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Notes to Accounts of Spentex Industries Ltd.

Mar 31, 2016

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:- 2 (b) Reconciliation of number of shares outstanding at the beginning and at the end of the year.

Nature of security

Repayment terms, amount and period of default

Debentures

Non convertible debentures

Secured by first pari-passu charge on fixed assets of the

Amounting to Rs. 155,888,356 (previous year Rs. 212,114,334)

Company both present and future and additionally secured

repayable in 24 quarterly installments commencing from June,

by personal guarantees of Mr. Mukund Choudhary and Mr.

2012. An amount of Rs. 14,556,866 (previous year Rs. 12,477,314/-

Kapil Choudhary. These Debentures are further secured by

) was due for payment as on 31.03.2016 is yet to be paid. For

second pari-passu charge on entire current assets of the

repayment schedule refer table below.

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.

a. Term loans from bank

i) 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. 8,113,806 (P.Y. 20,647,140) shares of promoters have also been pledged on exclusive basis for an amount of Rs. 242,830,905 (Rs. 258,007,836), Further secured by third charge on all the movable and immovable assets of the Company.

Amounting to Rs. 792,890,900 (previous year Rs. 817,029,503) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs. 748,747,430 (previous year Rs. 50,529,038) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no. 1 below.

Amounting to Rs. 211,677,452 (previous year Rs. 221,025,127) repayable in 20 quarterly installments commencing from June, 2012. An amount of Rs. 169,347,003 (previous year Rs. 20,645,000) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no. 2 below.

Amounting to Rs. Nil (previous year Rs. 7,240,975) repayable in 12 quarterly installments commencing from June, 2012. An amount of Rs. Nil (previous year Rs. 7,240,975) was due for payment on 31.03.2016 is yet to be paid. For repayment schedule refer table no. 3 below.

Amounting to Rs. 242,830,905 (previous year Rs. 258,007,836) repayable in 23 quarterly installments commencing from June, 2012. An amount of Rs. 242,830,905 (previous year Rs. 15,176,932) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no. 1 below.

b. Funded Interest Term Loan

i) 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

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 31.03.2016.

Amounting to Rs.64, 119,519 (previous year Rs.85, 215,810) repayable in 16 quarterly installments commencing from June, 2012. An amount of Rs. 62,487,206 (previous year Rs.15, 264,030) also secured by pledge 24,575,918 shares of the Company on pari-passu basis. Loan amounting to Rs. 64,119,519 (Rs. 85,215,810) 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 personalguarantees 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. 154,793,686 (previous year Rs. 162,447,805) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs. 154,793,686 (previous year Rs. 9,562,800) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no. 1 below.

Amounting to Rs. 285,454,059 (previous year Rs. 294,716,614) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs. 261,425,120 (previous year Rs. 20,703,750) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no. 2 below. Amounting to Rs. 315,767,320 (previous year Rs. 319,269,714) repayable in 24 quarterly installments commencing from June, 2012. An amount of Rs. 290,050,602 (previous year Rs. 22,290,000) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, 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 24,575,918 shares of the Company and collateral security on the property at 1st floor, 7, Padmini Enclave, Hauz Khas, New Delhi.

Amounting to Rs. 264,468,515 (previous year Rs. 312,500,000) repayable in 18 quarterly installments commencing from June, 2015. An amount of Rs. 200,312,514 (previous year Rs. 24,722,222) existed on 31.03.2016, which ranges from 1 to 699 days till 31.03.2016, is yet to be paid. For repayment schedule refer table no.1 below. Amounting to Rs. 27,563,366 (previous year Rs. 27,900,000) repayable in 18 quarterly installments commencing from September, 2015. An amount of Rs. 27,563,366 (previous year Rs. 1,550,000) existed on 31.03.2016, which ranges from 1 to 699

- 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 stands 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 1: 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 are 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 recognized 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 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

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

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

v)

Mr. Sitaram Parthasarathy (Ceased to

be a director on 07th Nov. 2015)

Director

vi)

Mr. Madhav Choudhary

Son of Deputy Managing Director

vii) Mr.Akash Agrawal

Son of Mr. Amrit Agrawal

Subsidiaries / Step-down Subsidiaries :

i)

M/s Amit Spinning Industries Limited

iii)

M/s Spentex Netherlands B.V

v)

M/s. Schoeller Textile Netherlands B.V.

Botekos Plus s.r.o.

NOTE 4

The company has an investment of Rs. 204,469,921/- in and has amount recoverable amounting to Rs. 732,239,193/- to Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2016. The accumulated losses of ASIL, at the yearend exceeded its net worth. There is also reduction in market value of the investment at the yearend by Rs. 187,475,249. 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 realized within a reasonable period of time. Accordingly no provision considered necessary in the value of investment held and amount due from ASIL.

NOTE 5:

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, 2016. 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). 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 6:

The accumulated losses of the Company had exceeded its net worth during the year 2011-12. 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 earlier financial years due to sluggish market demand, greater decline in cotton prices globally as compared to India, higher power cost in Maharashtra, certain policies of the Government and shortage of working capital. In spite of unfavorable market scenario and financial constraints, the units of the company continue to operate at satisfactory capacity utilization levels and are generating positive Earnings before Interest Depreciation Tax and Amortization (EBIDTA). The Company''s account has become Non Performing Assets (NPA) with majority of the dealing banks and the company is also in receipt of NPA cum recall notice. The company has submitted / in process of submitting restructuring proposal proposing various alternative to the banks which is currently under discussion. With strong management focus on strategic initiatives on cost rationalization, optimum product mix and efficient plant operations, the management believes that accumulated losses would reasonably be paired in due course. The financial statements, as such have been prepared on a going concern basis.

NOTE 7:

Advance balance of Rs. 18,410,722 from a party 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 (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 this stage.

NOTE 8:

Advance balances aggregating to Rs. 55,982,580 are due from certain parties where payments are not forthcoming. The company is making appropriate concerted efforts including negotiations with these parties to recover the same and expect to reduce the outstanding dues significantly. The management is of the view that ultimately there would be no losses against these outstanding balances and hence no provision is considered necessary at this stage.

NOTE 9:

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 2016-17 vide circular no 04/2013 dated 11-Feb-2013 issued by Ministry of Corporate Affair, which is still awaited.

NOTE 10:

The outstanding balance as on 31st March, 2016 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 11:

Pursuant to compliance of clause 34(3) of the Listing Agreement, on disclosure of Loans / Advances in the nature of loans, the relevant information is provided hereunder: (Amount in Rs.)

NOTE 12:

Extraordinary items represents write back of Rs. Nil (P.Y. Rs. 13,717,503) due to loan waiver from lender.

NOTE 13:

The company''s accounts have become Nonperforming assets (NPA) with majority of the dealing banks. The company has submitted restructuring proposal proposing various alternatives to the banks which is under discussions. None of the banks has initiated action in any legal forum. The company has provided interest on such loans, however penal interest, if any, has not been provided.

NOTE 14:

For the year ended March 31, 2016, 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.

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


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.


Mar 31, 2011

1 Contingent Liabilities not provided for in respect of : (Amount in Rs.)

Description This Year Previous Year

a) Demands from Income Tax Authorities under appeal 62,139,030 62,139,030

b) Demands from Sales Tax Authorities under appeal 2,961,560 3,265,040

c) Show cause notices/demands raised by Excise / Customs Department 180,853,192 179,856,196 (including applicable penalties), not acknowledged as debts

d) Show cause notices/demands raised by MP Government / 117,856,000 117,856,000 MPEB Department, not acknowledged as debts

e) Claims against the Company not acknowledged as debts 3,130,151 3,130,151

f) Guarantees and Letters of credit issued on behalf of the Company, 300,966,085 248,797,962 outstanding at the year end

g) Bills Discounted with Banks on behalf of the Company, outstanding 1,175,803,012 832,402,925 at the year end

h) Corporate Guarantee given to IREDA for Loan to M/s Himalayan 248,313,698 268,306,862 Crest Power Limited

i) Corporate Guarantee given to AXIS Bank Ltd.& UCO Bank for Loan 399,799,476 428,568,149 to M/s Amit Spinning Industries Limited

j) Corporate Guarantee given to Tashkent Toytepa Textil for deferred payment 1,928,517,500 2,007,040,000 of purchase consideration on behalf of Spentex Tashkent Toytepa LLC Current Year USD 43,250,000 (Previous Year USD 44,800,000)

k) Corporate Guarantee given to CVCI for investment in Spentex (Netherlands) 89,180,000 89,600,000 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 Spentex 873,666,050 978,840,666

(Netherlands) B.V Current Year USD 19,593,318 (Previous Year USD 21,849,122)

* The Company belived 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

4 In accordance with the current industry practice, plant and machinery of the Company has been treated as “Continuous Process Plant” as defined under Schedule XIV to the Companies Act,1956.

5 During the year, out of the Share Warrants money received, the Company has allotted 7,589,000 equity shares pursuant to option exercised by the share warrant holder to convert 7,589,000 share warrants in equal number of fully paid up equity shares and the balance consideration of 75% amounting to Rs. 96,475,163 has been received on 7,589,000 warrants at the time of conversion into equity shares at the agreed price of Rs. 16.95 per equity share (including premium of Rs. 6.95 per equity share).

6 Carrying value of Temple Land and Building at Pitampur unit amounting Rs. 183.66 Lacs has been restored back in books of account, as the Company is having possession and control of this Temple since acquisition.

7 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 52,879,724 (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 60,216,366 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. 113,096,090.

8 (a) The company has an investment of Rs 204,469,921 in and has advance loan including interest accrued amounting to Rs. 383,067,401 Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2011. 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. 130,406,719. 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. Further ASIL has refunded amount of Rs. 156,095,401 during the year and for remaining balances,management believes that the balance amount would be realised within a reasonable period of time. Accordingly no provision considered necessary in the value of investment held and loan advanced to ASIL

(b) 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 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 of time 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.

10 The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enterprises’ on an ‘arm’s length’ basis These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing of Return of Income. For the year ended March 31, 2011, the Company has initiated the process of compliance with the said transfer pricing regulations for which the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

16. Employee Benefits

(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. Expense for the same is being charged to Profit and Loss account for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the Profit and Loss Account for the year.

(ii) Other employee benefits

Other employee benefits are accounted for on accrual basis. 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 Profit and Loss Account.

17 Related Party Disclosures :

A) 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 :

i) Enterprises under significant influence:

a) Himalayan Crest Power Private Limited.

b) CLC & Sons (P) Limited

c) CLC Technologies Private Limited

ii) Key Management Personnel

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

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

iii) Subsidiaries / Step-down subsidiaries

a) M/s Amit Spinning Industries Limited

b) M/s Spentex Tashkent Toytepa LLC

c) M/s Spentex Netherlands B.V

d) M/s Spentex Mauritius P Ltd

e) M/s Spentex ( Cyprus ) P Ltd

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

g) M/s. Schoeller Textile Netherlands B.V. h) M/s. Schoeller Textile Verwaltungs GMBH i) M/s. Schoeller Textile GMBH & Co. KG

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

20. Previous years figures have been regrouped / recasted wherever necessary to confirm to current years classification.


Mar 31, 2010

1 Contingent Liabilities not provided for in respect of : (Amount in )

Description This Year Previous Year

a) Demands from Income Tax Authorities under appeal 62,139,030 62,139,030

b) Demands from Sales Tax Authorities under appeal 3,265,040 20,102,976

c) Show cause notices/demands raised by Excise / Customs Department 179,856,196 277,080,377 (including applicable penalties), not acknowledged as debts

d) Show cause notices/demands raised by MP Government / 117,856,000 117,856,000 MPEB Department , not acknowledged as debts

e) Claims against the Company not acknowledged as debts 3,130,151 13,298,670

f) Guarantees and Letters of credit issued on behalf of the Company, 248,797,962 271,958,521 outstanding at the year end

g) Bills Discounted with Banks on behalf of the Company, outstanding 832,402,925 642,380,891 at the year end

h) Corporate Guarantee given to IREDA for Loan to M/s Himalayan 268,306,862 266,222,000 Crest Power Limited

i) Corporate Guarantee given to AXIS Bank Ltd.& UCO Bank for 428,568,149 419,201,873 Loan to M/s Amit Spinning Industries Limited

j) Corporate Guarantee given to Tashkent Toytepa Textil for deferred payment 2,007,040,000 2,457,216,000 of purchase consideration on behalf of Spentex Tashkent Toytepa LLC Current Year USD 44,800,000 (Previous Year USD 48,600,000)

k) Corporate Guarantee given to CVCI for investment in Spentex (Netherlands) 89,600,000 101,120,000 B.VCurrent Year USD 20,00,000 (Previous Year USD 20,00,000)

l) Corporate Guarantee given to SBI - Tokyo Branch for loan to Spentex 978,840,666 1,094,659,594

(Netherlands) B.V Current Year USD 21,849,122 (Previous Year USD 21,650,704)*



* The Company has been legally advised 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

2 In accordance with the current industry practice, plant and machinery of the Company has been treated as “Continuous Process Plant” as defined under Schedule XIV to the Companies Act,1956.

3 Pursuant to special resolution passed by the Members of the Company in their Extra-ordinary General Meeting held on 27th November, 2009, the Company has issued 11,800,000 share warrants on a preferential basis to CLC Technologies Private Limited, promoters group company, each convertible into one equity share at share subscription price of Rs. 16.95 per warrant. The Company has received an advance of 25% of share subscription price amounting to Rs. 50,002,500, as per the guidelines issued by Securities and Exchange Board of India under Securities and Exchange Board of India (Issue Of Capital And Disclosure Requirements) Regulations, 2009 for Preferential Allotment Out of the 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 and the balance consideration of 75% amounting to Rs. 28,742,963 has been received on 2,261,000 warrants at the time of conversion into equity shares at the agreed price of Rs. 16.95 per equity share (including premium of Rs. 6.95 per equity share).

4 In the current year, the Company has changed its method of valuing raw materials at Synthetic division from the Weighted Average method to the Specific identification of cost method based on peculiarities of condition existing in the business and prevalent industry practices. The Specific identification of cost method results in a better presentation of the carrying value of raw material inventory in the financial statements.

Had the Company continued to use the earlier basis of valuing Raw Materials, closing stock of Raw Materials would have been lower by Rs. 43,27,747 with consequential impact on net current assets and loss for the year.

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 Honble High Court. TheSynthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing the HonbleHigh Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Honble Supreme Court, the Synthetic Division has not yet reversed the rebatereceivable on input duty aggregating to Rs 52,879,724 (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 theDepartment on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of dutyamounting to Rs 60,216,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. TheCommissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has beenkept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the company is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilizationof these cenvat balances of Rs. 113,096,090.

6 During the year company has charged Rs 14,304,599 to Amit Spinning Industries Limited, (Previous Year Rs 22,904,102 to Amit Spinning Industries Limited and Schoeller Litvinov, k.s). in respect of expenses borne by it which are allocable to these subsidiaries. These amounts have been offset against the respective expense heads

7 (a) 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 management, 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, management 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, management believes that the such amounts would be realized within a reasonable period of time . Accordingly, no provision is considered necessary at this stage.

8 (b) SchoellerLitvinov 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 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 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.

9 Sundry Debtors and Advances include amounts aggregating Rs. 17,408,913 and Rs. 22,473,335 espectively 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 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

10 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 :

1 There are no repayment schedule for the loans and advances to subsidiary as mentioned above.

2 Loans to employees as per Company’s policy are not considered.

11 The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enterprises’ on an ‘arm’s length’ basis These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing of Return of Income. For the year ended March 31, 2010, the Company has initiated the process of compliance with the said transfer pricing regulations for which the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

** Included in legal & professional expenses under schedule XVII Manufacturing and other costs.

Foot Note:

The contribution to Gratuity Fund and leave encashment have been made on group basis and separate figures applicable to an individual employee are not available and have, therefore, not been taken into account in the above computation.

12. Taxation

Deferred Tax

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

13. Earnings Per Share (EPS):

* There are no potential dilutive securities

14. Employee Benefits

(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. Expense for the same is being charged to Profit and Loss account for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the Profit and Loss Account for the year.

(ii) Other employee benefits

Other employee benefits are accounted for on accrual basis. 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 Profit and Loss Account.

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.

G. 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.

15. Related Party Disclosures

A) 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 :

i) Enterprises under significant influence:

a) Himalayan Crest Power Limited.

b) CLC & Sons (P) Limited

c) CLC Technologies Private Limited

ii) Key Management Personnel

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

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

iii) Subsidiaries / Step-down subsidiaries

a) M/s Amit Spinning Industries Limited

b) M/s Spentex Tashkent Toytepa LLC

c) M/s Spentex Netherlands B.V

d) M/s Spentex Mauritius P Ltd

e) M/s Spentex ( Cyprus ) P Ltd

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

g) M/s. Schoeller Textile Netherlands B.V. h) M/s. Schoeller Textil Verwaltungs GMBH i) M/s. Schoeller Textil GMBH & Co. KG

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

16. Segment Disclosure

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 .The segment wise disclosure are as follows :

* Purchase of yarn include 2,031,655 Kgs (Previous Year 1,101,473 Kgs) amounting to Rs 272,314,277 (Previous year Rs 128,012,463) on account of inter unit transfer

# The above sales figures do not include the export incentives - Duty Drawback of Rs 24,259 (Previous Year Rs 14,961,279) (figures in brackets are for the previous year.)

* Sale of Yarn Includes 2,031,655 Kgs (Previous Year 1,101,473 Kgs), amouting to Rs 272,314,277 ( Previous Year Rs 128,012,463) on account of Inter Unit Transfer

# The above sales figures do not include the export incentives - Duty Drawback of Rs 23,933,554 (Previous Year Rs. 191,257,562)

$ The above sales is inclusive of excise duty paid on Synthetic yarn sale amounting to Rs 36,443,713 ( Previous Year Rs 28,463,668)

@ # Above figures includes Opening stock of trial production of Nil ( Previous year 454,570 Kgs ) amounting to Rs Nil

(Previous year 45,780,423), Current year production Nil (Previous year 301,633 Kg), sales of trial production of Nil

(Previous year 756,203 Kgs) amounting to Rs. Nil (Previous year Rs 78,107,442). (figures in brackets are for the previous year.)

* It is not practicable to furnish quantitative information of other raw materials and components consumed in view of the large number of items which differ in size and nature, each being less than 10% in value of the total

17. Previous years figures have been regrouped / recasted wherever necessary to conform to current years classification.

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