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Notes to Accounts of Spentex Industries Ltd.

Mar 31, 2015

1. The Company has not allotted shares against this amount which was brought in by the promoters in more than one installments under restructuring scheme approved by the Bankers. Due to pending necessary approvals for allotment of shares, the Company has not complied with the provisions of Section 42 of the Companies Act, 2013.

a. Term loans from bank

Secured by first pari-passu charge on fixed assets of the Company both present and future and additionally secured by personal guarantees of Sh. Ajay Choudhary, Sh. Mukund Choudhary and Sh. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by second pari-passu charge on entire current assets of the Company. These loan are also secured by pledge of 24,575,918 shares of the company held by promoters and further secured by collateral security of property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi. 20,647,140 shares of promoters have also been pledged on exclusive basis for an amount of ' 258,007,836 /-, Further secured by third charge on all the movable and immovable assets of the Company and personal guarantee of Sh. Ajay Choudhary, Sh Mukund Choudhary and Sh. Kapil Choudhary.

b. Funded Interest Term Loan

Secured by first pari-passu charge on all the fixed assets of the Company, both present and future. The loan is further secured by second pari-passu charge on entire on entire current assets of the Company and additionally secured by personal guarantee of Sh. Ajay Choudhary,

Amounting to ' 15,378,904 (previous year ' 15,378,904) repayable in 2018. There is no default in repayment of loan existing as on 31.03.2015.

Amounting to ' 85,215,810 (previous year ' 139,301,510) repayable in 16 quarterly installments commencing from June,

c. Working Capital Term Loan

Secured by first pari-passu charge on fixed assets of the Company both present and future and additionally secured by personal guarantees of Sh. Ajay Choudhary, Sh. Mukund Choudhary and Sh. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by second pari-passu charge on entire current assets of the Company. These loans are also secured by pledge of 24,575,918 shares of the Company and further secured by collateral security on the property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

d. Corporate Loan

Secured by first pari-passu charge on the entire current assets of the Company including receivables. Additionally secured by personal guarantees of Sh. Ajay Choudhary, Sh. Mukund Choudhary and Sh. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by collateral security on entire fixed assets of the Company, also secured by pledge of 24,575,918 shares of the Company and collateral security on the property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

2. Nature of Security

Working Capital Loans from Banks are secured by first pari-passu charge on entire current assets, long term loan and advances and other non current assets of the Company. These loans are further secured by second pari-passu charge on entire fixed assets, both present and future and personal guarantee of the promoters. These loans, are also secured by pledge of promoters' shares (24,575,918 nos.) on pari-passu basis.

* The short term borrowings of the company have generally remained overdue during the substantial part of the financial year.

The overdue amount as 31st March 2015 was ' 203,189,847.

** Repayable in April 2015.

* For security details and other terms and conditions, refer note no. 5 of financial statement.

** 1) There is a default of ' 85,878,506 /- (previous year Rs. 83,058,604) existing as on 31.03.2015 which ranges from 1 to 90 days. 2) There is a default of Rs. 12,191,845 /- (previous year Rs. Nil) existing as on 31.03.2015 which ranges from 59 to 333 days.

* The Company believes that the corporate guarantee issued on behalf of its Step down subsidiary namely Spentex Tashkent Toytepa LlC (STTL) for deferred payment to TTL stand extinguished as all the assets and liabilities of STTL have been taken over by National Bank of Uzbekistan (NBU) and existence of STTL has been liquidated as per bankruptcy laws. Accordingly, the figure of current year does not include the portion of the guarantee relating to the deferred liability of TTL.

** The Company believes that the corporate guarantee given to Lehman Brothers is no longer valid as Lehman Brothers did not comply with the terms and conditions of the loan agreement based on which the guarantee was given. Accordingly, the figure for the current year and previous year do not include the portion of the guarantee relating to the loan from Lehman Brothers.

The amount shown in the items (a) to (e) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes. The amount shown in items (f) to (l) represent guarantees given and bills discounted in the normal course of the Company's operations and are not expected to result in any loss to the Company on the basis of beneficiaries fulfilling their ordinary commercial obligations.

NOTE 3 : EMPLOYEE BENEFIT PLAN

(i) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Company has defined contribution plans for post retirement employment benefits' namely Provident Fund and Employee State Insurance Scheme. Expenses for the same is being charged to statement of profit and loss for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation , using the projected unit credit (PUC) method at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the statement of profit and loss for the year. Liabilities for compensated absences which is a defined benefit plan are determined based on independent year end actuarial valuation and the resulting charge is being accounted in statement of profit and loss.

(ii) Other Employee Benefits

Other employee benefits are accounted for on accrual basis.

H. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

NOTE 4 : RELATED PARTY DISCLOSURES :

In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are :

Enterprises Under Significant Influence:

i) Himalayan Crest Power Pvt. Limited

ii) CLC & Sons (Pvt.) Limited

iii) CLC Technologies Private Limited

Key Management Personnel and their relatives :

i) Sh. Ajay Kumar Choudhary Chairman & Whole time Director

ii) Sh. Mukund Choudhary Managing Director

iii) Sh. Kapil Choudhary Deputy Managing Director

iv) Sh. Amrit Agrawal Director

v) Sh. Sitaram Parthasarathy Director

vi) Sh. Raghav Choudhary Son of Sh. Mukund Choudhary

vii) Ms. Megha Agrawal Daughter of Sh. Amrit Agrawal

viii) Sh. Akash Agrawal Son of Sh. Amrit Agrawal

Subsidiaries / Step-down Subsidiaries :

i) M/s Amit Spinning Industries Limited ii) M/s Spentex Tashkent Toytepa LLC

iii) M/s Spentex Netherlands B.V iv) M/s. Schoeller Litvinov k.s.

v) M/s. Schoeller Textile Netherlands B.V vi) M/s. Botekos Plus s.r.o.

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

NOTE 5:

The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty.

However, the Department appealed in the Hon'ble High Court of Mumbai which was upheld by the Hon'ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon'ble Supreme Court of India for quashing the Hon'ble High Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Hon'ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to ' 23,128,387 (including ' 2,826,621 at its Pithampur Unit).

Further, relying on the judgment of the Hon'ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to ' 6,02,16,366/- along with interest. Also, pending claims for the input stage of duty amounting to ' 2,826,621/- have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs. 83,344,753/-

NOTE 6:

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 ' 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 7:

The Company has an investment of ' 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 ' 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) 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 have decided not to make any provision for the aforesaid amounts. In addition to above claim, the company has sent notice to the GOU for indemnify the further losses caused to company directly or indirectly on account of investment made in Uzbekistan.

NOTE 8:

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 9:

Trade receivables, advance balances and receivables amount aggregating to Rs. 63,71,477, ' 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 ' 12,830,469 (P.Y. 12,830,469) 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 this stage.

NOTE 10:

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, 2014-15 and 2015-16 vide circular no 04/2013 dated 11-Feb- 2013 issued by Ministry of Corporate Affair, which is still awaited.

NOTE 11:

The outstanding balance as on 31st March, 2015 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.

NOTE 12:

Extraordinary items represents write back of '13,717,503 due to loan waiver from lender.

NOTE 13:

During the year ended 31st March, 2015, the company has revised the Depreciation rates based on the useful lives of its various fixed assets as per Part-C of Schedule-II to the Companies Act-2013. As a result, depreciation for year ended 31st March, 2015 is lower by ' 29,522,452. Further, in respect of fixed assets whose life has been expired as on 31st March 2014 an amount of ' 12,182,909 (net of related deferred tax of ' 6,017,651) has been adjusted with General Reserve.

NOTE 14:

For the year ended March 31,2015, the Company has initiated the process of compliance with the transfer pricing regulations for which the prescribed certificate of the accountant will be obtained. The management is of the opinion that the transactions are arms length

price. Hence the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and the provision for taxation.

NOTE 15:

Previous year figures have been regrouped and reclassified wherever necessary to make them comparable.


Mar 31, 2014

SUB NOTE:- 1 (a) The company has only one class of equity share having a par value of Rs 10/- per share. Each Shareholder is eligible for one vote per share. The dividend proposed, if any by the Board of Directors is subject to the approval of shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, in proportion of their shareholding.

SUB NOTE:- 1 (b) Reconciliation of number of shares outstanding at the beginning and at the end of the year

During the year, out of money received against share warrants , the company has allotted 14,00,000 (previous year 51,00,000) equity shares pursuant to options exercised by the share warrants holder CLC Technologies Private Limited to convert 14,00,000 (previous year 51,00,000) share warrants in equal number of fully paid up equity shares at the agreed price of Rs 10/- per equity share (previous year Rs 10/- pre equity share)

Nature of security Debentures

Non convertible debentures

Secured by first pari-passu charge on fixed assets of the Company both present and future and additionally secured by personal guarantees of Mr. Mukund Choudhary and Mr. Kapil Choudhary. These Debentures are further secured by second pari-passu charge on entire current assets of the Company. These debentures are also secured by pledge of 24,575,918 shares of the company held by promoters and further secured by collateral security of property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

Repayment terms, amount and period of default

Amounting to Rs262,023,589 (previous year Rs 307,773,740) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs 124,77,314/- (previous year Rs 83,18,209) was due for payment as on 31.03.2014 is yet to be paid. For repayment schedule refer table below.

a. Term loans from bank

Secured by first pari-passu charge on fixed assets of the Company both present and future and additionally secured by personal guarantees of Mr. Ajay Choudhary, Mr. Mukund Choudhary and Mr. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by second pari-passu charge on entire current assets of the Company. These loan are also secured by pledge of 24,575,918 shares of the company held by promoters and further secured by collateral security of property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi. 20,647,140 shares of promoters have also been pledged on exclusive basis for an amount of Rs 318,715,563 /-, Further secured by third charge on all the movable and immovable assets of the Company and personal guarantee of Mr. Ajay Choudhary, Sh Mukund Choudhary and Mr. Kapil Choudhary.

Amounting to Rs 1,014,206,877 (previous year Rs 1,179,943,869) repayable in 24 quarterly installments commencing from June, 201 2. An amount of Rs 47,582,957/- (previous year Rs 31,715,467) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 1 below.

Amounting to Rs 319,106,856 (previous year Rs 387,021,984) repayable in 20 quarterly installments commencing from June, 2012. An amount of Rs 16,137,400/- (previous year Rs 15,179,071) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 2 below. Amounting to Rs 41,515,976 (previous year Rs 88,287,415) repayable in 12 quarterly installments commencing from June, 2012. An amount of Rs 12,150,000/- (previous year Rs 93,50,000) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 3 below. Amounting to Rs 43,245,984 (previous year Rs 188,870,984) repayable in 8 quarterly installments commencing from June, 2012. An amount of Rs 4,36,87,500/- (previous year Rs 14,562,500) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 4 below. Amounting to Rs 318,715,563 (previous year Rs 374,364,313) repayable in 23 quarterly installments commencing from June, 2012. An amount of Rs15,176,932/- (previous year Rs 10,117,954) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 1 below.

b. Funded Interest Term Loan

Secured by first pari-passu charge on all the fixed assets of the Company, both present and future. The loan is further secured by second pari-passu charge on entire on entire current assets of the Company and additionally secured by personal guarantee of Mr. Ajay Choudhary, Mr. Mukund Choudhary and Mr. Kapil Choudhary . The loan is also secured by pledge 24,575,918 shares of the Company on pari-passu basis. Loan amounting to Rs 14,09,88,471/- is further secured by collateral security of property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

c. Working Capital Term Loan

Secured by first pari-passu charge on fixed assets of the Company both present and future and additionally secured by personal guarantees of Mr. Ajay Choudhary, Mr. Mukund Choudhary and Mr. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by second pari-passu charge on entire current assets of the Company. These loans are also secured by pledge of 24,575,918 shares of the Company and further secured by collateral security on the property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

Amounting to Rs 15,378,904 (previous year Rs 15,378,904) repayable in 2018. There is no default in repayment of loan existing as on 31.03.2014.

Amounting to Rs 139,301,510 (previous year Rs 191,265,905) repayable in 16 quarterly installments commencing from June, 2012. An amount of Rs 1,40,07,707/- (previous year Rs 1,07,08,823) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no.1 below. Amounting to Rs 16,86,961 (previous year Rs 8,500,000) repayable in 8 quarterly installments commencing from June, 2012. An amount of Rs 16,86,961/- (previous year Rs 17,00,000) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 2 below.

Amounting to Rs Nil (previous year Rs 1,281,479) repayable in 4 quarterly installments commencing from June, 2012. An amount of Rs Nil (previous year Rs 12,81,479) was due for payment on 31.03.2014 is yet to be paid.

Amounting to Rs 200,820,366 (previous year Rs 235,781,250) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs 9,562,800/- (previous year Rs 6,375,250) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 1 below.

Amounting to Rs 358,814,588 (previous year Rs 422,043,582) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs 17,244,608/- (previous year Rs 11,493,072) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 2 below. Amounting to Rs Nil (previous year Rs 57,158,108) repayable in 2 half yearly installments during September 2012 & March 2013. An amount of Rs Nil (previous year Rs 57,158,108) was due for payment on 31.03.2014 is yet to be paid. The rate of interest is 10% per annum.

Amounting to Rs 392,189,271 (previous year Rs 460,794,535) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs 18,711,750/- (previous year Rs 12,471,250) was due for payment on 31.03.2014 is yet to be paid. For repayment schedule refer table no. 3 below.

d. Corporate Loan

Secured by first pari-passu charge on the entire current assets of the Company including receivables. Additionally secured by personal guarantees of Mr. Ajay Choudhary, Mr. Mukund Choudhary and Mr. Kapil Choudhary and third party guarantee of Mrs. Jyoti Choudhary. These loans are further secured by collateral security on entire fixed assets of the Company, also secured by pledge of 18,075,918 shares of the Company and collateral security on the property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

Amounting to Rs 242,300,000 (previous year Rs Nil) repayable in 18 quarterly installments commencing from June, 2014. For repayment schedule refer table below.

Nature of Security

Working Capital Loans from Banks are secured by first pari-passu charge on entire current assets, long term loan and advances and other non current assets of the Company. These loans are further secured by second pari-passu charge on entire fixed assets, both present and future and personal guarantee of the promoters. These loans, are also secured by pledge of promoters'' shares (24,575,918 nos.) on pari-passu basis.

* For security details and other terms and conditions, refer note no. 5 of financial statement.

** There is a default of Rs 8,30,58,604/- (previous year Rs 5,44,59,088 ) existing as on 31.03.2014 which ranges from 1 to 90 days . *** There is no amount due and outstanding as on balance sheet date to be credited to Investor Education and Protection Fund.

NOTE 2 : CONTINGENT LIABILITIES :

(i) Contingent Liabilities Not Provided for in respect of : (Amount in Rs'')

Description Year ended Year ended March 31,2014 March 31,2013

Contingent Liabilities Not Provided For:

a) Demands from income tax authorities 3,79,71,404 3,79,71,404 under appeal

b) Demands from sales tax authorities 1,02,44,360 92,74,854 under appeal

c) Show cause notices/demands raised 39,21,23,888 24,99,82,370 by excise / customs department (including applicable penalties), not acknowledged as debts

d) Show cause notices/demands raised by 12,50,56,000 12,50,56,000 MP Government / MPEB department , not acknowledged as debts

e) Claims against the company not 62,27,81,103 36,77,12,997 acknowledged as debts

f) Guarantees and letters of credit 24,88,03,656 20,71,58,898 issued on behalf of the company, outstanding at the year end

g) Bills Discounted with banks on behalf 72,46,59,779 1,03,30,94,058 of the company,outstanding at the year end

h) Corporate Guarantee given to IREDA for 18,61,07,179 21,67,45,433 loan to M/s Himalayan Crest Power Private Limited

i) Corporate Guarantee given to AXIS Bank 31,90,50,140 34,82,43,429 Ltd.& UCO Bank for loan to M/s Amit Spinning Industries Limited

j) Corporate Guarantee given to Tashkent 2,58,98,10,000 2,34,76,10,000 Toytepa Textile for deferred payment of purchase consideration on behalf of Spentex Tashkent Toytepa lLc Current Year USD 43,250,000 (previous year USD 43,250,000)

* The Company believes that the corporate guarantee given to Lehman Brothers is no longer valid as Lehman Brothers did not comply with the terms and conditions of the loan agreement based on which the guarantee was given. Accordingly, the figure for the current year and previous year do not include the portion of the guarantee relating to the loan from Lehman Brothers.

The amount shown in the items (a) to (e) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes. The amount shown in items (f) to (l) represent guarantees given and bills discounted in the normal course of the Company''s operations and are not expected to result in any loss to the Company on the basis of beneficiaries fulfilling their ordinary commercial obligations

NOTE 3 : DEFINED BENEFIT PLAN :

(I) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Company has defined contribution plans for post retirement employment benefits'' namely Provident Fund and Employee State Insurance Scheme. Expenses for the same is being charged to statement of profit and loss for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation , using the projected unit credit (PUC) method at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the statement of profit and loss for the year. Liabilities for compensated absences which is a defined benefit plan are determined based on independent year end actuarial valuation and the resulting charge is being accounted in statement of profit and loss.

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

H. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

NOTE 4 : SEGMENT REPORTING :

In accordance with Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India, the Company has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading. Further, two geographical segments by location of customers have been considered as secondary segments viz, within India and outside India.

NOTE 5 : RELATED PARTY DISCLOSURES :

In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are :

Enterprises Under Significant Influence:

i) Himalayan Crest Power Pvt. Limited

ii) CLC & Sons (Pvt.) Limited

iii) CLC Technologies Private Limited

Key Management Personnel and their relatives :

i) Mr.Ajay Kumar Choudhary Chairman & Whole time Director

ii) Mr. Mukund Choudhary Managing Director

iii) Mr. Kapil Choudhary Deputy Managing Director

iv) Mr. Amrit Agrawal Director - Finance

v) Mr. Sitaram Parthasarathy Director - Works

vi) Mr. Raghav Choudhary Son of Managing Director

vii) Ms. Megha Agrawal Daughter of Director- Finance

viii) Mr. Suraj Sitaram Son of Director- Works

Subsidiaries / Step-down Subsidiaries :

i) M/s Amit Spinning Industries Limited

ii) M/s Spentex Tashkent Toytepa LLC

iii) M/s Spentex Netherlands B.V

iv) M/s. Schoeller Litvinov k.s.

v) M/s. Schoeller Textile Netherlands B.V.

vi) M/s. Botekos Plus s.r.o.

NOTE 6

The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty.

However, the Department appealed in the Hon''ble High Court of Mumbai which was upheld by the Hon''ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon''ble Supreme Court of India for quashing the Hon''ble High Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Hon''ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to Rs 23,128,387 (including Rs 2,826,621 at its Pithampur Unit).Further, relying on the judgment of the Hon''ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to Rs 6,02,16,366/- along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621/- have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs 83,344,753/- Note 41

The company has an investment of Rs 204,469,921/- in and has amount recoverable amounting to Rs 548,277,206/- 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 196,077,490. 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 7

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 draft report and claim to be lodged with ICSID, Board of Directors have decided not to make any provision for the aforsaid amounts.

Note 8

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 9

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 12,830,469 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 10

The company has applied to Securities & Exchange Board of India (SEBI) seeking exemption for maintaing 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 11

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.

Note 12

Pursuant to compliance of clause 32 of the Listing Agreement, on disclosure of Loans / Advances in the nature of loans, the relevant information is provided hereunder:

Note: The company has not recognized above Deferred Tax assets on account of prudence.

Note 13

For the year ended March 31,2014, the Company has initiated the process of compliance with the transfer pricing regulations for which the prescribed certificate of the accountant will be obtained. The management is of the opinion that the transactions are arms length price. Hence the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and the provision for taxation.

Notes referred to above form an integral part of financial Statements.

Notes referred to above form an integral part of financial Statement


Mar 31, 2013

NOTE 1 : DEFINED BENEFIT PLAN :

(i) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Company has defined contribution plans for post retirement employment benefits’ namely Provident Fund and Employee State Insurance Scheme. Expenses for the same is being charged to statement of profit and loss for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation , using the projected unit credit (PUC) method at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the statement of profit and loss for the year. Liabilities for compensated absences which is a defined benefit plan are determined based on independent year end actuarial valuation and the resulting charge is being accounted in statement of profit and loss.

(ii) Other Employee Benefits

Other employee benefits are accounted for on accrual basis.

NOTE 2 : SEGMENT REPORTING :

In accordance with Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India, the Company has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading. Further, two geographical segments by location of customers have been considered as secondary segments viz, within India and outside India.

NOTE 3 : RELATED PARTY DISCLOSURES :

In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are :

Enterprises Under Significant Influence:

i) Himalayan Crest Power Pvt. Limited

ii) CLC & Sons (Pvt.) Limited

iii) CLC Technologies Private Limited

Key Management Personnel and their relatives :

i) Mr. Ajay Kumar Choudhary Chairman & Whole time Director

ii) Mr. Mukund Choudhary Managing Director

iii) Mr. Kapil Choudhary Deputy Managing Director

iv) Mr. Amrit Agrawal Director - Finance

v) Mr. Sitaram Parthasarathy Director - Works

vi) Mr. Raghav Choudhary Son of Managing Director

vii) Ms. Megha Agrawal Daughter of Director- Finance

viii) Mr. Suraj Sitaram Son of Director- Works

Subsidiaries / Step-down Subsidiaries :

i) M/s Amit Spinning Industries Limited

ii) M/s Spentex Tashkent Toytepa LLC iii) M/s Spentex Netherlands B.V iv) M/s. Schoeller Litvinov k.s.

v) M/s. Schoeller Textile Netherlands B.V. vi) M/s. Botekos Plus s.r.o.

NOTE 4

The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty.

However, the Department appealed in the Hon’ble High Court of Mumbai which was upheld by the Hon’ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing the Hon’ble High Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Hon’ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to Rs.2,31,28,387 (including Rs.28,26,621 at its Pithampur Unit).

Further, relying on the judgment of the Hon’ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to Rs. 6,02,16,366/- along with interest. Also, pending claims for the input stage of duty amounting to Rs. 28,26,621/- have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs. 8,33,44,753/-

Note 5

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 6

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. The accumulated losses of SNBV and STTL at the year end exceeded their net worth. 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 7

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 8

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 9

For the year ended March 31, 2013, the Company has initiated the process of compliance with the transfer pricing regulations for which the prescribed certificate of the accountant will be obtained. The management is of the opinion that the transactions are arms length price. Hence the aforesaid legislation will not have any impact on the financial statements, particularly on the amount of tax expense and the provision for taxation.

Note 10

The outstanding balance as on 31st March, 2013 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.


Mar 31, 2012

SUB NOTE:- 1 (a) Above equity share of Rs. 10/- each include :

Pursuant to scheme of arrangement, 82,74,465 Equity Share of Rs. 10/- each fully paid issued to the share holder of erstwhile CLC Corporation Limited during the financial year 2005-06, 1,78,24,591 Equity Share of Rs. 10/- each fully paid issued to the share holder of erstwhile CLC Global Limited during the financial year 2005-06 and 44,87,844 Equity Share of Rs.10/- each fully paid issued to the share holder of erstwhile Indo Rama Textiles Limited during the financial year 2006-07 for consideration other than cash.

SUB NOTE:- 1 (b) The company has only one class of equity share having a par value of Rs. 10/- per share. Each shareholder is eligible for one vote per share. The dividend proposed, if any, by the Board of Directors is subject to the approval of shareholders in the ensuring Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amounts, in proportion of their shareholding.

During the year, out of money received against share warrants , the company has allotted 19,50,000 (previous year 75,89,000) equity shares pursuant to options exercised by the share warrants holder CLC Technologies Private Limited to convert 19,50,000 (previous year 75,89,000) share warrants in equal number of fully paid up equity shares at the agreed price of Rs. 16.95 per equity share (including premium of Rs. 6.95 per equity share).

Nature of Security

Working Capital Loans from Banks are secured by first pari-passu charge on entire current assets, long term loan and advances and other non current assets of the Company. These loans are further secured by second pari-passu charge on entire fixed assets, both present and future and personal guarantee of the promoters. These loans, are also secured by pledge of promoters' shares (18,075,918 nos.) on pari-passu basis.

* Repayable on demand.

The Company had accounted receivable amounting to Rs. 45,24,04,216 due from Schoeller Litvinov k.s (SLKS), a step-down subsidiary of the Company. In the previous year, auditors had qualified the same. Company has accordingly charged off Rs. 31,84,70,394 during the year, and had charged off Rs. 13,39,33,822 during the previous year. Company need to seek the permission from RBI through its authorised dealer for the same. In addition to that the company has given advance of Rs. 18,58,06,138 in the previous year against which a sum of Rs. 16,73,95,417 has been provided during the year considered as doubtful, pending settlement of contractual obligation to various parties. These matters have now been properly reflected in statement of profit & loss as exceptional items.

NOTE 2 : CONTINGENT LIABILITIES :

1 Contingent Liabilities Not Provided for in respect of :

(Amount in Rs.)

Description Year ended Year ended March 31, 2012 March 31, 2011

a) Demands from income tax authorities under appeal 3,79,71,404 6,21,39,030

b) Demands from sales tax authorities under appeal 44,88,038 29,61,560

c) Show cause notices/demands raised by excise / 24,84,32,148 18,08,53,192 customs department (including applicable penalties), not acknowledged as debts

d) Show cause notices/demands raised by MP Government/ 11,78,56,000 11,78,56,000 MPEB department, not acknowledged as debts

e) Claims against the company not acknowledged as debts 31,89,92,331 31,30,151

f) Guarantees and letters of credit issued on behalf of 25,59,38,318 30,09,66,085 the company, outstanding at the year end

g) Bills Discounted with banks on behalf of the company, 67,69,75,025 1,17,58,03,012 outstanding at the year end

h) Corporate Guarantee given to IREDA for loan to 21,18,23,570 24,83,13,698 M/s Himalayan Crest Power Private Limited

i) Corporate Guarantee given to AXIS Bank Ltd.& UCO 35,42,91,492 39,97,99,476 Bank for loan to M/s Amit Spinning Industries Limited

j) Corporate Guarantee given to Tashkent Toytepa Textil for 2,20,01,27,500 1,92,85,17,500 deferred payment of purchase consideration on behalf of Spentex Tashkent Toytepa LLC Current Year USD 43,250,000 (previous year USD 43,250,000)

k) Corporate Guarantee given to CVCI for investment in Spentex 10,17,40,000 8,91,80,000 (Netherlands) B.V.Current Year USD 20,00,000 (previous year USD 20,00,000)

l) Corporate Guarantee given to SBI - Tokyo Branch for loan to 99,67,12,087 87,36,66,050 Spentex (Netherlands) B.V Current Year USD 19,593,318 (previous year USD 19,593,318)*

* The Company believes that the corporate guarantee given to Lehman Brothers is no longer valid as Lehman Brothers did not comply with the terms and conditions of the loan agreement based on which the guarantee was given . Accordingly ,the figure for the current year and previous year do not include the portion of the guarantee relating to the loan from Lehman Brothers.

The amount shown in the items (a) to (e) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes. The amount shown in items (f) to (l) represent guarantees given and bills discounted in the normal course of the Company's operations and are not expected to result in any loss to the Company on the basis of beneficiaries fulfilling their ordinary commercial obligations.

NOTE 3 : DEFINED BENEFIT PLAN :

(i) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Company has defined contribution plans for post retirement employment benefits' namely Provident Fund and Employee State Insurance Scheme. Expenses for the same is being charged to statement of profit and loss for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation, using the Projected Unit Credit (PUC) method at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the statement of profit and loss for the year.

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

H. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

NOTE 4 : SEGMENT REPORTING :

In accordance with Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India, the Company has identified three business segments viz. Textile Manufacturing and Textile Trading. Further, two geographical segments by location of customers have been considered as secondary segments viz, within India and outside India.

NOTES 5 : RELATED PARTY DISCLOSURES :

In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are :

Enterprises Under Significant Influence:

i) Himalayan Crest Power Pvt. Limited

ii) CLC & Sons (Pvt.) Limited

iii) CLC Technologies Private Limited

Key Management Personnel

i) Mr. Ajay Kumar Choudhary Chairman & Whole time Director

ii) Mr. Mukund Choudhary Managing Director

iii) Mr. Kapil Choudhary Deputy Managing Director

iv) Mr. Amrit Agrawal Director - Finance

v) Mr. Sitaram Parthasarathy Director - Works Subsidiaries / Step-down Subsidiaries

i) M/s Amit Spinning Industries Limited

ii) M/s Spentex Tashkent Toytepa LLC

iii) M/s Spentex Netherlands B.V

iv) M/s Spentex (Mauritius) P Ltd***

v) M/s Spentex ( Cyprus ) P Ltd***

vi) M/s. Schoeller Litvinov k.s.

vii) M/s. Schoeller Textile Netherlands B.V.

viii) M/s. Schoeller Textile Verwaltungs GMBH***

ix) M/s. Schoeller Textile GMBH & Co. KG***

NOTE 6

The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty.

However, the Department appealed in the Hon'ble High Court of Mumbai which was upheld by the Hon'ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon'ble Supreme Court of India for quashing the Hon'ble High Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Hon'ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to Rs. 5,28,79,724 (including Rs. 28,26,621 at its Pithampur Unit ).

Further, relying on the judgment of the Hon'ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to Rs. 6,02,16,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs. 28,26,621 have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs. 11,30,96,090.

Note 7

The company has an investment of Rs. 20,44,69,921/- in Amit Spinning Industries Limited (ASIL), being a subsidiary of the Company. It also advanced a loan including interest accrued thereon amounting to Rs. 41,60,78,601/- as on March 31, 2012. The accumulated losses of ASIL, at the year end March 31, 2012 exceeded its net worth. There is also reduction in market value of the investment as on that date by Rs. 16,85,92,279/-. In the opinion of the management, diminution in this long term investment is due to adverse business conditions in the past. ASIL, as of now 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 the outstanding would be realized within a reasonable period of time. Accordingly no provision is considered necessary in the value of investment held and loan advanced to ASIL

Note:- The company has not recognized above Deferred Tax asset on account of prudence.

Note 8

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, 2012. During the period of investment, the Government of Uzbekistan changed certain laws and policies by breaching the investment agreement and rendered operation of STTL unviable. Consequently STTL could not pay its debts and insolvency proceedings have been initiated against it. Since treaties entered between the Governments of India and Uzbekistan and the Investment agreement entered between Govt. of Uzbekistan and Spentex were breached, company has issued notice claiming protection of investment and payment of dues & compensation for the losses suffered by company. In view of legal opinion placed before the board and claims lodged with the Government of Uzbekistan, the Directors have decided not to make any provision for diminution in value of investment at this stage.

Note 9

As on March 31, 2012, the accumulated losses of the Company have exceeded its net worth. Accordingly company in compliance with the provisions of section 23(1) of Sick Industrial Companies (Special Provisions) Act, 1985 will file a reference with Board for Industrial and Financial Restructuring (BIFR). However, in the opinion of the management, the Company's operations have been adversely affected a) due to ban on yarn export by the government resulting in the piling up of Yarn inventory and its offloading at reduced prices during current year and b) very high volatility in Raw Material prices. Further, considering the change in scenario, recent performance and trends of the company as well as overall industry outlook, there is an increase in average selling prices of the yarn, stability in production levels and reduction in procurement costs of raw materials. Resultantly, the company has started earning net profits and 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 and restructuring of loan facilities under Corporate Debt Restructuring scheme.

Note 10

The financial statements for the year ended 31st March, 2011 had been prepared as per the then applicable, pre-revised Schedule VI to the Companies Act, 1956. Consequent to the notification under the Companies Act, 1956, the financial statements for the year ended 31st March, 2012 are prepared under revised Schedule VI. Accordingly, the previous year figure have also been reclassified to conform to this year's classification.

Note 11

The outstanding balance as on 31st March, 2012 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.

 
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