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Notes to Accounts of Raj Rayon Industries Ltd.

Mar 31, 2015

1. Corporate Debt Restructuring

Raj Rayon Industries Limited hereinafter referred to as the 'Borrower', who have availed various financial facilities from the secured lenders. At the request of the Borrower, the Corporate Debt Restructuring Proposal ('QDR Proposal') of the Borrower was referred to Corporate Debt Restructuring Cell ("CDR Cell") by the consortium of lenders led by the State Bank of India. The CDR Proposal as recommended by State Bank of India, the lead lender and approved by lenders who are members of CDR Cell hereinafter referred to as the 'CDR Lenders' was approved by CDR Empowered Group ('CDR EG') on March 24, 2014 and communicated vide Letter of Approval dated March 27,2014. The cutoff date for CDR Proposal was August 01, 2013. The Master Restructuring Agreement ('MRA') between the Borrowers, guarantors and the CDR Lenders has been executed, by virtue of which the restructured facilities are governed by the provisions specified in the MRA having cutoff date ('COD') of August 01, 2013. The key features of the CDR Proposal are as follow:

1. Restructuring of repayment Schedule of Restructured Term Loan - 1 & 2 (RTL - 1 & 2)

2. Repayment of Restructured Term Loan - 3 ('RTL - 3') after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October, 2015 to July, 2021.

3. Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan ('WCTL'). Repayment of WCTL after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October, 2015 to July, 2021.

4. Restructuring of existing fund based and non fund based financial facilities, subject to renewal and reassessment every year.

5. Interest accrued on certain financial facilities from COD till the facility wise specified period shall be converted into Funded Interest Term Loan ('FITL'). The interest payable on RTL 1 & RTL - 2 for a period of 18 months from COD till January 31, 2015 shall be converted to FITL - I. The Interest payable on RTL -3 and WCTLI, WCTL II & WCTL III during moratorium period of 2 years from COD shall also be converted to FITL - II. The Interest paid on Unhedged Foreign Currency Facilities (LC, BC and FCNR) post Dec 31, 2013 shall also be converted into FITL - 3.

6. The rate of interest on RTL 1 & RTL - 2 remains unchanged whereas rate of Interest on RTL - 3, WCTL, FITL shall be 12.70% and fund based working capital facilities shall be 11% with reset option in accordance with MRA.

7. Waiver of all liquidated damages / penal charges / processing fees / penal interest or excess interest (in excess of documented rate) on any of the facilities till the implementation of Restructuring Scheme.

8. Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA.

9. Contribution of Rs. 10.98 Crores in the Company by promoters in lieu of lenders sacrifice in the form of introduction of funds by way of Unsecured Loans.

In case of financial facilities availed from the Non-CDR Lenders, the terms and conditions shall continue to be governed by the provisions of the existing financing documents.

Expenditure on restructuring and refinancing of earlier financial facilities has been charged off over a period of 9 years.

The Borrowers and the CDR Lenders executed a MRA during the year. The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve Bank of India, give a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR Proposal. The recompense payable by the borrowers is contingent on various factors including improved performance of the borrowers and many other conditions, the outcome of which currently is materially uncertain and hence the proportionate amount payable as recompense has been treated as a contingent liability. The aggregate present value of the outstanding sacrifice made/ to be made by CDR Lenders as per the MRA is approximately Rs. 37.06 crore for the Company.

2. SHARE CAPITAL

2.a The principle rights, powers, preferences and restrictions relating to each class of share capital are as follows:

(i) Equity Shares - The Company has issued only one class of Equity Shares having a par value of Rs. 1/- per share. Each Holder of Equity Shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuring Annual General Meeting. In the event of Liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the Shareholders.

(ii) Preference Shares - The preference shareholders shall have the right to receive all notices of General Meetings of the Company but shall not confer thereon the right to vote at any meeting. The Preference Shareholders shall be entitled to receive dividend @ 15% per annum from the date of allotment till the date of redemption on proportionate basis. The Preference Shareholders shall rank in priority to the Equity Shares for repayment of capital and payment of dividend. The Company shall redeem starting from the end of thirteenth year on yearly basis 1/3rd Preference Shares from the date of allotment at the rate of Rs. 10/- each at a premium of Rs. 20/- each till the end of fifteenth year. The Company shall have the option to prematurely redeem in part or in full the outstanding amount on preference shares at a price of Rs. 10/- each at a premium of Rs. 20/- each at any point of time after the end of three years from the date of allotment by giving three month notice in writing to the Preference Shareholders.

2.b Information regarding issue of shares in the last five years:

a) The Company has not issued any shares without payment being received in cash.

b) The Company has not issued any bonus shares.

c) The Company has not undertaken any buy-back of shares.

3. CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(Rs. in Lacs)

PARTICULARS As at As at 31.03.2015 31.03.2014

(i) Contingent liabilities:

(a) Notices or show cause which received from Excise department (excluding a 1093.00 1093.00 show cause notice received from Additional Director General, DGCEI, MZU, Mumbai since amount is unascertainable).

(b) Show cause notices for levy of cess. 7.82 7.82

(c) Notice received from SEBI, for delay in submission of certain information to BSE. 1.75 1.75

(d) Show cause notices received from Commercial Tax Officer, Ahmedabad 558.83 558.83

(ii) Contingent commitments

Estimated amount of contracts, net of advances, remaining to be executed on 41.37 119.73 capital account.

Other commitments (Raw Materials) 367.43 -

4. SEGMENT REPORTING

The company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS-17) 'Segment Reporting' is not applicable to the company.

5. RELATED PARTY DISCLOSURES (AS PER AS 18 ISSUED BY ICAI) :

I) Names of related parties and description of relationships

a) Party owning an interest in voting power of the company that gives it significance influence over the company:

Raj Money Market Limited

b) Key management personnel:

i) Mr. Naval Babulal Kanodia - Whole-time Director (Appointed w.e.f 28/03/2014)

ii) Mr. Gourishankar Poddar - Chairman & Managing Director (Resigned w.e.f. 18/03/2014)

iii) Mr. Sushil Kumar Kanodia - Chief Executive Officer (C.E.O.) & Chief Financial Officer (C.F.O.)

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence:

i) Gourishankar Poddar HUF

ii) Sangam Spinfab Limited

6. EMPLOYEE BENEFIT EXPENDITURE

The disclosures required under Accounting Standard 15 "Employee Benefits" notified in the Companies (Accounting Standards) Rules 2006, are given below:

a) Defined Benefit Plan:

Leave Encashment : During the year 2014-15, the amount paid to employees as leave encashment is Rs. 5.93 Lacs (Rs. 6.68 Lacs).

Gratuity : The employee's gratuity scheme is non -fund based. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

7. As informed by the management, the Company's Continuous Polymerization Plant (CP Plant), Direct Polymer Melt POY Plant (DPM POY Plant) and other Plants (POY, FDY & PTY) are operational.

8. In the Opinion of the Board, the Current Assets / Non Current Assets, Loans & Advances (including Export benefits/ incentive / interest subsidy under TUF) and Trade Payables are subject to confirmation / reconciliation.

9. Figures for the previous year have been reworked, regrouped, rearranged and reclassified wherever necessary.

Amounts and other disclosures for the preceding year are included as an integral part of the current year financial statements and are to be read in relation to the amounts and other disclosures relating to the current year.


Mar 31, 2014

Note 1. Corporate Debt Restructuring:

Raj Rayon Industries Limited hereinafter referred to as the ''Borrower'', who have availed various financial facilities from the secured lenders. At the request of the Borrower, the Corporate Debt Restructuring Proposal (''£DR Proposal'') of the Borrower was referred to Corporate Debt Restructuring Cell ("CDR Cell") by the consortium of lenders led by the State Bank of India. The CDR Proposal as recommended by State Bank of India, the lead lender and approved by lenders who are members of CDR Cell hereinafter referred to as the ''CDR Lenders'' was approved by CDR Empowered Group (''CDR EG'') on March 24, 2014 and communicated vide Letter of Approval dated March 27,2014. The cutoff date for CDR Proposal was August 01, 2013. The Master Restructuring Agreement (''MRA'') between the Borrowers, guarantors and the CDR Lenders has been executed, by virtue of which the restructured facilities are governed by the provisions specified in the MRA having cutoff date (''COD'') of August 01, 2013.

The key features of the CDR Proposal are as follow:

- Restructuring of repayment Schedule of Restructured Term Loan - 1 & 2 (''RTL - 1 & 2)

- Repayment of Restructured Term Loan - 3 (''RTL - 3'') after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October 2015 to July 2021

- Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan (''WCTL''). Repayment of WCTL after moratorium of 2 year from COD in 24 structured quarterly installments commencing from October 2015 to July 2021.

- Restructuring of existing fund based and non fund based financial facilities, subject to renewal and reassessment every year.

- Interest accrued on certain financial facilities from COD till the facility wise specified period shall be converted into Funded Interest Term Loan (''FITL''). The interest payable on RTL - 1 & RTL - 2 for a period of 18 months from COD till January 31, 2015 shall be converted to FITL - I. The Interest payable on RTL -3 and WCTL I, WCTL II & WCTL III during moratorium period of 2 years from COD shall also be converted to FITL - II. The Interest paid on Unhedged Foreign Currency Facilities (LC, BC and FCNR) post Dec 31, 2013 shall also be converted into FITL - 3.

- The rate of interest on RTL - 1 & RTL - 2 remains unchanged whereas rate of Interest on RTL - 3, WCTL, FITL shall be 12.70% and fund based working capital facilities shall be 11% with reset option in accordance with MRA.

- Waiver of all liquidated damages / penal charges / processing fees / penal interest or excess interest (in excess of documented rate) on any of the facilities till the implementation of Restructuring Scheme.

- Right of Recompense to CDR Lenders for the relief and sacrifice extended, subject to provisions of CDR Guidelines and MRA.

- Contribution of '' 10.98 Crores in the Company by promoters in lieu of lenders sacrifice in the form of introduction of funds by way of Unsecured Loans.

In case of financial facilities availed from the Non-CDR Lenders, the terms and conditions shall continue to be governed by the provisions of the existing financing documents.

Expenditure on restructuring and refinancing of earlier financial facilities has been charged off over a period of 9 years.

The Borrowers and the CDR Lenders executed a MRA during the year. The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve Bank of India, give a right to the CDR Lenders to get a recompense of their waivers and sacrifices made as part of the CDR Proposal. The recompense payable by the borrowers is contingent on various factors including improved performance of the borrowers and many other conditions, the outcome of which currently is materially uncertain and hence the proportionate amount payable as recompense has been treated as a contingent liability. The aggregate present value of the outstanding sacrifice made/ to be made by CDR Lenders as per the MRA is approximately Rs. 37.06 crore for the Company.

2.b The principle rights,powers,preferences and restrictions relating to each class of share capital are as follows;

(i) Equity Shares - The Company has issued only one class of Equity Shares having a par value of Rs. 1/- per share. Each Holder of Equity Shares is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuring Annual General Meeting.In the event of Liquidation of the Company, the holders of Equity Shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity Shares held by the Shareholders."

(ii) Preference Shares - The Preference Shareholders shall have the right to receive all notices of General Meetings of the Company but shall not confer thereon the right to vote at any meeting. The Preference Shareholders shall be entitled to receive dividend @ 15% per annum from the date of allotment till the date of redemption on proportionate basis. The preference shareholders shall rank in priority to the Equity shares for repayment of capital and payment of dividend. The Company shall redeem starting from the end of thirteenth year on yearly basis 1/3rd Preference Shares from the date of allotment at the rate of Rs. 10/- each at a

NOTES ON FINANCIAL STATEMENTS FOR THE YEAR ENDED 31st MARCH, 2014 premium of Rs. 20/- each till the end of fifteenth year. The Company shall have the option to prematurely redeem in part or in full the outstanding amount on preference shares at a price of Rs. 10/- each at a premium of Rs. 20/- each at any point of time after the end of three years from the date of allotment by giving three month notice in writing to the Preference Shareholders.

2.c Shareholders holding more than 5% share capital at the end of the year :

(ii) Terms of conversion of share warrants into equity shares:

Each share warrant of Rs. 17/- outstanding at the end of previous reporting periods was convertible into one equity share at a premium of Rs. 7/- at the option of warrant holders to be exercised within a period of 18 months from the date of allotment of share warrants i.e. 03rd January, 2011. Therefore the share warrants are optionally convertible into Equity Shares on or before 02nd July, 2012.

(iii) During the year the Company has forfeited the application money amounting to Rs. Nil /- (Previous Year Rs. 114.30 Lacs being the initial 25% of the warrant price on 2689300 warrants received by the Company from promoters / non promoters due to non exercising the option to convert the same into equity and accordingly it has been transferred to reserves).

2.e Information regarding issue of shares in the last five years :-

a) The Company has not issued any shares without payment being received in cash.

b) The Company has not issued any bonus shares.

c) The Company has not undertaken any buy-back of shares.

A. Secured Loans:

1) In case of financial facilities from CDR Lenders in accordance with MRA, Term Loan (TL) of Rs. 25090.23Lacs, Working Capital Term Loan (WCTL) of Rs. 24286.02 Lacs, Funded Interest Term Loan (FITL) of Rs.2186.92 Lacs and Fund Based Working Capital of Rs.2856.05 Lacs and Non Fund Based working Capital facility (Bank Guarantee) of Rs. 425.25 Lacs are secured by -

- All chargeable present & future tangible / intangible movable assets of the Company, first charge on all chargeable on all present & future immovable assets (excluding the identified properties) of the Company, first charge on all the present & future chargeable current assets of the Company.

- Extension of equitable mortgage on residential Flat no.T-35/706, 7th Floor, "Golden Heights" Co-operative Housing Society Limited owned by Mrs. Rajkumari Kanodia.

- Lien on TDR of Rs. 29.00 Lacs.

- Personal Guarantee of Mr. Gourishankar Poddar and Mrs. Rajkumari Kanodia.

- Corporate Guarantee of M/s Raj Money Market Limited.

- Pledge of 100735,930 Equity Shares of the Company (held by promoters).

3) Term Loan from Kotak Mahindra Prime Limited & HDFC Bank Limited are secured by hypothecation of specific vehicles.

Nature of security:

(i) The rate of Interest under Working Capital Loans ranges between 10.20 % to 14.45 % depending upon the prime lending rate of the banks, wherever applicable and the interest rate spread agreed with the banks. With cut off date the rate of interest is fixed as 11%. For details of security given for short term borrowings, refer Note no. 5 above.

(b) On the basis of information and records available with the company, there are no Micro and Small Enterprises, which have registered with the competent authority under the Micro, Small and Medium Enterprises Development Act, 2006 and relied upon by the Auditors.

NOTE 4: CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)

(RS in Lacs)

As at As at 31.03.2014 31.03.2013

(i) Contingent liabilities:

(a) Guarantees given by the bankers. 425.25 497.25

(b) Notices or show cause which received 1093.00 1093.00 from Excise department (excluding a show cause notice received from Additional Director General, DGCEI, MZU, Mumbai since amount is unascertainable).

(c) Show cause notices for levy of cess. 7.82 7.82

(d) Inland / Foreign letter of credit (Import) - 163.80 issued by the bankers.

(e) Sales bills discounted with State Bank of India. - 1011.61

(f) Notice received from SEBI, for delay in 1.75 1.75 submission of certain information to BSE.

(g) Impairment loss, if any, on realisation of - 88.61 suit filed debts.

(h) Undertakings given by the company under 7448.40 8837.31 EPCG Scheme,Pending fulfilment of export obligation.

(i) Show cause notices received from Commercial 558.83 - Tax Officer, Ahmedabad

(ii) Contingent commitments

Estimated amount of contracts, net of advances, 119.73 34.54 remaining to be executed on capital account.

NOTE 5: SEGMENT REPORTING

The company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS-17) ''Segment Reporting'' is not applicable to the company.

NOTE 6: RELATED PARTY DISCLOSURES

I) Names of related parties and description of relationships:

a) Party owning an interest in voting power of the company that gives it significance influence over the company:

Raj Money Market Limited

b) Key management personnel:

i) Shri Gourishankar Poddar - Chairman & Managing Director (Resigned w.e.f. 18/03/2014)

ii) Shri Sushil Kumar Kanodia - Executive Officer

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence:

i) Gourishankar Poddar HUF

ii) Sangam Spinfab Limited

NOTE 7: EMPLOYEE BENEFIT EXPENDITURE

The disclosures required under Accounting Standard 15 "Employee Benefits" notified in the Companies (Accounting Standards) Rules 2006, are given below:

b) Defined Benefit Plan:

Leave Encashment : During the year 2013-14, the amount paid to employees as leave encashment is Rs. 6.68 Lacs (Rs. 2.70 Lacs).

Gratuity : The employee''s gratuity scheme is non -fund based. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors. The above information is certified by the actuary.

Note 8: As informed by the management, the Company''s Continuous Polymerization Plant (CP Plant), commercial production of which was commenced from 01st July, 2013 has been temporarily shutdown from November, 2013 onwards. The CP Plant will restart after successful commissioning of Direct Polymer Melt POY Plant (DPM POY Plant) which is scheduled to be operational in July, 2014. The Company''s other Plants (PTY, POY & FDY) were running partially and temporarily shutdown in the month of March, 2014 due to negative Margins. The Company has restarted the PTY plant partially and will be fully operational with other plants once the margin improves.

Note 9: In the Opinion of the Board, the Current Assets / Non Current Assets, Loans & Advances (including Export benefits / incentive/ interest subsidy under TUF) and Trade Payables are subject to confirmation / reconciliation.

Note 10: Figures for the previous year have been reworked, regrouped, rearranged and reclassified wherever necessary.Amounts and other disclosures for the preceding year are included as an integral part of the current year financial statements and are to be read in relation to the amounts and other disclosures relating to the current year.


Mar 31, 2013

Note 1:CONTINGENT LIABILITIES AND COMMITMENTs (TO THE EXTENT NOT PROVIDED FOR)

(Rs. in Lacs)

As at 31.03.2013 As at 31.03.2012

(i) Contingent liabilities:

(a) Guarantees given by the bankers. 497.25 425.25

(b) Notices or show cause which received from Excise department (excluding a show cause notice received from Additional Director General, DGCEI, MZU, Mumbai since amount is unascertainable). 1093.00 1093.00

(c) Show cause notices for levy of cess. 7.82 7.82

(d) Inland / Foreign letter of credit (Import) issued by the bankers. 163.80 4586.17

(e) Sales bills discounted with SBI Global Factors Ltd. 0.00 290.11

(f) Sales bills discounted with State Bank of India. 1011.61 466.87

(g) Notice received from SEBI, for delay in submission of certain information to BSE. 1.75 1.75

(h) Impairment loss, if any, on realisation of suit filed debts. 88.61 88.61

(i) Undertakings given by the company under EPCG Scheme, pending fulfilment of export obligation. 8837.31 Nil

(ii) Contingent commitments

Estimated amount of contracts, net of advances, remaining to be executed on capital account. 34.54 9411.50

Note 2: Utili zation of proceeds of securities issued during the current reporting period

The money received in respect of the conversion of warrants into equity shares and 15% Non Convertible Non Cumulative Redeemable Preference Shares are utilised by the company for meeting its capital expenditure, new growth opportunities and for general corporate purpose.

Note 3: Segment reporting

The company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS-17) ''Segment Reporting'' is not applicable to the company.

Note 4: Related Party Disclosures

I) Names of related parties and description of relationships:

a) Party owning an interest in voting power of the company that gives it significance influence over the company: Raj Money Market Limited

b) Key management personnel:

i) Shri Gourishankar Poddar - Chairman & Managing Director

ii) Shri Sushil Kumar Kanodia - Executive Officer

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence:

i) Gourishankar Poddar HUF

ii) Sangam Spinfab Limited

b) Defned Beneft Plan:

Leave Encashment : During the year 2012-13, the amount paid to employees as leave encashment is Rs. 2.70 Lac (Rs. 2.89 Lac).

Gratuity : The employee''s gratuity scheme is non -fund based. The present value of obligaton is determined based on actuarial valuaton using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additonal unit of employee beneft enttlement and measures each unit separately to build up the fnal obligaton.

Note 5: In the Opinion of the Board, the Current Assets / Non Current Assets, Loans & Advances (including Export benefts / incentve / interest subsidy under TUF) and Trade Payables are subject to confrmaton / reconciliaton.

Note 6: Figures for the previous year have been reworked, regrouped, rearranged and reclassifed wherever necessary.Amounts and other disclosures for the preceding year are included as an integral part of the current year fnancial statements and are to be read in relaton to the amounts and other disclosures relatng to the current year.


Mar 31, 2012

(i) Terms of conversion of share warrants into equity shares:

Each share warrant of Rs. 17/- outstanding at the end of both the periods is/was convertible into one equity share at a premium of Rs. 7/- at the option of warrant holders to be exercised within a period of 18 months from the date of allotment of share warrants i.e. 3rd January, 2011. Therefore the share warrants are optionally convertible into equity shares on or before 2nd July, 2012.

A. Secured Loans:

(a) Nature of security:

(i) Term loans are secured by Equitable Mortgage of factory premises of all the units and Hypothecation of plant and machineries and other fixed assets and further secured by charge over current assets of the company in favour of State Bank of India, State Bank of Mysore, State Bank of Hyderabad, State Bank of Patiala and The South Indian Bank Limited on pari-passu basis.

(ii) Term loan from Kotak Mahindra Prime Ltd & HDFC Bank are secured by hypothecation of specific vehicles.

(iii) Loans including non funded facilities from State Bank of India, State Bank of Hyderbad, State bank of Mysore, State Bank of Patiala and The South Indian Bank Limited are further secured by corporate guarantees of Raj Money Market Limited and personal guarantees of Mr. Gourishankar Poddar, Chairman & Managing Director and Mrs. Raj Kumari Kanodia a non executive director of the company and lien on FDR of Rs. 2900000.

(i) Working capital loans including non funded facilities are secured by hypothecation charge (pari-passu) on entire current assets of the company and further secured by charge on all the fixed assets of the company on pari-pasu basis between State Bank of India, State Bank of Hyderabad and State Bank of Mysore.

(ii) Working capital loans including non funded facilities from State Bank of India, State Bank of Hyderabad and State bank of Mysore are further secured by corporate guarantees of Raj Money Market Limited and personal guarantees of Mr. Gourishankar Poddar, Chairman & Managing Director and Mrs. Raj Kumari Kanodia a non executive director of the company and lien on FDR of Rs. 2900000.

NOTE 1: UTILISATION OF PROCEEDS OF SECURITIES ISSUED DURING THE CURRENT REPORTING PERIOD

The money received in respect of the conversion of warrants into equity shares is utilised by the company for meeting its capital expenditure, new growth opportunities and for general corporate purpose as stated in the Notice of Postal Ballot dated 18th October, 2010.

NOTE 2: SEGMENT REPORTING

The company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS-17) 'Segment Reporting' not applicable to the company.

NOTE 3: LEASE

The company has taken office premises under-operating lease or on leave and license basis.This is not non-cancellable and for a period ranging between 11 months and above and are renewable at mutual consent on mutually agreeable terms.The company has given refundable interest free security deposits in accordance with the agreed terms.The rent paid in accordance with the agreements has been debited to profit and loss account for the year.

NOTE 4: RELATED PARTY DISCLOSURES:

I) Names of related parties and description of relationships

a) Party owning an interest in voting power of the company that gives it significance influence over the company: Raj Money Market Limited

b) Key management personnel:

i) Shri Gourishankar Poddar - Chairman & Managing Director

ii) Shri Sushil Kumar Kanodia - Executive Officer

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence:

i) Gourishankar Poddar HUF

ii) Sangam Spinfab Limited

b) Defined Benefit Plan:

Leave Encashment : During the year 2011-12, the amount paid to employees as leave encashment is Rs. 289293 (Rs. 259332). Gratuity : The employee's gratuity scheme is non-fund based. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

NOTE 5: INCOME TAX MATTERS

a) Regular assessments of the return of income filed by the company have been completed upto assessment year ("AY") 2009-2010;

b) Application for giving effect to the order of CIT(A) for AY 2001-2002 is pending before the Assessing Officer. Since the appeal was partly decided in favour of the company, on giving effect to the order CIT(A), the income tax demand of Rs. 77434 will become nil.

c) Application for giving effect to the order of CIT(A) for AY 2004-2005 is pending before the Assessing Officer. Since the appeal was decided in favour of the company, on giving effect to the order of CIT(A) the income tax demand of Rs. 2546695 will become nil.

d) Application for giving effect to the order of CIT(A) for AY 2007-2008 is pending before the Assessing Officer. Since the appeal was partly decided in favour of the company and company has already made full payment of demand, on giving effect to order of CIT(A) there will not be any tax liability.

e) Rectification application for AY 2009-2010 is pending before the assessing officer.

Note 6: Figures for the previous year have been reworked, regrouped, rearranged and reclassified wherever necessary. Amounts and other disclosures for the preceding year are included as an integral part of the current year financial statements and are to be read in relation to the amounts and other disclosures relating to the current year.


Mar 31, 2011

1. In the opinion of the Board, the current assets, loans and advances are approximately of the value stated if realised in the ordinary course of business. The provision for all the known liabilities is adequate. There is no unrecognised impairment loss.

2. Contingent liabilities not provided for:

a) Guarantees given by the bankers of the company amounting to Rs. 328.75 lacs (Rs. 391.25 lacs) against the fixed deposit of Rs. 34.85 lacs (Rs. 40.32lacs) kept as margin money;

b) In respect of Excise matters Rs. 916.78 lacs (Rs. 584.75 lacs) (excluding a show cause notice received from Additional Director General, DGCEI, MZU, Mumbai where amount is unascertainable), for demand and show cause notices received, as per legal opinion taken, the Board is of the view that the company has a very fair chance of succeeding in these matters;

c) In respect of levy of Cess Rs. 7.82 lacs (Rs. 7.82 lacs), for demand and show cause notices received, as per legal opinion taken, the Board is of the view that the company has fair chances of succeeding in the matter at higher forum;

d) Inland / Foreign letter of credit (Import) issued by the bank amounting to Rs. 32.50 lacs (Rs. 60.38 lacs);

e) Sales bills discounted with SBI Global Factors Ltd Rs. 284.17 lacs (Rs. 283.74 lacs);

f) Sales bills discounted with State Bank of India Rs. 404.34 lacs (Rs. Nil);

g) Notice received from SEBI, for delay in submission of certain information to BSE, amounting to Rs. 1.75 lacs (Rs. 1.75 lacs);

h) Liability, if any, arising on account of undertakings given by the company under EPCG Scheme, pending fulfilment of export obligation approximately Rs. 818.61 lacs (Rs. 248.86 lacs); and

i) Impairment loss, if any, on realisation of suit filed debts Rs. 88.61 lacs (Rs. 92.68 lacs).

3. Related Party Disclosures:

I. Names of related parties and description of relationships

a) Party owning an interest in voting power of the company that gives it significance influence over the company:

Raj Money Market Limited

b) Key management personnel:

(i) Shri Gourishankar Poddar - Chairman & Managing Director (ii) Shri Sushil Kumar Kanodia - Executive Officer

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence:

(i) Gourishankar Poddar HUF

(ii) Sangam Spinfab Limited

4. No commission has been paid to the directors and only the remuneration by way of salary and perquisites has been paid to the directors as per the section 198, 309 and Schedule XIII of the Companies Act, 1956 as under:

Note:

Managerial remuneration does not include gratuity benefits since the same are computed on the basis of actuarial valuation for all the employees and the amount attributable to the managerial person cannot be ascertained separately.

5. Income tax matters:

a) Regular assessments of the return of income filed by the company have been completed up to assessment year ("AY") 2008-2009;

b) Application for giving effect to the order of CIT(A) for assessment year 2004-2005 is pending before the Assessing Officer. Since the appeal was decided in favour of the company, the income tax demand of Rs. 25.47 lacs will become nil.

c) Application for giving effect to the order of CIT(A) for assessment year 2007-2008 is pending before the Assessing Officer. Since the appeal was partly decided in favour of the company and company has already made full payment of demand, there will not be any tax liability.

6. The Company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS- 17) 'Segment Reporting' not applicable to the Company.

7. Dadra unit, Amli Unit and Surangi Unit are also called by the name Unit-I, Unit-II and Unit-IV respectively.

8. Preferential allotment of share warrants in accordance with the provisions of SEBI (ICDR) Guidelines, 2009:

a) During the year, 9,46,500 equity share warrants of Rs. 10/- each were converted into equity share of Rs. 10/- each which were outstanding at the beginning of the year;

b) During the year, the company has allotted Rs. 1,03,90,000 share warrants of Rs. 17/-, each share warrant is convertible into one equity share of Rs. 10/- at a premium of Rs. 7/- at the option of warrant holders to be exercised within a period of not more than 18 months from the date of allotment of share warrants.

c) The company received application money of Rs. 4.25 per warrant.

d) As approved by the shareholders, the equity shares issued / to be issued against the warrants will rank pari passu in all respect including dividend with the existing equity shares of the Company;

e) The proceeds from the above preferential issue are being used for meeting the capital expenditure as well as working capital requirements.

9. Acceptances, other than the acceptances under letter of credit issued by consortium bankers, from SBI Global Factors Ltd are personally guaranteed by Chairman & Managing Director and one non-executive director.

10. Based on the information available with the Company in response to the enquires from all existing suppliers with whom Company deals, there are no suppliers who are registered as micro, small or medium enterprises under 'The Micro, Small and Medium Enterprises Development Act, 2006', as at 31st March, 2011.

11. Bank balances does not include Rs. 386690.40 (Rs. 305987.00) lying in dividend accounts pertaining to financial year 2003-2004 to 2009-2010 with a scheduled bank in the current accounts and also Rs. 369500.00 (Rs. 369500.00) lying in refund accounts for refund of application monies related to public issue of the company in the year 2005-2006.

12. Immovable properties represent residential flats towards which uncalled money payable by the company to the developers is Rs. Nil (Rs. 8.03 lacs).

13. The disclosures required under Accounting Standard 15 "Employee Benefits" notified in the Companies (Accounting Standards) Rules 2006, are given below:

b.) Defined Benefit Plan

Leave Encashment:

During the year 2010-11, the amount paid to employees as leave encashment is Rs. 2.59 lacs.

Gratuity:

The employee's gratuity scheme is non -fund based. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

14. Financial and derivative contracts:

b) Premium / discount, (difference between the exchange rate at the date of the inception of the forward exchange contract and forward rate specified in the contract), paid to hedge the risk associated with foreign currency fluctuations relating to certain firm commitment, of FEC amortised over the life of the contract, pertaining to the year under review has been accounted for under the head Financial Charges.

15. Miscellaneous income represents dividend Rs. 150/- (Rs. 150/-), gain/loss on LC Rs. Nil (Rs. 82495/-), rent Rs. Nil (Rs. 35000/-) and sundry balances written off Rs. 713203.17 (Rs. 42925.90).

16. Figures for the previous year have been regrouped, rearranged and recasted wherever necessary to make them comparable with the figures of the current year.

g) Expenditure in Foreign Exchange :

(i) On account of foreign travelling expenses amounting to Rs. 8.51 lacs (Rs. 12.21 lacs).

(ii) On account of interest on FCNRB term loan Rs. 121.80 lacs, excluding Rs. Nil capitalised (Rs. 59.37 lacs), PCFC Rs. 0.96 lacs (Rs. Nil) and on cash credit FCNRB Rs. 81.96 lacs (Rs. 246.56 lacs) [Section 195 of the Income Tax Act, 1961 is not applicable as the interest is not directly remitted by the company to non-resident but recovered by the bank].

17. In the financial statements, any discrepancies in any total and the sum of the amounts listed are due to rounding off.


Mar 31, 2010

1. In the opinion of the Board, the current assets, loans and advances are approximately of the value stated if realised in the ordinary course of business. The provision for all the known liabilities is adequate. There is no unrecognised impairment loss.

2. Contingent liabilities not provided for:

a) Guarantees given by the bankers of the Company amounting to Rs. 391.25 lacs (Rs. 391.25 lacs) against the fixed deposit of Rs. 40.32 lacs (Rs.103.25 lacs) kept as margin money;

b) In respect of Excise matters Rs. 584.75 lacs (Rs. 626.44 lacs) (excluding a show cause notice received from Additional Director General, DGCEI, MZU, Mumbai where amount is unascertainable), for demand and show cause notices received, as per legal opinion taken, the Board is of the view that the Company has a very fair chance of succeeding in these matters;

c) In respect of levy of Cess Rs. 7.82 lacs (Rs. 7.82 lacs), for demand and show cause notices received, as per legal opinion taken, the Board is of the view that the company has fair chances of succeeding in the matter at higher forum;

d) Inland / Foreign letter of credit issued by the bank amounting to Rs. 2729.03 lacs (Rs. 2402.48 lacs);

e ) Sales bills discounted with SBI Factors and Commercial Services Pvt. Ltd Rs. 283.74 lacs (Rs. 250.02 lacs);

f) Notice received from SEBI, for delay in submission of certain information to BSE, amounting to Rs. 1.75 lacs (Rs. 1.75 lacs);

g) Liability, if any, arising on account of undertakings given by the company under EPCG Scheme, pending fulfilment of export obligation approximately Rs. 248.86 lacs (Rs. 172.38 lacs); and

h) Impairment loss, if any, on realisation of suit filed debts Rs. 93.54 lacs (Rs. 93.54 lacs).

3. Estimated amount of contracts, net of advances, remaining to be executed on capital account Rs. 0.47 lacs (Rs. 660.95 lacs);

4. Related Party Disclosures:

I. Names of related parties and description of relationships a ) Party owning an interest in voting power of the company that gives it significance influence over

the company:

Raj Money Market Limited

b) Key management personnel:

(i) Shri Gourishankar Poddar - Chairman &

Managing Director (ii) Shri Sushil Kumar Kanodia – Executive Officer

c) Enterprises over which parties mentioned in (a) and (b) above are exercising significant influence: (i) Gourishankar Poddar HUF

(ii) Sangam Spinfab Limited

5. No commission has been paid to the directors and only the remuneration by way of salary and perquisites has been paid to the directors as per the section 198, 309 and Schedule XIII of the Companies Act, 1956 as under:

(Rs. in lacs)

2009-2010 2008-2009

a) Salaries 18.00 18.00

b) Contribution to provident fund 2.16 1.68

Note:

Managerial remuneration does not include gratuity benefits since the same are computed on the basis of actuarial valuation for all the employees and the amount attributable to the managerial person cannot be ascertained separately.

6. Income tax matters:

a ) Regular assessments of the return of income filed by the company have been completed up to assessment year (AY) 2007-2008;

b) The company is in appeal before the CIT(A) for AY 2007- 2008 against the order under section 143(3) of the Income Tax Act 1961 (the Act 1961) for the disputed issues. However, the company has made full payment of the demand arisen on the assessment; and

c) During the year income of the company, for AY 2004- 2005, was reassessed under section 143(3) read with section 147 of the Act 1961. The assessing officer while reassessing the income, reduced quantum of deduction under section 80IB of the Act 1961 on the ground that for computing the quantum of deduction under section 80IB of the Act 1961, losses of other units are first be reduced. Aggrieved by the order, the company has filed an appeal before the CIT(A). The assessments of AY 2005-2006 and AY 2006-2007 were also made on the similar lines for which the ITAT has already decided the Companys appeals in its favour. Therefore, being fair chances that the addition will be deleted by the appellate authorities, the demand of Rs. 25.46 lacs, in respect of AY 2004-2005, in the opinion of the board, is not enforceable and no provision is required to be made at this stage.

7. The Company operates in a single segment i.e. textile having same risk and return. Hence reporting as per Accounting Standard (AS-17) Segment Reporting not applicable to the Company.

8. After setting up the first Dadra unit in the name of the company or Unit-I, the second Amli unit was named as "Raj Rayon" or Unit-II, the third unit at Dadra was named as "Unit III" or Dadra-II and POY unit at Surangi was named as "Unit IV". However, during the year under review, the plant and machineries of Unit-III (Dadra-II), with a view to have better control and increase in cash flow, were shifted to Unit-IV and land and building of Unit-III (Dadra-II) were sold.

9. During the earlier year, the Company, after obtaining the requisite approvals, has, on a preferential basis, allotted the following securities to Raj Money Market Limited (promoter company), in accordance with the provisions of SEBI (ICDR) Guidelines, 2009:

a ) 19,27,000 Warrants, where each Warrant shall entitle Raj Money Market Limited to subscribe to one equity share of the Company against payment in cash. As per SEBI Guidelines, an amount equivalent to 10% of the price i.e. Re.1 per Warrant has been received from Raj Money Market Limited on allotment of the Warrants.

b) As approved by the shareholders, the above equity shares issued will rank pari passu in all respect including dividend with the existing equity shares of the Company;

c) 8,99,000 (81,500) equity shares of Rs. 10/- each of the Company has been allotted during the year;

d) application money received on 9,46,500 (18,45,500) warrants, has been added to shareholders fund; and

e) the proceeds from the above preferential issue are being used for meeting the working capital requirements and for general corporate purpose.

10. Acceptances, other than the acceptances under letter of credit issued by consortium bankers, from SBI Factors Services Pvt. Ltd are personally guaranteed by Chairman & Managing Director and one non-executive director and from Global Trade Finance Pvt Ltd are personally guaranteed by Chairman & Managing Director of the Company.

11. Based on the information available with the Company in response to the enquiries from all existing suppliers with whom Company deals, there are no suppliers who are registered as micro, small or medium enterprises under ‘The Micro, Small and Medium Enterprises Development Act, 2006, as at 31st March, 2010.

12. Bank balances does not include Rs. 3,05,987.00 (Rs. 3,60,629.70) lying in dividend accounts pertaining to financial year 2002-2003 to 2006-2007 with a scheduled bank in the current accounts and also Rs. 3,69,500/- (Rs. 3,69,500/-) lying in refund accounts for refund of application monies related to public issue of the company in the year 2005-2006.

13. Immovable properties represent residential flats towards which uncalled money payable by the company to the developers is Rs. 8.03 lacs (Rs. 334.40 lacs).

14. Declination in the value of long term quoted investment, in the opinion of the management, is temporary due to market conditions and other factors; therefore no provision for the same is required to be made in the financial statements.

b) Defined Benefit Plan Leave Encashment:

During the year 2009-10, the amount paid to employees as leave encashment is Rs. 2.96 lacs

Gratuity:

The employees gratuity scheme is non-fund based. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

The estimates of rates of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

15. The outstanding forward contracts for sale of USD against proforma invoices of foreign buyers amounting to USD 1466095.00 (USD 508000.00) as on 31st March, 2010, and the outstanding forward contract for purchase of USD against repayment of FCNR-B (in Term Loans) amounting to USD 4200000.00 (USD Nil) and against repayment of FCNR-B (in Cash Credits) amounting to USD 6720000.00 (USD 5570000) as on 31st March, 2010.

16. The company has, during the year, installed new 4 FDY Lines at its Surangi Unit, the commercial production of these lines commenced from 25th March, 2010. Interest of Rs. 200.16 lacs (including Rs. 59.37 lacs on term loan in FCNRB) on the loans raised for the expansion project up to commencement of commercial production was capitalised.

17. Miscellaneous income represents dividend Rs 150/- (Rs. 1,70,150/-), gain/loss on LC Rs. 82,495/- (Rs. 58,510/-), rent Rs. 35,000/- (Rs. 60,000/-) and sundry balances written off Rs. 42,925.90 (Rs. 8,95,059.08).

18. Figures for the previous year have been regrouped, rearranged and recasted wherever necessary to make them comparable with the figures of the current year.

19. Additional information pursuant to the provisions of paragraphs 3, 4C and 4D of part II of schedule VI of the Companies Act, 1956. (Figures in brackets indicate previous years figures.)

a) Licensed and installed capacity:

The company is not required to obtain any license under the Industries (Development & Regulation) Act; 1951, therefore the details of licensed and installed capacity are not applicable. However the company has filed the required Industrial Entrepreneurs Memorandum (IEM) to the Government of India, Ministry of Industry, and Secretarial for Industrial Approvals and obtained the acknowledgement for the same.

20. In the financial statements, any discrepancies in any total and the sum of the amounts listed are due to rounding off.

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