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Directors Report of Spentex Industries Ltd.

Mar 31, 2015

Dear Members,

The Directors are pleased to present the 23rd Annual Report together with the Audited Financial Statements for the year ended March 31,2015.

Financial Results

The highlights of the financial results for the year ended 31st March, 2015 are as under: ( Rs. in Crores)

Particulars 2014-2015

Consolidated Standalone

Net Sales (Turnover) 911.07 891.14

Other Income 17.94 16.66

EBIDTA 18.89 27.49

Financial charges 90.35 79.37

Depreciation 15.12 11.68

Profit/(Loss) before tax (PBT) (86.58) (63.56)

Extra ordinary items (income)/ 1.37 1.37

Impairment loss @ Fixed Assets

Exceptional Items - -

Net Profit from Operations (85.21) (62.19)

Prior Period Items - -

Tax expenses 0.60 0.60

Net Profit/(Loss) (85.81) (62.79)

EPS (9.56) (6.99)

Particulars 2013-2014

Consolidated Standalone

Net Sales (Turnover) 1142.94 1142.90

Other Income 16.49 13.87

EBIDTA 87.06 87.96

Financial charges 92.48 81.04

Depreciation 22.31 18.21

Profit/(Loss) before tax (PBT) (27.72) (11.29)

Extra ordinary items (income)/ - -

Impairment loss @ Fixed Assets

Exceptional Items - -

Net Profit from Operations (27.72) (11.29)

Prior Period Items 0.57 0.57

Tax expenses - -

Net Profit/(Loss) (28.29) (11.86)

EPS (3.16) (1.32)

Financial Analysis and Performance Review

During the financial year 2014-15 the Company's operations were adversely impacted due to sluggish demand, progressive decrease in yarn prices, high power cost in Maharashtra where the company's plants are located ,and adverse cash outflow due to the liability of servicing term & working capital loans availed by the company led to non optimal utilization of plant capacities and consequent decrease in EBIDTA.

The financial performance of the Company has been presented in two parts, as under:

(i) Spentex Industries Limited (Standalone) excluding the performance of its subsidiaries and step-down subsidiaries.

(ii) Spentex Industries Limited (Consolidated) including the performance of its subsidiaries and step-down subsidiaries. The Consolidated Financial Statements reflect the performance of Spentex Group of companies and are more relevant for understanding the overall performance of the Group.

Segment-wise Performance Yarn Manufacturing

During the year under review, your Company on standalone basis has manufactured 44930.63 MT of yarn as compared to 68941.08 MT of yarn produced during the previous year.

Subsidiary Companies

At the end of the accounting period under review, the Company has the following subsidiaries and step down subsidiaries :

Subsidiaries Companies

(a) M/s Amit Spinning Industries Limited

(b) M/s Spentex Netherlands B.V (SNBV)

(c) M/s. Spentex (Mauritius) Private Limited (The Company ceased to exist on 25th March 2015)

Step down subsidiary Companies

(a) M/s. Schoeller Textile Netherlands B.V. (STNBV)

(b) M/s Spentex Tashkent Toytepa LLC. (due to breach of Investment Agreement by Republic of Uzbekistan with its Investors, its holding Company SNBV, has filed case in ICSID)

(c) M/s. Schoeller Litvinov k.s. (Creditors taken over the subsidiary against their dues)

(d) M/s. Botekos Plus s.r.o. (Creditors taken over the subsidiary against their dues)

Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of subsidiaries, associates and joint venture companies in Form AOC-1 is attached to the Accounts. The separate audited financial statements in respect of each of the subsidiary companies shall be kept open for inspection at the Registered Office of the Company. The Company will also make available these documents upon request by any Member of the Company interested in obtaining the same.

Performance of Subsidiaries

The details of turnover and overall performance of material subsidiary companies is as under:

Amit Spinning Industries Ltd., India: During the year under review, due to market and financial constraints, the subsidiary could although manufactured 1,281.64 MT of yarn under own production and 1,112.65 MT of yarn on job work basis as compared to 5,123.08 MT of yarn produced under job work basis in the previous year, yet it could not fully utilize and leverage its capacity. It has been declared as a sick company by Board For Industrial and Financial Reconstruction (BIFR) under section 3 (1) (o) of Sick Industries (Companies) Act, since 2012 and has been awaiting approval of Debt Rehabilitation Scheme (DRS).

The Company has its manufacturing facilities at Kolhapur, Maharashtra with capacity of 30,672 spindles.

Spentex Tashkent Toytepa LLC, Uzbekistan (STTL) & Spentex Netherlands B.V, Netherlands (SNBV): During the period of investment, Government of Uzbekistan (GOU) changed certain laws and policies breaching the investment agreement and rendered operation of STTL not only unviable, but also expropriated its investment. SNBV (a subsidiary company), which had made around 99% investment in the equity of STTL, has initiated Arbitration Proceedings against GOU for its Investment Dispute Claim through its lawyers before International Center for Settlement of Investment Dispute (ICSID).

Schoeller Litvinov k.s., Czech Republic: During the year under review, the step down subsidiary could not manufacture yarn due to adverse market conditions, crises in the European Union and financial constraints, the Company had filed application for liquidation at Czech Republic. The Company has manufacturing unit situated at Czech Republic with capacity of 59,000 spindles. (Creditors taken over the subsidiary against their dues)

Management Perception on Opportunities, Risks, Concern & Outlook

The persistent weakness of Indian Rupee, as compared to U.S Dollar and other European currencies provides an opportunity on short term basis to the textile industry to optimize its sales values and margins respectively on its exports. Spentex will continue to offer market driven quality product mix for progressively improving its operational profile. The Indian textile sector is also facing the challenges of technology backwardness especially in weaving and processing segments, lower productivity and high power cost which has an adverse cascading effect on the industry as a whole.

With focus on Make in India, the Indian Textile industry is expected to become resilient and robust through various support measures likely to be announced by the government. The future outlook for the Indian textile industry looks promising, buoyed by both strong domestic consumption and increase in export turnover.

Slow but potentially promising increase in demand of cotton yarn in domestic market and talk of economic reforms by the new Government as well as encouraging export promotion policy for textile sector have already improved market sentiments to some extent, with the strategic efficiency improvement and cost containment measures being adopted by the company, and with the continued support and co operation of the company's bankers, your directors have confidence that sales volumes are reasonably expected to shore up with consequent strengthening of the margins in due course.

Consolidated Financial Statements

The Company is having six subsidiaries/step down subsidiaries . As per the Companies Act, 2013, the Company is not required to furnish the Balance Sheet and Statement of Profit & Loss and other documents of foreign subsidiary companies. These documents will however be available for inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presented by the Company includes financial results of its subsidiary companies.

The Consolidated Financial Statements of the Company prepared in accordance with the applicable Accounting Standards issued by the Institute of Chartered Accountants of India form part of this Annual Report.

Share Capital

The Company's issued and paid up capital as on 31st March, 2015 stands Rs. 89,77,20,350/- divided into 8,97,72,035 fully paid up equity shares of Rs. 10/- each. During the year, under review, the Company has not issued any share(s). Further the Company has not issued any share with differential Voting Rights/Sweat Equity shares/under Stock Option Scheme (ESOS) earlier and during the year.

The Company has issued 500 non-convertible debentures of Rs. 10.00 lacs each, however during the year under review, no debenture has been issued.

The Company has no scheme or provision of money for purchase of its own shares by employees or by trustees for the benefit of employees. Hence the details under rule 16 (4) of Companies (Share Capital and Debentures) Rules, 2014 are not required to be disclosed.

Directors

Change in Directors or Key Managerial Personnel

In terms of provisions of the Companies Act, 2013 read with Clause 49 of Listing Agreement, during the year, Ms. Kamal Kapur has been appointed as an Additional Director as a Women Non Executive Independent Director on the Board of the Company w.e.f 14th November, 2014 and holds office upto ensuing Annual General Meeting. She however being eligible for reappointment, Company has received an application from the Member for consideration of her appointment as Women Non Executive Independent Director on the Board in the ensuing AGM itself.

During the year, under review, the Board of Directors have appointed Sh. Sharat Kumar Gupta as the Chief Finance Officer (CFO) of the Company in place of existing CFO w.e.f. 1st April, 2015.

Sh. Ajay Kumar Choudhary and Sh. Kapil Choudhary are retiring by rotation in the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

The Company is required to seek Central Government approval for payment of existing remuneration to Shri Ajay Kumar Choudhary, Shri Kapil Choudhary and Shri Sitaram Parthasarathy for a period of 3 years. In case of Shri Ajay Kumar Choudhary, approval is required to be taken w.e.f. 1st April, 2015 to 1st December, 2017 (till the date of his existing tenure of appointment), and in the case of Shri Kapil Choudhary and Shri Sitaram Parthasarathy approval has to be taken for the period from 1st April, 2015 to 31st March, 2018

Brief resume of the Directors proposed to be appointed/re-appointed, nature of their expertise in specific functional areas and names of the companies in which they hold directorship and membership/chairmanships of the Board or its Committees, as stipulated under Clause 49 of the listing agreement entered by the Company with stock exchanges in India, is provided in the Report of Corporate Governance forming part of the Annual Report.

Number of Meetings of the Board

Four meetings of the Board were held during the year. The detailed information of the meetings of the Board held during the year is mentioned in the Corporate Governance Report which forms part to this report.

Declaration by independent directors

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

Annual Evaluation by the Board

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. During the year, neither the Managing Director nor the Whole-time Directors of the Company received any remuneration or commission from any of its subsidiaries. The said policy has also been hosted on the website of the company.

Directors' Responsibility Statement

Pursuant to the requirement of Section 134(3)(c) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended 31st March, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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 as at March 31,2015 and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) 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.

Related Party Transactions

All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions entered into by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

Prior omnibus approval of the Audit Committee was obtained for Related Party Transactions for a period upto 31st March, 2015 and for the financial year 2015-16. The transactions entered into pursuant to the omnibus approval so granted were audited and a statement giving details of all related party transactions were placed before the Audit Committee for its review on a quarterly basis.

The Company has framed a Related Party Transactions Policy for purpose of identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board has been uploaded on the Company's website. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company. Since all related party transactions entered into by the Company were in ordinary course of business and were on an arm's length basis, form AOC - 2 is not applicable to the Company.

Significant and Material Orders passed by the Regulators or Courts

There are no significant or material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Auditors

M/s. J C Bhalla & Co., Chartered Accountants, (Registration No. 001111N) have been appointed as Statutory Auditors of the Company at 22nd Annual General Meeting held on 11th September, 2014 to hold office until conclusion of 25th Annual General Meeting for a period of three years, as provided in Section 139 of the Companies Act, 2013, the said appointment is being placed for ratification at the forthcoming Annual General Meeting.

The Company has received a confirmation from M/s. J C Bhalla & Co., Chartered Accountants to the effect that their appointment, if made, at the ensuing AGM would be in terms of Sections 139 and 141 of the Companies Act, 2013 and rules made there under and that they are not disqualified for re-appointment.

Auditors Report

The Auditors' Report read with the Notes to Accounts is self-explanatory and does not call for any further explanation under Section 134 of the Companies Act, 2013, except for the responses in respect of some observations as mentioned here in below.

Directors' view on Auditor's Observations

Directors' response to the various observations of the auditors made in their report, even though explained wherever necessary through appropriate notes to accounts, is reproduced hereunder in compliance with the relevant legal requirements:

Note No. 14 of the Financial Statement qualified by Auditors

Auditors stated that they are unable to comment on the recoverability of advance balance of Rs.19,040,000/-, included under the head "Advance against expenses" in Note No. 14 of the standalone financial statements, for which no provision has been made in the books of account.

Note No. 41 of the Financial Statement qualified by Auditors

The company has an investment of Rs. 204,469,921/- in and has amount recoverable amounting to Rs. 642,244,069/- to Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31,2015. The accumulated losses of ASIL, at the year end exceeded its net worth. There is also reduction in market value of the investment at the year end by Rs.184,537,898. In the opinion of the management, diminution in this long term investment is due to adverse business conditions in the past. ASIL has started generating EBIDTA and cash profits. In view of these developments, management believes that diminution in the value of investment is of temporary nature and that outstanding would be realised within a reasonable period of time. Accordingly no provision considered necessary in the value of investment held and amount due from ASIL. Note No. 42 of the Financial Statement qualified by Auditors

The Company has an investment of Rs. 561,011,339 and Rs.9,323,779' in its subsidiary Spentex Netherlands B. V. (SNBV) and its step down subsidiary Spentex Tashkent Toytepa LLC (STTL) respectively. Further it has Rs.'70,012,404 as export receivable from STTL and advances recoverable of Rs.95,070,902 in SNBV as on March 31st, 2015. During the period of investment, Government of Uzbekistan (GOU) changed certain laws and policies breaching the investment agreement and rendered operation of STTL not only unviable, but also expropriated its investment. All the assets and liabilities of STTL have been taken over by National Bank of Uzbekistan (NBU- Government of Uzbekistan) and existence of STTL has been liquidated as per bankruptcy laws. In view of this corporate guarantee given by company in respect of STTL liability for deferred payment to Tashkent Toytepa Textile (TTL) stand extinguished. SNBV, which had made around 99% investment in the equity of STTL, had filed request for Arbitration against GOU for Claim through its lawyer before International Center for Settlement Investment Dispute (ICSID). As per the schedule prescribed in the procedural order issued by ICSID, SNBV has filed the memorial on Jurisdictions and Merits on 30th June, 2014. Based on the claim lodged with ICSID, Board of Directors has decided not to make any provision for the aforesaid amounts. In addition to above claim, the company has sent notice to the GOU for indemnifying the further losses caused to company directly or indirectly on account of investment made in Uzbekistan.

Note No. 44 of the Financial Statement qualified by Auditors

Rs. 1,28,30,469 dues from Government Authorities against which company has filed an application for release with concerned authorities. The Company is making effort to recover the same and expects to reduce the outstanding dues significantly. The management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at the stage.

Note No. 4 of the Financial Statement without qualifying by Auditors, have drawn attention:

The Company has not allotted shares against the share application amount of Rs.110,950,000/- which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. However, the company has not complied with the provisions of Section 42 of the Companies Act, 2013.

Note No. 43 of the Financial Statement without qualifying by Auditors, have drawn attention:

As on March 31,2012, the accumulated losses of the Company had exceeded its net worth. Accordingly company in compliance with the provisions of section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 filed a reference with Board for Industrial and Financial Restructuring (BIFR). The Company's operations were adversely affected in 2011-12 due to adverse Govt. policies and high volatility of Raw Material prices. Further, considering the change in scenario, recent performance and trends of the company as well as overall industry outlook, the management believes that losses incurred in the past would reasonably be made good, in due course. The financial statements, as such have been prepared on a going concern basis on the strength of management's plan of revival including reorganization of business. Note No. 44 of the Financial Statement without qualifying by Auditors, have drawn attention:

Trade receivables, advance balances and receivables amount aggregating to Rs. 6,371,477, Rs. 27,314,712, Rs. 17,869,256 respectively due from certain parties where payments are not forthcoming. Against the above, the Company has filed a suit for recovery. The Company is making effort to recover the same and expects to reduce the outstanding dues significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at the stage.

Note No. 45of the Financial Statement without qualifying by Auditors, have drawn attention:

The company has applied to Securities & Exchange Board of India (SEBI) seeking exemption for maintaining at least 15% of the amount of its debenture maturing during the financial year 2013-14 vide circular no 04/2013 dated 11-Feb-2013 issued by Ministry of Corporate Affair, which is still awaited.

Note No. 46 of the Financial Statement without qualifying by the Auditors, have drawn attention:

The outstanding balance as on 31st March, 2014 in respect of certain trade receivables, trade payables and loans & advances are subject to confirmation/reconciliation and consequential adjustment if any, from the respective parties. The management, however, does not expect any material variations.

Cost Auditors

Sh. Rajesh Goyal, Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants (Firm Registration No.000024) has been appointed as Cost Auditors to carry out audit of the Cost Accounts maintained by the Company for the financial year 2015-16.

Secretarial Auditor & Audit Report:

Pursuant to provisions of Section 204 of the Companies Act, 2013, the Company has appointed M/s. Loveneet Handa & Associate, Practicing Company Secretary (having CP No. 10753 & Membership No. 25973) as Secretarial Auditor to carry out the secretarial audit for the financial year 2014-2015.

The Secretarial Audit Report for the financial year ended March 31,2015 is annexed herewith as Annexure I to this Report.

There are no qualifications or observations or remarks made by the Secretarial Auditors in their Report.

Internal Auditors

Pursuant to section 138 of the Companies Act, 2013 read with The Companies (Accounts) Rules, 2014, the Company has appointed Dr. Sunil Kumar Gupta as Internal Auditor of the Company.

Internal Control Systems and Adequacy

The Company has adequate system of internal control with regard to various business processes, financial reporting and compliance with applicable laws and regulations, etc. with clearly defined roles and responsibilities for all managerial positions. All operating parameters are continuously monitored and controlled.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective actions in their respective areas and thereby further strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board.

Extract of the Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as Annexure-2 to this Report.

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

Company has implemented energy conservation methods and such action has resulted into major savings in energy consumption as well as in cost control. The information as required to be disclosed under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014 is set out in the Annexure - 3 to this Report.

Particulars of Employees

List of the employees who have received remuneration exceeding the limit as stated in rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 read with the Companies(Particulars of Employees) Rules, 1975, as amended, shall be made available to any shareholder on a specific request made by him in writing on or before 30th September, 2015.

Deposits

The Company has not accepted or renewed any deposit during the year and there are no outstanding and/or overdue deposits as at 31st March, 2015.

Particulars of Loans, Guarantees or Investments

Details of loans, Guarantees and Investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Corporate Social Responsibility

In accordance with the provisions of Section 135 of the Companies Act, 2013, the Corporate Social Responsibility (CSR) Committee of the Board has been constituted on 28th May, 2014, inter alia, to formulate and recommend to the Board, a CSR Policy which shall indicate the activities to be undertaken by the Company and monitor the same from time to time. The composition of committee is disclosed in Corporate Governance Report forming part to this report. The CSR policy has also been hosted on the website of the company Risk Management

A Risk Management Committee has been constituted to oversee the risk management process in the Company as required under the Companies Act, 2013 and Clause 49 of the Listing Agreement. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. The Risk Management Policy has also been hosted on the website of the Company Vigil Mechanism

The Company has framed and implemented a vigil mechanism named as Whistle Blower Policy to deal with instances of fraud and mismanagement, if any. The details of the Whistle Blower Policy are provided in the Corporate Governance Report and also posted on the website of the Company.

During the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Dividend

During the year under review, the Company has no distributable profits hence your Directors do not recommend payment of any dividend. Transfer of Reserves

During the year, the Company has not transferred any amount to reserves.

Material changes between the date of Board Report and end of Financial Year

There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

Human Resources/Industrial Relations

The Company and its management value the talent, commitment and dedication of its employees and acknowledge their contribution. All employees in the Company work as a team and integral part of the family, sharing their ideas and concerns through discussions, Town Hall meetings and intranet network installed across the units.

Industrial Relations scenario at all units continues to be healthy and enthusiastic.

Information Technology

Information Technology continues to be an integral part of your company's business strategy. The Company is working on SAP platform integrating all its units located at different places/locations, its business processes, financial parameters, customer transactions and people, effectively on real time basis.

Change in the nature of Business

There is no change in the nature of the business of the company.

Corporate Governance and Management Discussion and Analysis

As stipulated under Clause 49 of the Listing Agreement entered with the Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and the Management Discussion and Analysis (MD & A) is also included in this report so that duplication and overlapping between Directors' Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner.

Listing of Shares

Presently Company's shares are listed and traded at the BSE Ltd., Mumbai (BSE) and National Stock Exchange of India, Mumbai (NSE), for which annual Listing Fee has been paid by the Company, till 31st March, 2016.

Conclusion

Your Company enjoys leadership position in domestic market with strong competitive advantage in the export segment. However due to sluggish market and consequent losses in the recent past, the Company is currently in consolidation mode. We shall, however continue to explore the opportunities to make investments and progress to further strengthen our leadership position.

Acknowledgments

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Governments authorities, Regulatory authorities, Stock Exchanges, stakeholders, customers and vendors for their continued support and co-operation, and for the trust reposed by them in the Management. Your Directors also wish to thank all the employees of the Company for their commitment and contributions.

For and on behalf of Board of Directors

Sd/- Place: New Delhi Ajay Kumar Choudhary Dated: August 13, 2015 Chairman


Mar 31, 2014

Dear Members,

The Directors are pleased to present the 22nd Annual Report together with the Audited Accounts for the year ended March 31,2014.

FINANCIAL RESULTS

The highlights of the financial results for the year ended 31st March, 2014 are as under: (Rs in Crores)

Particulars 2013-2014 Consolidated Standalone

Net Sales (Turnover) 1142.94 1142.90

Other Income 16.49 13.87

EBIDTA 87.07 87.96

Financial charges 92.48 81.04

Depreciation 22.31 18.21

Profit/(Loss) before tax (PBT) (27.72) (11.29)

Extra ordinary items (income)/ - - Impairment loss @ Fixed Assets

Exceptional Items - -

Net Profit from Operations (27.77) (11.29)

Prior Period Items 0.57 0.57

Tax expenses - -

Net Profit/(Loss) (28.29) (11.86)

EPS (0.49) (1.32)

Particulars 2012-2013 Consolidated Standalone

Net Sales (Turnover) 1190.72 1129.66

Other Income 27.66 20.75

EBIDTA 119.33 126.24

Financial charges 88.57 76.81

Depreciation 75.43 26.20

Profit/(Loss) before tax (PBT) (44.67) 23.23

Extra ordinary items (income)/ (402) _ Impairment loss @ Fixed Assets

Exceptional Items - -

Net Profit from Operations (40.65) 23.23

Prior Period Items 2.65 2.65

Tax expenses - -

Net Profit/(Loss) (43.30) 20.58

EPS (0.49) 234

MANAGEMENT DISCUSSION AND ANALYSIS REPORT :

The Indian Textile Industry is the one of leading Industry in the World and is one of the oldest, largest and significant industrial sectors in India. The Textile Industry is providing basic necessity and an important contributor to the GDP, employment, Industrial output and exports of India. Considering the demand in Asian Markets, the Indian textile producers are taking advantage of the current situation and have increased their exposure in these emerging markets. During the year 2013-14 the exports of textile industry has increased by 15-20% and is expected to touch around US$ 220 billion by 2020. The export opportunities are opening up for Indian Cotton/Synthetic Yarn in overseas markets and the same is bound to increase exports volume.

During the Fiscal 2013-14 under review, the cost of production has considerably increased owing to the increase in power tariff, production loss, fortnight increase of fuel prices, procurement of raw material at higher price and due to shortage of working capital funds etc, leading to decrease in EBITA levels. While the management has increased its sales volume as compared to last year but the factors like, the inadequate working capital limits and adverse external environment has impacted the margins negatively.

Further the Government''s sudden decision for removal of the exports benefits under focus market scheme (FMS) on cotton yarn, has decreased, the yarn exports by 20%, coupled with lower demand from key markets of the US & EU has adversely affected the operations of your Company and it could not achieve expected margins. However, with the gradual improvement in business dynamics viz. restoration of TUF subsidy, removal of ban on export of cotton yarn, upward revision of duty drawback rates on some of the textile products and revival of demand from the US market alongwith continued weakness of rupee against US dollar, Spentex is quite confident for improvement in its operational performance in near future.

FINANCIAL ANALYSIS AND PERFORMANCE REVIEW

During the Fiscal 2013-14 under review, your company has suffered production losses due to increase in Production cost and inadequate margins. Frequent increases in power tariff and fuel prices, higher payment for procurement of raw material and sudden glut in the domestic & international market has lead to decrease in EBITA levels. Inadequate working capital limits and adverse external environment also impacted the margins negatively.

The financial performance of the Company has been presented in two parts, as under:

(i) Spentex Industries Limited (Standalone) which excluded the performance of its subsidiaries and step-down subsidiaries.

(ii) Spentex Industries Limited (Consolidated) which included the performance of its subsidiaries and step-down subsidiaries. The Consolidated Financial Statements have brought out comprehensively the performance of Spentex Group of companies and are more relevant for understanding the overall performance of Spentex Group.

SEGMENT-WISE PERFORMANCE Yarn Manufacturing

During the year under review, your Company on standalone basis has manufactured 68941.08 MT of yarn as compared to 55100.47 MT of yarn produced during the previous year.

PERFORMANCE OF SUBSIDIARIES

The details of turnover and overall performance of material subsidiary companies is as under:

Amit Spinning Industries Ltd., India: During the year under review, due to financial constraints, the subsidiary could although manufacture 5123.08 MT of yarn under job work basis as compared to 4983.01 MT of yarn produced under job work basis in the previous year, yet it could not utilize its full capacity. However, during the current year its operations have improved and it would try utilizing its capacity to full extent. The Company has its manufacturing facilities at Kolhapur, Maharashtra with a capacity of 30,672 spindles.

Spentex Tashkent Toytepa LLC, Uzbekistan (STTL) & Spentex Netherlands B.V, Netherlands (SNBV): During the period of investment, Government of Uzbekistan (GOU) changed certain laws and policies breaching the investment agreement and rendered operation of STTL not only unviable, but also expropriated its investment. SNBV (a subsidiary company), which had made around 99% investment in the equity of STTL, has filed request for Arbitration against GOU for its Investment Dispute Claim through its lawyer before International Center for Settlement of Investment Dispute (ICSID). As per the schedule prescribed in the Procedural Order issued by ICSID, SNBV has filed the memorial on Jurisdictions and Merits on 30th June, 2014.

Schoeller Litvinov k.s., Czech Republic: During the year under review, the step down subsidiary could only manufacture 1525.31 MT of yarn as compared to 2530.40 MT of yarn produced during the previous year, due to adverse market conditions and financial constraints. The Company has manufacturing unit situated at Czech Republic with a capacity of 59,000 spindles.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has adequate internal control systems for business processes, with regards to efficiency of operations, financial reporting and controls, compliance with applicable laws and regulations, etc. Clearly defined roles and responsibilities down the line for all managerial positions have also been institutionalized. All operating parameters are monitored and controlled. Regular internal audits and checks to ensure that responsibilities are being executed effectively are carried out. The Audit Committee of the Board of Directors also reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them, from time to time.

MANAGEMENT PERCEPTION ON OPPORTUNITIES, RISKS, CONCERN & OUTLOOK

Rebounding of economic growth in key export destinations, the Indian Textile Industry is reasonably expected to bounce back its margins from negative to stable. Indian Yarn manufactures are further likely to be benefited in the Fiscal 2014-15 due to decreased yarn exports from China and simultaneous increase in demand for its exports in overseas market and as well Asian domestic market, which will in turn improve the fortunes of textile sector. With market oriented product mix, high value added products developed by the management of Spentex, the production-Sell of yarn is likely to go up and Company is optimistic to achieve better margins in near future.

Devaluation of Indian Rupee has continued to offer an opportunity of short term benefit to Textile Industry to optimize its day to day sales volumes and margins, by increased exports. Continued subsidy benefits under the revised TUF scheme, focus market scheme and reinstating of export incentives, are further likely to help Spentex to improve its margins.

However, any change in demand pattern from key markets of the US and EU, which are still reeling under recessionary condition could impact dip in exports, besides high import duty imposed by China against textile imports, uncertainty in fuel prices, strengthening of Indian rupee and inconsistent change in government policies etc are other factors which may impact margins in coming years.

Whereas, factors like formation of Stable Government, increase in demand of cotton yarn in domestic market and talk of economic reforms of new Government, have already improved market sentiments and the same is resulting in showing some recovery signs in the business environment prevailing since last year and further with the support of company bankers, your directors believe that sales volumes are reasonably expected to increase and consequently margins are also expected to be strengthened in due course.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

The Company and its management value the talent, commitment and dedication of its employees and acknowledge their contribution. Consequently, the employee turnover is negligible. Everybody, in the Company is working as a team and is an integral part of the family, sharing their ideas and concerns through conclaves, Town Hall meetings and intranet network installed across the units and is instrumental in making your Company, a globally admired company. Management of your Company believes that it is an integration of human resources and business strategy that has culminated into its success. High performance orientation is the pivot of the HR philosophy of the Company and all the HR policies and strategies are centered on the same.

Industrial Relations scenario at all units continues to be healthy and enthusiastic.

CONSOLIDATED FINANCIAL STATEMENTS IN RESPECT TO SUBSIDIARIES

The Company, having five subsidiaries/step down subsidiaries, the Board of Directors at their meeting held on 14th February, 2014 approved to disclose the financial information of the subsidiary companies in the Annual Report as per format approved by the Board. Accordingly, the Balance Sheet and Profit & Loss Account and other documents of subsidiary companies are not being attached with the Balance Sheet of the Company. These documents will however be available for inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presented by the Company includes financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Accounting Standard AS-21 of Institute of Chartered Accountants of India, (ICAI) an audited Consolidated Financial Statement read with Accounting Standard AS-23 of ICAI in respect of Investments in Associates, has been provided in the Annual Report. INFORMATION TECHNOLOGY

Information Technology continues to be an integral part of your company''s business strategy. The Company is working on SAP platform integrating all its units located at different places/locations, its business processes, financial parameters, customer transactions and people, effectively on real time basis. Besides, it minimizes the chances of manipulation of accounts by any individual.

DIVIDEND

During the year under review, the Company has no distributable profits hence your Directors do not recommend payment of any dividend. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement entered with the Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and the Management Discussion and Analysis (MD & A) is also included in this report so that duplication and overlapping between Directors'' Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner.

DIRECTORS

Mr. Amrit Agrawal is retiring by rotation in the forthcoming Annual General Meeting and being eligible, offer himself for re-appointment. During the year, subject to approval of shareholders in the ensuing General Meeting, the members of Remuneration Committee and Board of Directors at their respective meetings held on 13th November, 2013, have re-appointed Mr. Ajay Kumar Choudhary as Chairman for another term of 4 years w.e.f. 02-12-2013, Mr. Kapil Choudhary as Dy. Managing Director and Mr. Sitaram Parthasarthy as Director Works, both for another term of 5 years w.e.f. 02-12-2013.

Pursuant to Section 149 and 152 of Companies Act, 2013 and applicable provisions, Mr. Prem Malik, Mr. R K Thapliyal, Mr. Shyamal Ghosh, Mr. D.P. Singh, and Mr. Deepak Diwan, being the Independent Directors of the Company are proposed to be re- appointed as Independent Directors for a period of five years effecting from the ensuing Annual General Meeting.

Brief resume of the Directors proposed to be re-appointed, nature of their expertise in specific functional areas and names of the companies in which they hold directorship and membership/chairmanships of the Board or its Committees, as stipulated under Clause 49 of the listing agreement entered by the Company with stock exchanges in India, is provided in the Report of Corporate Governance forming part of the Annual Report.

AUDITORS

The Auditors of the Company M/s. J C Bhalla, Chartered Accountants retire at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment for a period of three financial years.

AUDITORS REPORT

The Auditors'' Report read with the Notes to Accounts is self-explanatory and do not call for any further explanation under Section 217 (3) of the Companies Act, 1956, except for the responses in respect of some observations as mentioned here in below.

DIRECTORS'' VIEW OF AUDITOR''S OBSERVATIONS

Directors'' response to the various observations of the auditors made in their report, even though explained wherever necessary through appropriate notes to accounts, is reproduced hereunder in compliance with the relevant legal requirements:

Note No. 41 of the Financial Statement qualified by Auditors

The company has an investment of Rs.20,44,69,921/- in and has amount recoverable amounting to Rs 54,82,77,206/- to Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31,2014. The accumulated losses of ASIL, at the year end exceeded its net worth. There is also reduction in market value of the investment at the year end by Rs 19,60,77,490. In the opinion of the management, diminution in this long term investment is due to adverse business conditions in the past. Management believes that diminution in the value of investment is of temporary nature and that outstanding would be realised within a reasonable period of time. Accordingly no provision considered necessary in the value of investment held and amount due from ASIL.

Note No. 42 of the Financial Statement qualified by Auditors

The Company has an investment of Rs 56,10,11,339 and Rs 93,23,779 in its subsidiary Spentex Netherlands B. V. (SNBV) and its step down subsidiary Spentex Tashkent Toytepa LLC (STTL) respectively. Further it has Rs 7,00,12,404 as export receivable from STTL and advances of Rs 9,50,70,902 in SNBV as on March 31,2014. During the period of investment, Government of Uzbekistan (GOU) changed certain laws and policies by breaching the investment agreement and rendered operation of STTL unviable and insolvency proceedings have been initiated against it. Since investment agreement entered between GOU and company, Treaties entered between countries were breached, Company has initiated Arbitration proceeding against GOU for protection of investment and dues & compensation dispute Claim in International Centre for Settlement of Investment Dispute (ICSID) SNBV appointed various experts to assess losses suffered by the company. Based on the reports and claims lodged with ICSID, Board of Director''s have decided not to make any provision for the aforesaid amounts.

Note No. 43 of the Financial Statement without qualifying Auditors, have drawn attention:

As on March 31,2012, the accumulated losses of the Company had exceeded its net worth. Accordingly company in compliance with the provisions of section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 filed a reference with Board for Industrial and Financial Restructuring (BIFR). The Company''s operations were adversely affected in 2011-12 due to adverse Govt policies and high volatility of Raw Material prices. Further, considering the change in scenario, recent performance and trends of the company as well as overall industry outlook, the management believes that losses incurred in the past would reasonably be made good, in due course. The financial statements, as such have been prepared on a going concern basis on the strength of management''s plan of revival including reorganization of business. Note No. 44 of the Financial Statement without qualifying by Auditors, have drawn attention:

Trade receivables, advance balances and receivables amount aggregating to Rs 63,71,477, Rs 2,73,14,712, Rs 17,869,256 respectively due from certain parties where payments are not forthcoming. Against the above, the Company has filed a suit for recovery. In addition to above for Rs 1,28,30,469 dues from Government Authorities company filed an application for release with concerned authorities. The Company is making effort to recover the same and expects to reduce the outstanding dues significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at the stage.

Note No. 45 of the Financial Statement without qualifying by Auditors, have drawn attention:

The company has applied to Securities & Exchange Board of India (SEBI) seeking exemption for maintaining at least 15% of the amount of its debenture maturing during the financial year 2013-14 vide circular no 04/2013 dated 11-Feb-2013 issued by Ministry of Corporate Affair, which is still awaited

Note No. 46 of the Financial Statement without qualifying by Auditors, have drawn attention:

The outstanding balance as on 31st March, 2014 in respect of certain trade receivables, trade payables and loans & advances are subject to confirmation/reconciliation and consequential adjustment if any, from the respective parties. The management, however, does not expect any material variations COST AUDITORS

Mr. Rajesh Goyal, a Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants has been appointed to carry out audit of the Cost Accounts maintained by the Company for the financial year ending 31st March, 2014. The Central Government has approved the appointment of Mr. Rajesh Goyal, Cost Accountant to conduct the audit of the Cost Accounts of the Company for the financial year ending 31st March, 2014 for the product "Textile". Cost Auditor would submit its report to concerned authorities in due course, in terms of applicable rules, guidelines and statutory provisions.

FIXED DEPOSITS

The Company has not accepted any deposit during the year and there are no outstanding and/or overdue deposits as at 31st March, 2014. LISTING OF SHARES

Presently Company''s shares are listed and traded at the Bombay Stock Exchange Ltd., Mumbai (BSE) and National Stock Exchange of India, Mumbai (NSE), for which annual Listing Fee has been paid by the Company, till 31st March, 2015.

DIRECTORS'' RESPONSIBILITY STATEMENT Your Directors hereby state and confirm that:

i) in preparing the Annual Accounts for the year ended 31st March 2014 all the applicable Accounting Standards have been followed,

ii) accounting policies were adopted and applied consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2014,

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

iv) the Annual Accounts have been prepared on a "going concern" basis.

PARTICULARS OF EMPLOYEES

In terms of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure to the Directors'' Report. However, as per the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956 the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ENERGY CONSERVATION, TECHNOLOGYABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Company has implemented energy conversion methods and such action has resulted into major savings in energy consumption as well as in cost control. However the information as required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is set out in the Annexure - I; the same is forming part of this Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on record their appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

CONCLUSION

Your Company enjoys the leadership position in domestic market with strong competitive advantage in the export segment. However due to losses in recent past, the Company is in consolidation mode. We will, however continue to explore the opportunities to make investments and progress to further strengthen our leadership position.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Governments authorities, Regulatory authorities, Stock Exchanges, stakeholders, customers and venders for their continued support and co-operation, and also thank them for their trust reposed in the Management. Your Directors also wish to thank all the employees of the Company for their commitment and contributions.

For and on behalf of Board of Directors

Sd/- Place: New Delhi Ajay Kumar Choudhary Dated: August 13, 2014 Chairman


Mar 31, 2013

Dear Members,

The Directors are pleased to present the 21st Annual Report together with the Audited Accounts for the year ended March 31, 2013.

FINANCIAL RESULTS

The highlights of the financial results for the year ended 31st March, 2013 are as under:

(Rs.in Crores)

Particulars 2012-2013 2011-2012 Consolidated Standalone Consolidated Standalone

Net Sales (Turnover) 1,190.72 1,129.66 1,090.60 967.84

Other Income 27.66 20.75 7.68 15.41

EBIDTA 119.34 126.24 (81.66) (30.43)

Financial charges 88.57 76.81 97.09 85.42

Depreciation 75.43 26.20 78.17 33.08

Profit/(Loss) before tax (PBT) (44.66) 23.23 (256.52) (149.42)

Extra ordinary items (income) (4.02) 0.41 0.41

Impairment loss @ Fixed Assets

Exceptional Items 16.74 48.59

Net Profit from Operations (40.64) 23.23 (273.67) (198.42)

Prior period expenses 2.65 2.65

Tax expenses 3.03 3.03

Net Profit/(Loss) (43.29) 20.58 (276.70) (201.45)

EPS (0.49) 2.34 (33.31) (24.25)

CONSOLIDATED FINANCIAL STATEMENTS IN RESPECT TO SUBSIDIARIES

The Company is having six subsidiaries/ step down subsidiaries. Pursuant to SEBI Circular No. 2/2011 dated 08.02.2011, the Board of Directors at their meeting held on 13th February, 2013 approved to disclose the financial information of the subsidiary companies in the Annual Report as per format approved by the Board. Accordingly, the Balance Sheet and Profit & Loss Account and other documents of subsidiary companies are not being attached with the Balance Sheet of the Company. These documents will however be available for inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presented by the Company includes financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Accounting Standard AS-21 of Institute of Chartered Accountants of India, (ICAI) an audited Consolidated Financial Statement read with Accounting Standard AS-23 of ICAI in respect of Investments in Associates, is has been provided in the Annual Report.

INFORMATION TECHNOLOGY

Information Technology continues to be an integral part of your company''s business strategy. The Company is working on SAP platform integrating all its units located at different places/locations, which integrates its business processes, financial parameters, customer transactions and people, effectively on real time basis. Besides it minimizes the chances of manipulation of accounts by any individual.

DIVIDEND

During the year under review, the Company has no distributable profits hence your Directors do not recommend payment of any dividend.

ISSUE OF EQUITY SHARES

During the year under review, your Company has issued and allotted 51,00,000 equity shares of Rs. 10/- each on 8th October, 2012 to CLC Technologies Private Limited, a promoters group Company in terms of CDR rework package which rank pari passu with the existing equity shares. Accordingly, the paid-up capital of the Company has been increased from Rs. 83,27,20,360 to Rs. 883,720,350/-consisting of 8,83,72,035 equity shares of Rs. 10/- each.

TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND

The Company informs herewith to all its shareholders whose dividend still remained unclaimed for the year 2004-05 (declared by erstwhile Indo Rama Textiles Limited, which has since been amalgamated with the Company) that pursuant to Section 205A of the Companies Act, 1956, the Company is required to transfer unpaid and unclaimed dividend to Investor Education & Protection Fund on completion of 7 years of transferring of unpaid dividend into unpaid dividend account. Accordingly, Company is taking appropriate steps in this regard.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement entered with the Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and the Management Discussion and Analysis (MD & A) is also included in this report so that duplication and overlapping between Directors'' Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner.

DIRECTORS

Shri Ajay Kumar Choudhary, Shri Kapil Choudhary and Shri Sitaram Parthasarathy are retiring by rotation in the forthcoming Annual General Meeting and being eligible, they offer themselves for re-appointment. Further, subject to approval of shareholders in the ensuing General Meeting and Central Government, the members of Remuneration Committee and Board of Directors at their meeting held on 13th February, 2013, have re-appointed Shri Mukund Choudhary as Managing Director and Shri Amrit Agrawal as Director Finance for another term of 5 years.

Brief resume of the Directors proposed to be re-appointed, nature of their expertise in specific functional areas and names of the companies in which they hold directorship and membership/chairmanships of the Board or its Committees, as stipulated under Clause 49 of the listing agreement with stock exchanges in India, is provided in the Report of Corporate Governance forming part of the Annual Report.

AUDITORS

M/s. J C Bhalla, Chartered Accountants who are the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends for their re-appointment.

DIRECTORS'' VIEW OF AUDITOR''S OBSERVATIONS

Directors'' response to the various observations of the auditors made in their report, even though explained wherever necessary through appropriate notes to accounts, is reproduced hereunder in compliance with the relevant legal requirements :

Note No. 41 of the Financial Statement qualified by Auditors

''The company has an investment of Rs. 20,44,69,921/- in and has amount recoverable amounting to Rs. 47,10,47,260/- from Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2013. The accumulated losses of ASIL, at the year end exceeded its net worth. There is also reduction in market value of the investment at the year end by Rs. 18,18,10,358. In the opinion of the management, diminution in this long term investment is due to adverse business conditions in the past. ASIL has started generating EBIDTA and cash profits. In view of these developments, management believes that diminution in the value of investment is of temporary nature and that outstanding would be realised within a reasonable period of time. Accordingly no provision considered necessary in the value of investment held and amount due from ASIL.''

Note No. 42 of the Financial Statement without qualifying Auditors, have drawn attention:

The Company has an investment of Rs. 56,10,11,339 and Rs. 93,23,779 in its subsidiary Spentex Netherlands B. V. (SNBV) and its step down subsidiary Spentex Tashkent Toytepa LLC (STTL) respectively. Further it has Rs. 7,00,12,404 as export receivable from STTL and advances of Rs. 9,50,70,902 in SNBV as on March 31, 2013. During the period of investment Government of Uzbekistan changed certain laws and policies by breaching the investment agreement and rendered operation of STTL unviable. Since treaties entered between the Governments of India and Uzbekistan and the Investment agreement entered between Govt. of Uzbekistan and STTL were breached, company has issued notice claiming in excess of USD 100 Mn. towards protection of investment and payment of dues & compensation for the losses suffered by the company. Company has since been making all possible efforts to settle the same amicably with the Govt. of Uzbekistan, failing which arbitration proceeding would be initiated by the company to recover its Investment and claims. In view of the legal opinion and claim lodged with the Govt of Uzbekistan, the Directors have decided not to make any provision for diminution in value of investment at this stage.

Note No. 43 of the Financial Statement without qualifying Auditors, have drawn attention:

Trade receivables and advance balances include amount aggregating to Rs. 63,71,477/- and Rs. 2,73,14,712/- respectively due from certain parties where payments are not forthcoming. Against the above, the Company has filed a suit for recovery. The Company is making effort to recover the same and expects to reduce them significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at the stage.

Note No. 47 of the Financial Statement without qualifying by Auditors, have drawn attention:

As on March 31, 2012, the accumulated losses of the Company had exceeded its net worth. Accordingly company in compliance with the provisions of section 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 filed a reference with Board for Industrial and Financial Restructuring (BIFR). The Company''s operations were adversely affected in 2011-12 due to adverse Govt policies and high volatility of Raw Material prices. Further, considering the change in scenario, recent performance and trends of the company as well as overall industry outlook, the management believes that losses incurred in the past would reasonably be made good, in due course. The financial statements, as such have been prepared on a going concern basis on the strength of management''s plan of revival including reorganization of business.

COST AUDITORS

Pursuant to a directive of the Central Government, your Company is required to get Cost Audit conducted for the product "Textile" for every year until further notice. Accordingly Shri Rajesh Goyal, a Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants was appointed to carry out audit of the Cost Accounts maintained by the Company for the financial year ending 31st March, 2013. Cost Auditor would submit its report to concerned authorities in due course, in terms of applicable rules, guidelines and statutory provisions.

FIXED DEPOSITS

Your Company has not accepted any deposits during the year under review within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that:

i) in preparing the Annual Accounts for the year ended 31st March 2013 all the applicable Accounting Standards have been followed,

ii) accounting policies were adopted and applied consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2013,

iii) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,

1956 for safeguarding the assets of the Company and for preventing / detecting fraud and irregularities has been taken and iv) the Annual Accounts have been prepared on a "going concern" basis.

PARTICULARS OF EMPLOYEES

In terms of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure to the Directors'' Report. However, as per the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956 the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Company has implemented energy conversion methods and such action has resulted into major savings in energy consumption as well as in cost control and new products also been developed. However the information as required under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is set out in the Annexure – I; the same is forming part of this Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on record their appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

CONCLUSION

Your Company enjoys the leadership position in domestic market with strong competitive advantage in the export segment. However due to losses in recent past, the Company is in consolidation mode. We will, however continue to explore the opportunities to make investments and progress to further consolidate our leadership position.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Governments authorities, Regulatory authorities, Stock Exchanges, stakeholders, customers and venders for their continued support and co-operation, and also thank them for the trust reposed in the Management. Your Directors also wish to thank all the employees of the Company for their commitment and contributions.

For and on behalf of Board of Directors

Place: New Delhi Ajay Kumar Choudhary

Dated: May 29, 2013 Chairman


Mar 31, 2011

The Directors are pleased to present the 19th Annual Report together with the Audited Accounts for the year ended March 31, 2011.

FINANCIAL RESULTS

The highlights of the financial results for the year ended 31st March, 2011 are as under: (Rs. in Crores)

Particulars 2010-2011 2009-2010 Consolidated Standalone Consolidated Standalone

Net Sales (Turnover) 1604.32 1027.00 1223.38 732.22

Other Income 64.44 51.74 61.04 47.74

EBIDTA 210.29 151.63 109.72 81.86

Financial charges 93.24 80.05 80.19 69.16

Depreciation 74.24 34.08 75.29 35.04

Extra Ordinary Items (Income) - - 32.04 -

Profit/(Loss) before tax (PBT)42.82 37.50 (45.06) (22.34)

Fringe benefit tax - - 0.02 0.02

Net Profit from Operations 42.82 37.50 (45.08) (22.36)

Impairment loss @ Fixed Assets41.07 - - -

Net Profit/(Loss) 1.75 37.50 (45.08) (22.36)

EPS 0.23 4.87 (10.79) (3.13)

DIVIDEND

During the year the Company has no distributable profits hence your Directors do not recommend any dividend.

ISSUE OF EQUITY SHARES ON CONVERSION OF SHARE WARRANTS

During the year under review, your Company has issued and allotted 75,89,000 equity shares on 13th August, 2010 and 31st March, 2011 to CLC Technologies Private Limited, a promoters group Company in respect to option exercised by warrant holder to convert same number of share warrants at a price of Rs.16.95 (including premium of Rs. 6.95). Accordingly, the paid-up capital of the Company has been increased from Rs. 737,330,350/- to Rs. 813,220,350/- consisting 81,322,035 equity shares of Rs. 10/- each.

TRANSFER OF INVESTOR EDUCATION & PROTECTION FUND

The Company informs herewith all its shareholders whose dividends are unclaimed for the year 2003-04 (declared by erstwhile Indo Rama Textiles Limited, which has since been amalgamated with the Company) that pursuant to Section 205A of the Companies Act, 1956, the Company is required to transfer unpaid and unclaimed dividend to Investor Education & Protection Fund on completion of 7 years of transferring into unpaid dividend account and shall ensure that they receive their rightful dues. Company is taking appropriate steps in this regard.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement entered with the Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and the Management Discussion and Analysis (MD & A) is also included in this report so that duplication and overlap between Directors Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner.

DIRECTORS

Shri R K Thapliyal, Shri Prem Malik and Shri Shyamal Ghosh are retiring by rotation in the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. During the year, the five year term of Shri Ajay Kumar Choudhary, Chairman, Shri Kapil Choudhary, Deputy Managing Director and Shri Sitaram Parthasarathy, Director Works ceased on 1st December, 2010. The Remuneration Committee and Board of Directors, subject to requisite approvals, re-appointed them for another term of 3 years w.e.f. 2nd December, 2010.

Brief resume of the Directors proposed to be re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership/chairmanships of Board Committees, as stipulated under Clause 49 of the listing agreement with stock exchanges in India, is provided in the Report of Corporate Governance forming part of Annual Report.

AUDITORS

M/s. J C Bhalla, Chartered Accountants who are the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re- appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their re- appointment.

DIRECTORS VIEW ON AUDITORS OBSERVATIONS

Directors response to the various observations of the auditors even though explained wherever necessary through appropriate notes to accounts, is reproduced hereunder in compliance with the relevant legal requirements.

Reference Para 4 of the Auditors Report

Schoeller Litvinov k.s. (SLKS), the Czech step-down subsidiary of the Company, had registered losses during the year and earlier financial years due to economic slowdown. This step down subsidiary had submitted a re-organization plan seeking deferment of payment to Secured creditors, and proportionate waiver of unsecured liabilities which has since been approved by the court. The Company believes that the reorganization plan, considering improvement in the global textile market, will turn around this subsidiary, so as to make good its losses in a foreseeable period and will also place this subsidiary in a position to repay the liabilities in due course. Accounts and other receivables Rs. 327,965,283 (Previous Year 468,986,120) is due from SLKS as at March 31, 2011. Accordingly, provision against these Accounts and other receivables is not considered necessary at this stage.

In view of developments, Company believes in future with the financial viability of this subsidiary such amounts would be realized within a reasonable period of time.

COST AUDITORS

The Central Government had directed an audit of the cost accounts maintained by the Company in respect of textile business. The Central Government has approved the appointment of Shri Rajesh Goyal, a Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants to conduct the audit of the Cost Accounts of the Company for the financial year ending 31st March, 2011 for the product “Textile”.

FIXED DEPOSITS

Your Company has not accepted any deposits during the year within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that: i) in preparing the Annual Accounts for the year ended 31st March 2011 all the applicable Accounting Standards have been followed,

ii) accounting policies were adopted and applied consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2011,

iii) proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing / detecting fraud and irregularities has been taken and

iv) the Annual Accounts have been prepared on a "going concern" basis.

PARTICULARS OF EMPLOYEES

In terms of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure to the Directors Report. However, as per the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956 the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure – I to the Directors Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on record their appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

CONCLUSION

Your Company enjoys a leadership position in domestic market with strong competitive advantage in export segment. The Company now stands at the cusp of the next phase of growth. We will continue to make investments and progress to further consolidate our leadership position.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Governments authorities, Regulatory authorities, Stock Exchanges, stakeholders, customers and venders for their continued support and co-operation, and also thank them for the trust reposed in the Management. Your Director also wishes to thank all the employees of the Company for their commitment and contributions.

For and on behalf of Board of Directors

Place: New Delhi Ajay Kumar Choudhary

Dated: May 12, 2011 Chairman


Mar 31, 2010

The Directors have great pleasure in presenting the 18th Annual Report together with the Audited Accounts for the year ended March 31, 2010.

FINANCIAL RESULTS

The highlights of the financial results are as under: (in Crores)

Particulars 2009-2010

Consolidated Standalone

Net Sales (Turnover) 1223.38 732.22

Other Income 61.04 47.74

EBIDTA 78.38 81.86

Financial charges 80.19 69.16

Depreciation 75.29 35.04

Exceptional items - -

Extra Ordinary Items 32.04 -

Profit/(Loss) before tax (PBT) (45.06) (22.34)

Provision for current tax - -

Provision for deferred tax - -

Fringe benefit tax 0.02 0.02

Profit/(Loss) after tax (PAT) but before Minority Int. (45.08) (22.36)

Minority Interest - -

Net Profit/(Loss) (45.08) (22.36)

2008-2009

Particulars Consolidated Standalone

Net Sales 1216.92 681.80

Other Income 26.49 26.56

EBIDTA (44.87) 31.52

Financial charges 97.93 69.23

Depreciation 78.93 39.31

Exceptional items 12.72 -

Extra Ordinary Items - -

Profit/ before tax (234.45) (77.02)

Provision for current tax 0.07 -

Provision for deferred tax 8.28 -

Fringe benefit tax 0.39 0.37

Profit/ after tax (243.19) (77.39) but before Minority Int.

Minority Interest 7.01 -

Net Profit/ (236.18) (77.39)



MANAGEMENT DISCUSSION AND ANALYSIS REPORT



World economy has shown initial indications of recovery after a severe spell of recession and is expected to grow by 4.2 percent in 2010 and projected to maintain the growth momentum in the next 5 years. However, the consumer confidence in major importing countries like USA and EU has been lagging behind economic growth projections and may take some more time before showing any convincing revival. The timely policy response from the Indian Government and the resilience of the Indian economy led to a smooth and consistent recovery, in spite of the uncertainty over sub normal monsoon. The resurgence has been broad-based with both Services and Manufacturing sector growing at high rates. All leading indicators including IIP growth, credit growth, continuous surge in imports and exports since November 2009 and the growth in all industry groups point towards a sustainable recovery. Though inflation and currency appreciation may pose challenges in the short term, RBIs timely monetary initiatives, including the calibrated exit from the accommodative stance, will ensure that Indias growth remains unhindered. The year has proved that though the Indian economy is interlinked with the global economy, its focus on domestic markets and the Governments prudent policies will help maintain a high growth trajectory.

The Textile Industry plays a very important role in our Countrys Economy since it came into existence in India. It contributes about 14 per cent to industrial production, 4 per cent to the countrys gross domestic product (GDP) and 17 per cent to the countrys export earnings. Moreover, total textile exports have been increased to US$ 18.6 billion during April09-January10, from US$ 17.7 billion during the corresponding period of the previous year, registering an increase of 4.95 per cent in rupee terms. Further, the share of textile exports in total exports has been increased to 12.36 per cent during April09-January10, according to the Ministry of Textile and is the second largest employment providers after agriculture i.e. direct employment to more than 35 million people. The Indian textile industry is one of the largest in the world with a massive raw materials and textile-manufacturing base and also currently India has attained the position of having second highest spindleage in the world after China.

The spun yarn production is expected to increase at about 4200 mn kg in 2009-10 and is likely grow by about 8% to 4500 mn kg in 2010-11. The domestic deliveries of spun yarn have also been growing consistently showing increased activities in the entire textile value chain. There are some areas of concerns also, which need to be stated here. Along-with recovery, the textile industry is also facing increase in input prices in sync with the global trends. In addition to appreciating rupee, free export of cotton followed by withdrawal of duty refund on cotton yarn are also causing concerns for the sustained recovery in the textile industry

Spentex has utilized the opportunity offered by the global recession for introspection to identify areas of improvement i.e. fine tuning supply chain management and resource optimization to strengthen our competitiveness by offering more value to customers in terms of high value added products. It is a matter of pleasure to note that such initiatives have paid us well, enhanced our learning, strengthen our resolve and increase our capabilities to overcome such events in future. We have a firm faith in the bright future of textile industry in India.

FINANCIAL ANALYSIS AND PERFORMANCE REVIEW

The performance of the Company in fiscal year 2009-10 has significantly improved as compared to the performance in fiscal 2008- 09. This significant improvement is attributed to increase in total sales value and volumes, better fund flow management coupled with successfully implemented Corporate Debt Restructuring Scheme and Enhanced usage of ERP - SAP to bring efficiencies in business.

The financial performance of Spentex industries Limited is discussed in two parts:

(i) Spentex Industries Limited (Standalone) which excludes the performance of subsidiaries and step-down subsidiaries of Spentex Industries Limited.

(ii) Spentex Industries Limited (Consolidated) which includes the performance of subsidiaries and step-down subsidiaries of Spentex Industries Limited. The Consolidated Financial Statements bring out comprehensively the performance of Spentex Group of companies and are more relevant for understanding the overall performance of Spentex Group.

Your Company has made a strong comeback. It has been able to achieve much better operational performance in terms of achieving higher sales value and overall efficient operations which led to reduction in consolidated net loss from Rs. 236.18 Crores to Rs. 45.11 Crores i.e. down by 81% and in reduction in standalone net loss from Rs. 77.39 Crores to Rs. 22.36 Crores i.e. down by 71% respectively.

SEGMENT-WISE PERFORMANCE

Yarn Manufacturing

During the year under review, your Company on standalone basis has manufactured 56,652MT of yarn as compared to 52,255MT of yarn produced during the previous year and on consolidated basis has manufactured 92,608 MT of yarn as compared to 91,971MT of yarn produced during the previous year which reflects an increase of 8.41% on standalone basis and 0.69 % on consolidated basis.

PERFORMANCE OF SUBSIDIARIES

The Company had eight subsidiaries at the beginning of the year. The turnover and overall performance of material subsidiary companies are as under:

Amit Spinning Industries Ltd., India: During the year its production of yarn has been increased by 165.37% and sales turnover increased by 57% as compared to previous year. The Company has its manufacturing facilities at Kolhapur, Maharashtra with a capacity of 30,672 spindles.

Spentex Tashkent Toytepa LLC, Uzbekistan: During the year its production of yarn has been increased by 9.98% and sales turnover increased by 23.93% as compared to previous year. The Company has two manufacturing units situated at Tashkent and Toytepa with a capacity of 220,000 spindles and 236 Air jet looms.

Schoeller Litvinov K.S., Czech Republic: During the year its production of yarn has been decreased by 54.65% and sales turnover decreased by 63.49% as compared to previous year. The Company has manufacturing unit situated at Czech Republic with a capacity of 59,000 spindles.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has appropriate internal control systems for business processes, with regards to efficiency of operations, financial reporting and controls, compliance with applicable laws and regulations, etc. Clearly defined roles and responsibilities down the line for all managerial positions have also been institutionalized. All operating parameters are monitored and controlled. Regular internal audits and checks ensure that responsibilities are executed effectively. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them, from time to time.

MANAGEMENT PERCEPTION ON OPPORTUNITIES, RISKS, CONCERN & OUTLOOK

One of the major challenges to the textile industry is the continued appreciation in the Indian rupee against US dollar, which has serious implication on textile exports. Being highly competitive industry, increase in the external value of rupee would cripple the competitiveness of the industry. Another important issue is availability, quality and the price of power. The availability of good quality power at reasonable prices is critical for sustainability of the industry. However, the cost of power has been continuously increasing, adding to the input cost pressure in the industry. We hope that power situation will improve in the coming year. The differentiated treatment for different sectors of textile industry in government policy is also a serious development. The proposal to withdraw duty refund on cotton yarn exports can be seen in this respect. An integrated approach is required for the growth of the industry in the country. We are making all efforts to cope up with the challenges through continuous cost reduction, process improvements and improved customer services to mitigate the growing cost pressure.

On the other side, encouraging factors in favor of spinning sector are the rise in domestic and export demand which resulted into rise on volumes over last corresponding period.

In view of these measures and initiatives, it is expected that Indian textile industry would continue to grow at an impressive rate. The textile industry is anticipated to generate 12 million new jobs.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

During the period of recession and global turmoil when every company was in process of laying off their employees to reduce cost, your company systematically nurtured its greatest resource–human resource. Consequently, the employee turnover was negligible. The Company and its management value the talent, commitment and dedication of its employees and acknowledge their contribution. Everyone in the Company is working as a team and is integral part of a family, welcoming the idea of making Spentex, a globally admired company. Management of your Company believes that it is the integration of human resources and business strategy that has culminated in its success. High performance orientation is the pivot of the HR philosophy of the Company and all the HR policies and strategies are centered on the same.

Industrial Relations remained cordial and not a single days work was lost due to any industrial dispute during the year.

SUBSIDIARIES

The Company had eight subsidiaries at the beginning of the year. The Ministry of Corporate Affairs, Government of India, vide order No.47/80/2010-CL-III dated March 15th 2010 has granted approval that the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section 212 of the Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet and Profit & Loss Account and other documents of subsidiary companies are not being attached with the Balance Sheet of the Company. Financial Information of the subsidiary companies, as required by the said order, is disclosed in the Annual Report. The Company will make available the Annual Accounts and related details upon request by any member of the Company. These documents will also be available for inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presented by the Company includes financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

INFORMATION TECHNOLOGY

Information Technology continues to be an integral part of Spentexs business strategy. The Company is working on SAP platform integrating all units located at different places, which will integrate business processes, financial parameters, and customer transactions and people effectively.

DIVIDEND

During the year the Company has no distributable profits hence your Directors do not recommend any dividend.

ISSUE OF CONVERTIBLE SHARE WARRANTS

During the year under review, your Company has issued and allotted 1,18,00,000 share warrants at a price of Rs.16.95 (including premium of Rs. 6.95) to CLC Technologies Private Limited, a promoter group company. Out of above, the Company has allotted 2,261,000 equity shares on 31st March, 2010 pursuant to option exercised by the share warrant holder to convert 2,261,000 share warrants in equal number of fully paid up equity shares. Accordingly, the paid-up capital of the Company has been increased from Rs. 714,720,350/- to Rs. 737,330,350/- consisting 73,733,035 equity shares of Rs. 10/- each.

TRANSFER OF UNPAID/UNCLAIMED DIVIDEND INTO INVESTOR EDUCATION & PROTECTION FUND

The Company informs herewith all its shareholders whose dividends are unclaimed for the year 2002-03 (declared by erstwhile Indo Rama Textiles Limited, which has been amalgamated with the Company) that pursuant to Section 205A of the Companies Act, 1956, the Company is required to transfer unpaid and unclaimed dividend to Investor Education & Protection Fund on completion of 7 years of transferring into unpaid dividend account and shall ensure that they receive their rightful dues. Company is taking appropriate steps in this regard.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement entered into with Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and the Management Discussion and Analysis (MD & A) is included in this report so that duplication and overlap between Directors Report and a separate MD & A is avoided and the entire information is provided in a composite and comprehensive manner.

DIRECTORS

Shri Ajay Kumar Choudhary, Shri Kapil Choudhary and Shri Sitaram Parthasarathy retire by rotation in the forthcoming Annual General Meeting and being eligible offers themselves for re-appointment. During the year Shri Pankaj Sharma has resigned from the Board of Directors with effect from close of business on 1st May, 2009, your Directors would like to record their appreciation of the services rendered by Shri Sharma.

During the year, the three year term of Shri Amrit Agrawal, Director Finance ceased on 27th April, 2010. The Remuneration Committee and Board of Directors, subject to requisite approvals, re-appointed him for another term of 3 years w.e.f. 28th April, 2010.

In terms of Section 260 of the Companies Act, 1956, Shri Rajeev Kalra has been appointed as Additional Director, consequent to his nomination by Citigroup Venture Capital International Growth Partnership Mauritius Ltd. on the Board w.e.f. 10th June, 2010 in place of Shri Vivek Chhachhi who has tendered his resignation w.e.f. 12-5-2010. Directors appreciated the services rendered by Shri Vivek Chhachhi during his tenure as director of the company.

Brief resume of the Directors proposed to be appointed/re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership/chairmanships of Board Committees, as stipulated under Clause 49 of the listing agreement with stock exchanges in India, is provided in the Report of Corporate Governance forming part of Annual Report.

AUDITORS

During the year, the members in their Extra Ordinary General Meeting held on 19th January, 2010 appointed M/s. J C Bhalla & Company, Chartered Accountants as Statutory Auditors of the Company for the year 2009-10 in place of M/s. Price Waterhouse, Chartered Accountants, who have tendered resignation as Statutory Auditors of the Company.

M/s. J C Bhalla & Company, Chartered Accountants who are the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their re-appointment.

DIRECTORS VIEW ON AUDITORS OBSERVATIONS

Directors response to the various observations of the auditors even though explained wherever necessary through appropriate notes to accounts, is reproduced hereunder in compliance with the relevant legal requirements.

Reference Para 4(a) of the Auditors Report

The Company has an investment of Rs 204,469,921 in Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2010. The accumulated losses in ASIL, at the year end exceeded its net worth. There is also a reduction in market value of these investments as at the year end by Rs.162,297,956 (Previous Year Rs. 171,949,252). In the opinion of the directors, the above diminution in this long term investment is due to adverse business conditions and is not ultimately expected to continue in future. Based on recent performance and trends of ASIL and overall industry outlook, there is an increase in average selling prices of yarn, consistent increase in production level and reduction in procurement costs of raw materials. Consequent to such developments, ASIL has started generating EBIDTA and cash profits.

In view of these developments, directors believes in future financial viability of this subsidiary and accordingly, provision for the diminution in the value of this long term investment is not considered necessary at this stage.

Regarding the loans, advances, and interest due on the loan amounting to Rs. 440,528,019, Rs. 17,726,208, and Rs.60,414,121 respectively, amount Rs.170,400,000 related to Loan has been subsequently received and for remaining balances, directors believe that the such amounts would be realized within a reasonable period of time . Accordingly, no provision is considered necessary at this stage. (Note 9(a) of Notes to Accounts in Schedule XXI of Accounts Annexed).

Reference Para 4(b) of the Auditors Report

Schoeller Litvinov k.s. (SLKS), the Czech step-down subsidiary of the Company, had registered losses during the year and earlier financial years due to economic slowdown. This step down subsidiary had submitted a re-organization plan seeking deferment of payment to Secured creditors, and proportionate waiver of unsecured liabilities which has now been approved by the court. The directors believe that the reorganization plan, considering improvement in the global textile market, will turn around this subsidiary, so as to make good its losses in a foreseeable period of time and will also place this subsidiary in a position to repay the liabilities in due course. Accounts and other receivables Rs. 468,986,120 is due from SLKS as at March 31, 2010. Accordingly, provision against these Accounts and other receivables is not considered necessary at this stage. (Note 9(b) of Notes to Accounts in Schedule XXI of Accounts Annexed).

Reference Para 4(c) of the Auditors Report

Sundry Debtors and Advances include amounts aggregating Rs. 17,408,913 and Rs. 22,473,335 respectively due from certain customers where payments are not forthcoming. Of the above, the Company has filed a suit for recovery of Rs. 17,408,913 against two of the customers. Further, in respect of the advances of Rs. 22,473,335 the Company is making efforts to recover the same and expects to reduce them significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the directors are of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at this stage. (Note 10 of Notes to Accounts in Schedule XXI of Accounts Annexed).

COST AUDITORS

The Central Government had directed an audit of the cost accounts maintained by the Company in respect of textile business. The Central Government has approved the appointment of Shri Rajesh Goyal, Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants to conduct the audit of the Cost Accounts of the Company for the financial year ending 31st March, 2010 for the product “Textile”.

FIXED DEPOSITS

Your Company has not accepted any deposits during the year within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgment 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 Loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts on a going concern basis.

PARTICULARS OF EMPLOYEES

In terms of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure to the Directors Report. However, as per the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956 the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure – I to the Directors Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on record their appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

CONCLUSION

Your Company enjoys a leadership position in domestic market with strong competitive advantage in export segment. The Company now stands at the cusp of the next phase of growth. We will continue to make investments and progress to further consolidate our leadership position.

ACKNOWLEDGMENTS

Your Directors take this opportunity to thank the Financial Institutions, Banks, Central and State Governments authorities, Regulatory authorities, Stock Exchanges, stakeholders, customers and venders for their continued support and co-operation, and also thank them for the trust reposed in the Management. Your Director also wishes to thank all the employees of the Company for their commitment and contributions.

For and on behalf of Board of Directors

Place: New Delhi Ajay Kumar Choudhary

Dated: August 13, 2010 Chairman

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