Directors Report of Regency Ceramics Ltd.

Mar 31, 2015

Dear Members,

Your Directors hereby present their Thirty First Annual Report of the Company together with the Audited Accounts for the financial year ended 31st March, 2015.

FINANCIAL SUMMARY:

The performance of the Company for the Financial Year ended 31st March 2015 is as under:

Rs in Lakhs

Sl. Particulars 2014-15 2013-14 No.

1 Turnover - 3

2 Loss / Profit before Interest and Depreciation (105) 70

3 Finance charges 104 249

4 Loss before Depreciation and Tax (209) (179)

5 Less : Provision for Depreciation 1132 931

6 Loss before Tax (1341) (1110)

7 Less : Provision for Income Tax - -

8 Net Loss after Tax (1341) (1110)

9 Balance carried to Balance Sheet (9455) (8114)

REVIEW OF OPERATIONS AND STATE OF COMPANY'S AFFAIRS:

During the year under review, your Company could not make any sales and as such the Turnover was Rs.NIL compared to previous year of Rs.3 Lakhs and incurred a Net Loss of Rs.1341.06 Lakhs compared to previous year Net loss of Rs.1110.49 Lakhs.

PERFORMANCE & FINANCE:

Your company declared lock-out of its plant at Yanam with effect from 31.01.2012 after the devastating incident occurred on 27.01.2012. Since then, there is no production in the plant.

DIVIDEND :

Your Directors express their inability to recommend any dividend for the year under review due to insufficient disposable income.

INSURANCE SETTLEMENTS:

Your company submitted its claim for loss/damage to the properties of the company and provided all the supporting information as called for by the surveyors. Your company is awaiting the decision of the insurance company.

LABOUR SETTLEMENTS:

Your company paid full and final settlement amounts to those who have resigned from the company and waiting for the balance workmen to come forward for final settlement. Action initiated by your company against the workers involved in the Violence is pending for disposal at the Labour Tribunal.

LENDERS' DUES SETTLEMENTS:

Your company paid part of One Time Settlement (OTS) amount to the lenders and requested for extension of time for balance payment. However, the lenders issued a Demand Notice under section 13(2) of SARFAeSi Act. State Bank of India on behalf of its bank, Corporation Bank and State Bank of Travancore issued a Possession Notice (Symbolic) under Rule 8(1) of Security Interest (Enforcement) Rules, 2002 and taken possession of the properties in exercise of powers conferred on them under section 13(4) of the SARFAeSi Act on 04.03.2015. State Bank of Bikaner & Jaipur assigned and transferred the facilities sanctioned by them together with all underlying securities interests thereto to Phoenix ARC Private Limited (Trustee of Phoenix Trust - FY15-5). The lenders filed an application under section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 in the Debts Recovery Tribunal, Hyderabad for recovery of their dues.

REFERENCE TO BIFR:

A reference made by your company to Board for Industrial and Financial Reconstruction (BIFR) as per the provisions under section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 has been registered as case no. 19/2014.

FUTURE OUTLOOK:

Consequent to the completion of the general elections and assumption of the new governments at the center and as well as in Andhra Pradesh and Telangana states, the economic activity which had slowed down during the past few years has started picking-up. The construction activity and infrastructure activities in the country are expected to push the demand for ceramic tiles and all tile producing Companies would be able to take full advantage of the economic momentum in the coming years.

Your company is in the process of resolving all pending issues including settlement of insurance claim, release of the claim amount, settlement with workmen, settlement with lenders, settlement with statutory authorities, suppliers and other creditors. Your company is also pursuing with Central and State government for extending support by way of reliefs, concessions, grants, etc. for recommencing plant operations.

INSURANCE

All properties and insurable interests of the Company including building, plant and machinery and inventory were being fully insured at the reinstatement values every year. However, after the incident of 27.01.2012, the Insurance companies denied insurance coverage for the good assets as the assessment could not be completed.

CORPORATE GOVERNANCE

As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from Company's Auditors confirming compliance forms an integral part of this report.

EXTRACTS OF ANNUAL RETURN

The Extracts of Annual Return is prepared in Form MGT-9 as per the provisions of the Companies Act, 2013 and Rule 12 of Companies (Management and Administration) Rules, 2014 and the same is enclosed as Annexure - 1 to this Report.

DIRECTORS:

In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Mr. N. Satyendra Prasad, Director retires by rotation at the forthcoming Annual General Meeting and being eligible offers himself for re- appointment.

Further, the tenure of Mr. N. Satyendra Prasad as a Executive Director will expire on

31.07.2015 and the Board of Directors at its meeting held on 29.05.2015 re-appointed him as Executive Director of the Company for further period of 5 years with effect from 31.07.2015 on terms and conditions as mentioned in the notice of the meeting.

The Board of Directors at its meeting held on 14th November 2014 has appointed Smt G. Vijaya Vani as an Additional Director of the Company. As per Section 161(1) of the Companies Act, 2013, the above said Additional Director holds office only up to the date of this Annual General Meeting of the Company. A notice has been received from a member proposing her as a candidate for the office of Director of the Company with effect from 14th November, 2014 to hold office for five consective years for a term up to 14th November, 2019 as Independent Director as mention in the resolution.

NUMBER OF MEETINGS OF THE BOARD

The details of the number of meetings of the Board held during the financial year 2014-15 forms part of the Corporate Governance Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY

The details of Loans, Guarantees, Investments given during the Financial Year ended on 31st March, 2015 in terms of the provisions of Section 186 of the Companies Act, 2013 read with Companies (Meetings of Board and its Powers) Rules, 2014: NIL

REMUNERATION AND NOMINATION POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The details of this policy are explained in Corporate Governance Report.

STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

There are no employees in the Company withdrawing remuneration in excess of Rs. 5 lakhs and the median remuneration of managerial personnel has not been disclosed as no remuneration is being paid to the Key Managerial Personnel of the Company.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in sub- section (1) of Section 188 of the Act, are prepared in Form No. AOC-2 pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 : NIL

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the Directors' Responsibility Statement, the Board of Directors of the Company hereby confirms:

1) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

2) that the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

3) that the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

4) That the Directors have prepared the accounts for the financial year ended 31st March, 2015 on a "Going Concern" basis.

5) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

STATUTORY AUDITORS

M/s Brahmayya & Co., Chartered Accountants, Hyderabad were appointed as Statutory Auditors of the Company to hold office until conclusion of Thirty First Annual General Meeting. The Board pursuant to the recommendation of Audit Committee of the company now recommends the re-appointment of M/s Brahmayya & Co., Chartered Accountants, Hyderabad as statutory auditors to hold office from the conclusion of this Annual General Meeting until the conclusion of next Annual general Meeting and authorized the Board of Directors to fix their remuneration.

The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for appointment.

AUDITORS REPORT

M/s.Brahmayya & Co., Chartered Accountants (ICAI Regn. No.000513S) have issued Auditors Report for the Financial Year ended 31st March, 2015 being annexed to this Annual Report.

The Auditors' comments in the Report are self-explanatory.

Auditor's Remarks:

i. Referring to Para on basis for qualified opinion of the Auditors' Report, the Directors would like to refer Notes forming part of Accounts which is self explanatory. The reference to note numbers are as under :

a. Para 1 of basis for qualified opinion - Note No.25.3

b. Para 2 of basis for qualified opinion - Note No.25.3

c. Para 3 of basis for qualified opinion - Note No.25.8

d. Para 4 of basis for qualified opinion - Note No.25.4

e. Para 5 of basis for qualified opinion - Note No.25.9

f. Para 6 of basis for qualified opinion - Note No.10

g. Para 7 of basis for qualified opinion - Note No.25.10

ii. Referring to Para 7 (a), 7(b) and 7(c) of the Annexure to the Auditors' report, your Directors are of the opinion that the Company is in the process of executing various alternative plans to control such delays in future.

COST AUDITORS:

The Board of Directors, on the recommendation of Audit committee has appointed M/s. Badri Prasad & Associates, Practicing Cost Accountants, Hyderabad as Cost Auditor to audit the cost accounts of the Company for the financial year 2015-16.

The Cost Audit Report for the financial year 2014-15 was not applicable to the company.

CUSTOMS, EXCISE, INCOME TAX & OTHER MATTERS:

1. Your Company preferred appeals before the Hon'ble CESTAT, Bangalore against the demand from Customs & Central Excise Department (Service Tax Cell) for service tax on installation, erection and commissioning of plant & machinery imported during the year 2005-06 and on GTA services during the year 2008-09, though paid by the service provider.

2. The income Tax Appellate Tribunal, Hyderabad disposed of the appeal preferred by the Company partly in its favour on the demand from Dy Commissioner of Income Tax, Hyderabad in respect of Assessment year 2004-05 for disallowance of additional depreciation, for which the company is eligible under the Act.

3. Yanam Muncipality has demanded Property Tax of Rs.32.35 lakhs for the years from 1998-99 to 2006-07 and your company disputed the same as the grounds are not just proper and reasonable.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and rules made thereunder, the Company has appointed Mr. K.V.Chalama Reddy, Practicing Company Secretary as Secretarial Auditor to undertake the Secretarial Audit of the company for the Financial year ended on 31st March, 2015.

Secretarial Audit Report issued by Practicing Company Secretary in Form MR-3 is enclosed as Annexure - 2 to this Annual Report and certificate is enclosed as Annexure - 3.

With respect to observations made in the report, the explanations are as follows:

Regarding the observation Nos, 01,03, 04 and 05 of the report, the Company could not comply with the same due to current financial position of the Company.

Regarding the Observation No.02, Non -compliance noticed was rectified later.

DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has appointed Internal Auditors to observe the Internal Controls, whether the work flows of organization is being done through the approved policies of the Company. Internal Auditors will present to the Audit Committee the Internal Audit Report and Management Comments on the Internal Audit observations.

VIGIL MECHANISM

The Board of Directors of the Company has adopted Whistle Blower Policy. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud, or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism, and allows direct access to the Chairman of the audit committee in exceptional cases.

RISK MANAGEMENT POLICY

The Company has a Risk Management Policy for dealing with different kinds of risks which it faces in day to day operations of the Company. Risk Management Policy of the Company outlines different kinds of risks and risk mitigating measures to be adopted by the Board. The Company has adequate internal control systems and procedures to combat the risk. The Risk management procedure will be reviewed by the Audit Committee and Board of Directors on a periodical basis at the time of review of Quarterly Financial Results of the Company.

OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Woman at workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding Sexual Harassment. All employees (permanent, contractual, temporary and trained) are covered under the policy.

The following is a summary of sexual harassment complaints received and disposed off during each calender year:

A) No. of Complaints received - NIL

B) No. of Complaints disposed off - NIL

DECLARATION BY INDEPENDENT DIRECTORS

The independent directors have submitted the declaration of independence, as required pursuant to section 149 (7) of the Companies Act ,2013 stating that they meet the criteria of independence as provided in sub-section 6 of Section 149 of the Companies Act 2013.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Corporate Social Responsibility is commitment of the Company to improve the quality of life of the workforce and their families and also the community and society at large. The Company believes in undertaking business in such a way that it leads to overall development of the stakeholders and society.

Pursuant to section 134 of the Companies Act, 2013 and the relevant rules, the Board has constituted the CSR Committee under the Chairmanship of Dr. G N Naidu with the other members as required.

The report on CSR activities as required under Companies(Corporate Social Responsibility) Rules, 2014 is set out as Annexure -4 forming part of this report.

MATERIAL CHANGES AND COMMITMENTS

There are no Material Changes and Commitments impacting the going concern status and Company's operations in future.

DEPOSITS

The Company has not invited/accepted any deposits from the public in terms of Section 73 of the Companies Act, 2013 during the Financial Year 2014-15.

INDUSTRIAL RELATIONS:

Your Company has always been known to maintain cordial industrial relations with its employees. Your Company believed in developing Human Resources at all levels by imparting continuous training, motivation to attain higher productivity, finer quality, cost control, safety and environment protection.

CONSERVATION OF ENERGY:

Your Company committed to energy conservation and had taken up the fuel saving technology for the manufacture of ceramic tiles and was constantly upgrading the same to reduce the consumption of gas and power. Regular maintenance and repairs of all the equipment and machinery were carried out to ensure optimum efficiency and to minimize wastage. Necessary steps were initiated for implementing the energy conservation across the plant.

TECHNOLOGY ABSORPTION:

Your Company was continuously endeavoring to upgrade its technology from time to time in all aspects through R&D primarily aiming at reduction of cost of production and improving the quality of the product. Your company developed several value added products and high definition designs with laser printing.

FOREIGN EXCHANGE EARNINGS AND OUTGO

(Rs. In Lakhs)

Foreign Exchange: 2014-15 2013-14

Foreign Exchange Inflow - -

Foreign Exchange Outflow - -

ACKNOWLEDGEMENTS:

The company places on record continued support and cooperation extended by the Banks and other secured lenders, Central and state government departments, GAIL, Dealers, customers, suppliers and shareholders. The Company also places on record the deep sense of appreciation for the dedicated efforts and contribution being made by employees at all levels during the year.

For and on behalf of the Board

Place : Hyderabad Dr G N Naidu N Satyendra Prasad Date : 29.05.2015 Chairman and Managing Director Executive Director

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Mar 31, 2014

THE SHAREHOLDERS

The Directors hereby present their 30th Annual Report along with the Audited Accounts of the company for the financial year ended 31st March 2014.

Financial Results:

Rs in lakhs Sl. Particulars 2013.14 2012-13 No. 1 Turnover 3 607

2 Gross profit before interest and Depreciation 70 (919)

3 Finance charges 249 187

4 Depreciation 931 942

5 Net loss before tax (1110) (2048)

6 Income tax - -

7 Net Loss after tax (1110) (2048)

8 Balance carried to balance sheet (8114) (7004)

Review of Operations:

Your company declared lock out of its plant at Yanam with effect from 31.01.2012 after the devastating incident occurred on 27.01.2012. Since then, there is no production in the plant.

During the year under review, your Company sold the left out stocks available in the depot. The sales in financial terms from own operations were Rs. 3 lakhs (previous year Rs. 607 lakhs).

Your Company could not continue trading activity as the marketing staff left the organisation and dealers shifted to other competitors.

Dividend :

Your Directors express their inability to recommend any dividend for the year under review due to insufficient disposable income.

Insurance settlements:

Your Company obtained estimates from refurbishing technical experts for carrying out repairs/replacement of the damaged equipments, put back the plant into operation and lodged the claim with the Insurance Company for settlement. Your company has also requested the insurance company for release of on-account payment to support the finances required for carrying out such repairs/replacement and is awaiting response from them.

Labour settlements:

Some of the employees decided to leave the company and submitted their resignations and your company paid full and final settlement amounts to these employees. Your company will, on the same lines, settle the accounts of remaining employees also upon receipt of resignation letters. Action initiated by your company against the workers involved in the violence is pending for disposal at the Labour Tribunal.

One Time Settlement of Bank Loans:

The lenders of the company offered One Time Settlement of the dues as a compromise. Your company paid part OTS amount and requested for extension of time for the balance payment. The promoters are in the process of arranging funds and in the meantime, the lenders served a Demand Notice under Sec.13 (2) of SARFAESI Act, 2002 calling for the entire loan amount along with interest(without considering the OTS package). Your company requested the banks not to precipitate any action and committing for the payments. However, SBI issued a possession notice under Sec.13 (4) of SARFAESI Act, 2002 and took symbolic possession of the immovable properties of the company and collateral security offered by M/s Regency Transport Carriers Ltd situated at Yanam and East Godavari & West Godavari Districts of Andhra Pradesh. Your company filed Securitization Application before the Debts Recovery Tribunal and is seeking reliefs including stay of all further proceedings pending settlement of insurance claim. In the meantime, State Bank of Bikaner & Jaipur, one of the lenders of your company signed an Assignment Agreement, assigned and transferred the credit facilities together with all underlying securities and interests to Ms Phoenix ARC Pvt. Ltd. (trustee of Phoenix Trust FY15-5).

Reference to BIFR:

Your Company made a reference to Board for Industrial and Financial Reconstruction (BIFR) as per the provisions under section 15(1) of Sick Industrial Companies (Special Provisions) Act,1985. The aforesaid reference made by the company has been registered as Case no. 19/2014.

Future Outlook:

The ceramic tile industry in India is growing with higher consumption levels seen from tier II and tier III towns and cities. It is expected to expand further in future especially in areas like residential housing, commercial space, retail and entertainment, among others. The ceramic tile industry is expected to witness double digit growth in the production capacity – both in the branded and unorganized sectors. The varied changes in the consumer''s preference for decorative use and application of ceramic tiles in indoor and outdoor areas have brought in new trends and developments in the market. With the increase in cost of production due to increase in input costs, increase in the prices of natural gas, etc the margins are under pressure. Currently, the thrust is to withstand market competition by producing value added products, offering competitive pricing and timely supplies.

Your company is putting its best efforts to come out of the challenges and present difficult circumstances in its front. The support from insurance company for early settlement of the claim, release of the claim amount, amicable settlement of labour related issues, the support from the State and Central Government by way of grants, concessions and reliefs will help your company resuming plant operations in a smooth and faster manner.

Customs, Excise, Income tax & other matters:

1. Your Company preferred appeals before the Hon''ble CESTAT, Bangalore against the demand from Customs & Central Excise Department (Service Tax Cell) for service tax on installation, erection and commissioning of plant & machinery imported during the year 2005-06 and on GTA services during the year 2008-09, though paid by the service provider.

2. The income Tax Appellate Tribunal, Hyderabad disposed of the appeal preferred by the Company partly in its favour on the demand from Dy Commissioner of Income Tax, Hyderabad in respect of Assessment year 2004-05 for disallowance of additional depreciation, for which the company is eligible under the Act.

3. Yanam Muncipality has demanded Property Tax of Rs.32.35 lakhs for the years from 1998-99 to 2006-07 and your company disputed the same as the grounds are not just proper and reasonable.

Environment and Social concerns:

Your company enjoyed the ISO 9001–2000 certification for quality, the ISO 14001 certification for its Environmental Management Systems and the OHSAS 18001 certification from ''Occupational Health Safety Managing System (OHSMS) for the Health and Safety measures observed in the company. The integrated QESH (Quality, Environment, Safety and Health) policy implemented in all areas of operations was in place.

Directors:

Sri. P J V Sarma, Sri T Ramesh Chandra Bose and Smt. Bindu G Naidu resigned as Directors from the Board with effect from February 12, 2014 due to their preoccupation. The Board recorded its deep sense of appreciation of the un-stinted support, professional guidance and valuable service rendered by Sri. P. J .V Sarma, Sri T Ramesh Chandra Bose and Smt Bindu G Naidu during their long association with the Company.

Dr G N Naidu retires by rotation and, being eligible, offers himself for reappointment.

Dr M V G Rao'' s period of office as a Director is liable to determination by retirement of directors by rotation under erstwhile applicable provisions of the Companies Act 1956. In terms of section 149 and other applicable provisions of the Companies Act 2013 and clause 49 (as amended) of the listing agreement, Dr M V G Rao being eligible and offer himself for re-appointment, is proposed to be appointed as an independent director for five consecutive years for a term up to 29th September 2019. A notice under Section 160 of the Companies Act 2013 has been received from a member proposing Dr M V G Rao as a candidate for the office of director of the Company.

Sri B.Surendra and Sri D.Chandra Sekhar Babu were appointed as Additional Directors on the Board of the company on 12th February, 2014 in the category of Independent Directors to fill up the vacancy caused by the resignations of Sri. P.J.V. Sarma and Sri T. Ramesh Chandra Bose. The Company has received notices from members of the Company under section 160 of the Companies Act 2013 in respect of their appointment as Directors at the ensuing Annual general meeting of the Company along with deposit as prescribed there under.

Their profile along with statement fulfills the conditions as required in the Act in the opinion of the Board. The terms and conditons of appointments are furnished in the statement pursuant to Section 102(1) of the Companies Act, 2013 annexed with the Notice for the forthcoming Annual General Meeting.

The Board of Directors accorded to the reappointment of Dr. G.N.Naidu, as Chairman and Managing Director, for a period of five years with effect from February 09, 2014 on the existing terms and conditions as recommended by the Remuneration Committee.

Brief resumes of all the Directors being appointed/re-appointed have been incorporated in the Notice for the forthcoming Annual General Meeting.

Auditor:

M/s. Brahmayya & Co., Chartered Accountants, Hyderabad, the Statutory Auditors of the Company retires at the conclusion of this Annual General Meeting and is eligible for re-appointment.

Auditors'' Report:

The Auditors'' comments in the Report are self-explanatory.

Auditor''s Remark:

i. Referring to Para on basis for qualified opinion of the Auditors'' Report, the Directors would like to refer Notes forming part of Accounts which is self explanatory. The reference to note numbers are as under :

a. Para 1 of basis for qualified opinion – Note No.9 and item No.3 of Note.23

b. Para 2 of basis for qualified opinion – item No.3 of Note.23

c. Para 3 of basis for qualified opinion – Note.5, Note.20 and item No.8 of Note.23

d. Para 4 of basis for qualified opinion – Item 4 of Note 23

e. Para 5 of basis for qualified opinion – Note.21 and Item .9 of note 23

f. Para 6 of basis for qualified opinion – Note.8

g. Para 7 of basis for qualified opinion – Item 11 of note.23

ii. Referring to Para 9 (a), 9(b) and 9(c) of the Annexure to the Auditors'' report, your Directors are of the opinion that the Company is in the process of executing various alternative plans to control such delays in future.

Fixed deposits:

During the year, the Company has not accepted any fixed deposits.

Corporate Governance:

The Corporate Governance Report along with the Management Discussion & Analysis Report is annexed as part of this Annual Report.

Auditors report on Corporate Governance is also attached to this report.

Directors'' Responsibility Statement:

Your Directors confirm that

i. In the preparation of annual accounts, applicable accounting standards have been followed;

ii. the accounting policies adopted are consistent and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for the financial year;

iii. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Information pursuant to Section 217(1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 are given in Annexure-I forming part of the report.

Particulars of Employees:

Provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not applicable to the Company, since none of the employees of the Company was in receipt of total remuneration in excess of the prescribed limits as amended.

Industrial Relations:

Your Company has always been known to maintain cordial industrial relations with its employees. Your Company believed in developing Human Resources at all levels by imparting continuous training, motivation to attain higher productivity, finer quality, cost control, safety and environment protection.

Acknowledgements:

The Board gratefully acknowledges the ongoing support and co-operation extended by the Financial Institutions/Banks viz: CDR Cell, State Bank of India, The South Indian Bank Ltd, State Bank of Travancore, State Bank of Bikaner and Jaipur, Corporation Bank, Axis Bank, IFCI Ltd, PIPDIC, Central & State Government Departments, GAIL, ONGC, Dealers, Customers, Suppliers and Shareholders. Your Directors place on record their deep sense of appreciation for the dedicated efforts and contribution being made by employees at all levels during the year.

For and on behalf of the Board Place : Hyderabad Dr. G N Naidu Date : 30.05.2014 Chairman and Managing Director

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Mar 31, 2013

The Directors hereby present their 29th Annual Report along with the Audited Accounts of the company for the financial year ended 31st March 2013. Financial Results :

Rs in lakhs

SI.No. Particulars 2012-13 2011-12

1 Turnover 607 17828

2 Gross profit before interest and

Depreciation (919) (196)

3 Finance charges 187 1558

4 Depreciation 942 972

5 Net loss before tax (2048) (2726)

6 Income tax - (348)

7 Net Loss after tax (2048) (2378)

8 Balance carried to balance sheet (7004) (4955)

Review of Operations:

On 27.01.2012, a section of workers joined hands with few anti-social elements and caused extensive damage to the equipment, buildings, electrical installations, raw material, finished goods and records by using iron rods, boulders and set on fire to the equipment, sheds and vehicles. Your company declared lock out of its plant at Yanam after the incident with effect from 31.01.2012. Since then, there is no production.

During the year under review, your Company sold the sound finished stocks available both in the plant and at depots. The sales in physical and financial terms from own operations were 2.58 lakh sq. mts (Previous year 68.31 lakh sq.mts) and Rs.514.22 lakhs (previous year Rs. 14478 lakhs) respectively. Your Company could not continue trading activity as the marketing staff left the organization and dealers shifted to other competitors. The sales in physical and financial terms from trading during the year were 0.34 lakh sq.mts (previous year 11.79 lakh sq. mts) and Rs. 92.90 lakhs (previous year Rs.3350 lakhs) respectively.

Exports:

Your Company achieved an export turnover of Rs. 197.51 lakhs (previous year Rs.1359.33 lakhs).

Dividend:

Your Directors express their inability to recommend any dividend for the year under review due to insufficient disposable income.

Lockout of the factory:

Your Company is in discussions with Original Equipment Manufacturers (OEMs) and reconditioning technical experts for taking up repairs/replacement of the damaged equipment and machinery and put back the plant into operation. As per the Insurance policy taken, your Company is eligible to claim the cost of repairs to the plant and machinery. However, wherever repairs are not possible or repair cost is more than the replacement cost, your company is eligible to claim for replacement value. Your company has also requested the insurance company for release of on-account payment to support the finances required for carrying out such repairs/replacement.

The Government of Puducherry issued a G.O. dt. 10.04.2013 prohibiting the continuance of the lockout declared by the management. However, in view of the situation prevailing in Yanam, your company approached the Hon''ble High Court of Madras and obtained stay.

Labour settlements:

Arrangements are being made for settlement of dues to workers leaving the company. Most of the employees have submitted resignations and your company has already settled many employee accounts and is in the process of finalizing the settlement in respect of remaining number of cases.

Your company initiated action against the workers involved in violence and requested the labor tribunal for early disposal of the same. The CBI is also investigating cases related to the incident and in the process, has arrested some employees and others involved.

One Time Settlement of Bank Loans:

The lenders of the company conveyed their respective sanctions for settlement of their dues under One Time Settlement (OTS) as a compromise. Your company paid 10% of the OTS amount and seeking extension of time from the lenders for the balance payment.

Future Outlook:

In India, real estate industry is expanding especially in areas like housing, office space, retail and entertainment, among others. The ceramic tile industry is witnessing constant growth in the production capacity - both in the organized and unorganized sectors. The varied changes in the consumer''s perspective towards the decorative use of ceramic tiles and its application in indoor and outdoor areas have brought in new trends and developments in the market. With the over capacity positions in the country, the thrust will be to withstand market competition by producing value added products, offering competitive pricing, innovative designs and series, etc., The focus as such is on consistent improvement in the product mix with value addition.

All efforts are being made to sort out the present difficult circumstances that your company is facing. The support from insurance company for releasing the on-account payment immediately and for early settlement of the claim and releasing the claim amount fully is very important for resuming operations. The State and Central Governments will have to support your company by way of grants and reliefs in this crucial juncture.

Customs, Excise, Income tax & other matters:

1. Your Company preferred appeals before the Hon''ble CESTAT, Bangalore against the demand from Customs & Central Excise Department (Service Tax Cell) for service tax on installation, erection and commissioning of plant & machinery imported during the year 2005-06 and on GTA services during the year 2008-09, though paid by the service provider.

2. The Income Tax Appellate Tribunal, Hyderabad disposed of the appeal preferred by the company partly in its favor on the demand from Dy. Commissioner of Income Tax, Hyderabad in respect of Assessment year 2004-05 for disallowance of additional depreciation, for which the company is eligible under the Act.

3. Yanam Municipality has demanded Property Tax of Rs.32.35 lakhs for the years from 1998-99 to 2006-07 and your company disputed the same as the grounds are not just, proper and reasonable.

Achievements /Accomplishments:

Your Company enjoyed the status of "Export House", recognized by the Ministry of Commerce, Government of India, in view of consistent export performance till its validity i.e up to 31st March 2013.

Environment and Social concerns:

Your company enjoyed the ISO 9001-2000 certification for quality, the IS0 14001 certification for its Environmental Management Systems and the OHSAS18001 certification from ''Occupational Health Safety Managing System (OHSMS) for the Health and Safety measures observed in the company. The integrated QESH (Quality, Environment, Safety and Health) policy implemented in all areas of operations is in place.

Directors:

Sri G.Sreenivasulu Naidu and Sri. T. Ramesh Chandra Bose, Directors retire by rotation and are eligible for re-appointment in this AGM.

Auditors:

M/s. Brahmayya & Co., Chartered Accountants, Hyderabad, the Statutory Auditors of the Company retires at the conclusion of this Annual General Meeting and are eligible for re-appointment.

Auditors'' Report:

The Auditors'' comments in the Report are self-explanatory.

Auditors'' Remark:

I. Referring to Para on basis for qualified opinion of the Auditors'' Report, the Directors would like to refer Notes forming part of Accounts which is self explanatory. The reference to note numbers are as under:

a. Para 1 of basis for qualified opinion - Note. 9 and Item No. 3 of Note. 23.

b. Para 2 of basis for qualified opinion - Note. 5, 20 and Item No. 9 of Note. 23.

c. Para 3 of basis for qualified opinion - Item No. 4 of Note. 23.

d. Para 4 of basis for qualified opinion - Note. 3, 6, 8,13 and 21.

e. Para 5 of basis for qualified opinion - Note. 8.

ii. Referring to Para 9(a), 9(b) and 9(c) of the Annexure to the Auditors report, your Directors are of the opinion that the Company is in the process of executing various alternative plans to control such delays in future.

Fixed deposits:

During the year, the Company has not accepted any fixed deposits.

Corporate Governance:

The Corporate Governance Report along with the Management Discussion &

Analysis Report is annexed as part of this Annual Report.

Auditors report on Corporate Governance is also attached to this report.

Directors'' Responsibility Statement:

Your Directors confirm that

I. In the preparation of annual accounts, applicable accounting standards have been followed;

ii. the accounting policies adopted are consistent and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for the financial year;

iii. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

Particulars of Employees:

Provisions of Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not applicable to the Company, since none of the employees of the Company was in receipt of total remuneration in excess of the prescribed limits as amended.

Industrial Relations:

Your Company has always been known to maintain cordial industrial relations with its employees. Your Company believed in developing Human Resources at all levels by imparting continuous training, motivation to attain higher productivity, finer quality, cost control, safety and environment protection.

Acknowledgements:

The Board gratefully acknowledges the ongoing support and co-operation extended by the Financial Institutions/Banks viz: CDR Cell, State Bank of India, The South Indian Bank Ltd, State Bank of Travancore, State Bank of Bikaner and Jaipur, Corporation Bank, Axis Bank, IFCI Ltd, PIPDIC, Central & State Government Departments, GAIL, ONGC, Dealers, Customers, Suppliers and Shareholders. Your Directors place on record their deep sense of appreciation for the dedicated efforts and contribution being made by employees at all levels during the year.

For and on behalf of the Board

Place: Hyderabad Dr G N Naidu Date : 29.05.2013 Chairman and Managing Director

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Mar 31, 2010

The Directors hereby present their 26th Annual Report along with the Audited Accounts of the Company for the year ended March 31, 2010

Financial Performance: (Rs. in lakhs)

SI. No. Particulars 2009-10 2008-09

01. Turnover 17522 16654

02. Gross profit before interest and Depreciation 936 501

03. Finance charges 1427 1321

04. Depreciation 1070 1063

05. Net loss before tax (1561) (1883)

06. Income tax (223) (381)

07 Provision for Gratuity - Earlier Years - (19)

08. Net Loss after tax (1338) (1483)

09. Balance carried to balance sheet (1034) 304

Review of Operations :

Your Company passed through a critical phase during the year under review because of recession in the international economy and operated under difficult business environment. The year continued to witness a disturbing and fluctuating economy making it all the more challenging for your Company to optimise the capacity utilisation and to achieve the breakeven point. With the continued constraints of shortage in the supply of gas, increase in the price of raw materials, slower growth of consumer durables, delayed realisations, ups and down in the sectoral commodity markets, your Company could not register the upward graph it intended to.

Your Company achieved the production of 97.90 lakh sq.mts during the year under review as against 89.31 lakh sq.mts during the previous year. The sales in physical and financial terms being 92.64 lakh sq.mts. (previous year 91.73 lakh sq.mts) and Rs.16599 lakhs (previous year Rs. 16404 lakhs) respectively.

Your Company made a turnover in the trading activity to boost up the earnings during the year under review. The sales in physical and financial terms being 3.61 lakh sq.mts (previous year 1.16 lakh sq mts) and Rs 923.24 lakhs, (previous year Rs.250.38 lakhs)

Your Directors express their inability to recommend any dividend for the year under review due to insufficient disposable income.

Exports:

Your Company improved its export activities during the year under review and achieved an Export turnover of Rs 2990 lakhs, (previous year Rs.2443 lakhs). Your Company is confident of further improving its share in international market in future, once the production gets streamlined.

Equity shares issued pursuant to the Scheme of Arrangement

1,28,44,786 equity shares of Rs. 10/- each along with a share premium of Rs. 2.37/- per share were allotted on 23rd December, 2009 to the Promoters and their associates by converting their unsecured loans into equity shares pursuant to the Scheme of Arrangement approved by the Honble High Court of Andhra Pradesh on 8th October, 2009. All the necessary listing formalities have been complied with and now these shares are listed on The Stock Exchange Ltd., Mumbai and National Stock Exchange Ltd.

Future outlook:

Your Company has laid emphasis on Increase in production, improvement in quality, increase in average realization, reduction in variable cost, constant product innovation and development, full usage of gas supply, aggressive marketing and distribution network during the year under review. The Company has identified the above few factors which would contribute to the success of the Company. Your Company has launched new products in vitrified tiles segment, glazed porcelain, polished tiles, multi charge tiles for catering the high net worth individuals and the expanding upper middle class. Your Company also forayed into the wall tile market and producing the market referred range of high value added products with emphasis on research and development. With the economy now going on an upward graph, your Company is expecting a growth and demand for its products.

Transfer of unpaid/unclaimed Dividend to IEPF:

The unclaimed dividend for the year 2002-03 is due for transfer in October, 2010. The dividend once transferred to Investor Education and Protection Fund cannot be claimed. It is advised to the Shareholders, who have not so far encashed the dividend warrants, to write to the Company or its Registrar and Transfer Agents immediately.

Customs, Excise, Income tax & Other matters:

1) Your Company preferred appeals before the Honble CESTAT, Bangalore against demand by Customs & Central Excise Department (Service Tax cell) for service tax during the year 2005-06 on installation, erection and commissioning of plant & machinery imported and on GTA services during the year 2006-07 though paid by the service provider.

2) Your Company preferred an appeal before Income Tax Appellate Tribunal, Hyderabad on demand from Dy. Commissioner of Income Tax, Hyderabad in respect of Assessment Year 2004-05 for disallowance of additional depreciation, for which the Company is eligible under the Act.

3) Your Company preferred an appeal before the Employees Provident Fund Appellate Tribunal, New Delhi against the demand from Regional Provident Fund Commissioner, Rajahmundry for penalty and damages on account of delays in remittances during 2003 to 2009, for which stay has been granted to the Company.

4) Yanam Municipality has demanded Property Tax of Rs.32.35 lakhs for the years from 1998 -99 to 2006-07 and your Company disputed the same as the grounds are not just, proper and reasonable.

Achievements /Accomplishments :

The Company continues to enjoy "Export House", status in recognition of its export performance by Ministry of Commerce, Government of India till the year 2013. During the year under review, your Company received a "Certificate of Merit" from CAPEXIL sponsored by Ministry of Commerce & Industry, Government of India.

Environment and Social concerns:

Your Company continues to enjoy the ISO 9001-2000 certification for quality, the ISO 14001 certification for its Environmental Management Systems and the OHSAS 18001 certification from Occupational Health Safety Managing System (OHSMS) for the Health and Safety measures observed in the Company. The integrated QESH (Quality, Environment, Safety and Health) policy implemented in all areas of operations is in place.

Directors :

Smt G.Radhika ceased to hold the office of Whole Time Director of the Company w.e.f. 31-07-2010.

Sri T.V.Chowdary and Sri G.Sreenivasulu Naidu, Directors retire by rotation and are eligible for re-appointment in this AGM.

Appointments:

Sri N.Satyendra Prasad was appointed as an Additional Director of the Company with effect from 31-07-2010. The explanatory statement annexed to the notice contains the details regarding appointment of Sri Prasad.

Auditors:

M/s. Brahmayya & Co., Chartered Accountants, Hyderabad, the Statutory Auditors of the Company retire at the conclusion of this Annual General Meeting and are eligible for re-appointment.

Auditors Report:

The Auditors comments in the Report are self-explanatory.

Auditors Remarks:

L Referring to para 4(vi) of the Auditors report, the Directors would like to refer to Note No.5 of the schedule 19 - Notes to Accounts, which is self explanatory.

B. Referring to para ix (b) of the Annexure to the Auditors report, your Directors state that the Company is generally regular in payment of statutory dues. Your Directors are of the opinion that the Company is in process of implementing various strategies towards improving the overall performance of the Company and the improved operating conditions would enable the Company to perform better.

Fixed deposits:

During the year, the Company has not accepted any fixed deposits.

Corporate Governance:

The Corporate Governance Report along with the Management Discussion & Analysis Report is annexed as part of this Annual Report.

Auditors report on Corporate Governance is also attached to this report.

Directors Responsibility Statement

Your Directors confirm that

i) in the preparation of annual accounts, applicable accounting standards have been followed;

ii) the accounting policies adopted are consistent and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company for the financial year;

iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo:

Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 are given in Annexure-I forming part of the report.

Particulars of Employees:

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given at Annexure-ll to this report.

Industrial Relations:

The industrial relations continue to be cordial. Development of Human Resources at all levels is given utmost importance and continuous training is imparted to improve the productivity, quality, cost control, safety & environment protection.

Acknowledgements:

The Board gratefully acknowledges the ongoing support and co-operation provided by the Financial Institutions/Banks viz: CDR Cell, State Bank of India, The South Indian Bank Ltd, State Bank of Travancore, State Bank of Indore, State Bank of Bikaner and Jaipur, Corporation Bank, Axis Bank , IFCI Ltd, PIPDIC, Central & State Government Departments, GAIL, ONGC, Dealers, Customers, Suppliers and Shareholders. Your Directors place on record their deep sense of appreciation for the dedicated efforts and contribution made by employees at all levels.

For and on behalf of the Board

Place : Hyderabad Dr.G.N.Naidu

Date : July 31, 2010 Chairman and Managing Director