Notes to Accounts of Sarla Performance Fibers Ltd.

Mar 31, 2018

1. CORPORATE INFORMATION:

Sarla Performance Fibers Limited (‘SPFL’ or ‘the Company’) is a public limited Company incorporated and domiciled in India and has its registered office at Survey No. 59/1/4, Amil Piparia Industrial Estate, Silvassa - 396 230, U.T. of Dadra & Nagar Haveli, India. The Company is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) in India.

The Company is engaged primarily in manufacturing of various types of polyester and nylon yarns. The Company caters to both domestic and international markets. The Company has three plants, 2 at Silvassa, Union territory of Dadra and Nagar haveli and 1 at Vapi, Gujarat.

The Company has a global presence with key subsidiaries in United States of America (USA) and British Virgin Island (BVI) that are engaged in the manufacture and/or sale of various types of polyester and nylon yarns.

(I) In Plant and Equipments addition is net off loss of Rs.1.09 lakhs (as at 31 st March, 2017: Rs. 3.38 lakhs and as at 1st April, 2016: Rs. 118.21 lakhs) on reinstatement of foreign currency loan taken to acquire the asset. (Refer note 54) (ii) Freehold land includes, Land acquired during FY 2016-17 for Rs. 30 Crores which is standing in the name of two directors pending completion of formalities for transfer of the same to the company name, (iii) Charge has been created over property, plant and equipments of the company in regard to borrowings (Refer note 23) (iv)Leasehold land represents land taken on finance lease for 20 years. (v)The Company has adopted carrying value as recognized in the financial statement as at 31st March, 2016, measured as per Previous GAAP as its deemed cost. Accordingly, its Net Block as on 31st March, 2016 is its Gross Block under Ind AS. Break up of the said Gross block as at 1st April, 2016 is as under:

(i) The fair value of the Company''s investment property is Rs. Nil (as at 31st March, 2017: Rs. 1,580.62 lakhs and as at 1st April, 2016: Rs. 1,649.18 lakhs.

(ii) Charge has been created over investment property of the company in regard to borrowings (Refer note 23)

(iii) The Company has adopted carrying value as recognized in the financial statement as at 31st March, 2016, measured as per Previous GAAP as its deemed cost. Accordingly, its Net Block as on 31st March, 2016 is its Gross Block under Ind AS. Break up of the said Gross block as at 1st April, 2016 is as under:

(i) Security deposits of Rs. Nil (as at 31st March, 2017: Rs. 250 lakhs and as at 1st April, 2016: Rs. 250 lakhs) is given to related party (Refer note 45)

(ii) Other loans and advance includes loan amount Rs. 7,369.04 lakhs (as at 31st March, 2017: Rs. 6,318.67 lakhs and 1st April, 2016: Rs. 5,628.11 lakhs) is given to related party (Refer note 45)

(i) Trade receivable includes Rs. 488.41 lakhs (As at 31st March, 2017: Rs. 617.54 lakhs , As at 1st April, 2016: Rs. 468.31 lakhs), receivable from two subsidiaries.

(ii) Trade Receivables of Rs. 6,875.27 lakhs (as at 31st March, 2017: Rs. 6,481.67 lakhs and as at 1st April, 2016: Rs. 5,060.84 lakhs ) are hypothecated against working capital facilities from banks. (Refer note 28)

(iii) Movement in the expected credit loss allowance

Note 21.2 Terms / Rights attached to Equity Shares

The company has only one class of equity shares having par value of Re. 1/-. each (P.Y. Re. 1/- each) holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing annual general meeting.

In the event of liquidation of the company, the holders of the 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.

Note 21.3 During the 5 years immediately preceding the balance sheet date, there were no equity shares allotted as fully paid up pursuant to contract without payment being received in cash, no bonus shares were issued and there was no buy-back of equity shares of the Company.

TERM OF REPAYMENT AND SECURITIES FOR CURRENT BORROWINGS

All the working capital facilities are secured against:

i) First pari passu charge on entire current assets of the Company, excluding those kept, stored, lying loose at Unit No. 1, both present and future.

ii) Second pari passu charge on the entire Movable fixed assets, excluding the movable fixed assets situated or kept at unit no. 1, of the Company.(save and except for vehicles)

iii) Second pari passu charge on immovable fixed assets of the Company situated at silvassa plant unit II bearing survey no. 64/2, 64/3, 64/4, 61/1, 61/2, 63/5, 63/7, 62/5 and all the piece and parcel of Industrial non-agricultural land bearing Survey No. 62/5, admeasuring 2700 sq.mtrs., situated at village - Amli, Silvassa Union Territory of Dadra & Nagar Haveli.

iv) The facilities are further secured by personal guarantee of Managing Director

In accordance with Ind AS 18 on "Revenue" and Schedule III to the Companies Act, 2013, Sales for the pervious year ended 31st March 2017 and for the period 1st April to 30 June 2017 were reported gross of Excise Duty and net of Value Added Tax (VAT)/Sales Tax. Excise Duty was reported as a separate expenses line item. Consequent to the introduction of Goods and Services Tax (GST) with effect from 1st July 2017, VAT/Sales Tax, Excise Duty etc. have been subsumed into GST and accordingly the same is not recognised as part of Sales as per the requirements of Ind AS 18. This has resulted in lower reported sales in the current year in comparison to the sales reported under the pre-GST structure of indirect taxes. With the change in structure of indirect taxes, expenses are also being reported net of taxes. Accordingly, Financial Statements for the year ended 31st March 2018 and in particular, Sales, absolute expenses, elements of Working Capital (Inventories, Trade payable, other current assets/current liabilities etc.) and ratios in percentage of sales, are thus not comparable with the figures of the pervious year.

44 Employee benefits A Defined Contribution plans:

The company contributes to the Government managed provident and pension fund for all qualifying employees.

Contribution to provident fund of Rs. 47.32 lakhs (31st March, 2017: Rs. 43.64 lakhs) is recognised as an expense and included in "Contribution to provident and other funds" in Statement of Profit and Loss.

B Defined benefit plans:

The Company has defined benefit plan for payment of gratuity to all qualifying employees. It is governed by the Payment of Gratuity Act, 1972. Under this Act, an employee who has completed five years of service is entitled to the specified benefits provided which depends on the employee''s length of service and salary at retirement age. The Company''s defined benefit plan is funded with Life Insurance Corporation (LIC).

There are no other post retirement benefits provided by the Company.

The present value of the defined benefit obligation, the related current service cost and past service cost, were measured using the projected unit credit method.

The average duration of the defined benefit plan obligations at the end of reporting period is 39 years.

Major category of plan assets as a % of total plan

The plan assets are being managed by LIC. No further details are made available by the fund manager.

Sensitivity analysis

Significant actuarial assumptions for the determination of defined obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumption would occur in isolation of one another as some of the assumptions may be correlated. Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.

There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.

Estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. These plans typically expose the company to actuarial risks such as Interest rate risk and salary risk

(a) Interest risk: a decrease in the bond interest rate will increase the plan liability.

(b) Salary risk: the present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, a variation in the expected rate of salary increase of the plan participants will change the plan liability.

C Other short term and long term employment benefits Short term leave

The liability towards compensated absences (annual and short term leave) for the year ended 31 March 2018 of Rs. 13.85 lakhs (31 March 2017: Rs. 1.86 lakhs), is included in the ''Employee benefits expense'' in the Statement of Profit and Loss.

Notes:

(a) Sales, purchases and service transactions with related parties are made at arm''s length price.

(b) Amounts outstanding are unsecured and will be settled in cash or receipts of goods and services.

(c ) No expense has been recognised for the year ended 31st March 2018 and 31st March 2017 for bad or doubtful trade receivables in respect of amounts owed by related parties.

(d) The Company has issued stand by letters of credit to banks on behalf of Sarlaflex Inc., Wholly Owned Subsidiary of USD 2.38 million (as at 31st March, 2017: USD 3.68 million, as at 1st April, 2016: USD 8.55 million) equivalent to Rs. 1544.70 lakhs ( as at 31st March, 2017: Rs. 2,387.22 lakhs, as at 1st April, 2016: Rs. 5,670.55 lakhs).

Note 46 Segment information

As per the requirements of para 4 of Ind AS 108 - Operating Segments, segment information has been provided under the Notes to Consolidated Financial Statements.

Note 47.1 Contingent liabilities not provided for: (a)Claims against the company not acknowledged as debt;

The Claims against Company not acknowledged as debt, comprises of excise duty & Custom duty disputed by company relating to issue of applicability of duty and classification of goods aggregating to Rs.1,553.01 lakhs (As at 31st March, 2017: Rs. 1,627.67 lakhs, as at 1st April, 2016: Rs. 1,196.62 lakhs).

The Differential CST liability in respect of Non Collection of C Forms of Rs. 41.50 lakhs (As at 31st March, 2017: Rs. 3,203.42 lakhs, as at 1st April, 2016: Rs. 2,604.20 lakhs).

(b) Guarantees excluding financial guarantees;

Bank Guarantees issued by Banks on behalf of the company Rs.742.71 lakhs ( As at 31st March, 2017: Rs. 662.74 lakhs, as at 1st April,2016: Rs. 593.38 lakhs). These are secured by the charge created in favour of the company''s bankers by way of pledge of all Fixed Deposit Receipts.

(c) Other money for which the company is contingently liable

Stand-by Letter of credit issued by Banks on behalf of Sarlaflex Inc, Wholly Owned Subsidiary of USD 2.38 million (as at 31st March, 2017: USD 3.68 million, as at 1st April, 2016: USD 8.55 million) equivalent to Rs. 1544.70 lakhs ( as at 31st March, 2017: Rs. 2,387.22 lakhs, as at 1st April, 2016: Rs. 5,670.55 lakhs)

Note 48 Financial instruments A Capital Management:

The Company manages its capital structure with a view to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimization of the debt and equity balance.

as detailed in notes 23, 28 and 30) and total equity of the Company.

The Company''s management reviews the capital structure of the Company on an annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital.

ii) Fair Value Measurements (Ind AS 113):

The fair value of the Financial Assets and Liabilities are included at the amount, at which instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments based on the input that is significant to the fair value measurement as a whole:

Level 1 :

This hierarchy uses quoted (unadjusted) prices in active markets for identical assets or liabilities. The fair value of all Equity Shares which are traded on the stock exchanges, is valued using the closing price at the reporting date.

Level 2:

The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on company specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3:

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

The management assessed that cash and bank balances, trade receivables, loans, trade payables, borrowings (cash credit, foreign currency loans, working capital loans) and other financial assets and liabilities approximate their carrying amounts largely due to the shortterm maturities of these instruments.

During the reporting period ending 31st March, 2018 and 31st March, 2017, there was no transfer between level 1 and level 2 fair value measurement.

Key Inputs for Level 1 and 2 Fair valuation Technique:

1. Mutual Funds : Based on Net Asset Value of the Scheme (Level 2)

2. Derivative (forward) contracts : The fair value is determined using quoted forward exchange rates at the reporting date (Level 2)

3. Preference Shares : Based on comparable instruments (Level 2)

4. Listed Equity Investments (other than Subsidiaries): Quoted Bid Price on Stock Exchange (Level 1)

Note 49 Financial risk management objectives (Ind AS 107)

The Company’s Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework.

The Company’s risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Company’s activities.

The key risks and mitigating actions are also placed before the Audit Committee of the Company.

The Company has exposure to the following risks arising from financial instruments:

A) Credit risk;

B) Liquidity risk;

C) Market risk; and

D) Interest rate risk

A Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counter party to a financial instrument fails to meet its contractual obligations. Credit risk arises primarily form financial assets such as trade receivables, investments in mutual funds, preference shares, debentures, derivative financial instruments, other balances with banks, loans and other receivables.

Trade and other receivables

Customer credit is managed by each business unit subject to the Company''s established policies, procedures and control relating to customer credit risk management. Trade receivables are non-interest bearing and are generally on 0 to 180 days credit term. Credit limits are established for all customers based on internal rating criteria. Outstanding customer receivables are regularly monitored.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The Company does not hold collateral as security. The Company has no concentration of credit risk as the customer base is widely distributed both economically and geographically.

The Company measures the expected credit loss of trade receivables environment in which the entity operates. Loss rates are based on actual based on historical trend, industry practices and the business credit loss experience and past trends.

Other financial assets

The Company maintains exposure in cash and cash equivalents, term deposits with banks, investments in Debentures, Preference shares, mutual funds, derivative contracts and loan to subsidiary companies. The Company has diversified portfolio of investment with various number of counter parties which have secure credit ratings hence the risk is reduced. Individual risk limits are set for each counter party based on financial position, credit rating and past experience. Credit limits and concentration of exposures are actively monitored by the Management of the Company.

B Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset.

Liquidity risk is managed by Company through effective fund management. The Company''s principal sources of liquidity are cash and cash equivalents, borrowings and the cash flow that is generated from operations. The Company believes that current cash and cash equivalents, tied up borrowing lines and cash flow that is generated from operations is sufficient to meet requirements. Accordingly, liquidity risk is perceived to be low.

The following are the remaining contractual maturities of financial liabilities at the reporting date. Amounts disclosed are the contractual un-discounted cash flows.

C Market risk

Market Risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and price risk.

I Currency Risk

The Company is exposed to currency risk on account of its operating and financing activities. The functional currency of the Company is Indian Rupee. Company''s exposure is mainly denominated in U.S. dollars (USD). The USD exchange rate has changed substantially in recent periods and may continue to fluctuate substantially in the future. The Company has put in place a Financial Risk Management Policy to Identify the most effective and efficient ways of managing the currency risks. The Company uses derivative instruments (mainly foreign exchange forward contracts) to mitigate the risk of changes in foreign currency exchange rate.

The Company does not use derivative financial instruments for trading or speculative purposes.

Sensitivity analysis

The following table details the Company’s sensitivity to a 5% increase and decrease in the Rupee against the relevant foreign currencies. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. This is mainly attributable to the net exposure outstanding on receivables or payables in the Company at the end of the reporting period. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% charge in foreign currency rate. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecast sales and purchases. In cases where the related foreign exchange fluctuation is capitalised to fixed assets or recognised directly in reserves, the impact indicated below may affect the Company''s income statement over the remaining life of the related fixed assets or the remaining tenure of the borrowing respectively.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in prevailing market interest rates. The Company’s exposure to the risk due to changes in interest rates relates primarily to the Company’s short-term and long term borrowings with floating interest rates. The Company constantly monitors the credit markets and revisits its financing strategies to achieve an optimal maturity profile and financing cost.

The Company has given interest free loan to Subsidiaries for business purpose.

The Company''s investments in term deposits(i.e. certificates of deposits) with banks, investments in preference shares, mutual funds and debentures are at fixed interest rate and therefore do not expose the company to significant interest rate risk.

Note 52 Leases

A) Operating lease:

The Company procures on lease office premises under operating leases. These rentals recognized in the Statement of Profit and Loss Account for the year is Rs. 15.87 lakhs (31st March, 2017: Rs. 24.06 lakhs). The said lease is renewable at the option of the lessor & lessee. The deposit paid in respect of the same is Rs. Nil (as at 31st March, 2017: 250 lakhs, as at 1st April, 2016: 250 lakhs). The future minimum lease payments and payment profile of cancellable operating leases are as under:

Note 53 Service Concession Arrangements

The Company has entered into service concession arrangements with entities supplying electricity ("The Regulator") to construct, own, operate and maintain a wind energy based electric power generating station ("Plant"). Under the terms of agreement, the Company will operate and maintain the Plant and sell electricity generated to the Regulator for a period which covers the substantial useful life of the Plant which may be renewed for such further period as may be mutually agreed upon between the parties. The Company will be responsible for any maintenance services during the concession period.

The Company in turn has a right to charge the Regulator at the agreed rate as stated in the service concession arrangement. The fair value towards the construction of the Plant has been recognised as an Intangible Asset and is amortized over the useful life of the asset or period of contract whichever is less.

The Company has recognised an intangible asset of Rs.2232.02 lakhs as at 31st March, 2018 (31st March 2017: 2232.02 lakhs and 1st April 2016: 2232.02 lakhs) of which 96.65 Lakhs (Previous year 96.65 lakhs) has been amortized during the respective periods.

Note 54 The Company has elected to continue the policy adopted under previous GAAP for accounting the foreign exchange differences arising on settlement or translation of long-term foreign currency monetary items outstanding as of 31st March 2017 i.e. foreign exchange differences arising on settlement or translation of long-term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in “Foreign Currency Monetary Item Translation Difference Account” and amortized over the balance period of the liability. For the current financial year, the impact on account of above (net of depreciation and amortization) is decrease in profit before tax of Rs. 4.69 lakhs (in Previous year Rs. 6.23 lakhs). The net gain remaining unamortized under Foreign Currency Monetary Item Translation Difference Account as at 31st March 2018 is Rs. 9.38 lakhs (net gain as at 31st March 2017 Rs. 18.70 lakhs and net loss of Rs. 26.46 lakhs as at 1st April 2016). (Also refer note 4A(i).

Note 55 Transition to Ind AS

These are the Company''s first financial statements prepared in accordance with Ind AS. The Company has adopted all the Ind AS and the adoption was carried out in accordance with Ind AS 101 - First time adoption of Indian Accounting Standards. The transition was carried out from Generally Accepted Accounting Principles in India (Indian GAAP) as prescribed under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, which was the ''Previous GAAP''.

The Significant Accounting Policies set out in Note No. 2 have been applied in preparing the financial statements for the year ended 31st March 2018, 31st March 2017 and the opening Ind AS balance sheet on the date of transition i.e. 1st April 2016.

In preparing its Ind AS Balance Sheet as at 1st April 2016 and in presenting the comparative information for the year ended 31st March 2017, the Company has adjusted amounts previously reported in the financial statements prepared in accordance with Previous GAAP. This note explains the principal adjustments made by the Company in restating its financial statements prepared in accordance with Previous GAAP, and how the transition from Previous GAAP to Ind AS has affected the Company''s financial position, financial performance and cash flows.

I Explanation of transition to Ind AS

In preparing the financial statements, the Company has applied the below mentioned optional exemptions and mandatory exceptions.

A Optional Exemptions availed

I Deemed cost for property, plant and equipment, investment property and intangible assets:The Company has elected to measure all its property, plant and equipment and intangible assets at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.

ii Investments in Subsidiaries

The Company has elected to measure its investments in subsidiaries at the Previous GAAP carrying amount as its deemed cost on the date of transition to Ind AS.

iii Service Concession Arrangement

The Company has elected to use the exemption available under Ind AS 101 to continue the carrying value as per Previous GAAP for all of its intangible assets under the service concession arrangements.

iv Long Term Foreign Currency Monetary Items

The Company has elected to continue the policy adopted under Previous GAAP for accounting the foreign exchange differences arising on settlement or translation of long-term foreign currency monetary items outstanding as of 31st March 2017 i.e. foreign exchange differences arising on settlement or translation of longterm foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in ''Foreign Currency Monetary Item Translation Difference Account'' and amortised over the balance period of the liability.

B Mandatory Exceptions

I Estimates

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

ii Derecognition of financial assets and financial liabilities Derecognition of financial assets and liabilities as required by Ind AS 109 is applied prospectively i.e. after the transition date.

iii Classification and measurement of financial assets Ind AS 101 requires an entity to assess classification of financial assets on the basis of facts and circumstances existing as on the date of transition. Further, the standard permits measurement of financial assets accounted at amortised cost based on facts and circumstances existing at the date of transition if retrospective application is impracticable.

Accordingly, the Company has determined the classification of financial assets based on facts and circumstances that exist on the date of transition. Measurement of financial assets accounted at amortised cost has been done retrospectively except where the same is impracticable.

VII Notes to reconciliation:-A Fair valuation of investments

All Investments except investments in group companies have been fair valued in accordance with Ind AS 109. Investments in debt securities are measured at amortised costs. Other investments are fair valued through profit or loss. Under Previous GAAP, current investments were carried at cost net of diminution in their value as at the Balance Sheet date. The long term investments were carried at cost net of permanent diminution, if any.

B Trade receivables

Under previous GAAP, the Company had recognised provision on trade receivables based on the expectation of the Company.

Under Ind AS the Company provides loss allowance on receivables based on the Expected Credit Loss (ECL) model which is measured following the "simplified approach" at an amount equal to the lifetime ECL at each reporting date.

C Derivative financial instruments

Under Previous GAAP, in respect of all derivative contracts (except forward contracts), only mark-to-market loss was provided. Premium /discount arising at the inception of the forward exchange contracts to hedge foreign currency risks were amortised as expense or income over the life of the contract. Exchange differences on such forward exchange contracts were recognised in the Statement of Profit and Loss. Under Ind AS, all derivative contracts are measured at fair value through profit and loss.

D Government Grants

Under previous GAAP, Government Grants in respect of Property, Plant and Equipment was presented as Capital Reserve under Reserves and Surplus. Under Ind AS, Government Grants in respect of Property, Plant and Equipment needs to be presented as deferred income as part of liabilities.

E Proposed Dividend

Under Ind AS the final dividend including related tax is recognised in the period in which the obligation to pay is established on its approval, post reporting of financial statements. Under Previous GAAP, provision was required to be made in the financial statements for the proposed final dividend in the period to which the liability related.

F Deferred Tax

Under previous GAAP, deferred tax accounting was done using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Under Ind AS, accounting of deferred taxes is done using the Balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base.

G Remeasurement of Defined benefits liabilities

Under previous GAAP the company recognised remeasurements of defined benefits plans under profit and loss. Under Ind AS , remeasurement of defined benefits plans are recognised in Other Comprehensive Income

H Other Comprehensive Income

Under Ind AS, all items of income and expense recognised in a period should be included in profit or loss for the period, unless a standard enquires or permits otherwise. Items of income and expense that are not recognised in profit or loss but are shown in the statement of profit and loss as ‘other comprehensive income’ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP.

I Excise Duty

Under previous GAAP, revenue from sale of products was presented net of Excise Duty under revenue from operations.

Under Ind AS, revenue from sale of products includes excise duty. The corresponding excise duty expense is presented under other expenses in the statement of profit and loss. The change does not affect the total equity as at 1st April, 2016 and 31st March, 2017, profit before tax or total profit for the year ended 31st March, 2017.

J Investment Property

Pursuant to Ind AS requirements, investment property is presented separately. Under Previous GAAP the same was presented as part of tangible assets. Tangible assets have been now divided into two categories under Ind AS viz. Property, plant and equipment and Investment property.

K Restatement of loan given to subsidiary

Loan given to subsidiary has been restated at the exchange rates prevailing on the reporting date.

L Long Term Foreign Currency Monetary Items

The Company has elected to continue the policy adopted under previous GAAP for accounting the foreign exchange differences arising on settlement or translation of long-term foreign currency monetary items outstanding as of 31st March 2017 i.e. foreign exchange differences arising on settlement or translation of long term foreign currency monetary items relating to acquisition of depreciable assets are adjusted to the carrying cost of the assets and depreciated over the balance life of the asset and in other cases, if any, accumulated in“Foreign Currency Monetary Item Translation Difference Account” and amortized over the balance period of the liability.

M Others

Other adjustments on account of transition to Ind AS include reclassification of Property, Plant and Equipment (PPE) to Intangible asset as part of service concession arrangements, classification of Investment Property, fair valuation of deposits and effect of adjustments relating to revenue recognition.

N The previous year Previous GAAP figures have been reclassified/regrouped to make them comparable with Ind AS presentation.

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Mar 31, 2016

NOTE 1: CONTINGENT LIABILITIES NOT PROVIDED FOR:

A: CONTINGENT LIABILITIES

1. Letter of credit: Letter of Credit issued by Banks on behalf of the Company Rs. 2,848.40 Lacs (P.Y. Rs. 1,873.46 Lacs), these are covered by the Charge created in favor of the Company''s Bankers by way of Hypothecation of Stocks, Receivable & Machineries/Assets of the Company.

Stand-by Letter of credit issued by Banks on behalf of Sarlaflex, Inc, WOS of USD 8.55 million (P.Y. USD 9.00 millions) equivalent to Rs. 5,670.55 lacs (P.Y. Rs. 5,633.10lacs).

2. Guarantees: Bank Guarantees issued by Banks on behalf of the company Rs. 593.38 Lacs (P.Y. Rs. 523.40 Lacs). These are secured by the charge created in favour of the company''s bankers by way of pledge of Fixed Deposit Receipts.

3. The claim against Company not acknowledged as debt, comprises of excise duty & Custom duty disputed by company relating to issue of applicability of duty and classification of goods aggregating to Rs. 1,196.62 Lacs (P.Y. Rs. 2,771.66 Lacs).

4. The Differential CST liability in respect of Non Collection of C Forms of Rs. 2,604.20 Lacs (P.Y. Rs. 2,105.47).

5. Liability of Income Tax amounting to Rs. 13.17 Lacs for A.Y. 2003-04 for which part relief is granted by Honb''le ITAT, Mumbai but appeal effect is not given by assessing officer.

Liability of Income Tax amounting to Rs. 53.94 Lacs for A.Y. 2013-14 is mainly due to mistake by AO while passing order wherein credit for Dividend Distribution Tax was not granted and for which rectification application is filed by company for granting tax credit paid before assessing officer and same is not yet rectified.

NOTE 6:

The company has exercised option given in Companies (Accounting Standard) Amendment Rules 2009 on Accounting Standard 11 issued by ICAI which was notified by MCA regarding accounting of exchange rate difference related to foreign currency loan utilized for acquisition of fixed assets by way of notification no. GSR 225(E) dated 31.03.2009 read with notification no. GSR 913(E) dated 29.12.2011. On exercise of option referred above, foreign exchange gain of Rs. 118.21 lacs (P.Y. loss of Rs. 194.55lacs) is adjusted in Fixed Assets during the year.

NOTE 7:

The company has invested USD 4,35,000 equivalent to Rs. 183.22 Lacs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin Islands as a result the said company is Wholly Owned Subsidiary of the Company

The Company has also invested USD 9,89,000 equivalent to Rs. 596.50 Lacs for 100% share being 989000 shares of Sarlaflex, Inc registered at USA as a result the said company is Wholly Owned Subsidiary of the Company.

Managing Director’s remuneration is Rs. 120.00 Lacs (P.Y. Rs. 96.00 Lacs) & the whole time Director''s remuneration is Rs. 108.00 Lacs ( P.Y. Rs. 80.00 Lacs) is in accordance with section 197(12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

NOTE 8: TAXATION:

Provision for taxation for the current year has been made, taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

In accordance with AS-22 on ''Accounting of Taxes on Income'' net deferred tax expenses on account of timing difference for current year is Rs. 202.27 lacs (P.Y. income of Rs. 33.26 lacs) which is credited to statement of profit and loss.

NOTE 9: EARNING PER SHARE:

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders(after deducting attributable taxes) by the weighted average number of equity s hares outstanding during the period.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity Shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

Note: During the year under review, Shares of the Company of face value of Rs. 10/- each has been sub-divided into 10 equity shares of Re. 1/- each.

NOTE 10:

Company does not have complete information to determine Micro, Small and Medium Enterprises as specified in Micro, Small and Medium Enterprises Development Act, 2006, hence it is not possible for us to verify the amount due to such enterprises.

The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes.

A) Information about Primary Business Segment: Based on the guiding principles given in the Accounting Standards on Segment Reporting (AS-17) the company is primarily in the business of manufacturing and processing of synthetic yarn which mainly having similar risk and returns. The Company has diversified its activities into Wind Power Generation, hence the company''s business activity now falls under two business segments, viz.

(i) Manufacturing of Yarn and (ii) Generation of Wind Power.

B) Information about Secondary Geographical Segment:

The secondary segment is based on geographical demarcation i.e. in India and out side India.

In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realize at their Book Value in the normal course of business and adequate provision have been made in respect of all known liabilities.

NOTE 11:

The copany has contributed Rs. 5.93 lacs towards CSR activities from the company during the year. There is a short fall of Rs. 60.94 lacs towards spending on CSR as required under section 135 of the Companies Act, 2013.

NOTE 12:

Disclosures as required under clause 32 of the listing agreement Loans and Advances Include amount receivable from subsidiaries

The company has taken office premises under cancelable lease. Lease rent accounted in statement of profit and loss Rs. 6.00 lacs (Previous Year Rs. 6.00 ). The said lease is renewable at the option of the lessor & lessee. The deposit paid in respect of the same is Rs. 250.00 lacs (Previous Year Rs. 250.00 lacs).

NOTE 13:

Certain balances under the heads Sundry Debtors, Loans & Advances and Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

NOTE 14:

The company has reclassified/rearranged/regrouped previous year figures to conform to this year’s classification.

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Mar 31, 2015

1. Letter of credit: Letter of Credit issued by Banks on behalf of the Company Rs. 1,949.95 Lacs (P.Y. Rs. 1,873.46 Lacs), these are covered by the Charge created in favour of the Company's Bankers by way of Hypothecation of Stocks, Receivable & Machineries/Assets of the Company.

Stand-by Letter of credit issued by Banks on behalf of Sarlaflex, Inc, WOS of USD 9.00 millions (P.Y. USD 8.34 millions) equivalent to Rs. 5,633.10 lacs (P.Y. Rs. 5,013.91 lacs). i

2. Guarantees: Bank Guarantees issued by Banks on behalf of the company Rs. 523.40 Lacs (P.Y. Rs. 431.90 Lacs). These are secured by the charge created in favour of the company's bankers by way of pledge of Fixed Deposit Receipts.

3. The claim against Company not acknowledged as debt, comprises of excise duty & Custom duty disputed by company relating to issue of applicability of duty and classification of goods aggregating to Rs. 2,771.66 Lacs (P.Y. Rs. 2,771.66 Lacs).

4. Bill discounted not matured Rs. 1,560.01 Lacs (P.Y. Rs. 2,046.85 Lacs).

5. CST liability in respect of invoice amount of Rs. 2,105.47 Lacs (P.Y. Rs. 2,144.50) for which C-Form are yet to be collected from the customers.

6. Liability of Income Tax amounting to Rs. 13.17 Lacs for A.Y. 2003-04 for which part relief is granted by Honb'le ITAT, Mumbai but appeal effect is not given by assessing officer.

Liability of Income Tax amounting to Rs. 51.05 Lacs for A.Y. 2012-13 is mainly due to mistake by AO while passing order wherein credit for Dividend Distribution Tax was not granted and for which rectification application is filed by company for granting tax credit paid before assessing officer and same is not yet rectified.

NOTE 7:

The company has exercised option given in Companies (Accounting Standard) Amendment Rules 2009 on Accounting Standard 11 issued by ICAI which was notified by MCA regarding accounting of exchange rate difference related to foreign currency loan utilized for acquisition of fixed assets by way of notification no. GSR 225(E) dated 31.03.2009 read with notification no. GSR 913(E) dated 29.12.2011. On exercise of option referred above, foreign exchange gain of Rs. 194.55 lacs (P.Y. loss of Rs. 301.50 lacs) is adjusted in Fixed Assets during the year.

NOTE 8: DEPRECIATION:

Pursuant to the enactment of the Companies Act, 2013, the Company has applied the estimated useful lives as specified in Schedule II. Accordingly the unamortized carrying value is being depreciated/ unamortized over the revised/ remaining useful lives. The written down value of fixed assets whose lives have expired as at 1st April 2014 have been adjusted net of tax, in the opening balance of Reserves & Surplus amounting to 61.74 lacs.

NOTE 9:

The company has invested USD 4,35,000 equivalent to Rs. 183.22 Lacs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin Islands as a result the said company is Wholly Owned Subsidiary of the Company

The Company has also invested USD 9,89,000 equivalent to Rs. 596.50 Lacs for 100% share being 989000 shares of Sarlaflex, Inc registered at USA as a result the said company is Wholly Owned Subsidiary of the Company.

NOTE 10:

Managing Director's remuneration is Rs. 96.00 Lacs (P.Y. Rs. 66.00 Lacs) & the whole time Director's remuneration is Rs. 80.00 Lacs (P.Y. Rs. 62.00 Lacs) is in accordance with section 197(12) of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

NOTE 11: TAXATION:

Provision for taxation for the current year has been made, taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

In accordance with AS-22 issued by the Institute of Chartered Accountants of India on 'Accounting of Taxes on Income' net deferred tax income on account of timing difference for current year is Rs. 33.26 lacs (P.Y. expense of Rs. 105.15 lacs) which is credited to statement of profit and loss.

NOTE 12: RELATED PARTY TRANSACTIONS:

The Company has identified following related parties with whom transactions have taken place during the year:

1) Associates

M/s Satidham Industries Private Ltd. M/s Hindustan Cotton Co.

2) Key Management Personnel & their Relatives

Madhusudan Jhunjhunwala - Chairman

Krishna Jhunjhunwala - Managing Director

Neha Jhunjhunwala - Relative

(Appointed as woman director w.e.f. 31st March 2015)

3) Joint Ventures of Subsidiary Company

Savitex SA De C.V., Honduras

MRK SA De C.V., Honduras

Sarla Tekstil Filament Sanayi Ticaret A.S.

4) Subsidiary and step down subsidiary Companies

M/s Sarla Overseas Holding Ltd. - Subsidiary company

M/s SarlaFlex Inc - Subsidiary company

M/s Sarla Europe, Lda - Step down subsidiary company

NOTE 13: DERIVATIVE INSTRUMENTS:

The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes

NOTE 14:

The company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong,

do not exceed their recoverable amounts (i.e., the higher of the assets' net selling price and value in use). Hence, no impairment had arisen during the year as per the recommendations of the Accounting Standard - 28 on Impairment of Assets.

NOTE 15:

In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realize at their Book Value in the normal course of business and adequate provision have been made in respect of all known liabilities.

NOTE 16:

During the year, Company has paid Rs. 16,30,00,000/- to the official liquidator for purchase of property at Dadra as per order of Humble High Court of Bombay. However the conveyance deed is not executed till the year end and therefore aforesaid amount is disclosed as advance paid for property at Dadra under the head 'Long Term Loans & Advances' in note no 11.

NOTE 17:

Certain balances under the heads Sundry Debtors, Loans & Advances and Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

NOTE 18:

The company has reclassified/rearranged/regrouped previous year figures to conform to this year's classification.

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Mar 31, 2013

NOTE 1: CONTINGENT LIABILITIES NOT PROVIDED FOR

A. CONTINGENT LIABILITIES

1. Letter of credit: Letter of Credit issued by Banks on behalf of the Company Rs. 1115.26 Lacs (P.Y. Rs. 2493.31 Lacs), these are secured by the Charge created in favour of the Company''s Bankers by way of Hypothecation of Stocks, Receivable & Machineries/Assets of the Company

Stand-by Letter of credit issued by Banks on behalf of Sarlaflex, Inc, WOS of USD. 3.00 millions equivalent to Rs. 4281.60 lacs.

2. Guarantees: Bank Guarantees issued by Banks on behalf of the company Rs. 359.90 Lacs (P.Y. Rs. 371.68 Lacs). These are secured by the charge created in favour of the company''s bankers by way of pledge of Fixed Deposit Receipts.

3. The claim against Company not acknowledged as debt, comprises of excise duty & Custom duty disputed by company relating to issue of applicability of and classification of goods aggregating to Rs. 2325.53 Lacs (P.Y. Rs. 2201.97 Lacs).

4. Bill discounted not matured Rs. 944.14 Lacs (P.Y. Rs. 2007.36 Lacs).

The contingent liabilities in respect of Bank Guarantees and other matters arising in the ordinary course of business frommmhich it is anticipated that no material liabilities will arise.

5. CST liability in respect of invoice amount of

Rs. 4304.85 Lacs (P.Y. Rs. 5705.22) for which C-Form are yet to be collected from the customers.

B. Liability of Income Tax with respect to which appeal is pending before ITAT amounting to Rs. 13.17 Lacs for A.Y 2003-04, and appeals pending before CIT Appeal for Rs. 4.27 Lacs for A.Y. 2010-11.

NOTE 2:

The company has exercised option given in Companies (Accounting Standard) Amendment Rules 2009 on Accounting Standard 11 issued by ICAI which was notified by MCA regarding accounting of exchange rate difference related to foreign currency loan utilised for acquisition of fixed assets by way of notification no. GSR 225(E) dated 31.03.2009 read with notification no. GSR 913(E) dated 29.12.2011. On exercise of option referred above, foreign exchange gain of Rs. 46.27 lacs (P.Y. Loss of Rs. 121.70 lacs) is adjusted in Fixed Assets during the year.

NOTE 3: DEPRECIATION

A : The depreciation for the year has been provided on "straight line method"as per Section 205 (2) of the Companies Act, 1956 at the rates prescribed in schedule XIV thereto.

B: Depreciation on additions / disposals of the fixed assets during the year is provided on pro-rata basis according to the period during which assets are put to use.

C: Intangible assets represents the cost of computer software acquired for internal use, to be amortized equally over five years based upon their estimated useful lives.

NOTE 4:

The company has invested USD 4,35,000 equivalent to Rs. 183.22 Lacs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin Islands as a result the said company is Wholly Owned Subsidiary of the Company & during the year also invested USD 1,00,200 equivalent to Rs. 54.91 Lacs for 100% share being 1,00,200 shares of Sarlaflex, Inc registered at USA as a result the said company is Wholly Owned Subsidiary of the Company.

NOTE 5:

Managing Director''s remuneration is Rs. 54.00 Lacs (P.Y. Rs. 42.00

Lacs) & the whole time Director''s remuneration is Rs. 40.00 Lacs ( P.Y.Rs.34.00 Lcs) is in accordance with section 198 schedule XIII of the Companies Act. 1956.

NOTE 6: TAXATION

Provision for taxation for the current year has been made, taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

In accordance with AS-22 issued by the Institute of Chartered Accountants of India on ''Accounting of Taxes on Income'' net deferred tax expenses on account of timing difference for current year is Rs. 277.09 lacs (P.Y. Rs. 200.25 lacs) which is charged to Statement of Profit and Loss.

NOTE 7:

Company does not have complete information to determine Micro, Small and Medium Enterprises as specified in Micro, Small and Medium Enterprises Development Act, 2006, hence it is not possible for us to verify the amount due to such enterprises.

NOTE 8: SEGMENT REPORT

A) Information about Primary Business Segment: Based on

the guiding principles given in the Accounting Standards on Segment Reporting (AS-17) the company is primarily in the business of manufacturing and processing of synthetic yarn which mainly having similar risk and returns. The Company has diversified its activities into Wind Power Generation, hence the company''s business activity now falls under two business segments, viz. (i) Manufacturing of Yarn and (ii) Generation of Wind Power.

B) Information about Secondary Geographical Segment:

The secondary segment is based on geographical demarcation i.e. in India and out side India.

NOTE 9: RELATED PARTY TRANSACTIONS

The Company has identified following related parties with whom transactions have taken place during the year:

1) Associates

M/s Satidham Industries Private Ltd.

M/s Hindustan Cotton Co.

M/s. Shivchandrai Jhunjhunwala & Co.

2) Key Management Personnel & their relatives Madhusudan Jhunjhunwala - Chairman Krishna Jhunjhunwala - Managing Director

Neha Jhunjhunwala - Relative

3) Joint Ventures of Subsidiary Company Savitex SA De C.V., Honduras

MRK SA De C.V., Honduras

Sarla Tekstil Filament Sanayi Ticaret A.S.

4) Subsidiary Companies

M/s Sarla Overseas Holding Ltd.

M/s Sarlaflex Inc.

M/s Sarla Europe, Lda

NOTE 10: DERIVATIVE INSTRUMENTS

The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes.

NOTE 11:

The company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amounts (i.e., the higher of the assets'' net selling price and value in use). Henc, no impairment had arisen during the year as per the recommendations of the Accounting Standard - 28 on Impairment of Assets.

NOTE 12:

In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realise at their Book Value in the normal course of business and adequate provision have been made in respect of all known liabilities.

NOTE 13:

Certain balances under the heads Sundry Debtors, Loans & Advances and Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

NOTE 14:

The company has reclassified/rearranged/regrouped previous year figures to conform to this year''s classification.

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Mar 31, 2012

Terws/rights attached to Equity Shares: The company has only one class of equity s hares having par value of Rs. 10. Each holder of equity shares is entitled to one vote per share. The cowpnay delcares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing annual general meeting.

During the year ended 31st March 2012, the amount of per share dividend recognised as distributions to equity shareholders was Rs. 5.00 (31 st March 2011 Rs. 4.50)

In the event of liquidation of the company, the holders of the equity shares will be entitled to reecive 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.

NOTE 1: CONTINGENT LIABILITIES NOT PROVIDED FOR AND CAPITAL COMMITMENTS

A. CONTINGENT LIABILITIES

1. Letter of credit: Letter of Credit issued by Banks on behalf of the Company Rs. 2,493.31 Lacs (P.Y. Rs. 3,345.71 Lacs), these are covered by the Charge created in favour of the Company s Bankers by way of Hypothecation of Stocks, Receivable & Machineries/Assets of the Company.

2. Guarantees: Bank Guarantees issued by Banks on behalf of the company Rs. 371.68 L acs (P.Y. Rs. 361.69 L acs). These are secured by the charge created in favour of the company s bankers by way of pledge of Fixed Deposit Receipts.

3. The claim against Company not acknowledged as debt, comprises of excise duty & Custom duty disputed by company relating to issue of applicability of duty and classification of goods aggregating to Rs. 2,201.97 L acs (P.Y. Rs. 1,891.72 L acs).

4. Bill discounted not matured Rs. 2007.36 Lacs (P.Y. Rs. 1022.5 Lacs).

The contingent liabilities in respect of Bank Guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise.

5. CST liability in respect of invoice amount of Rs. 3069.57 Lacs (P.Y. Rs. 2518.59) for which C-Form are yet to be collected from the customers.

6. Liability of Income Ta x with respect to which appeal is pending before ITAT amounting to Rs. 13.17 Lacs for A.Y. 2003-04, and appeals pending before CIT Ap peal for Rs. 6.28 Lacs for A.Y. 2009-10

B. CAPITAL COMMITMENTS

Estimated amounts of contracts remained to be executed on capital account net of advance at the end of the year Rs. 18.14 Lacs (P.Y. Rs. 59.91 Lacs).

NOTE 2

The company has exercised option given in Companies (Accounting Standard) Amendment Rules 2009 on Accounting Standard 11 issued by ICAI which was notified by MCA regarding accounting of exchange rate difference related to foreign currency loan utilised for acquisition of fixed assets by way of notification no. GSR 225(E) dated 31.03.2009 read with notification no. GSR 913(E) dated 29.12.2011. On exercise of option referred above, foreign exchange loss of Rs. 121.70 lacs is capitalised during the year.

NOTE 3! DEPRECIATION

A ! The depreciation for the year has been provided on straight line method as per Section 205 (2) of the Companies Act, 1956 at the rates prescribed in schedule XIV thereto.

B! Depreciation on additions / disposals of the fixed assets during the year is provided on pro-rata basic according to the period during which assets are put to use.

C! Intangible assets represents the cost of computer software acquired for internal use, to be amortized equally over five years based upon their estimated useful lives.

NOTE 4

The company has invested USD 4,35,000 equivalent to Rs. 183.22 L acs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin I slands as a result the said company is W holly Owned Subsidiary of the Company.

NOTE 5

Managing Director s remuneration is Rs. 42.00 L acs (P.Y. Rs. 39.00 Lacs ) & th e whole time Director s remuneration is Rs. 34.00 L acs ( P.Y. Rs.27.00 Lacs) is in accordance with section 198 schedule XIII of the Companies Act. 1956.

NOTE 6! TAXATION

Provision for taxation for the current year has been made, taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

In accordance with AS-22 issued by the Institute of Chartered Accountants of India on Accounting of Taxes on Income net deferred tax expenses on account of timing difference for current year is Rs. 200.25 lacs (P.Y. Rs. 269.12 lacs) which is charged to profit and loss account.

NOTE 7! SEGMENT REPORT

A) Informotion obout Primory Business Segment! Based on the guiding principles given in the Accounting Standards on Segment Reporting (AS-17) the company is primarily in the business of manufacturing and processing of synthetic yarn which mainly having similar risk and returns. The Company has diversified its activities into wVind Power Generation, hence the companys business activity now falls under two business segments, viz. (i) Ma nufacturing of Yarn and (ii) Generation of wVind P ower.

B) Informotion obout Secondory Geogrophicol Segment! The secondary segment is based on geographical demarcation i.e. in India and out side India.

NOTE 8: RELATED PARTY TRANSACTIONS

The Company has identified following related parties with whom transactions have taken place during the year!

1) Associates

M/s Satidham Industries Private Ltd.

M/s Hi ndustan Cotton Co.

M/s. Shivchandrai Jhunjhunwala & Co.

2) Key Management Personnel

M adhusudan Jhunjhunwala - Chairman Krishna Jhunjhunwala - Managing Director

3) Joint Ven tures of Subsidiary Company Savitex SA De C.V., H onduras

MRK SA De C.V., Honduras

Sarla Tekstil Filament Sanayi Ticaret A.S.

4) Subsidiary Companies

M/s Sarla O verseas Holding Ltd.

5) Subsidiary of subsidiary Company M/s Sarla Europe, Lda

NOTE 9: DERIVATIVE INSTRUMENTS

The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes.

NOTE 10

The company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amounts (i.e., the higher of the assets net selling price and value in use). Hence, no impairment had arisen during the year as per the recommendations of the Accounting Standard - 28 on Impairment of Assets.

NOTE 11

In the opinion of the (Management, the Current Assets and Loans and Advances as shown in the books are expected to realise at their Book Va lue in the normal course of business and adequate provision have been made in respect of all known liabilities.

NOTE 12

Certain balances under the heads Sundry Debtors, Loans & Advances and Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

NOTE 13

Till the year ended 31 st M arch 2011 , the company was using pre- revised schedule VI to the Companies Act, 1956, for preparation and presentation of its financial statements. During the year ended 31 st M arch 2012, the revised Schedule VI notified under the Companies Act, 1956 has b ecome applicable to the company. The company has reclassified previous year figures to conform to this year s classification.

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Mar 31, 2011

1. i: CONTINGENT LIABILITIES NOT PROVIDED FOR:

A. Letter of credit: Letter of Credit issued by Bank on behalf of the Company Rs. 3345.71 Lacs (P.Y. Rs. 2016.74 Lacs) these are covered by the Charge created in favour of the Company's Bankers by way of Hypothecation of Stocks, Receivable & Machineries/Assets of the Company.

B. Guarantees: Bank Guarantees issued by Banks on behalf of the Company Rs. 361.69 Lacs (P. Y. Rs. 345.79 Lacs). These are secured by the charge created in favour of the Company's bankers by way of pledge of Fixed Deposit Receipts.

C. The claim against Company not acknowledged as debt, comprises of excise duty & Customs duty disputed by company relating to issue of applicability and classification aggregating to Rs. 1,891.72 Lacs ( P. Y. Rs. 1,845.23 Lacs).

D. Bill discounted not matured Rs. 1,022.50 Lacs ( P. Y. Rs. 1,073.45 Lacs).

The contingent liabilities in respect of Bank Guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise.

E. CST liability in respect of invoice amount of Rs. 2,518.59 Lacs ( P. Y. Rs. 1,559.08 Lacs) for which C-Form are yet to be collected from the customers.

F. Liability of Income Tax with respect to which appeal is pending before ITAT amounting to Rs. 13.17 Lacs for A.Y 2003-04 and appeals pending before CIT Appeal for Rs. 9.93 Lacs for A.Y. 2007-08, Rs. 30.56 Lacs for A.Y. 2008-09 and Rs. 6.28 Lacs for A.Y. 2009-10.

2. ii: Estimated amount of contracts remained to be executed on capital account net of advance at the end of the year Rs. 59.91 Lacs ( P. Y. Rs. 47.17 Lacs)

3. DEPRECIATION:

A: The depreciation for the year has been provided on “straight line method” as per Section 205 (2) of the Companies Act, 1956 at the rates prescribed in Schedule XIV thereto.

B: Depreciation on additions/disposals of the fixed assets during the year is provided on pro rata basic according to the period during which assets are put to use.

C: Intangible assets in represents the cost of computer software acquired for internal use, to be amortised equally over five years based upon their estimated useful lives.

4. A: The Company has invested USD 4,35,000 equivalent to Rs. 183.22 Lacs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin Islands as a result the said company is Wholly Owned Subsidiary of the Company.

B: No provision is made for the interest of Rs. 7.24 Lacs for Unsecured Loan given to Sarla Overseas Holdings Limited, a wholly owned subsidiary of the Company. Hence profit of the current year is understated to this extent.

5. Managing Director's remuneration is Rs. 30.00 Lacs (P.Y Rs. 30.00 lacs) & the whole time Director's remuneration is Rs. 27.00 Lacs ( P.Y. Rs. 20.00 lacs) is in accordance with Section 198 Schedule XIII of the Companies Act, 1956.

6. TAXATION:

A: Provision for taxation for the current year has been made, taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

B: In accordance with AS-22 issued by the Institute of chartered Accountants of India on 'Accounting of Taxes on Income' net deferred tax expenses on account of timing difference for current year is Rs. 269.12 Lacs (P.Y. Rs. 70.20 Lacs) which is charged to profit and loss account.

7. RELATED PARTY TRANSACTIONS:

The Company has transactions with following related parties:

1) Associates

a) M/s. Satidham Industries Pvt. Ltd.

b) M/s. Sarla Estate Developers Pvt. Ltd.

c) M/s. Hindustan Cotton Co.

d) M/s. Shivchandrai Jhunjhunwala & Co.

e) M/s. Harmony Estates Pvt. Ltd.

2) Key Management Personnel

a) Madhusudan Jhunjhunwala - Chairman

b) Krishna Jhunjhunwala - Managing Director

3) Joint Ventures of Subsidiary Company

a) Savitex SA De C. V. , Honduros

b) MRK SA De C.V., Honduras

c) Sarla Tekstil Filament Sanayi Ticaret A.S.

4) Subsidiary Companies

a) M/s. Sarla Overseas Holding Ltd. (SOHL)

b) M/s. Sarla Europe, Lda held through SOHL

8. SEGMENT REPORTING:

a) Information about Primary Business Segment:

Based on the guiding principles given in the Accounting Standards on Segment Reporting (AS-17) the Company is primarily in the business of manufacturing and processing of synthetic yarn which mainly having similar risk and returns the Company has diversified its activities into Wind Power Generation, hence the company's business activity now fails under two business segments, viz

(i) Manufacturing of Yarn and (ii) Generation of Wind Power.

b) Information about Secondary Geographical Segment:

The secondary segment is based on geographical demarcation i.e. in India and out side India.

9. DISCLOSURE IN ACCORDANCE WITH REVISED AS - 15 ON “EMPLOYEE BENEFITS”

A) Defined Contribution Plans:

The Company has recognised the following amounts in the profit and loss account for the year

10. Company does not have complete information to determine Micro, Small and Medium Enterprises as specified in Micro, Small and Medium Enterprises Development Act. 2006, hence it is not possible for us to verify the amount due to such enterprises.

11. Derivative Instruments:

The Company uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The Company does not enter into any derivative instruments for trading or speculative purposes.

12. During the year, the Company has commissioned One more Wind Turbine Generator of the Capacity of 2 MW in the State of Maharashtra.

13. The company is of the view that there are no indications of material impairment and the carrying amount of its fixed assets or where applicable, the cash generating unit to which these assets belong, do not exceed their recoverable amount (i.e. the higher of the assets' selling net price and value in use). Hence, no impairment had arisen during the year as per the recommendations of the Accounting Standard - 28 on Impairment of Assets.

14. In the opinion of the Management, the Current Assets and Loans and Advances as shown in the books are expected to realise at their Book Value in the normal course of business and adequate provision have been made in respect of all known liabilities.

15. Certain balances under the heads Sundry Debtors, Loans & Advances and Sundry Creditors are subject to confirmations from the respective parties and consequential reconciliation, if any.

16. Previous years figures have been regrouped/rearranged wherever necessary.

17. The balance sheet abstract & company's general business profile as required by part IV of Schedule VI to the Companies Act, 1956 are given in the annexure.

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Mar 31, 2010

1. A: CONTINGENT LIABILITIES NOT PROVIDED FOR:

A. Letter of credit: Letter of Credit issued by Banks on behalf of the Company Rs. 2,01 6.74 Lacs (RY. Rs. 2,519.1 6 Lacs) these are covered by the Charge created in favour of the Companys Bankers by way of Hypothecation of Stocks, Receivable & Machineries.

B. Guarantees: Bank Guarantees issued by Banks on behalf

of the Company Rs. 345.79 Lacs (R Y. Rs. 232.11 Lacs). These are secured by the charge created in favour of the Companys bankers by way of pledge of Fixed Deposit Receipts.

C. The claim against Company not acknowledged as debt, comprises of excise duty & Customs duty disputed by company relating to issue of applicability and classification aggregating to Rs. 1,845.23 Lacs (RY. Rs. 1,769.90 Lacs).

D. Bill discounted not matured Rs. 1,073.45 Lacs (R Y. Rs. 1,256.28 Lacs). The contingent liabilities in respect of Bank Guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise.

E. CST liability in respect of invoice amount of Rs. 1,559.08 Lacs for which C-Form are yet to be collected from the customers.

F. Liability of Income Tax with respect to which appeal is pending before CIT (Appeals) amounting to Rs. 22.77 Lacs for A.Y 2003-04 and Rs. 9.93 Lacs for A. Y. 2007-08

2. B: Estimated amount of contracts remained to be executed

on capital account net of advance at the end of the year Rs. 47.1 7 Lacs ( R Y. Rs. 194.33 Lacs)

3. DEPRECIATION:

A: The depreciation for the year has been provided on "straight line method" as per Section 205 (2) of the Companies Act, 1956 at the rates prescribed in Schedule XIV thereto.

Among their advantages, wind farms are scalable: when more electricity is needed for the market place, more windmills can be added. In fact, windmills can be built and installed within 2 months. during the year is provided on pro rata basic according to the period during which assets are put to use.

C: Intangible assets in represents the cost of computer software acquired for internal use, to be amortised equally overfive years based upon their estimated useful lives.

1. A: The Company has invested USD 4,35,000 equivalent to Rs. 183.22 Lacs for 100% share being 4,35,000 shares of Sarla Overseas Holding Limited registered at British Virgin Islands as a result the said company is Wholly Owned Subsidiary of the Company.

B: The Company has an investment of Rs. 61.40 lacs (equivalent to USD 135,000) in 2,700 shares of M/s. Savitex SA De C.V, Honduras, which the company has sold during the year.

C: No provision is made for the interest of Rs. 8.99 Lacs for Unsecured Loan given, to Sarla Overseas Holdings Limited, a wholly owned subsidiary of the Company. Hence profit of the current year is understated to this extent.

D. Sarla Overseas Holdings Limited, a wholly owned subsidiary of the Company has further acquired 2,700 shares of Savitex SA De C.V. during the year, due to which the its shareholding in Savitex SA De C.V. has increased to 1 6,000 Shares out of total capital of 40,000 shares of the said Savitex SA De C.V.

4. Managing Directors remuneration is Rs. 30.00 Lacs (RY Rs. 22.50 lacs) & the whole time Directors remuneration is Rs. 20.00 Lacs ( RY. Rs. 17.00 lacs) is in accordance with Section 198 Schedule XIII of the Companies Act, 1956.

5. The Excise and Custom Authority has passed certain adjudication orders in earlier years against the company relating to classification of excisable goods, determination of rate of duty and non compliance of parameters decided for 100% EOU. Due to these orders the demand of excise and Custom has been raised to the extent of Rs. 543.07 Lacs (RY. Rs. 816.45 Lacs). The Company has appealed against the said orders and based on the various decisions of the appellate authorities and the interpretations of order and relevant provisions, the Company has been legally advised that the demand is likely to be either deleted or substantially reduced and accordingly no provision has been made.

6. There are no outstanding Forward Contracts as on 31st March 2010.

7. TAXATION:

A: Provision for taxation for the current year has been made, taking into consideration benefits admissible underthe provisions of the Income Tax Act, 1961.

B: In accordance with AS-22 issued by the Institute of chartered Accountants of India on Accounting of Taxes on Income net deferred tax liability on account of timing difference for current year is Rs. 70.20 Lacs (RY. Rs. 60.76 Lacs) is charged to profit arid loss account.

8. RELATED PARTY TRANSACTIONS:

The Company has transactions with following related parties:

1) Associate Cos.

a) M/s. Satidham Industries Pvt. Ltd.

b) M/s. Sarla Estate Developers Pvt. Ltd.

c) M/s. Hindustan Cotton Co.

d) M/s. Hindustan Synthetics

e) M/s. Shivchandrai Jhunjhunwala & Co.

f) Te.chnofil Honduras, SA De C.V.

2) Key Management Personnel

a) Madhusudan Jhunjhunwala - Chairman

b) Krishna Jhunjhunwala - Managing Director

3) Joint Ventures

a) M/s. Savitex SA De C. V, Honduros

4) Subsidiary Company

a) M/s. Sarla Overseas Holding Ltd.

b) M/s. Sarla Europe, Lda

9. SEGMENT REPORTING:

a) Primary Segment (by Business Segment):

Based on the guiding principles given in the Accounting Standards on Segment Reporting (AS-1 7) the Company is primarily in the business of manufacturing and processing of synthetic yarn which mainly have similar risk and returns and during the year, the Company has diversified its activities into Wind Power Generation, hence the companys business activity now fails under two business segments.

b) Secondary Segment (By Geographical demarcation)

1) The secondary segment is based on geographical demarcation i.e. in India and outside India.

c) Information about primary and secondary segment

10. Company does not have complete information to determine Micro, Small and Medium Enterprises as specified in Micro, Small and Medium Enterprises Development Act. 2006, hence it is not possible for us to verify the amount due to such enterprises.

11. Pursuant to the approval of members by way of Special ;

Resolution passed at Extra-Ordinary General Meeting of the Company heid on 26th March, 2008, the Company had allotted 12,00,000 warrants on 10th April 2008, with an option to subscribe to share capital of the Company, the options lapsed on 9th October, 2009. No Subscriber of the warrant exercised the option of conversations of warrants into Shares, uptil 9th October, 2009, when option lapsed, hence the money received on application amounting to Rs. 1 82.40 Lacs isforefieted and transferred to Capital Reserve.

12. During the year, the Company has delivered its activities into Wind Power Generation and in this regard the Company has passed the Special Resolution in Extra Ordinary General Meeting held on 06th March, 2010 for modification in the object clause of Memorandum of Association. The Company has invested Rs. 633.46 Lacs for installation of Wind Turbine Generator at Baradia site, Dist. Jamnagar in Gujarat and Wind Power Plant was successfully commissioned on 30-03-2010.

13. Previous years figures have been regrouped/rearranged wherever necessary.

14. The balance sheet abstract & companys general business profile as required by part IV of Schedule VI to the Companies Act, 1956 are given in the annexure.