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Directors Report of V2 Retail Ltd.

Mar 31, 2014

The Members of V2 Retail Limited

The Directors have great pleasure in presenting the Thirteen Directors'' Report on the business and operations of the Company together with the Audited Statements of Accounts of the Company for the year ended March 31, 2014.

FINANCIAL HIGHLIGHTS: (Rs. in Million)

PARTICULARS Year ended Year ended 31.03.2014 31.03.2013

Income from Operations (1) 2288.92 1056.71

Other Income (2) 22.07 20.99

Total Income (3) 2310.99 1077.70

Total Expenditure except interest cost (4) 2281.31 1072.07

Interest (5) 80.54 65.21

Profit( ) & Loss(-) before tax (6)=(3)-(4 5) (50.86) (59.58)

Provision for Taxation (7) Ni] Nil

Tax Adjustments (8) 7.52 18.84

Net Profit ( ) & Loss (-) after tax (6-(7 8)) (43.34) (40.74)

Brought forward from Previous year (5321.27) (5268.52)

Extra Ordinary Item & Prior Period (1.73) (12.02)

Adjustment

Amount available for appropriation Nil Nil

Less: Provision for Preference Dividend Nil Nil

Less: Provision for Dividend Distribution Tax Nil Nil

Balance carried to Balance Sheet (5366.35) (5321.27)

EPS (In Rs for Equity Shares of par value of Rs.10/- each) _

Basic (before extraordinary & (1.94) (1.82) prior period items)

Basic (after extraordinary & prior period (2.01) (235) items)_

Diluted (before extraordinary & (1.94) (182) prior period items)

Diluted (after extraordinary & (2.01) (235) prior period items)

PERFORMANCE REVIEW

The Indian retail industry has experienced high growth over the last decade with a noticeable shift towards organized retailing formats. During the year the company has increased its turnover from 1056.71 Million to 2288.92 Million by 2.1 times compared to previous year. The Company has significantly reduced its accumulated loss as compared to its last year. It is expected in future the company will generate Profits for its stakeholders. The overall retail market continues to grow and consumer aspiration for a better service environment still remains intact. Your company continues to endeavor to reinstate its growth pattern in the retail industry with a chain of stores under the ''V2'' brand in the Retail Industry.

OPERATIONS REVIEW

During the year, Company had 15 stores. 1 New Store was opened under the brand "V2" at AARA (Bihar) and 1 was closed during the year.

One more Store of the Company at Guwahati (Assam) becomes operational in the month of April 2014.

The Company''s strategy of investing in growth of its own retail business is being pursued steadfastly.

INDUSTRIAL RELATIONS

The relations between the Company and its employees continued to be cordial and harmonious throughout the year under review.

MATERIAL CHANGES AFTER BALANCE SHEET DATE

((a) Mr. Rohit Singh Rautela has joined as Non Executive Additional Independent Director on April 14, 2014.

(b) Mr. Ravinder Kumar Sharma has joined as Non Executive Additional Independent Director on April 14, 2014.

(c) Mr. Varun Kumar Singh has joined as a Chief Financial officer on April 01, 2014.

(d) Mr. Dinesh Kumar Malpani has joined as Chief Executive officer on April 26, 2014 and he has resigned on August 04, 2014.

(e) One more Store of the Company at Guwahati (Assam) becomes operational in the month of April 2014.

MANAGEMENT DISCUSSION AND ANALYSIS

Management''s Discussion and Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges in India, is presented in the Annexure I forming separate section of the Annual Report.

DIVIDEND

Keeping in view of the non Profitability of the previous year, your directors do not propose to declare any dividend for this year.

PUBLIC DEPOSIT

During the year under review, the Company has not accepted any deposit under Section 58A and section 58AA of the Companies Act, 1956 read with Companies (Acceptance of Deposits) rules, 1975 and other applicable provisions of the Companies Act, 2013 to the extent as applicable, if any.

DIRECTORS

Mr. Yatish Bhardwaj who has joined the company as an Additional Director on August 27, 2012 has resigned on March 12, 2014.

The Board of Directors appointed Mr. Rohit Singh Rautela and Mr. Ravinder Kumar Sharma as Independent Directors at its board meeting held on April 14, 2014. They hold office until the ensuing Annual General Meeting. Notice has been received from a Member under Section 257 of the Companies Act, 1956 offering their names for appointment as directors of the Company liable to retire by rotation.

Mrs. Uma Agarwal, Director of the company liable to retire by rotation, and being eligible, offers herself for re-appointment as Whole -time director.

APPOINTMENT OF COMPANY SECRETARY

During the year under review, Mr. Dheeraj Kumar Mishra, Company Secretary has resigned on March 12, 2014 and Mr. Yatish Bhardwaj has joined the Company on March 12, 2014.

As required under section 383A of the Companies Act, 1956 read with the provisions of the listing agreement with stock exchanges, Mr. Yatish Bhardwaj an associate member of the Institute of Company Secretaries of India, New Delhi, has been appointed as the Company Secretary on March 12, 2014 pursuant to the resignation of Mr. Dheeraj Kumar Mishra.

SUBSIDIARY COMPANIES

The Company has 3 subsidiary Companies as on date namely, VRL Movers Limited, VRL Infrastructure Limited, VRL Retail Ventures Limited.

VRL Movers Limited, VRL Infrastructure Limited, VRL Retail Ventures Limited are subsidiaries by virtue of control over composition of the Board of Directors. None of the companies have commenced business operations during the year.

As per General Circular No: 2/2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been provided to Companies for attaching the Directors'' Report, Balance Sheet and Profit and Loss Account of all subsidiaries to its balance sheet, subject to fulfilling certain conditions as stipulated in the circular. Your Company complies with those conditions and, therefore, has been generally exempted by the Central Government from attaching detailed accounts of the subsidiaries, and accordingly, the financial statements of the subsidiaries are not attached in the Annual Report. For providing information to Shareholders, the annual accounts of these subsidiary Companies along with other related details are available for inspection during business hours at the Company''s registered office and at the registered office of the subsidiary companies concerned.

STATUTORY AUDITORS AND THEIR REPORT:

M/s. AKGVG & Associates, Chartered Accountants, Statutory Auditors of the Company, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. They have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment would be in conformity with the provisions of Section 139(2) and 142(1) of the Companies Act, 2013. The Board recommends their appointment.

The Auditor''s have put certain Qualifications to which the management has put forward the following below mentioned replies;

Qualification and response to Auditor''s Report

a) Attention is invited to note 4 of these financial statements, included in capital reserve amounting to Rs.6,05,23,24,263/-, is Rs. 4,29,42,24,263/- arising out of transfer of asset and liabilities to the acquiring companies in earlier years for which necessary reconciliation/information to the tune ofRs 3,72,24,324/- is not available with the company. Accordingly in the absence of the same, we are unable to comment on the appropriateness of capital reserve including consequential impact, if any, arising out of the same on these financial statements.

Management Response:

The Company had restructured its business during the Financial Year 2010-11 by way of sale of its Wholesale and Retail Business to TPG Wholesale Private Limited and Airplaza Retail Holdings Private Limited (referred to as Acquiring Companies) respectively. The Master Restructuring Agreement and other settlement agreements were entered into the Company with Acquiring Companies and its Lenders to effect the said restructuring and CDR proposal of the Company. The Company had trifurcated its Assets and Liabilities as on appointed date between the Acquiring Companies and selling Company as per agreement entered into between them and the difference between Assets and Liabilities transferred has been shown as Capital Reserve. As a result of the said agreement the liabilities to the extent of Rs. 823.20 Crores and assets of Rs. 393.78 Crores were taken over by the Acquiring Companies against a consideration of Rs. 70 Crores. This transaction resulted in a Capital Reserve of Rs. 499.42 Crores. As a part of the said restructuring process some unsecured lenders of the company also waived off their claims to the extent of Rs. 105.81 Crores which has also been transferred to Capital Reserve Account. While in relation to reconciliation necessary reconciliation to the tune of Rs. 3,72,24,324/-, company is in process to reconcile the same.

b) Attention is invited to note 5 and 10 of these financial statements the Company has outstanding short-term borrowings at the year-end due to a lender including overdue principal and interest for which necessary supporting documents for balance confirmation at the year end and relevant information with relation to rate of interest is not available with the Company. In the absence of the same, we are unable to comment on the same.

Management Response:

The interest expense has been recognised in the Books of Account on the basis of the fgure provided by the concern lender in May 2012, in relation to balances as on 31st March 2012 which is disputed by the Company, as interest rate has been charged in excess of the prescribed rate under Master Restructuring Agreement dated 11.11.2010. The company is in the process of obtaining relevant documents and information from lender for basis of such charge and trying to resolve the dispute.

c) Attention is invited to note 14 of these financial statements the company has recognized Rs. 2,71,11,06,418/- as deferred tax assets at the year- end for which it does not have virtual certainty supported by convincing evidence that suffcient future taxable income will be available against which such deferred tax assets can be realized in accordance with principles of Accounting Standard 22 "Accounting for Taxes on Income" issued by the Institute of Chartered Accountants of India . Had the company not recognized deferred tax, impact on Profit and loss account would have been increase in loss during the year by Rs. 16,70,481/- and decrease in Reserves and Surplus by Rs. 2,71,11,06,418/-.

Management Response:

The Company has started its new retail venture under the brand & style "V2". The Company is successfully running 16 new stores, and one warehouse. Considering the above, management do not see any event which may lead to a reason wherein company should not be considered as Profitable. Further the company has earned increase in turnover in year 2013-14 of Rs 1,23,22,11,031/- in comparison to financial year 2012-13 and further we made Profit in frst quarter of financial year 2014-2015. The Board is confdent that because of such positive signs and growth in the business and industry there is virtual certainty that company will be able to make suffcient Profits and accordingly deferred tax assets will be recognized.

d) Attention is invited to note 38 of these financial statements, the Company has disclosed contingent liabilities on account of appeals with various statutory authorities at different levels amounting to Rs. 1,69,57,11,396/- for which necessary information is not available with the Company to reliably ascertain estimated amount of such liabilities and consequential impact thereof on these financial statements in accordance with Accounting Standard-29 issued by the Institute of Chartered Accountants of India. Hence, we are unable to comment on the same.

Management Response:

The Contingent Liabilities to the tune of Rs. 1,69,57,11,396/- are under appeal with different authorities at different levels. The provision of these liabilities could not be made due to various reasons such as no possible obligation on the Company; outflow for the Company is very remote as according to past trends of assessments under sales tax and the estimate for the contingent liabilities could not be ascertained. In such position, the company is not in a position to provide for certain fixed amount as liabilities in the books of accounts, which will be done as and when the management will be in a position to estimate the same. The company has made provision in the books of account in the current year with respect to amount payable to labour welfare fund. The liability on account of same was not provided for in the earlier year as the same cannot be ascertained.

e) Matter of Empasis: Attention is invited to note 4 of of these financial statements, wherein the Company has accumulated losses amounting to Rs. 5,36,63,49,094/- at the year end and has incurred loss of Rs. 4,50,76,168/- during the year which raises concern regarding going concern status of the Company. However, having regard to improvement in the business conditions, increase in revenue from operations, cost rationalization measures adopted and opening of new stores by the Company, these consolidated financial statements have been prepared on a going concern basis and that no adjustments are required to the carrying value of assets and liabilities.

Management Response:

The Company has started its new retail venture under the brand & style "V2". The Company is successfully running 16 new stores, and two warehouses. From the above, management do not see any event which may lead to a reason wherein company should not be considered as going concern. Based on the same assessment, accounts have been drawn on going concern assumption. Further the company has earned huge increase in turnover in frst quarter of financial year 2014-2015 and expecting same in the financial year 2014-15. The Board is confdent that because of such positive signs and growth in the business and industry, the company will improve its performance and net worth will not be eroded further.

f) The Company has maintained proper records showing full particulars, and situation of fixed assets except quantitative details.

Management Response:

The Company was in the process of updating its records regarding the quantity of the fixed assets and the same has been updated in the register of fixed assets now

g) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the sale of goods and services and for the purchase of fixed assets. However, the internal control system for purchases of inventory is inadequate since the inventory items are entered into incorrect item codes at the time of recording in the system.

Management Response:

After restructuring of the Business, the business of the Company has been substantially reduced, and accordingly Purchase and Inventory also go down. Any purchase involving substantial amount is directly supervised by the Management and accordingly accounting transactions are made. The management is committed to bring strong internal system in the company with the increase in operations for the benefit of all stakeholders.

h) The company is irregular in depositing with appropriate authorities Undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty cess and other material statutory dues have not generally been regularly deposited with the appropriate authorities though the delays in deposit have not been serious.

Management Response:

The Company has always tried to regularly deposit the applicable statutory dues with the appropriate authorities, however due to high attrition rate and lot of structural changes in the company; sometimes it is not deposited on time but has been paid with the Interest and Penalty as applicable. The Board by implementing strong internal control and internal audit system in the company will improve the system of depositing the statutory dues with statutory authorities. Further with the growth in business, the board is expecting that there will be improvement in the liquidity position of company.

i) According to the records of the company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute which, are as Rs. 1,509,287,158.

Management Response:

The total due of Rs. 1,509,287,158 is under dispute at various forums, the final due will be settled on account of final decision by the respective authorities. The Board has initiated appropriate representations before such forums to settle the dues and issue the final orders.

j) The company has accumulated losses at the end of the financial year which exceed fifty percent of its net worth. Further, company incurred cash losses in the current and immediately preceding financial year.

Management Response:

Excess of accumulated losses over net worth of the Company will have no negative impact on the operations and running of the Company as the loss pertains to the earlier venture, which the Company has already restructured through Slump Sale, further the Company has reduced its indebtedness considerably and started its new retail venture and in the process of bringing financial stability within the Company.

k) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the company has defaulted in repayment of dues to a financial institution.

Management Response:

Pursuant to Master Restructuring Agreement, the payment to the Financial Institution was to be made by sale of property currently shown in Investments. The Financial Institution did not take effective steps to sell the Land and Building of the Company, therefore the payment could not be made. The Board is continuously doing efforts to sell the land & building of company and will pay off the requisite dues of financial institution/bank after realization of consideration.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company hereby confirm:

Subject to and except to the extent of the Auditor''s Qualification in the Auditor''s Report which have been adequately responded to above, in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

That the Directors had selected such accounting policies and applied them consistently and made judgments and estimated that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the Profit or loss of the company for the period under review;

That the Directors had taken precautionary steps for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and avoiding fraud and other malpractices.

That the Directors had prepared the annual accounts for the year ended March 31, 2014 on a ''going concern'' basis.

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

A Statement giving details of Conservation of energy, technology absorption and foreign exchange earnings and outgo as required u/s 217(1)(e) of the Companies Act 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, has been enclosed as Annexure- II to this report

OTHER INFORMATION

None of the Director or Employee of the Company was in receipt of remuneration exceeding the limits prescribed under Section 217(2A) of the Companies Act 1956.

REPORT ON CORPORATE GOVERNANCE

The report on corporate governance along with auditor certificate on the same has been enclosed as an Annexure III to this report

IMPORTANT INTIMATION TO THE MEMBERS

As you may be aware, the Ministry of Corporate Affairs, Government of India (''MCA'') has recently introduced ''Green Initiative in Corporate Governance'' by allowing paperless compliance by Companies i.e. service of notice/ documents including Annual Report can be sent by email to its Members. Keeping in view the underlying spirit and pursuant to the said initiative of MCA, we request to the members who have not registered their e-mail addresses, so far, to register their e-mail addresses, in respect of electronic holdings with the depository through their respective Depository Participants. Members holding shares in physical form are also requested to register their e-mail addresses with Company''s Registrar & Share Transfer Agent viz. Link Intime India Private Limited.

ACKNOWLEDGEMENT

Yours Directors take this opportunity to express their sincere appreciation for the support and cooperation provided by the shareholders, customers, suppliers, bankers and other business associates. Your Directors gratefully acknowledge the ongoing cooperation and support provided by Central and State Governments and all regulatory authorities. Your Directors also place on record their appreciation of the contribution made by employees across all levels.

On behalf of the Board of Directors

Sd/- Ram Chandra Agarwal Date 25.08.2014 Chairman and Managing Director Place New Delhi Din:-00491885


Mar 31, 2013

The Directors have great pleasure in presenting the Twelfth Directors'' Report of the company with the audited statements of accounts for the year ended March 31, 2013.

Financial Highlights

(Rs. in Million)

PARTICULARS Year ended Year ended 31.03.2013 31.03.2012

Income from Operations (1) 1056.71 401.64

Other Income (2) 20.99 37.40

Total Income (3) 1077.70 439.05

Total Expenditure except interest cost (4) 1072.07 510.35

Interest (5) 65.21 81.50

Proft( ) & Loss(-) before tax (3)-(4 5) (6) (59.57) (152.81)

Provision for Taxation (7) Nil Nil

Tax Adjustments (8) 18.84 (155.31)

Net Proft ( ) & Loss (-) after tax(6-(7 8)) (40.73) (308.12)

Brought forward from Previous year (5268.52) (4920.72)

Extra Ordinary Item & Prior Period (12.02) (39.69)

Adjustment

Amount available for appropriation Nil Nil

Less: Provision for Preference Dividend Nil Nil

Less: Provision for Dividend Distribution Tax Nil Nil

Balance carried to Balance Sheet (5321.27) (5268.52)

EPS

(In Rs for Equity Shares of par value of Rs.10/- each)

Basic (before extraordinary & prior (1.82) (13.76) period items)

Basic (after extraordinary & prior period (2.35) (15.53) items)

Diluted (before extraordinary & prior (1.82) (13.76) period items)

Diluted (after extraordinary & prior period (2.35) (15.53) items)

PERFORMANCE REVIEW

The Indian retail industry has experienced high growth over the last decade with a noticeable shift towards organized retailing formats. During the year the company has increased its turnover from 401.64 Million to 1056.71 Million by 2.5 times compared to previous year. The Company has signifcantly reduced its accumulated loss as compared to its last year. It is expected in future the company will generate profts for its stakeholders. The overall retail market continues to grow and consumer aspiration for a better service environment still remains intact. Your company continues to endeavor to reinstate its growth pattern in the retail industry with a chain of stores under the ''V2'' brand in the Retail Industry.

OPERATIONS REVIEW

During the year, Company opened in its 8 new stores under the brand "V2" at different places across nation and added approx 2 Lac square feet.

Relocation of Warehouse from Delhi to Manesar, Gurgaon.

INDUSTRIAL RELATIONS

The relations between the Company and its employees continued to be cordial, and harmonious throughout the year under review.

MATERIAL CHANGES AFTER BALANCE SHEET DATE

The Company opened new store admeasuring approx 20000 sq. ft. at Hubli, Karnataka.

Four Stores of the Company become operational in the month of April and May 2013

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis has been dealt extensively in the Annexure I to this Report.

DIVIDEND

In view of the loss for the current fnancial year, your directors do not propose to declare any dividend for this year.

PUBLIC DEPOSIT

During the year, the Company has not accepted any deposit under Section 58A of the Companies Act, 1956.

DIRECTORS

Mr. Sourabh Kumar, Non Executive Independent Director of the Company retires by rotation and being eligible offer himself for reappointment at the ensuing Annual General Meeting.

SUBSIDIARY COMPANIES

The Company has 3 subsidiary Companies as on date namely, VRL Movers Limited, VRL Infrastructure Limited, VRL Retail Ventures Limited.

VRL Movers Limited, VRL Infrastructure Limited, VRL Retail Ventures Limited are subsidiaries by virtue of control over composition of the Board of Directors. None of the companies have commenced business operations during the year.

As per General Circular No: 2 /2011 issued by the Ministry of Corporate Affairs, Government of India, a general exemption has been provided to Companies for attaching the Directors'' Report, Balance Sheet and Proft and Loss Account of all subsidiaries to its balance sheet, subject to fulflling certain conditions as stipulated in the circular. Your Company complies with those conditions and, therefore, has been generally exempted by the Central Government from attaching detailed accounts of the subsidiaries, and accordingly, the fnancial statements of the subsidiaries are not attached in the Annual Report. For providing information to Shareholders, the annual accounts of these subsidiary Companies along with related information are available for inspection during business hours at the Company''s registered offce and at the registered offce of the subsidiary companies concerned.

AUDITORS

M/s. AKGVG & Associates, Chartered Accountants, Statutory Auditors of the Company, retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. They have expressed their willingness to act as Auditors of the Company, if appointed, and have further confrmed that the said appointment would be in conformity with the provisions of Section 224 (1B) of the Companies Act, 1956. The Board recommends their appointment.

The Auditor''s have put certain qualifcations to which the management has put forward the following below mentioned replies;

Qualifcation and response to Auditor''s Report

a) Attention is invited to note 4 of fnancial statements explaining the reserves and surplus in the head capital reserve amounting to Rs. 60,523.24/-Lacs., necessary supporting documents and relevant information is not available with the Company and provided to us, so In the absence of the same, we are unable to comment on the appropriateness of the same including consequential impact, if any, arising out of the same on these fnancial statements. This was also the subject matter of qualifcation by us in previous year as well.

The Company has restructured its business during Financial Year 2010- 11 by way of sale of its Wholesale and Retail Business to TPG Wholesale Private Limited and Airplaza Retail Holdings Private Limited (referred to as Acquiring Companies) respectively. The Master Restructuring Agreement and other settlement agreements were entered into the

Company with Acquiring Companies and its Lenders to effect the said restructuring and CDR proposal of the Company. The Company had trifurcated its Assets and Liabilities as on appointed date between the

Acquiring Companies and selling Company as per agreement entered into between them and the difference between Assets and Liabilities transferred has been shown as Capital Reserve. As a result of the said agreement the liabilities to the extent of Rs. 823.20 Crores and assets of Rs. 393.78 Crores were taken over by the Acquiring Companies against a consideration of Rs. 70 Crores. This transaction resulted in a Capital Reserve of Rs. 499.42 Crores. As a part of the said restructuring process some unsecured lenders of the company also waived off their claims to the extent of Rs. 105.81 Crores which has also been transferred to Capital Reserve Account.

b) Attention is invited to note 4 of fnancial statements explaining the reserves and surplus, company has accumulated losses more than 50% of its net worth. However, having regard to improvement in the economic sentiment, rationalization measures adopted by the Company, opening of new stores, these fnancial statements have been prepared on the basis that the company is a going concern and that no adjustments are required to the carrying value of assets and liabilities. The accumulated losses is Rs. 5,32,12,72,927 (Rupees Five hundred Thirty twocrores twelve lacs seventy twothousand nine hundred twenty seven only) as at 31st March, 2013 which exceed the net worth of the company.

The Company has started its new retail venture under the brand & style "V2". The Company is successfully running 15 stores, and one warehouse. From the above, management do not see any event which may lead to a reason wherein company should not be considered as going concern. Based on the same assessment, accounts have been drawn on going concern assumption. Further the company has earned huge increase in turnover in frst quarter of fnancial year 2013-2014. The Board is confdent that because of such positive signs and growth in the business and industry, the company will improve its performance and net worth will not be eroded further.

c) As stated in Note 29 to the fnancial statement, the Company has debited Rs 5,99,80,407/- on account of interest expense in the statement of Proft and Loss , however, necessary supporting documents and relevant information in relation to rate of interest is not available with the Company. In the absence of the same, we are unable to comment whether such charge to the statement of proft and loss is appropriate in accordance with Accounting Standard 16 on "Borrowing Costs" issued by the Institute of Chartered Accountants of India

The interested expense of Rs. 5,99,80,407/- has been recognised in the Books of Account on the basis of the fgure provided by the concern lender, which is disputed by the Company, as interest rate has been charged in excess of the prescribed under Master Restructuring Agreement dated 11.11.2010.The company is in the process of obtaining relevant documents and information from lender for basis of such charge and trying to resolve the dispute.

d) As stated in Note 38 to the fnancial statement, the Company has contingent liability on account of appeal with different authorities at different levels amounting to Rs. 64,13,54,011/- , however, At the moment Company is not able to reliably ascertain estimated amount of such liability so the provision as required in accordance to the Accounting Standard-29 has not been made in books of accounts.

The Contingent Liabilities to the tune of Rs. 64,13,54,011/- are under appeal with different authorities at different levels. The provision of these liabilities could not be made due to various reasons such as no possible obligation on the Company, outfow for the Company is very remote and the estimate for the contingent liabilities could not be ascertained. In such position, the company is not in a position to provide for certain fxed amount as liabilities in the books of accounts, which will be done as and when the management will be in a position to estimate the same. The company has made provision in the books of account in the current year with respect to amount payable to labour welfare fund. The liability on account of same was not provided for in the earlier year as the same cannot be ascertained.

e) The company has maintained proper records showing full particulars, including situation of fxed Assets except quantitative details.

The Company was in the process of updating its records regarding the quantity of the fxed assets and the same has been updated in the register of fxed assets now.

f) Fixed assets have not been physically verifed by the management during the year. As explained by the management company has a policy of physical verifcation once in a period of three year, in our opinion, is unreasonable having regard to the size of the company and the nature of its assets.

The Company has policy for physical verifcation of its Fixed Assets over a period of Three years. All fxed assets except Land, Building and Computer Software are acquired during the year and its previous year. The verifcation is in process and all assets will be verifed in FY 2013- 14. The Management is also considering to review the policy of physical verifcation of fxed assets from once in 3 years to every year, which will be implemented very soon.

g) In our opinion and according to the information and explanations given to us, there is inadequate internal control system commensurate with the size of the company and the nature of its business, for the recording of accounting transactions of purchase of inventory and expenses, which need to be strengthen. During the course of our audit, however we observed that management is in process of improvising the Internal Control.

After restructuring of the Business, the business of the Company has been substantially reduced, and accordingly Purchase and Inventory also go down. Any purchase involving substantial amount is directly supervised by the Management and accordingly accounting transactions are made. The management is committed to bring strong internal system in the company with the increase in operations for the beneft of all stakeholders.

h) In our opinion and according to the information and explanations given to us, the company does not have internal audit system commensurate with its size and nature of business.

After restructuring of the Business, the turnover of the Company falls substantially. Therefore in order to save the cost, internal audit system is performed by the employees independent of Finance & Accounts Department. The management is committed to bring strong internal audit system in the company with the increase in operations for the beneft of all stakeholders. The management is also considering appointing independent frm of professionals to carry on the internal audit work in the company.

i) The company is irregular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees'' state insurance, income-tax, sales- tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it, however such dues have been paid with interest and penalties as applicable.

The Company has always tried to regularly deposit the applicable statutory dues with the appropriate authorities, however due to high attrition rate and lot of structural changes in the company; sometimes it is not deposited on time but has been paid with the Interest and Penalty as applicable. The Board by implementing strong internal control and internal audit system in the company will improve the system of depositing the statutory dues with statutory authorities. Further with the growth in business, the board is expecting that there will be improvement in the liquidity position of company.

j) According to the records of the company, the dues outstanding of income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty and cess on account of any dispute which are Rs. 43,51,44,514 .

The total due of Rs. 43,51,44,514 (Rupees Forty Three Crore Fifty One Lacs Forty Four Thousand Five Hundred Fourteen) is under dispute at various forums, the fnal due will be settled on account of fnal decision by the respective authorities. The Board has initiated appropriate representations before such forums to settle the dues and issue the fnal orders.

k) The company has accumulated losses at the end of the fnancial year which exceed ffty percent of its net worth. Further, company incurred cash losses in the current and immediately preceding fnancial year.

Excess of accumulated losses over net worth of the Company will have no negative impact on the operations and running of the Company as the loss pertains to the earlier venture, which the Company has already restructured through Slump Sale, further the Company has reduced its indebtedness considerably and started its new retail venture and in the process of bringing fnancial stability within the Company.

l) Based on our audit procedures and as per the information and explanations given by the management, we are of the opinion that the company has defaulted in repayment of dues to a fnancial institution/ bank.

Pursuant to Master Restructuring Agreement, the payment to the Financial Institution was to be made by sale of Land and Building. The Financial Institution did not take effective steps to sell the Land and Building of the Company, therefore the payment could not be made. The Board is continuously doing efforts to sell the land & building of company and will pay off the requisite dues of fnancial institution/bank after realization of consideration.

AUDIT COMMITTEE

The Constitution of the Audit Committee as on 31st March 2013 was as follows:

Mr. Yatish Bhardwaj NEID^ Chairman

Mr. Ram Chandra Agarwal Promoter & Member

Executive Director

Mr. Saurabh Kumar NEID^ Member

^ NEID- Non Executive Independent Director

Mr. Sourabh Kumar has been designated as Chairman w.e.f 10 April 2013.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company hereby confrm:

Subject to and except to the extent of the Auditor''s qualifcation in the Auditor''s Report which have been adequately responded to above, in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

That the Directors had selected such accounting policies and applied them consistently and made judgments and estimated that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the fnancial year and of the proft or loss of the company for the period under review;

That the Directors had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

That the Directors had prepared the annual accounts for the year ended 31st March 2013 on a ''going concern'' basis.

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

A Statement giving details of Conservation of energy, technology absorption and foreign exchange earnings and outgo as required u/s 217(1)(e) of the Companies Act 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, has been enclosed as Annexure- II to this report

OTHER INFORMATION

None of the Director or Employee of the Company was in receipt of remuneration exceeding the limits prescribed under Section 217(2A) of the Companies Act 1956.

REPORT ON CORPORATE GOVERNANCE

The Report on Corporate Governance along with Auditors Certifcate on the same has been enclosed as an Annexure III to this Report.

ACKNOWLEDGEMENT

The Directors wish to thank and deeply acknowledge the co-operation, assistance and support extended by the Central Government, the State Governments, the Company''s Bankers, the Shareholders, the dealers, vendors of the company in the success and growth of the Company. The Directors also wish to place on record appreciation for the co-operation and contribution made by the employees at all levels.

By the Order of the Board of Directors

Sd/-

Ram Chandra Agarwal

Date : 04.09.2013 Chairman

Place : New Delhi DIN 00491885


Mar 31, 2010

The Directors have great pleasure in presenting the Ninth Directors Report of the company with the audited statements of accounts for the year ended March 31,2010.

Financial Highlights (Rs. in million)

PARTICULARS Year ended Year ended 31.03.2010 31.03.2009

Income from Operations 11054.59 13232.34

Other Income 130.28 94.84

Total Income 11184.87 13327.18

Total Expenditure except interest cost 16139.32 13778.09

Interest 894.43 925.03

Profit(+) & Loss(-) before tax (3)-(4+5+6) (5848.88) (1375.94)

Provision for Taxation Nil Nil

Tax Adjustments 2238.89 458.81

Net Profit (+) & Loss (-) after tax(7-8) (3609.99) (917.13)

Brought forward from Previous year (121.83) 823.02

Extra Ordinary Item & Prior Period Adjustment (537.18) (27.73)

Amount available for appropriation Nil Nil

Less: Provision for Preference Dividend Nil Nil

Less: Provision for Dividend Distribution Tax Nil Nil

Balance carried to Balance Sheet (4269.00) (121.84) EPS(ln Rs for Equity Shares of par value of Rs.10/- each)

Basic (before extraordinary items) (162.47) (42.18)

Basic (after extraordinary items) (185.15) (42.18)

Diluted (before extraordinary items) (162.47) (42.18)

Diluted (after extraordinary items) (185.15) (42.18)

PERFORMANCE REVIEW

Retail industry has faced various challenges due to economic melt down. Most of the companies in the organized retail sector have seen a decline. Similarly it has not been a year of growth for the company. The Company has seen decline in turnover by 16.46%. Due to reduction in sales and consequential rise in expense burden your company has seen increased losses during the year 2009-10 which reached to Rs. 4269 Million.

The Company has attempted to recover from the situation during the current year and several corrective measures have been taken in operational restructuring, cost reduction to sustain in the current situation of the Company.

Continuing the cost control exercise, 15 unviable stores of the Company have been closed and the Company has adopted centralized warehousing system, 22 regional warehouses have been closed down. The operations have been rationalized based on the current size of operations of the company.

The Company has also closed down all manufacturing set-ups.

The company is under process of restructuring its debts through corporate debt restructuring mechanism. During the financial year 2009-2010 company has submitted its proposal under corporate debt restructuring mechanism to CDR cell for restructuring its secured as well as unsecured debts. SBI, HDFC, HSBC, ING Vyasa, UCO bank and BOI are participating banks under the CDR mechanism. CDR empowered group has approved the proposal of the Company

As per market analysis the retail industry in India is expected to grow during the time to come with many retailers maturing in the trade and with new entrants joining the business. The customer base of organized retail is growing rapidly.

The company has made several efforts during the year and will be continuing its efforts to minimize losses and improve profitability during the ensuing year.

OPERATIONS REVIEW

- During the year, the Company closes down 15 unviable stores and 11 new stores have added across various locations. The company has 171 stores and has reduced 0.78 Lakh Sq. Ft. of Retail Space during the financial year ended March 31,2010.

- The Company has now adopted the centralized warehousing system. The number of warehouses have been reduced to 4 only from the previous 26 warehouses, 22 of the regional warehouses have been closed down during the year.

- Considering all the restructuring measures taken during the year by the company and based on those actions which will follow as per the planned action mechanism instituted, the company is expected to witness the changes/ benefits of all those actions during the following year.

INDUSTRIAL RELATIONS

The relations between the Company and its employees continued to be cordial and harmonious throughout the year under review.

However, due to economic meltdown several employees left the Company during the financial year.

MATERIAL CHANGES AFTER BALANCE SHEET DATE

Memorandum of Understanding with strategic Investor

The Company has entered into Memorandum of Understanding (MOU) with Texas Pacific Group (TPG) in accordance with Corporate Debt Restructuring scheme approved by the lenders of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis has been dealt extensively in the Annexure I to this Report.

DIVIDEND

In view of the loss for the current financial year, your directors do not propose to declare any dividend for this year.

PUBLIC DEPOSIT

During the year, the Company has not accepted any deposit under Section 58Aof the Companies Act, 1956.

DIRECTORS

Ms. Uma Agarwal Whole time Director of the Company retires by rotation and being eligible offers herself for reappointment at the ensuing Annual General Meeting.

Mr. Jai Prakash Shukla, Director of the company liable to retire by rotation, whose term as additional director lapse at the ensuing Annual General Meeting, is proposed to be reappointed in the ensuing Annual General Meeting, pursuant to the receipt of Notice u/s 257 in his favor. Mr. Jai Prakash Shukla was appointed as Additional Director on September 30, 2009 and on the same date appointed as the Whole time Director of the Company for a term of 5 years.

Mr. Surendra Kumar Agarwal, Director, resigned from the company on 30th September 2009.

Mr. Rakesh Agarwal, Director, resigned from the company on 30th October,2009.

Mr. Bharat Jain, Director, resigned from the company on 2nd August 2010.

Mr. Sandeep Kumar, Director, resigned from the company on 1st September, 2010.

SUSIDIARY COMPANIES

The Company has 7 subsidiary Companies namely, VRL Foods Limited, VRL Movers Limited, VRL Consumer Goods Limited, VRL Fashions Limited, VRL Infrastructure Limited, VRL Retail Ventures Limited and VRL Knowledge Process Limited. Out of the same 4 Companies viz. VRL Movers Limited; VRL Infrastructure Limited, VRL Retail Ventures Limited and VRL Knowledge Process Limited are subsidiaries by virtue of control over composition of the Board of Directors. None of the subsidiariescompanies have commenced business operations during the year.

AUDITORS

The existing auditors M/s Haribhakti & Co., Chartered Accountants, retires at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

The Auditors have put certain qualifications to which the management has put forward the following below mentioned replies;

Qualification and response to Auditors Report

Para 4 (a) (i) The accumulated losses ofRs.4269 Mn as at March 31, 2010 exceed the net worth of the Company. Para 4 (a) (ii) Certain lenders have filed winding up petition against the Company in High Court. However the accounts have been drawn on going concern assumption as the company has made a proposal under corporate debt restructuring scheme to CDR cell for restructuring of its secured as well as unsecured debts and expects turnaround.

Companys business is supported by lenders/ creditors and working capital is positive. Further company has become EBITDA positive in the first quarter. Considering the above, excess of accumulated losses over net worth of the company will have no negative impact on the operations and running of the company.

Winding up petitions have been filed by certain lenders, but Honorable Courts have not given decision which has any negative impact on running of business. Further we are seeking legal opinions to vacate those orders. We are also approaching our lenders for amicable solution.

From the above, management do not see any event which may lead to a reason wherein company should not be considered as going concern. Based on the same assessment, accounts have been drawn on going concern assumption.

Para 5 (i) (a) Basis and supporting for write off of inventory amounting to Rs.3,41,71,59,919 on account of pilferage, shrinkage, slow moving, non moving, obsolete and damaged goods.

The company started the process of identification of inventory which were slow-moving, non-moving, dead, obsolete and damaged during the year. The company has substantially completed this exercise during the financial year. Now the perpetual controls have been put in place to continuously monitor the inventory.

Para 5 (i) (b) Adequate documentary evidence for display charges included in other Income amounting to Rs. 2,86,02,715 recognized in the Profit & loss Account.

The arrangements of display where company allows vendors/ companies to display their products are seasonal and not regular in nature, though we have adequate control on the collections from all the vendors. The above amounts are not material and significant in size in each arrangement. Though company obtains/ keeps contracts in cases where each arrangement is regular and material in nature.

Para 5 (i) (d) Basis for write off of sundry balances amounting to Rs. 1,40,33,201 included in other expenses in schedule 16.

The company made an assessment and has written off deposits/ advances which were not expected to realize in future.

Para 5 (iv) (a) Accounting Standard 2-"Valuation of Inventories" The cost of valuation of inventories does not include Octroi, mandi tax, entry tax, input VAT, freight inwards and discount received on the purchase. The impact of such valuation from AS2 is currently unascertainable.

Considering the complexity of transaction, movement of stock and number of SKUs, current system is not supportive to charge expenses like octroi, mandi tax, entry tax, input VAT etc on specifically identified inventory, hence we have not taken them in account Jor valuation of inventory but same have been charged to profit and loss account. Further the quantum of amount involved in not too high.

Para 5 (iv) (b) Accounting Standard 28-"lmpairment of Assets": whereby no assessment for impairment of assets if any was carried out during the year by the management.

The company has valued assets at cost less accumulated depreciation and is following the same policy consistently and due to scattered stores, huge asset base and the nature of assets the company has not accounted for loss on account of impairment.

Para 5 (iv)(c) Accounting Standard-22 "Accounting for taxes on income" The company has recognized Deferred Tax Asset amounting to Rs. 2,62,64,99,840 as at 31st March 2010 even though the company has incurred operating loses in the current year and in earlier years and there is no convincing evidence as to virtual certainty of future income.

We have seen economic slowdown in past years due to which company operating profit margins went under pressure and there was some financial imbalance. Now, the company has been witnessing growth in sales and EBITDA margins gradually. All required mark down in the value of slow moving, non moving and obsolete stock has already been provide for. From all these indicator we found that there is virtual certainty that company will be able to make sufficient profits and accordingly Deferred Tax Asset has been recognized.

Para 5 (vi) (a) The balances of unsecured loans amounting to Rs. 1,60,45,87,755 from various banks and financial institutions are subject to confirmation and reconciliation.

We have made full efforts for getting confirmation from unsecured lenders but due to CDR process going on, some of the lenders were unable to given confirmations.

Para 5 (vi) (b) The balance of sundry debtors Rs. 2,91,57,235 and Sundry creditors Rs. 1,23,51,04,887 are subject to confirmation and reconciliation.

The company has taken note of the same and will act upon the same for getting reconciliation/ confirmation. The creditors as at 31 st March 2010 have been paid in the months of April, May and June in majority and hence major portion is reconciled. As the numbers of suppliers are more and reconciliation is expected to take time, the company will complete the exercise of reconciliation in due course of time- Para 5 (i) (c) Adequate documentary evidence to support write off of capital work in progress amounting to Rs. 78,69,388 included in prior period expenses.

The company has identified certain capital assets under progress which were not to be installed due to closing down of respective projects. The identified assets were written off accordingly from the books of accounts.

DIRECTORSRESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, the Directors of the Company hereby confirm:

That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

That the Directors had selected such accounting policies and applied them consistently and made judgments and estimated that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company forthe period under review;

That the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

That the Directors had prepared the annual accounts for the year ended 31 st March 2010 on a going concern basis.

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

A Statement giving details of Conservation of energy, technology absorption and foreign exchange earnings and outgo as required u/s 217(1)(e) of the Companies Act 1956 read with the Companies (Disclosure of particulars in the Report of Directors) Rules 1988, has been enclosed asAnnexure- II to this report

REPORT ON CORPORATE GOVERNANCE

The Report on Corporate Governance along with Auditors Certificate on the same has been enclosed as an Annexure III to this Report.

OTHER INFORMATION

Information as per section 217 (2A) of Companies Act, 1956, read with companies (particular of employees) Rules, 1975 forms part of this report. However, as per the provisions of section 219 (b) (iv) of Companies Act, 1956, the reports and the accounts are being sent to all members of the Company, excluding the information required under sec 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended. Any member interested in obtaining such information may write to the Company Secretary at the registered office. The said information is also available for inspection at the corporate office during working hours up to the date of Annual General Meeting.

ACKNOWLEDGEMENT

The Directors wish to thank and deeply acknowledge the co- operation, assistance and support extended by the Central Government, the State Governments, the Companys Bankers, the Shareholders, the dealers, vendors of the company in the success and growth of the Company. The Directors also wish to place on record appreciation forthe co-operation and contribution made by the employees atall levels.

On behalf of the Board of Directors

sd/- Date: 30.09.10 Ram Chandra Agarwal

Place :NewDelhi Chairman

Din:-00491885



 
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