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Notes to Accounts of Suryajyoti Spinning Mills Ltd.

Mar 31, 2015

1. BRIEF BACKGROUND

Suryajyoti Spinning Mills Ltd was incorporated in the year 1983 and has commenced operations from the year 1992. The company is into manufacture of Yarn and Fabric. The manufacturing facilities are located in four places in the district of Mahaboobnagar of Telengana State. The company's products include Cotton Yarn, Polyester Yarn and Bottom Weight Fabric.

i) Reconciliation of number and amount of Shares at the beginning and end of reporting period.

iii) Rights, preferences and restrictions attached to Equity Shares:

The company has one class of equity shares having a par value of Rs. 10 each. Each equity shareholder is entitled to one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the annual general meeting except in the case of interim dividend. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to number of equity shares held by them.

iv) Rights, preferences and restrictions attached to Preference Shares:

The company has one class of preference shares called Cumulative Redeemable Preference Shares having a par value of Rs. 100 each with a fixed dividend rate of 10% pa with cumulative rights to the dividend. The holders are eligible to vote on all the resolutlions of the company at General Meetings, in case the dividend is in arrear for not less than two years as on the date of the meeting. The holders will be preferencial right to the paid up capital and arreas of dividend over the equity holders, in case of winding up the company. The shares are redeemable at par on the due date as mentioned below by giving three months notice of redemption by the Board of Directors of the company.

2. SHARE APPLICATION MONEY PENDING ALLOTMENT

During the Year our Company has allotted 3,07,000, 10% Cumulative Redeemable Preference shares on 13.11.2014 pursuant to the approval of Share Holders in their meeting held on 30.09.2014.

Previous year

Share Application money of ' 307 Lakhs is pending for allotment subject to approval of share holders and completion of formalities with Securities and Exchange Board of India and Stock Exchanges.

i. The Primary security for the loans mentioned at (i) above is Pari-passu 1st charge on the entire fixed assets of the company, both present and future, situated at the four locations of the factories. Further secured by Pari-Passu II nd charge on the entire Current Assets of the company along with other Lenders.

ii. The Collateral security for the loans mentioned a (i) above are a ) Pledge of shareholding of the promoters in the company of 76,1 1,397 equity shares on pari-passu basis along with other Lenders; b) EM of commercial property belonging to the relatives of the Promoters on Pari-Passu basis along with other Lenders.

iii. The loans mentioned at (i) above are further secured by way of Personal Guarantee of three Directors of the company and by five of the relative of the Promoters. These are further secured by Corporate Guarantees of two of the group companies.

iv. The Loans at (i) (b) and (e) are further secured by pledge of 500,000 equity shares of the company held by the Promoters on exclusive basis to SBI and SBH.

v. The Loans at (i) (m) (n) and (o) are further secured by way of exclusive charge in respect of open land and commercial property belonging to the relatives of the Directors of the company.

vi. The security for the loan mentioned at (ii) above is II nd pari-passu charge on the fixed assests of the company along with other lenders.

vii. The company has taken vehicle loans from NBFC's for Rs.32.82 lakhs under hypothecatin scheme. These loans are repayable in 36 monthly instalments including interest. The outstandng loan as on 31 Mar 2015 is repayable in 3-18 monthly instalemnts with the last instalment due on Sep-2016. The loan is secured by way of hypothecation of the respective vehicle acquired and further guaranteed by one of the Director of the company.

3.i. The Unsecured Loans from Promoters and Corporate are in complaince with the stipulations of Banks at the time of approval of CDR restructuring. These unsecured loans does not carry any interest and are sub servent to Bank loans.

ii. The ROR amount represents the differential interest amount payable to the Banks as on 31 Mar 2015 in terms of the CDR scheme sanctioned. This amount is payable at the end of the CDR period if the banks raise demand. As on 31 Mar 2015, the Banks have not raised any demand. However, the company is making provision for the same as a matter of prudence.

iii. The Foregin Currency Convertible Bonds have been repaid during the year by availing Priority Debt from the Consortium Banks under the CDR scheme.

iv. The company had availed interest free Sales Tax Deferment Loan from Government of Andhra Pradesh on Burgul unit Original and availing on Burgul unit Expansion Scheme. The Sales Tax Deferment loan shown under Unsecured Loans under Schedule 4 indicates sales tax collected under deferral scheme and is payable at the end of 10 th year in respect of Burgul unit original and is payable at the end of 14th year in respect of Burgul unit expansion. The same is repayable as under:

4.i. The Primary security for the loans mentioned above is Pari-passu 1st charge on the entire current assets of the company, both present and future, situated at the four locations of the factories. Further secured by Pari-Passu II nd charge on the entire Fixed Assets of the company along with other Lenders.

ii. The Collateral security for the loans mentioned above are a) Pledge of shareholding of the promoters in the company of 76,1 1,397 equity shares on pari-passu basis along with other Lenders; b) EM of commercial properties belonging to the relatives of the Promoters on Pari-Passu basis for SBI and SBH.

iii. The loans mentioned above are further secured by way of Personal Guarantee of three Directors of the company and by five of the relative of the Promoters. These are further secured by Corporate Guarantees of two of the group companies.

iv. The Loan of SBI is further secured by way of exclusive charge on the non-agricultural land belonging to one of the Director of the company.

5. OTHER DISCLOSURES

A. Contingent Liabilities not provided for (Rs. in lakhs)

PARTICULARS Amount Amount

(a) Arrears of Preference Dividend 477.03 308.46

(b) Claims against the company 25.49 25.49

Total 502.52 333.95

Notes:

(a) The Company has purchased HSD and FO form Bharat Petroleum Corporation Ltd from 1997- 98 onwards against C form. However, BPCL has subsequently raised demand for additional tax amounting to Rs.12.71 lacs on the basis that HSD can not be purchased against C form and filed a case in the Court for recovery of the same. The case is still not disposed off by the Honorable Court as at the date of Balance Sheet.

(b) The Electrical Inspectorate of Govt of Andhra Pradesh has raised a demand for Rs. 12.78 lacs for payment of Electricity Duty at the rate of 0.25 paisa per every unit of power generated and used for captive purposes as per the provisions of Andhra Pradesh Electricity Act, 1939 in the year 2004. The company has made an appeal for waiver of the same and also deposited an amount of Rs. 6.34 lakhs under protect. Further, the company has filed a petition in the High Court of AP in 2012 and the matter is still pending as on the date of Balance Sheet.

6. Capital commitments

Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. Nil (Previous Year Rs. 153.21 lakhs).

7. Related parties disclosure

(a) Name of the related parties and description of the Relationship

Name of the Related Parties Nature of Relationship

R K Agarwal Key Managerial Personnel

A K Agarwal Key Managerial Personnel

Neha Agarwal Key Managerial Personnel

Umabhai Agarwal Relative of KMP

Suryajyoti Infotech Ltd Enterprise in which KMP has significant influence

Pangea Fabrics India Pvt Ltd Associate Company

Suryalakshmi Cotton Mills Ltd Enterprise in which relative of KMP have significant influence

Aananda Lakshmi Spinning Mills Ltd Enterprise in which relative of KMP have significant influence

(b) The transactions with related parties have been entered at amounts which are not materially different from those on normal commercial terms.

(c) The amount due from related parties are good and hence no provision for doubtful debts in respect of dues from such related parties is required.

8. No provision is made in respect of Deferred Tax asset and Liability during the year. As the company has incurred losses during the year and is having substantial brought forward losses and un absorbed depreciation and as there is uncertainty of sufficient future taxable income which may be available for its realization. The deferred tax asset with reference AS22 issued by ICAI is thus is not considered as a matter of prudence.

9. Payment of Excise Duty on sales is taken into consideration on removal of goods and consequently no Excise Duty is provided on the closing stock of inventories and corresponding liability. There is no effect on profit or loss.

10. The information with regard to Micro, Small and Medium Enterprises has been determined to the extent such parties could be identified on the basis of the information available with the company. Accordingly, the trade payables include Rs. NIL (previous year Rs. NIL) due to them for a period exceeding 30 days and the company has not paid any interest during the year to any enterprise registered under Micro, Small and Medium Enterprises Development Act, 2006.

11. Employee Benefits :

a. Provident Fund

The company makes provident fund to defined contribution plans for qualifying employees. Under the scheme, the company is required to contribute a specified percentage of the payroll costs to fund the benefits. The company recognised Rs. 84.83 lakhs during the year (Previous year Rs. 87.23 lakhs) for Provident Fund contributions in the statement of Profit and Loss. The contribution payable to these plans by the company are at the rates specified in the rules of the scheme.

12. Central Excise applicability

Vide Notifications No. 29 & 30 of 2004 of the Central Excise Department, we can opt for zero rate of duty by not taking Cenvat credit on Inputs or for payment of duty on Final products by taking credit on inputs and capital items. Accordingly, in case of Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items; where as in case of Polyester yarn we have taken Cenvat credit on part of the raw material which are used for production of polyester yarn meant for export and cleared the material for export on payment of duty.

13. Depreciation

Consequent to the enactment of Companies Act, 2013, the company has charged depreciation based on the balance useful life of the Assets as per Schedule II of the Companies Act 2013 except in case of weaving mill Plant and Machinery, which has been based on internal assessment and independent Technical evaluation. The management believes that the useful lives as determined, best represents the period over which it expects to use these assets. In terms of the Schedule II of the Companies Act 2013, an amount of Rs. 82.76 lakhs representing the carrying amount (after retaining the residual value) of assets for which the remaining useful life is 'NIL' has been adjusted against the Retained Earnings. Similarly, the excess depreciation claimed in earlier years amounting to Rs. 518.50 lakhs has been shown under Exceptional Items in the Statement of Profit and Loss.

14. The previous year figures are re-arranged and/or re-grouped wherever necessary.


Mar 31, 2014

NOTE 1: SHARE APPLICATION MONEY PENDING ALLOTMENT

Current Year

Share Application money of Rs. 307 Lakhs is pending for allotment subject to approval of share holders and completion of formalities with Securities and Exchange Board of India and Stock Exchanges.

Previous year

Share Application money of Rs. 164 Lakhs is pending for allotment subject to approval of share holders and completion of formalities with Securities and Exchange Board of India and Stock Exchanges.

NOTE 2: SHORT TERM BORROWINGS :

All Working Capital loans are secured by hypothecation of stocks of raw materials, yarn, fabric, stock-inprocess, stores and spares and book debts and by a second mortgage over the (present and future) movable & immovable properties of the Company on pari-passu basis and further guaranteed by two Directors of the Company in their personal capacities.

3. Trade Payables - Micro, Small and Medium Enterpises :-

A. Trade Payables includes (i) Rs. Nil (Previous Year Rs. Nil) due to Micro and small enterprises for a period Exeeding 30 Days registered under the Micro,Small and Medium Enterprises development Act,2006 (MSIME)

B. No Interest is paid/Payable during the year to any enterprise registered under the MSMIE.

C. The Above information has been determined to the extent such parties could be identified on the basis of the informationa available with the Company regarding the status of suppliers under the MSIME.

4. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

5. Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

6. Employees Benefits : Gratuity

Consequent to the adoption of Accounting Standard on employees Benefuts (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity.

7. Consequent to the Notification under the Companies Act, 1956, the financial statements for the year ended 31st March,2014 are prepared under Revised Schedule VI. Accordingly, the Previous year''s figures also have been reclassified to confirm to this year''s classification.

8. The Company approached the lenders to restructure the term loans under Corporate Debt Restructuring Scheme (CDR)as the Company is facing the liquidity problems in view of external problems of steep power cuts of 4 days in a week imposed by government of Andhra Pradesh and volatality in rawmaterial prices etc. Corporate Debt Restructuring Empowered Group approved the relief package at their meeting held on 15.02.2013. The lenders have since implemented the CDR package.

9. The Company had issued 10,000 Foreigh Currency Convertible Bonds (FCCBs) of US $ 1,000 each in 2006-07, maturity date being February 17,2012. Out of these, during the year 2010-11 (I.e., on 29th june 2010) 7,000 FCCBs of worth US$ 7,000,000 were bought back by the Company with the approval of Reserve Bank of India and 500 FCCBs were converted into 5,23,509 Equity shares of Rs. 10/- each at a premium of Rs. 32.11 per share. The said shares were listed on Bombay Stock Exchange Ltd., and National Stock Exchange of India Ltd., 2,500 FCCBs were outstanding as on 31/03/2014. As the operations of the Company had come under strain since past two years due to various reasons the Bonds could not be redeemed in time, Negotiations are under way between the Company and the Bondholders for redeeming the said outstanding FCCBs.


Mar 31, 2012

Appendix:

1. The Loans referred at (a), (b), (e) to (h) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis and guaranteed by two Directors of the Company in their personal capacities.

2. The Loan referred at (c) & (d) above is secured by mortgage of the fixed assets created by virtue of proposed term loan for the present movable and immovable properties of the Company on first charge pari passu basis and Pledge of 5,00,000 shares from the Promotors on Pari passu basis.

3. The Loan referred to in (i) above is secured by hypothecation of specified plant and machinery as per the scheme and guaranteed by two Directors of the Company.

4. The Loan referred to in (ii)-(a) are secured by Second charge on block assets of the company on pari passu basis with other banks holding second charge.

Notes forming part of Balance Sheet as at 31st March, 2012 and Profit and Loss Statement for the year ended on that date

Note 1

PARTICULARS AS AT AS AT 31.03.2012 31.03.2011 Rs. Rs.

1. Contingent Liabilities not provided for

a. Contracts to be executed on capital accounts. 712.81 227.81

b. Against Foreign & Inland Letters of Credit 0.00 275.15

c. Against Bank Gaurantees 5.58 5.58

d. Fuel Surcharge Adjustment under dispute with APCPDCL 260.13 260.13

e. APSEB Liability under dispute 12.78 12.78

f. APGST under dispute with BPCL 12.21 12.21

g. Preference Share Dividend 56.43 0.00

5. Trade Payables - Micro , Small and Medium Enterpises :

A. Trade Payables includes (i) Rs. Nil (Previous Year Rs. Nil) due to Micro and small enterprises for a period Exceeding 30 Days registered under the Micro,Small and Medium Enterprises development Act,2006 (MSIME)

B. No Interest is paid/Payable during the year to any enterprise registered under the MSMIE.

C. The Above information has been determined to the extent such parties could be identified on the basis of the information available with the Company regarding the status of suppliers under the MSIME.

2. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

3. Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/ 09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

4. 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's figures also have been reclassified to confirm to this year's classification.


Mar 31, 2010

1. The company had availed interest free Sales Tax Deferment Loan from Government of Andhra Pradesh on Makthal unit, Burgul Original and availing on Burgul Expansion Scheme. The Sales Tax Deferment loan shown under Unsecured Loans under Schedule 4 indicates sales tax collected under deferral scheme and is payable at the end of I Oth year in respect of Makthal and Burgul original and is payable at the end of 14th year in respect of Burgul expansion.

2. a) During the year 2006-07 the Company has issued 2% coupon Foreign Currency Convertible Bonds for an amount of USD 10 Million at par. These Bonds are convertible into equity shares with a fixed rate of exchange of Rs.44.09 per I USD at initial conversion price of Rs.85/- per share at the option of the bond holders at any time on or after 16th February, 2007 and on or before January 17, 2012 which is 30 calender days prior to the maturity date. The Company has also an option to force each bondholder, after 2 years, if the stock price for 30 consecutive days is above 150% of conversion price to convert up to USD I Million of their holdings into shares in every six months period. If no conversion takes place the bonds are redeemable on 17th February, 2012, at their accreted principal amount calculated from the issue date (being a price equal to 140.48% of the outstanding principal of the bonds) giving a yield to maturity of 8.5% per annum.

b) The proceeds of the above issue have been utilized towards issue expenditure, modernization and expansion of existing units and new units taken up at Rajapur and Kucherkal units.

c) As the variables are indeterminate at present, the premium on actual redemption is not computable and will be recognized, as and when the redemption option is exercised, as a charge to the Securities Premium Account in terms of Section 78(2)(d) of the Companies Act, 1956.

3. In the opinion of the Board, the current assets and loans and advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

4. The company has set up a new unit at Kucherkal Village, Mahabubnagar District, A.R to manufacture/ process 20 MN Mtr fabric per annum. The unit processed fabric with special finishes like Leather, Velvet etc., to cater to the niche markets in the world. To achieve the quality of product to be accepted by domestic and international markets, the company has made various alternative processes of manufacturing by using various dyes, chemicals, enzymes etc. The company has then made test runs on the various processes using different combination of dyes, chemicals, enzymes etc. The expenditure incurred(net of revenue) in these test runs and experimental production from April 2009 to September 2009 amounting to Rs. 10,13,06,221/- is capitalized to Fixed Assets as trail run expenses.

5. As per the notification 30, Dt.09-07-2004 issued by government of India, the Company has opted for exempted route in respect of excise duty on Yarn. Hence the company neither collected nor paid the duty on its products and also not availed any CENVAT credit on purchase of raw materials.

6. Paise have been rounded off to nearest rupee.

7. Previous Years Figures have been regrouped wherever necessary.



 
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