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Directors Report of Sportking India Ltd.

Mar 31, 2014

Dear Members,

The Directors of your company are pleased to present their Twenty Fifth Annual Report on the affairs of the company together with Audited Accounts of the Company for the year ended 31st March, 2014.

1. FINANCIAL RESULTS

The summarized financial results for the year are as under:

Particulars 2013-14 2012-13

(Rs. in Crores)

Gross Turnover/Operating Income 1067.29 861.65

Profit before Interest, Depreciation & 170.91 136.86 Taxation

Less Interest (Net) 81.25 71.31

Profit before Depreciation & Taxation 89.66 65.55

Less: Depreciation 46.63 40.87

Net Profit before Taxation 43.03 24.68

Less Current Tax {Net of MAT Credit of

Rs. 9.02 crs.(Previous Year Rs. 5.05 Crs.) - -

Deferred Tax 15.59 (7.50)

Net Profit afterTax 27.44 32.17

Add: Surplus of Last Year 57.94 26.20

Less: Transfer to Capital Redemption Reserve 0.43 0.43

Surplus carried to Balance Sheet 84.95 57.94

3. DIRECTORS

According to the erstwhile provisions of the Companies Act, 1956 Sh. Ajay Chaudhry & Sh. Sunil Puri are liable to retire by rotation at this annual general meeting of the company but pursuant to the provisions of section 149 and schedule IV of the Companies Act, 2013 they as well as Dr. (Mrs.) Harbhajan Kaur Bal are being appointed as an Independent Directors of the Company.

4. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:-

i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii) appropriate accounting policies have been selected and applied consistently, and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2014 and the profit of the Company for the year ended 31st March 2014.

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

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

5. AUDIT COMMITTEE

The Company has an Audit Committee of the Board of Directors, the members of which are Mr. Ajay Chaudhry, Dr. (Mrs.) H K Bal and Mr. Sunil Puri. Mr. Ajay Chaudhry is the Chairman of the committee. The committee is empowered to look into all the matters related to finance and accounting and its terms of reference are as per Clause 49 of the listing agreement read with section 177 of The Companies Act, 2013.

6. RISK MANAGEMENT - MANAGEMENT PERCEPTION

The textile business, like other businesses, is susceptible to various risks. The primary risk factor is raw material prices, mainly raw cotton and synthetic fibre, which is the largest component of cost. Since cotton is an agriculture produce, it suffers from climatic volatility in the major cotton producing countries the prices of synthetic fibre are based on the prices of petroleum products in the international market. This is turn creates uncertainties for textile manufacturers.

Another important issue is the availability, quality and price of power. The availability of good quality power at reasonable prices is critical for sustainability of the industry. However, the cost of power has been continuously increasing. The non-availability of skilled manpower along with high labour cost prevailing in the country is growing concern area for textile industry.

We are making all efforts to cope up with the challenges through continuous cost reduction, process improvements, diversification of products, training the workforce on the continued basis, and creating a stronger customer oriented approach.

7. AUDITORS

M/s. Rawla & Company, Chartered Accountants, New Delhi, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received letters from them to the effect that their re-appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment.

8. AUDITORS' REPORT

The comments in the Auditors' Report read with Notes to Accounts are self explanatory and do not call for any further explanation.

9. PUBLIC DEPOSITS

The Company has not raised any deposits from the public except the interest free unsecured loan from Directors of the Company. Hence the provisions of Section 58A of the Companies Act, 1956 / Section 73 of the Companies Act, 2013 and the rules made under Companies (Acceptance of Deposits) Rules, 2014 with regard to the deposits accepted from the public are not attracted.

10. LISTING OF SECURITIES

The securities of the company are listed on The Delhi Stock Exchange Ltd., New Delhi, The Ludhiana Stock Exchange Ltd., Ludhiana, The Ahmedabad Stock Exchange Ltd., Ahmedabad and The Madhya Pradesh Stock Exchange Ltd., Indore and the company has already paid listing fees of the stock exchanges for the financial year 2014-15. Since these regional stock exchanges are not fulfilling the eligiblity criteria as per SEBI Guidlines,the company is planning to go for Direct Listing on the other recognised stock exchange.

11. PARTICULARS OF EMPLOYEES

The information as required by the provision of the Section 217(2A) of the Companies Act,1956 read with Companies (Particulars of Employees) Rules,1975 is annexed hereto and forms part of this report.

12. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as required by the provisions of the Section 217 (1) (e) of the Companies Act 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

13. CORPORATE GOVERNANCE

A separate report on Corporate Governance along with Auditors' Certificate is attached.

14. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation of the co-operation from the Bankers, Financial Institutions and Government Bodies & Business Associates. Your Directors also record their appreciation of the services rendered by the employees of the company.

By Order of the Board

Raj Kumar Avasthi Place : Ludhiana Chairman Date : August 14,2014 DIN:- 01041890

Regd. Office : 5/69, Guru Mansion, 1st Floor, Padam Singh Road, Karol Bagh, New Delhi - 110005


Mar 31, 2013

Dear Member,

The Directors of yOur company are pleased to present their Twenty Fourth Annual Report on the affairs of the company together with Audited Accounts of the Company for the year ended 3',si March. 2013.

1. FINANCIAL RESULTS

The summarized financial results for the year areas under:

(Rs. in Crores)

Particulars 2012-13 2011-12

Gross Trunover Income 861.65 763.30

Profit before interest .depreciation & Taxation 136.86 62.57

Leu Interest (Net) 70.76 52.07

Profit before depreciation & Taxation 66.10 10.50

Less : Depreciation 40.88 25.81

Net profit before Taxation 25.22 15.31

Less: Provision forcurrent taxes 0.54 -0.02

Net Profit after current Taxes 24.88 (-) 15.23

Add: provision for deferred tax assets ( ) /Liabilities (-) 7.50 (-)10.73

Net profit after deferred taxation 32.10 (-)26.08

add: surplus of last year 26.19 52.63

Less. Transfer to Capital redemption reserve 0.43 0.43

Surplus carried to Balance sheet 57.84 26.18

2. MANAGEMENTS DISCUSSION AND ANALYSIS BUSINESS REVIEW ;

Global economic outlook has been improving and expected to grow above 3% in the ycar2013and4% in the year 2D14, though the growh i$ not uniform even among the developed countries. Private demand in USA has been growing giving stranglh to the recovery but similar indications are missing m EU. The driver of Uie devc'opod countries' growth is manly monetary easing which needs to be substituted with more fundamental forces to make it s ustai noble. The emerging economies especially in Asia are likely to grow sy 7% for next couple of years, which is lass than the g rowth rate achieved in the past. If is mainly dueto some slowdown m export sector of the leading economies like China end partially duo to the China's efforts to re-balance economy towards domestic consumption side. It is expected that such a move would strengthen the gnowlhfeKports of emerging economies in coming years.

The 12th Five Year plan of India targeis a growth rate of 9.6% for the manufacturing sector. The National Manufseluring Plan targets ar increase in manufaclurlng sector growth to 12-14% over die medium term. The mean, value of different GDP growth estimates of Indian economy shows that Indian economy may grow in the range of 5-6% in financial year 2013-14 The stubborn current account deficit, fiscal deficit and a lackluster performance gf manufacturing Sector especially catering to exports are some factors affecting the business climate and investor confidence mi (ho country adversely. Since the Textile Sector contributes about 12 par cent ol 1tie manufscluring Output, the growth oflhis sector is crucial to the realization of targets 'elating to total outpul and employ merit growth.

COTTON

During 2012-13. the International cotton prices benefited radically from me policies of the Chinese Government ft must be borne m mind that a large part of world cotton stocks are in the hands of the Chinese government. Though the future Chinese policies remain unclear, but it dees nut seem that the reserve cotton will be released in quantities large enough to significantly undermine domestic Chinese puces or intemstignsfl cotton prices. In 2012-13, global cotton produclxm is estimated at 26.4 million tons, down by 5%, while cotton mill use Is expected lo rise by 6% With consumplion anticipated at 23 $ milhon tons, Ihe global Slocks at the end of July 2013 are forecast at a record 17.9 million tons, up 19% from the3previous year In 2013-14, world area under cotton cultivation is likely to drop by 5-6% due to better prices available to farmers against alternative crop Globally, the cotton production is eslmated at around 25.5 millon Ions against consumption of about 24. S million tons The major increase in stock will happen in China whereas the world stock minus China is likely to be reduced.

The cation production in India in the current season (October- September) is estimeled to be around 34 million bales. The exports of cotton are estimated at 10 mil .ion bales as compared to 12.9 million bates in 2011-12. Domestic consumption of cotton ncreased by 13% as compared to test year Consequently, the closing slock of cotton is expected to gei substantially reduced. In 2013 14, it is anticipated that ttie area Lnder cotton cultivation in me country will reduce by around 6% again due to better margins in alternative crops. However, with, the lorecas' of normal end on time monsoons the ytefd is likely to be better than ihe year 2012-13.

COTTON YARN

Cotton yarn production in India increased by about 14% during the year 2012-13 Most Indian yarn manufacturers experienced high demand from domestic as well as export market, mainly from China, during 1be financial yea' 2012-13. Favorable policy environment, impraved demand supply position and favorable input costs were sonne of me aimer driving factors that led to improvements in margins. With lower Cotton prices, depreciating rupee, SlOw but steady pick up in domestic demand and continued demand of colton yam from China, yarn manufacturers expect to maintain their margins in Ihe coming quarters. Also, Fcieigr Direct Investmenl m multi brand retail is an opportunity that would unleash demand in Ihe long run

The Central Governmeni has also extended the benefits of Technology Upgradalion Fund Scheme for the 12th Five Year Plan of (2012-17) and envisaged a capital investment Of Fts- 144 &92 entires in the textile value chain activities during this period out of which capital investment of Rs. 41750 crates have been envisaged for spinning sector

EXPORTS

The textiles industry accounts tor nearly 11% share of Ihe country's total exports basket. Exports of Textiles 5 Clothing grew from USD 21.22 billion in 2098-09 to USD 22.41 billion in 2009-10 and have touched USD 27 47 billion ir 2910-11. In Ihe financial year 2011-12 (P). exports of textiles and clothing, has grown by 20 05% over Ihe financial year 2010-11 to touch USD31.31 billon in rupee/US$lenms, experts of readymade garmenls wifriessed the highest export share (39%) tollowed by Cotton Textiles (33%), and Man- Made Textiles (17%) during 2912-13 (April- December). Indy's textiles and dolnmg industry is also one of the largest contribut.ng sectors of I nd a's exports worldwide. The report or Working Group constituted by the Planning Commission on boosting India's manufactumg exports dunng 12th Five Year Plan (2012-17), envisages India's exports of Textiles and Clothmg at USD 64.11 billon by the end of March 2017

FINANCIAL ANALYSIS

PRODUCTION / SALES REVIEW

During the year under revew. your company achieved a production of 36364 MT of ooitonteyniheiic yam as compared to 29479 MT in the previous year showing an increase of about 39%. THE company ach.evad a gross tomtiverfoperatmg income of Fts Rtil 65 Crcres as compared to Rs. 763.39 Crores n Ihe previous year shewing a growth of about 12 96% The experts increased to Rs. 373.81 Crcres against Rs. 325.05 C i ores In the previous year showimg a growth of about 11.90%. The Company is recognized as 'Trading House' by Govt, of India.

PROFITABILITY

The company earned a gross profit of Rs. 136.BS Crcres having protitabilily.'sa ratio at 15 B-S % as compared to Rs. 62.67 Crones having profitability/ pates ratio of 819% In the previous year which has improved substantially with stable business environment and due tti better realisal(ons, procurement of raw cotton at the appropriate price, purchase of power at lower price under open access etc.

The -merest cost increased to Rs. 73 76 Crones as compared to Rs, 52 07 Crares in the previous year due to increase in interest rates and increased borrowings with the increased level of operations. The company earned gross cash profit bf Rs. 66.1(3 Crcres agansi cash profit of Rs. 19.50 Ogres in the previous year. After making provision of deprecation of Rs. 46.66 Crcres (Previous Year Rs 25.31 Crones), Income Tax cf Rs. 0.54 Cranes (Previous Year Rs - 0.02 Crones). and after providing for deferred tax assets of Rs. 7 50 Cfores (Previous Year Rs [-J10.79 Crates) there was a net prolil of Rs 32.1B Crwes against previous year net loss of Rs. 26.08- Crones After transfer of,Re. 0,43 Crores to Capital Redempfion R eserve, the su rplus n Lne Pro fit 4 Loss Appropriation Account stands at Rs. 57.S4 Crores

RESOURCE UTILISATION :

Fixed Assets

The Net Fixed Assels ( nclucmg wqii- n-progress] as at 31st March. 2013 were Rs 431.00 Crores as compared to Rs 400 05 Crones in the previous year as the company has completed a major part of Drown field project of 6153C spmdtes at Batfnnda.

Current Assets and Current Liabilities

The inventory level increased by Rs. 19 99Cngnes from Rs. 173.89 Crones at the end of the previous year lo Rs 193 80 Crores at the end or the year under review. The Sundry Debtors level decreased lo Rs 7fl 10 C rpres at the end Of Current year tfom Rs. 88.29 Crores aLtheend Of previous yearwhilprhe level of other current assets increased to Rs. -66 82 Ctores at the end at current year from Rs 44.,99 Crores at the end of previous year due to increased level of operations. The level of trade payablesrshort term borcowlngstother current liabilities end provisions has decreased to Rs. 393.79 Crs at the end of current year From Rs 437 07 Crs a1 the end of previous year, (hus improving the net working cap 1al position gf the company

LIQUIDITY S CAPITAL RESOURCES:

I he position of liquidity and capital resources is given below:

(Rs. in crores)

Particular 2012-13 2011-12

Cash & Cash Equivalents:

Beginning of the year 9.64 4.73

End of me year 9.26 9.64

Net Cash provided (used) by:

Operating Activities 61.91 70.33

investing Activities (67.50) (150.91)

Financial Activities 3.21 82.49

The company is utilizing cash accruals for meeting term loan commitments and acquisition of fixed assets

EXPANSION PROJECT

So far 40430 spindles have been commissioned out of the company's brownfield expansion project of 61536 spindles at Rathinda for manu.factuie of polyester cotton bierfoedfccmpati cotton yarn and the ^stalled capacity at the Company has increased to 1.79 Lacs soil'd es as on dale from 1.55 Lacs spindles as anaist March 2612 The implements on of tie balance 13056 spindles of the expansidr. project alongwiih additional 19534 spndles at a additional cosi of Rs 63.52 crores for the manufedure of compact cotton yam is at the final stage winch is expected to be commissioned m the current F Y 2913-14

INTERNAL CONTROL SYSTEM

The company has internal audit department to oversee internal control systems and procedures to ensu re efficiency of decisions for optimum utilizaLicn and protection of resources and compliance with applicable statutory laws and regulations and interna' policies. Quarterly reports are- submitted by the ntemal auditor to the Audit Committee erf the Board and necessary action recommendation are made thereafter by the said committee. Continuous efforts are being made lo further strengthen the internal oonlrel systems.

MATERIAL DEVELOPMENTS IN HUMAN

Resources r industrial relations

The Company recognizes its human resources as its most valuable asset The Company has specialized professionals in the respective fields to take care of its operations and allied activities. The company recognizes the whole headed contribution by its committed worn force in bringing the Company to its present position The Company is employing over 3700 parsons. The Industrial Relations continues to be cordial.

3. DIRECTORS

Mr Raj Kumar Avaslhi Chairman curw Managing Director and Sin Mumsb Avasthi Managing Director of the company, retire by rotation at trie ensuing Annual General Meeting of the company and being eligible offer themselves for reappointment.

4. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of trie Companies Act, 1956, the Directors confirm that:-

i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii) appropriate accounting policies have been selected and applied consistently, and naive made judgments end estimates that arc reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March 2013 and the loss of the Company for the year ended on 31st March 2013.

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

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

5. AUDIT COMMITTEE

The Company has an Audit Committee of the Board of Directors, the members of which are Mr. Ajay Chaudhry, Dr. (Mrs) H. K. Bal and Mr. Sunil Pun, Mr, Ajay Chaudhry Is the Chairman of the comm,ties. The committee is empowered to look into al the matters related to finance and accounting and its terms of reference are as per Clause 49(H) of the listing agreement read with section 292A of The Compnies Act, 1956.

6. RISK MANAGEMENT - MANAGEMENT PERCEPTION

The textile business, like other businesses, is susceptible to various risks The primary risk factor is raw malerial prices, mainly raw cotton end synthetic fibre, which is the largest component of cost Since cotton is an agriculture produce, it suffers from climatic volatility in the major cotton producing countries the prices of synthetic fibre are based on the prices of petroleum products m the miemetionai market. This is turn creates uncertainties for textile manufacturers

Another important issue is the availability, quality and price of power The evailability of good qualily power al reasonable prices is critical Tor suslainahility of the industry However, the cost of power has been continuously increasing The non-availability of skilled manpower along with high labour cost prevailing in the counlry is growing concern area for textile industry.

Wo are making all efforts to cope up with the challenges through continuous cost reduction, process Improvements, diversification of products, training the workforce on the continued basis, and creating a stronger customer onented approach.

7. AUDITORS

M/s Rawla & Company, Chartered Accountants. New Delhi, being the auditors erf the Company retire at the forthcomeig Annual General Meeting of the Company and being eligible olfer themselves for re- appointment.

8. AUDITORS' REPORT

The comments in the Auditors' Report read with Notes to Accounts are self explanatory and do not call for any further explanation.

9. COST AUDITORS

The board of director^ has appointed Mis R.R. & Co., Cost Accountants, Ludhiana as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956 read with Cost Audit Rules, 20H for the year 2013-14. The Cost Auditors' Report lor the financial year2012-13 will be forwarded to the Central Government as required under law.

10. PUBLIC DEPOSITS

The Company has not raised any deposits from the public except the interest free unsecured loan from Directors of the Company. Hence the provisions of Section 58A of the Companies Act 1956 and the rules made under Companies (Acceptance of Deposits})Rules, 1975 with regard to the deposits accepted from the public are not attracted

11- LISTING OF SECURITIES

The securities of the company are luted or The Delhi Stock Exchange Ltd., New Delhi, The Ludhiana Stock Exchange Ltd., Ludhiana. The Ahmedebed Stock Exchange Ltd., Ahmedabad and The Madbya Pradesh Stock Exchange Ltd Indore and the company has ebeedy paid listing fees of the stock exchanges for the financial year 2013-14

12, PARTICULARS OF EMPLOYEES

No employee is covered under ihe provisions of Section 217 (2A) of the Companies Acl 1B5B read with Companies (Particulars of Employees) Rules, 1975.

13, PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as requ red by the provisions of the Section 217 [1} (a) of the Companies Act 19S6 read with the Companies (Disclosure of particulars in Ihe Report of (hE Board or Directors) Rules 1988 is annexed fierelo and forms part of this Report

14. CORPORATE GOVERNANCE

A separate report on Corporate Governance eking with Auditors' Certificate is eilechetf.

15. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation of me co-operation from Vie Bankers. Financial Instnulions and Government Bodies & Bus ness Associates Your D rectors also record their apprecahon of the services remdered by the employees of the company

By Order of the Board

Place : Ludhiana Raj Kumar Avasthi

Date ; September 1,2013 Chairman

Regd, Office: S/69, Guru Mansion, 1st Floor, Padam Singh Road, Karol Baijh, New Delhi - 110005


Mar 31, 2012

Dear Members,

The Directors of your company are pleased to present their Twenty Third Annual Report on the affairs of the company together with Audited Accounts of the Company for the year ended 31st March, 2012.

1. FINANCIAL RESULTS

The summarized financial results for the year are as under:

(Rs. in Crores)

Particulars 2011-12 2010-11

Gross Tumover/Operating income 767.73 418.95

Profit before Interest, Depreciation & 58.79 72.81 Taxation

Less interest (Net) 48.29 14.37

Profit before Depreciation & Taxation 10.50 58.44

Less: Depreciation 25.81 13.90

Net Profit before Taxation -15.31 44.54



Less: Provision for Current Taxes -0.02 11.96

Net Profit after Current Taxes -15.29 32.58

Add: Provision for Deferred Tax Assets -10.79 -3.38 ( ) /Liabilities (-)

Net Profit after Deferred Taxation -26.08 29.20

Add: Surplus of Last Year 52.70 23.78

Less: Transfer to Capital Redemption 0.42 0.28 Reserve

Surplus carried to Balance Sheet 2620 52.70

2. MANAGEMENTS DISCUSSION AND ANALYSIS BUSINESS REVIEW:

The economic slowdown in EU and USA has forced emerging economies to struggle for growth after experiencing weak performance in the FY 2010-11 and up to first half of FY 2011-12. Moreover, these tough economic conditions have not been compensated by surge in domestic demand in emerging economies.

So, the emerging and developing economies are expecting lower growth in the near future. India is also projected to grow in the range of 6% - 7% respectively due to major issues in EU and its banking system. In addition to global pressures on Indian economic performance, structural problems related to infrastructure, lower productivity levels and lack of policy reforms are other major concern areas. Moreover, higher inflationary pressures are also resulting in tighter monetary policies thereby restricting the industrial growth in India.

COTTON

The global cotton price which is largely a function of global demand and supply of cotton has been influenced by factors other than actual user demand and overall supply of cotton in 2011-12. The Chinese policy of accumulating cotton for strategic reserves and occasional policy decisions of Indian Government in relation to export of cotton has caused much volatility in cotton prices. The global cotton production is estimated at 27.16 million tons in 2011-12, which is expected to decline to 24.9 million tons in 2012-13 due to lower area under cotton cultivation in sync with moderation in global cotton prices to an extent. The 'global mill consumption of cotton is estimated at 22.7 million tons in 2011-12 and is projected to grow moderately in 2012-13.

YARN

Financial year 2011-12 was a year rampant with nervousness and unpredictability, which was not a conducive environment for business. The ban on the exports of cotton yarn in January, 2011 seriously impacted the industry and there was accumulation of inventory till end of March, 2011. The Government announced its new policy on export of Cotton Yarn in first week of April, 2011 and yarn export was brought under Open General Licence. As a result, the yam prices moved in a wide range for the first half of the year. Most of the textile mills, particularly which are predominantly spinning, suffered losses including losses incurred by the writing down of the stock of cotton and yarn in the first half of the FY 2011-12.

However, it was only in the second half that things showed some signs of stabilization. All India yarn production was lower by an estimated 15% due to (i) Power crisis in the South (ii) Huge inventory losses as referred above resulting in severe shortage of working capital availability to some companies (iii) Acute labour shortage across India (iv) Sharp fall in

yarn prices as compared to last year propelling voluntary cut in production. However, this year production is expected to increase even though margins are expected to be on the lower side only. There is also a noticeable trend of increasing value addition in products. The removal of trade barriers with Bangladesh is yet to show any impact on the Indian Industry.

Overall the year is expected to be more stable due to expectation that cotton will be much less volatile than last year. Growth of the industry will hinge on recovery in the global economy although Indian demand is expected to increase at a relatively moderate rate.

FINANCIAL ANALYSIS

Your directors are pleased to report performance of the business operations as follows:

PRODUCTION / SALES REVIEW

During the year under review, our company achieved a production of 29479 M.T. as compared to 20757 MT in the previous year showing an increase of about 42%. The company achieved a gross turnover/ operating income of Rs. 767.73 Crores as compared to Rs. 418.95 Crores in the previous year showing a growth of about 83 %. The exports increased to Rs. 322.50 Crores against Rs. 207.35 Crores in the previous year showing a growth of about 55 % owing better market penetration. The Company is recognized as Trading House' by Govt, of India.

PROFITABILITY

The company earned a gross profit of Rs. 58.79 Crores having profitability/sales ratio of 7.66 % as compared to Rs. 72.81 Crores having profitability/ sales ratio of 17.38 % in the previous year which has declined due to inventory losses with decrease in prices of raw cotton/cotton yarn during first half of the financial year 2011-12

The interest cost increased to Rs. 48.29 Crores as compared to Rs. 14.37 Crores In the previous year due to increase in interest rates and increased borrowings due to increased level of capacities/ operations. The company earned gross cash profit of Rs. 10.50 Crores against cash profit of Rs. 58.44 Crores in the previous year. After making provision of depreciation of Rs. 25.81 Crores (Previous Year Rs 13.90 Crores), Income Tax of Rs. (-)0.02 Crores (Previous Year Rs. 11.99 Crores), and after providing for deferred tax liability of Rs.10.79 Crores (Previous Year Rs. 3.38 Crores) there was a net loss of Rs. 26.08 Crores against previous year net profit of Rs. 29.20 Crores. After transfer of Rs.0.42 Crores to Capital Redemption Reserve, the surplus in the Profit & Loss Appropriation Account stands at Rs. 26.20 Crores.

RESOURCE UTILISATION:

Preferential Allotment

During the year, the company allotted 28,92,000,5% Redeemable Non Cumulative Preference Shares of Rs. 10/- each at premium of Rs. 90/- per share amounting to Rs. 28.92 Crs to the promoters and their associates to augment the long term resources of the company.

Fixed Assets

The Net Fixed Assets (including work-in-progress) as at 31st March, 2012 were Rs. 414.95 Crores as compared to Rs. 283.56 Crores in the previous year as the company has completed the greenfield project of 57600 spindles and a part of brownfield project of 61536 spindles with dye house at Bathinda.

Current Assets and Current Liabilities

The inventory level increased by Rs. 9.94 Crores from Rs. 163.95 Crores at the end of the previous year to Rs. 173.89 Crores at the end of the year under review. The Sundry Debtors level increased to Rs. 88.29 Crores at the end of current year from Rs. 45.73 Crores at the end of previous year while the level of other current assets increased to Rs. 44.99 Crores at the end of current year from Rs. 40.84 Crores at the end of previous year due to increased level of operations. The increased level of current assets has also been financed by increased trade payables/short term borrowings/other current liabilities and provisions of Rs. 437.07 Crs at the end of current year from Rs. 309.02 Crs at the end of previous year.

LIQUIDITY & CAPITAL RESOURCES:

The position of liquidity and capital resources is given below:

(Rs. in Crores)

Particulars 2011-12 2010-11

Cash & Cash Equivalents:

Beginning of the year 4.73 4.21

End of the year 9.64 4.73

Net Cash provided/ (used) by:

Operating Activities 79.33 62.91

Investing Activities (156.91) (176.41)

Financial Activities 82.49 114.02

The company is utilizing cash accruals for meeting term loan commitments and acquisition of fixed assets.

EXPANSION PROJECT

The Company's brownfield expansion project at Bathinda is underway for installation of 61536 spindles and a dye house for manufacture polyester cotton blended/cotton/meiange yarn. So far 48400 spindles have been installed / commissioned under this project and rest of the project is likely to be completed by March 2013. So the installed capacity of the Company has increased to 1.78 Lacs spindles as on date from 1.01 Lacs spindles as on 31st March 2011.

INTERNAL CONTROL SYSTEM

The company has internal audit department to oversee internal control systems and procedures to ensure efficiency of decisions for optimum utilization and protection of resources and compliance with applicable statutory laws and regulations and internal policies. Quarterly reports are submitted by the internal auditor to the Audit Committee of the Board and necessary action / recommendation are made thereafter by the said committee. Continuous efforts are being made to further strengthen the internal control systems. The company's main works at Ludhiana have been accredited with ISO-9001 from the concerned certification body DNV.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS

The Company recognizes its human resources as its most valuable asset. The Company has specialized professionals in the respective fields to take care of its operations and allied activities. The company recognizes the whole hearted contribution by its committed work force in bringing the Company to its present position. The Company is employing over 3000 persons. The Industrial Relations continues to be cordial.

3. DIRECTORS

Mr. Naresh Jain and Dr. (Mrs.) H. K Bal of the company, retire by rotation at the ensuing Annual General Meeting of the company and being eligible offer themselves for reappointment.

4. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that:-

i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii) appropriate accounting policies have been selected and applied consistently, and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March 2012 and the loss of the Company for the year ended on 31st March 2012.

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

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

5. AUDIT COMMITTEE

The Company has an Audit Committee of the Board of Directors, the members of which are Mr. Ajay Chaudhry, Dr. (Mrs.) H K Bal and Mr. Sunil Puri, Mr. Ajay Chaudhry is the Chairman of the committee. The committee is empowered to look into all the matters related to finance and accounting and its terms of reference are as per Clause 49(ii) of the listing agreement read with section 292A of The Companies Act,1956.

6. RISK MANAGEMENT - MANAGEMENT PERCEPTION

The continued economic gloom, sharp drop in incomes and consumption in major consuming countries, uncertainties on when and to what extent economic recovery will take place and lack of trust and confidence in financial markets are major concern areas. The economic growth in our country, agriculture income, political and economic policies of new government will be few major influencing factors on textile industry's performance. The crude oil / raw cotton prices, foreign exchange rates, demand of cotton / synthetic yam in the international/ domestic market, employment generation and their disposable incomes levels etc. would be influencing factors on the margins of textile industry. Overall the uncertainties and risks are likely to moderate in the coming year.

7. AUDITORS

M/s. Rawla & Company, Chartered Accountants, New Delhi, being the auditors of the Company retire at the forthcoming Annual General Meeting of the Company and being eligible offer themselves for re- appointment.

8. AUDITORS' REPORT

The comments in the Auditors' Report read with Notes to Accounts are self explanatory and do not call for any further explanation.

9. PUBLIC DEPOSITS

The Company has not raised any deposits from the public. Hence the provisions of Section 58A of the Companies Act, 1956 and the rules made under Companies (Acceptance of Deposits) Rules, 1975 with regard to the deposits accepted from the public are not attracted.

10. LISTING OF SECURITIES

The securities of the company are listed on The Delhi Stock Exchange Ltd., New Delhi, The Ludhiana Stock Exchange Ltd., Ludhiana, The Ahmedabad Stock Exchange Ltd., Ahmedabad and The Madhya Pradesh Stock Exchange Ltd., Indore and the company has already paid listing fees of the stock exchanges for the financial year 2012-13.

11. PARTICULARS OF EMPLOYEES

No employee is covered under the provisions of Section 217 (2A) of the Companies Act 1956 read with Companies (Particulars of Employees) Rules, 1975.

12. PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information as required by the provisions of the Section 217 (1) (e) of the Companies Act 1956 read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 is annexed hereto and forms part of this Report.

13. CORPORATE GOVERNANCE

A separate report on Corporate Governance along with Auditors' Certificate is attached.

14. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation of the co-operation from the Bankers, Financial Institutions and Government Bodies & Business Associates. Your Directors also record their appreciation of the services rendered by the employees of the company.

By Order of the Board

Place : Ludhiana Raj Kumar Avasthi Date : September 1, 2012 Chairman

Regd. Office:

5/69, Guru Mansion, 1st Floor, Padam Singh Road, Karol Bagh, New Delhi -110005

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