demand for yarns and fabrics in both the export and domestic markets are muted and there is a lack of confidence in the entire supply chain. With the financial turmoil in the Euro zone continuing and the US economy limping back to recovery, a quick turnaround in export demand looks remote. Our domestic economy continues to struggle with high inflation and slowing growth, factors which are strongly affecting demand for textiles and other consumer goods.

Given this scenario, your company will attempt to cut spending and concentrate on maximising capacity utilization in the coming quarters.

Opportunities, Risks and Concerns

Continued acute power shortage in Tamilnadu, the economic situation in the Euro Zone and high domestic inflation are going to be the major concerns and challenges in the coming period. The high volatility in price and demand for Cotton and Yarn in the domestic and international markets is another major concern which could adversely affect your company's financial performance.

Personnel

Labour relations continued to be cordial throughout

The year in all the units of the company. There is an acute shortage of labour in Tamil Nadu but your company is continuing to strive to overcome the shortage.

Internal control systems & Risk Management

The company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit committee of the Board reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the company, recommendations made for corrective action and the internal audit reports. The committee reviews with the statutory auditors and the management, key issues, significant processes and accounting policies.

Risk Management is an integral part of the business process. The audit committee of the Board reviews the risk management report periodically.

Directors

Mr. Sumanth Ramamurthi and Mr. Vijay Venkataswamy retire by rotation at the ensuing Annual General Meeting. They are eligible for reappointment.

In accordance with the retirement policy for the company's Board of Directors, M V Subaraman, independent director, retiring at the ensuing annual general meeting, expressed his intention not to seek re-appointment.

The directors would like to place on record the valuable contributions made by Mr M V Subaraman as a member of the board and the audit committee since 2002.

Subsidiary companies

The Company has four subsidiaries namely 1. Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited. Benwood Corporation Sdn Bhd, a subsidiary incorporated in Malaysia, recorded a turnover of Rs. 11 crores for the year ended 31st March 2012 with a Net Profit of Rs. 0.07 crores. The operations of the other subsidiaries are not significant.

The statement pursuant to section 212 of the Companies Act 1956, containing details of subsidiary companies, forms part of this Annual report.

The Ministry of Corporate Affairs, Government of India, vide its circular dated 8th February 2011 has exempted companies from attaching the Annual reports and some particulars of its subsidiary companies along with the Annual report of the company required under section 212 of the Companies Act 1956. Therefore, the Annual reports of the subsidiary companies viz 1. Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited are not attached with this Annual report. A statement giving certain information as required vide aforesaid circular dated 08th February 2011 is placed along with the consolidated accounts.

The Annual accounts of the subsidiary companies are kept for inspection by the shareholders at the registered office of the company. The company shall provide free of cost, the copy of the annual accounts of subsidiary companies to the shareholders upon their request.

Corporate Governance

The report on corporate governance is annexed. The company has complied with the conditions relating to corporate governance as stipulated in clause 49 of the listing agreement.

Directors responsibility statement

The directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

Auditors

M/s Haribhakti & Co and KSG Subramanyam & Co, auditors of the company retire at the ensuing Annual General Meeting. They have given their consent for their re-appointment. The company has received confirmation from them that, if appointed, it would be within the limits under section 224(1 B) of the Companies Act, 1956. The Audit committee and the Board of Directors of the company propose the re- appointment of the auditors.

Cost Auditors

Pursuant to section 233B(2) of the Companies Act 1956, the Board of Directors on the recommendation of the Audit committee appointed M/s K R S & Associates, Cost Accountants, as the cost Auditor of the company for the financial year 2012-13. The company has filed the Cost audit report for the financial year 2010-11 on 17.09.2011.

Fixed Deposits

During the year the company did not accept or renew any fixed deposits and no fixed deposits remained unclaimed with the company as on 31st March 2012.

Particulars of Employees

In terms of the provisions of section 217(2A) of the companies act 1956, read with the companies (particulars of employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the directors' report. Having regard to the provisions of section 219(1)(b)(iv) of the said act, the annual report excluding the aforesaid information is being sent to all the members of the company and others entitled thereto. The annexure is available for inspection by the members at the registered office of the company during business hours on working days upto the date of ensuing annual general meeting. Any member who is interested in obtaining such particulars may write to the company secretary at the registered office of the company, whereupon a copy would be sent.

Acknowledgement

Your directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the company

Annexure to Directors Report

a. Foreign Exchange Earnings

The company's foreign exchange earnings during the year was Rs. 152 crores. Outflow on account of import of raw materials, machinery and spares amounted to Rs. 27 crores resulting in a net foreign exchange earnings of Rs. 125 crores.

b. Technology Absorption, Adaptation and innovation Research and Development

Research and Development activities are carried out on an ongoing basis for improving the efficiency and also for improving quality of its products. No separate expenditure was incurred for R & D.

By Order of the Board

D Sarath Chandran Chairman

Coimbatore 30th May 2012


Mar 31, 2011

Dear Shareholders,

The Directors hereby present the 49th Annual Report along with the financial results for the year ended 31st March 2011.

Financial Results Rs. in Lacs

2010-11 2009-10

Sales - Domestic 45543 34044

- Exports 11929 9618

57472 43662

Profit Before Interest,Depreciation 8031 6443 & Taxes

Less : Interest 1459 1220

Profit from Operations 6572 5223

Other income 525 336

Profit before Depreciation and Tax 7097 5559

Less : Depreciation and Amortization 2696 2792

Profit Before Tax 4401 2767

Less : Provision for Income Tax 872 470

MAT Credit (19) (49)

Deferred Tax 288 (225)

Tax provision for earlier years - 1000

Profit After Tax 3260 1571

Add : Balance brought forward 85 (81)

Profit available for appropriation 3345 1490

Dividend and appropriations

In view of the improved performance, your directors recommend a dividend of Rs.10 per share (100%), absorbing a sum of Rs. 808 lacs including the tax payable by the company. The amount of Rs.3345 lacs is proposed to be appropriated as under:

2010-11 2009-10 Rs. in Lacs Rs. in Lacs

Proposed Dividend 695 348

Tax on Dividend 113 58

General Reserve 2000 1000

Balance carried forward 537 85

Economic overview and Industry review

The year under review began with a distinctively positive industrial climate, which was a welcome relief after the set backs in previous years due to the global meltdown. Flow of credit from institutions both internally and externally had picked up and overall business sentiments remained positive. However, in view of the rising food inflation and the risk of broader inflationary expectations, the Reserve Bank of India hiked interest rates on several occasions. So finance costs has been dearer and the abundance of liquidity in the system has been curtailed. Inflation remains one of the biggest challenges for the government on the economic front. Oil and coal prices rose sharply and the trend does not seem to be reversing.

During the year, the Indian economy grew at 8.6% and that growth rate is expected to continue in the coming years. So, the outlook for the current year remains broadly positive, subject to the assumption of normal monsoon and robust growth in manufacturing and service sectors. On the downside, global commodity and energy prices remain volatile and could adversely impact growth.

The year 2010-11 for the Textile Industry was a year of opportunities as well as challenges. The increase in the prices of cotton were extraordinary and contradictory to estimates. The opening cotton prices were lower for certain medium and long staple varieties when compared to the prices of the previous year. However, from December 2010, in the wake of a sudden surge in global demand, the domestic cotton prices started rising. The cotton prices peaked during the months of February & March 2011 and were higher by around 100% as compared to the previous year. The volatility and strong international demand directly influenced domestic cotton prices.

To curb the rising cotton price and to ensure sufficient raw material availability to Indian spinners, the Government banned further exports of cotton for the 2009/10 season in April 2010. However, for the 2010/11 season, the Government decided to allow the exports of cotton under OGL without duty effective from 01s1 October 2010. This was however capped at 55 lacs bales for the season. Yarn prices had also increased significantly during the period under review. To curb the increasing prices of cotton yarn, the Government restricted the export of yarn to 720 Million Kgs for the year 2010-11. This limit was reached by the end of November 2010, and further exports of yarn was stopped until March 2011. The export incentive schemes, DEPB and Duty draw back for cotton yarn were withdrawn in April 2010.

The TUF (Technology Upgradation Fund) scheme has been extended up to March 2012 and the scope of the scheme has been modified by the Ministry of Textiles to meet the needs of the industry. The Government has imposed Central excise duty on branded garments in March 2011. The Hon'ble Madras High court issued a closure order to al) dyeing units in Tirupur due to concerns over environmental pollution. Around 750 dyeing units were shutdown after this order. Review of operations

The remunerative prices and good demand for yarn, both in the domestic and international markets for most of the year under review enabled the company to maintain the profit margins despite the steep rise in raw material costs. However the ban on exports of cotton yarn from December 2010 resulted in the company having to hold high stocks of export yarn by the end of the financial year.

On the power front, in Kerala, Andhra Pradesh and Karnataka the situtation improved compared to previous years, which facilitated the increase in the Company's capacity utilisation. However, the continued shortage of power in Tamil Nadu has affected utilisation levels and increased energy costs. The prevalent acute shortage of labour has also affected the performance of our Tamil Nadu units. Notwithstanding these external factors your company's performance in the year 2010-11 was commendable and your company achieved the highest profit figures in the company's history.

During the year under review, your company had taken measures to improve the performance of the weaving division, as a result of which, there were significant improvement in the division's efficiency. The turnover of the division increased, however the higher yarn costs negated the effects of improved efficiency levels. Your company is optimistic of improved performance of this division during the current financial year.

Your company's turnover of Rs.575 crores during the year under review, registered a significant growth of 32% over the previous year due to better capacity utilisation and increased sales realisation. This coupled with improved operational efficiencies enhanced the Operating Profit to Rs.66 Crores for the year, as against the corresponding figure of Rs.52 Crores in the previous year.

Outlook for the current year

There was a lot of optimism at the start of the year about the growth prospects for the textile industry. As the Government opened up exports of cotton yarn from April 2011 there were expectations of maintaining the healthy margins seen during 2010/11. However, the huge stocks of cotton yarn that was held by exporters coupled with a slow down in demand saw domestic and international yarn prices fall steadily from the second half of April onward. During the same period, domestic and international cotton prices fell sharply by over 25% from the peak levels seen during March 2011. As a result of this, the prices of cotton stocks held by the company are higher than current market prices. If this trend were to continue, it will adversely affect the operating margins in cotton yarn. Since the closure of dyeing units in Tirupur, the demand for yarn in that region has been affected. Similarly the imposition of central excise duty on branded garments has also affected the hosiery cotton yarn market.

The predictions of a normal monsoon point towards improved power availability in Kerala and Andhra Pradesh, but the acute shortage of power is anticipated to continue in Tamil Nadu.

In order to mitigate the impact of acute labour and power shortages and to take advantage of technology advancements, your company continues its modernisation programme. Your company augmented the windmill generation capacity by 3 MW during the year under review and total capacity grew to 13.25 MW, which caters to 50% of the power requirement of the Tamil Nadu units.

Opportunities, Risks and Concern

Even in this liberalised economy, Government interventions in the textile industry are frequently occurring partly because of the linkage to the agricultural sector and also due to lobbying by the garment manufacturers. These sudden policy changes by the government may hinder the growth of the Indian textile industry.

The high volatility in price and demand of Cotton and Yarn in the domestic and international market is a major concern which could adversely affect your company's top line performance. The shortages of power and labour continue to hinder the operations of your company and increase costs in these areas.

Personnel

Labour relations continued to be cordial throughout the year in all the units of the company.

Internal control systems & Risk Management

The company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit committee of the Board reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the company, recommendations made for corrective action and the internal audit reports. The committee reviews with the statutory auditors and the management, key issues, significant processes and accounting policies. The company continues its efforts in strengthening internal controls.

Risk Management is an integral part of the business process. The audit committee of the Board reviews the risk management report periodically.

Directors

Mr A Ramkrishna, Mr Suresh Jagannathan and Dr Jairam Varadaraj retire by rotation at the ensuing Annual General Meeting. They are eligible for reappointment.

The term of office of Mr D Sarath Chandran, Chairman and Managing Director came to an end on 31st March 2011. He expressed his intention to relinquish the post of Managing Director. The Remuneration committee, at its meeting held on 24,h January 2011 and the Board of Directors, at their meeting held on 29th January 2011, appointed him as the Chairman for a period of three years effective from 1st April 2011. His appointment and remuneration are being placed before you at the ensuing Annual General meeting for consideration and approval.

The term of office of Mr Ashwin Chandran, Joint Managing Director came to end on 31s1 March 2011. He submitted his willingness under section 269 of the Companies act 1956 to be appointed as the Managing Director. The Remuneration committee, at its meeting held on 24th January 2011 and the Board of Directors, at their meeting held on 29th January 2011, appointed him as the Managing Director for a period of three years effective from 1s" April 2011. His appointment and remuneration are being placed before you at the ensuing Annual General meeting for consideration and approval.

In supersession of earlier resolutions passed at the Board of Directors meeting held on 29th January 2010 and the Annual General meeting held on 06th August 2010 regarding the appointment of Mr Prashanth Chandran as the Executive Director, the Remuneration committee, at its meeting held on 24th January 2011 and the Board of Directors, at their meeting held on 29th January 2011, appointed him as the Executive Director for a period of three years effective from 1st April 2011. His appointment and remuneration are being placed before you at the ensuing Annual General meeting for consideration and approval.

EXIM Bank has appointed Mr K Ajit Kumar as its Nominee Director in place of Mr K Muthukumaran with effect from 29th April 2011.

Subsidiary companies

The Company has four subsidiaries namely LBenwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited. Benwood Corporation Sdn Bhd, a subsidiary incorporated in Malaysia, recorded a turnover of Rs.22 crores for the year ended 31st March 2011 with a Net Profit of Rs. 2 crores. The operations of the other subsidiaries are not significant.

The statement pursuant to section 212 of the Companies Act 1956, containing details of subsidiaries of the Company, forms part of this Annual report.

The company has obtained approval from the Ministry of Corporate Affairs, New Delhi vide letter No: 47/101/2011-CL-lll dated 09/02/2011, in terms of Sec 212(8) of the Companies Act, 1956 exempting it from attaching its subsidiaries 'Balance Sheet, Profit and Loss Account, Auditors' and Directors' Report thereon alongwith the Company's accoutns for the year ended 31st March 2011. As per the terms of the exemption order the brief financial statement of subsidiaries is included in the Annual report. Corporate Governance

The report on Corporate Governance is annexed. The company has complied with the conditions relating to Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

Directors' Responsibility statement

The Directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

Auditors

M/s Haribhakti & Co and KSG Subramanyam & Co, auditors of the company retire at the ensuing Annual General Meeting. They have given their consent for re-appointment. The company has received confirmation from them that, if appointed, it would be within the limits under section 224(1 B) of the Companies Act, 1956. The Audit committee and the Board of Directors of the company propose the re-appointment of the auditors.

Fixed Deposits

During the year the Company did not accept or renew any fixed deposits and no fixed deposits remained unclaimed with the company as on 31st March 2011.

Acknowledgement

Your Directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your Directors also place on record their appreciation of the contributions made by the employees at all levels towards the growth of the company.

Annexure to Directors' Report

a. Foreign Exchange Earnings

The Company's foreign exchange earnings during the year was Rs. 117 crores. Outflow on account of import of raw materials, machinery and spares amounted to Rs. 7 crores resulting in a net foreign exchange earnings of Rs. 110 crores.

b. Technology Absorption, Adaptation and innovation Research and Development

Research and Development activities are carried out on an ongoing basis for improving the efficiency and also for improving quality of the products. No separate expenditure was incurred for R&D.

c. Conservation of Energy

Conservation of Energy continues to receive increased emphasis at all the units of the Company. Energy audits and Inter unit studies are carried out on a regular basis for taking steps for reduction of the energy consumption. The details of total consumption are as follows.

Particulars of Employees pursuant to the provisions of Section 217 (2A) of the Companies Act, 1956

I

Name : D Sarath Chandran

Age : 65 years

Qualification : B Sc (Hons), MBA

Experience : 39 years

Designation : Chairman & Managing Director

Nature of duties : Management of the Company

Gross remuneration : Rs 98.23 lacs

Date of commencement of employment : 01st April 1975

Previous employment : Premier Mills Limited

Notes:

1. The Chairman & Managing Director was appointed for a period of 3 years with effect from 01sl April 2008.

2. Gross remuneration includes salary, allowances, Commission and Company's contribution to Provident and Superannuation Funds.

3. Mr D Sarath Chandran is the brother of Mr Vijay Mohan and father of Mr Ashwin Chandran and Mr Prashanth Chandran.

II

Name : Ashwin Chandran

Age : 36 years

Experience : 14 years

Qualification : B Sc (Hons), MBA

Designation : Joint Managing Director

Nature of duties : Management of the Company

Gross remuneration : Rs 67.94 lacs

Date of commencement of employment : 19th September 2002

Previous employment : -

Notes:

1. The Joint Managing Director was appointed for a period of 3 years with effect from 01st April 2008.

2. Gross remuneration includes salary, allowances, Commission and Company's contribution to Provident and Superannuation Funds.

3. Mr Ashwin Chandran is the son of Mr D Sarath Chandran and brother of Mr Prashanth Chandran.

III

Name : Prashanth Chandran

Age : 30 years

Experience : 6 years

Qualification : B.Engg

Designation : Executive Director

Nature of duties : Operations of the company

Gross remuneration : Rs 61.13 lacs

Date of commencement of employment : 01st October 2005

Previous employment : -

Notes:

1. The Executive Director was appointed for a period of 3 years with effect from 01st April 2010.

2. Gross remuneration includes salary, allowances, Commission and Company's contribution to Provident and Superannuation Funds.

3. Mr Prashanth Chandran is the son of Mr D Sarath Chandran and brother of Mr Ashwin Chandran.

Coimbatore By Order of the Board

27th May 2011 D Sarath Chandran

Chairman


Mar 31, 2010

The Directors hereby present the 48th Annual Report along with the financial results for the year ended 31st March, 2010.

Financial Results Rs. in Lacs

31.03.10 31.03.09

Sales -Domestic 34044 28183

- Exports 9618 9712

43662 37895

Profit Before Interest.Depreciation 6443 2552

& Taxes

Less : Interest 1220 1302

Profit from Operations 5223 1250

Other income 336 1077

Profit before Depreciation and Tax 5559 2327

Less : Depreciation and Amortization 2791 2992

Profit Before Tax 2768 (665)

Less : Provision for Income Tax 470 -

Fringe Benefit tax - 17

MAT Credit (49) -

Deferred Tax (225) 189

Tax provision for earlier years 1000 -

Profit After Tax 1572 (871)

Add : Balance brought forward (81) 790

Profit available for appropriation 1491 (81)

Dividend and appropriations

In view of the improved performance, your directors recommend a dividend of Rs.5 per share of Rs. 10 each (50%) absorbing a sum of Rs.406 lacs including the tax payable by the company. The amount of Rs.1491 lacs is proposed to be appropriated as under:

09 -10 08-09

Rs. in Lacs Rs. in Lacs

Proposed Dividend 348 -

Tax on Dividend 58 -

General Reserve 1000 -

Balance carried forward 85 (81)

Industry overview and Review of operations

The year under review began with a climate of uncertainty in the economy. Following the financial crisis that spread across the industrialised nations in the second half of 2008-09, there was a significant slowdown in the GDP growth rate in India. The stimulus measures introduced by the Government helped in maintaining liquidity in the financial system and reviving growth in the economy. The real turnaround came in the second quarter of 2009-10 when the economy grew by 7.9 percent. However, a major concern during the year was the rise in inflation which impacted consumer spending.

For the textile industry, the year began on a similar note and your company was looking at the future with uncertainty due to the global recession, shortages of power and labour, and fluctuations in foreign exchange rates.

The Indian cotton crop of 2009-10 is estimated at 292 lac bales, which is a marginal increase from the previous year. However, due to the increase in demand and higher international prices, cotton prices rose sharply in December. With the growth in exports of cotton yarn and apparel from India, sentiments in the domestic market also turned positive and the effect of the increased raw material cost was offset by higher yarn prices.

There were improvements on the power front in Kerala and Andhra Pradesh, which helped to improve the Companys capacity utilisation. However in Tamil Nadu and Karnataka, the power shortages affected utilisation and increased energy costs.

The roof repairs at our unit in Pollachi were carried out as planned and production restarted in July in a phased manner with the unit reaching its full capacity in December.

The weaving division of the company recorded an increase of 7% in turnover. However higher yarn prices and power shortages meant that there was only a marginal improvement in the operating profit. This division continues to disappoint in terms of return on investment.

The turnover of the company grew by 15% to Rs.437 Crores against the corresponding figure of Rs.379 Crores in the previous year due to better capacity utilisation and increased sales realisation. This, coupled with improved operational efficiencies enhanced the Operating Profit to Rs.52.2 Crores for the year, as against the corresponding figure of Rs.12.5 Crores.

Income tax provision for earlier years

Our company has been making regular investments in replacing machinery and these expenses were claimed as revenue expenditure for tax purposes, based on the judgements of the Supreme Court and High Courts and the same was accepted by the IT department during earlier assessments. However, since 1997 the department has disputed the claim and the issue has been under litigation. In 2005, the Madras High Court had ruled in favour of the company but the department made an appeal to the Supreme Court, which in 2008 remanded the issue back to the Commissioner of Appeals Coimbatore, where it stands today.

However, based on recent judicial pronouncements relating to claim of certain expenses as revenue expenditure, as a prudent measure, the Company has made a provision of Rs.10 crores towards income tax and interest charges for earlier years.

Outlook for the current year

The steep increase in yarn prices resulted in government intervention to restrict the export of cotton and removal of export incentives for cotton yarn. The adverse effect of this has been negated to a certain extent by the increase in export prices of cotton yarn as demand remains buoyant. The International Cotton Advisory Council has estimated a 7% increase in the cotton production for 2010-11, which we hope will stabilise the cotton prices for the coming year. The predictions of a normal monsoon point towards improved power availability in Kerala and Andhra Pradesh, but the acute shortage is expected to continue in Tamil Nadu.

The operating margins in cotton yam continued to be healthy during the first two months of 2010-11. With the present climate in the economy, we expect the performance of the company to improve in the coming year barring any unforeseen circumstances.

The company is looking at various options to improve the weaving divisions performance. A major shift in the market segment might be required to improve price realisation and enhance operational efficiencies.

Opportunities, Risks and Concern

While the recovery of the US economy and strong domestic demand indicate a lot of scope for growth in the industry, the recent upheavals in the Euro zone economies could threaten that. The hardening of interest rates in Europe will have an effect on consumer spending, which will affect yarn and apparel exports to these countries. However the bigger concern would be the consequent effect of oversupply globally.

The shortages of power and labour will continue to hinder operations of the company, and increase costs.

Personnel

Labour relations continued to be cordial throughout the year in all the units of the company. We have entered into a five year wage settlement with the permanent workers at our A unit in Kerala.

Internal control systems & Risk Management

The company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels.

The Audit committee of the Board reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the company, recommendations made for corrective action and the internal audit reports. The committee reviews with the statutory auditors and the management, key issues, significant processes and accounting policies. The company continues its efforts in strengthening internal controls.

Risk Management is an integral part of the business process. The audit committee of the Board reviews the risk management framework.

Mr L G Varadarajulu

It is with deep regret that we inform the members about the sad demise of our beloved Ex-Chairman Mr L G Varadarajulu on 19th May 2010. Mr L G Varadarajulu had been associated with the company since inception as one of the promoter members/directors and was Chairman of the Company from 1992 to 2004.

The Company has benefited immensely under his able leadership and guidance. The Board of Directors places on record its highest appreciation of the contribution and invaluable services rendered by Mr L G Varadarajulu to the growth of the company.

Directors

Mr Vijay Mohan, Mr C N Srivatsan and Mr Vijay Venkataswamy retire by rotation at the ensuing Annual General Meeting. They are eligible for reappointment.

Mr P Sai Prakash resigned from the Board with effect from 31st December 2009. The Directors would like to place on record the valuable contributions made by Mr P Sai Prakash.

Mr Prashanth Chandran was appointed as a Whole time Director effective from 01.04.2010 and designated as Executive Director. The above appointment is subject to the approval of the members at the forthcoming Annual General Meeting.

Subsidiary companies

The Company has four subsidiaries namely 1. Benwood Corporation Sdn Bhd 2. Suprem Textile Processing Limited 3. Multiflora Processing (CBE) Limited and 4. Precot Meridian Energy Limited. Benwood Corporation Sdn Bhd, a subsidiary incorporated in Malaysia, recorded a turnover of

Rs. 13 crores for the year ended 31st December 2009 with a Net Profit of Rs 0.67 crores. The operations of the other subsidiaries are not significant.

The statement pursuant to section 212 of the Companies Act 1956, containing details of subsidiaries of the Company, forms part of this Annual report.

The company has obtained approval from the Ministry of Corporate Affairs, New Delhi vide letter No:47/27/ 2010-CL-lll dated 24/02/2010 in terms of Section 212(8) of the Companies act 1956 exempting the company from attaching the Balance sheet and profit & loss account of the subsidiaries namely 1 .Suprem Textile Processing Limited 2 Multiflora Processing (CBE) Limited 3. Precot Meridian Energy Limited and 4. Benwood Corporation Sdn Bhd along with Auditors and Directors report thereon, with the companys accounts for the year ended 31st March 2010. As per the terms of the exemption order the brief financial statement of subsidiaries is included in the Annual report.

Delisting of securities from Regional Stock Exchanges

The Company applied for delisting its securities from the Coimbatore and Madras Stock Exchanges as there is no trading in these Exchanges. The Approval from Madras Stock Exchange for delisting the shares was obtained. The shares of the company will continue to be listed on the National Stock Exchange, Mumbai.

Corporate Governance

The report on Corporate Governance is annexed. The company has complied with the conditions relating to Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

Directors Responsibility statement

The Directors confirm that:

(a) The applicable accounting standards have been followed and proper explanations provided relating to material departures

(b) The company has adopted prudent and consistent accounting policies so as to give a true and fair view of the state of affairs of the company

(c) Proper and sufficient care has been taken for maintenance of adequate accounting records under the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities

(d) The annual accounts of the company have been prepared on a going concern basis

Auditors

M/s Suri & Co and KSG Subramanyam & Co, auditors of the company retire at the ensuing Annual General Meeting. While M/s KSG Subramanyam & Co have given their consent for reappointment, M/s Suri & Co have not opted for reappointment. The Board proposes to appoint M/s Haribhakti & Co and M/s KSG Subramanyam & Co, as Statutory auditors of the company subject to approval from the members at the forthcoming Annual General Meeting. The directors have received confirmation from them that, if appointed, it would be within the limits under section 224(1 B) of the Companies Act, 1956.

The Board would like to place on record their appreciation of the valuable service rendered by M/s Suri & Co for the past 13 years.

Fixed Deposits

One Fixed Deposit amounting to Rs.0.15 lacs remained unclaimed as on 31st March, 2010.

Acknowledgement

Your Directors thank the shareholders, customers, suppliers and bankers for their continued support during the year. Your directors also place on record their appreciation of the contributions made by the employees at all levels towards the growth of the company.

Coimbatore By Order of the Board

29.05.2010 D Sarath Chandran

Chairman & Managing Director

 
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