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Directors Report of Vardhman Polytex Ltd.

Mar 31, 2015

Dear Members,

The Directors of your Company are presenting 35th Annual Report on the affairs of the Company together with Audited Financial Statements of the Company for the year ended 31st March, 2015.

1. Financial Highlights

(Rs.lac)

Particulars 2014-15 2013-14

Net Operating income 94,240.69 92,271.81

Operating Expenses 88,333.01 83,512.46

Profit/(Loss) before Depreciation, 8,261.84 10,775.47 Interest & Tax & before exceptional items (PBDIT)

Depreciation 3,238.57 3,265.85

Finance Cost 7,255.20 7,177.39

Other Income 2,354.15 2,016.12

Profit/(Loss) before Tax & exceptional (2,231.94) 332.23 items

Exceptional Items 3,585.01 --

Profit/(Loss) before Tax (5,816.95) 332.23

Tax Expenses (2,936.74) (145.28)

Profit/(Loss) after Tax (2,880.20) 477.51

Earnings Per Share (EPS) (in Rs.) (after exceptional items)

- Basic (14.02) 2.59

- Diluted (14.02) 2.28

2. Business Performance

Your Directors are pleased to report the Company's business performance as follows:

Sales Revenue

During the year under review, net operating income of the Company was Rs.94,240.69 lac as against Rs. 92,271.81 lac in 2013-14, registering a marginal increase of 2.09%. The FOB value of exports during the year has marginally decreased by 2.09% to Rs. 43,237.25 lac against Rs. 44,123.61 lac in 2013-14.

Profitability

During the year under review, the Company earned a profit before depreciation, interest & tax of Rs. 8,261.84 lac as against of Rs. 10,775.47 lac during the previous year. The Company has a net loss after tax of Rs. (2,880.20) lac during the current year against net profit of Rs. 477.51 lac in the previous year.

4. Share Capital

During the year under review, paid-up share capital of the company was increased from Rs. 19.82 crore to Rs. 22.29 crore by allotment of 24.73 lac equity shares of Rs. 10/- each at a premium of Rs. 45/- per share to the Promoters/ Promoter Group Company.

5. Redefined the address of Registered Office

During the year under review, the Board vide its resolution dated 31.03.2015 has redefined the address of registered office of the Company from 341-K-1, Mundian Khurd, P.O. Sahabana, Chandigarh Road, Ludhiana-141123 to Vardhman Park, Chandigarh Road, Ludhiana-141123.

6. Dividend

The Board of Directors of your Company has not recommended any dividend for the financial year 2014-15.

7. Directors & Committees

During the financial year 2014-15, Mrs. Rakhi Oswal was appointed as Director of the Company w.e.f. 12.08.2014 being a woman director on the Board. Mr. Ajay Chaudhry, Mr. B. S. Bhatia, Mr. M. D. Kanitkar and Mr. Amit Jain were appointed as Independent Director for a term of five years upto 31.03.2019. All the Independent Directors have confirmed that they meet the criteria of independence as mentioned under clause 49 of the Listing Agreement and Section 149 of the Companies Act, 2013.

Mr. Ashok Kumar Oswal was re-appointed as Chairman and Managing Director of the Company and Mr. Adish Oswal as Executive Director of the Company w.e.f. 01.04.2015 for a period of three years with the approval of shareholders vide resolution dated 30.03.2015.

Mr. Adish Oswal, Director retires by rotation at this Annual General Meeting, and being eligible offers himself for re-appointment.

Mr. Ashok Kumar Oswal, Chairman and Managing Director, Mr. Parvinder Singh, Chief Financial Officer and Mr. Sushil Sharma, Company Secretary were designated as "Key Managerial Personnel" of the Company pursuant to Sections 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Remuneration Policy and Board Evaluation

Pursuant to the provisions of Companies Act, 2013 and clause 49 of the Listing Agreement, the Company has adopted Nomination & Remuneration Policy for Directors, KMP and Senior Management Personnel.

The independent directors in their meeting held on 27.12.2014, through discussion, evaluated the performance of non independent directors, Board, Managing Director and Executive Directors. The minutes of the said meeting were submitted to Chairman of the Company and also placed before the Board for their consideration. The Board has carried out annual performance evaluation of its own performance, the directors individually as well the evaluation of the working of its Audit, Nomination & Remuneration and Stakeholders' Relationship Committee. The Nomination & Remuneration Policy is enclosed as Annexure-I' and manner of evaluation of the Board is explained in Corporate Governance Report.

Board Meetings

During the year, 5 (Five) meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report, which forms part of the directors' report.

Board's Committee composition

The composition of Audit Committee, Nomination and Remuneration Committee and other Board's Committee is furnished in the Corporate Governance Report, which forms part of the directors' report.

8. Corporate Social Responsibility

The Company has constituted a Corporate Social Responsibility (CSR) Committee consisting of Mr. Ashok Kumar Oswal (Chairman), Mr. Adish Oswal, Mr. Ashok Kumar Goyal, Mr. Ajay Chaudhry and Mrs. Rakhi Oswal as members of the Committee.

The Company has framed a CSR policy and the same has been available on the website of the Company www.owalgroup.com. As per the Policy, the Company considers CSR as social obligation, sustainability development, regulatory environment, human resource management, safety health & environment and a part of Corporate Governance. The projects/ programs to be undertaken under CSR are specified in the policy.

Due to average loss during preceding three financial years, the company is not falling under the criteria for spending the amount under CSR. Hence, reporting on CSR activities as per the provisions is not required /applicable.

9. Listing of securities

The Securities of the Company are listed on National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE). The Company has paid annual listing fee to exchanges for the year 2015-16. Further, Foreign Currency Convertible Bonds (FCCBs) of the company are listed at Singapore Exchange Securities Trading Ltd.

10. Subsidiaries, Associates and Joint Venture

The Company has two subsidiaries, namely F.M. Hammerle Textiles Ltd (Formerly known as Oswal F.M. Hammerle Textiles Ltd) and F.M. Hammerle Verwaltungs GmbH, Austria, as on 31st March, 2015. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries.

The Company has published the audited consolidated financial statements for the financial year ended 31st March, 2015 and the same forms part of this Annual Report. Accordingly, the Annual Report does not contain the financial statements of our subsidiaries. As per the provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiaries in Form AOC-1 is annexed with this Annual Report.

The audited financial statements of these subsidiaries and the related information will be made available to any Member of the Company/its subsidiaries seeking such information at any point of time and are also available for inspection at the Registered Office of the Company/its subsidiaries.

Your Company divested its stake of 99.99% ownership in Oswal Industrial Enterprises Private Limited (OIEPL). Consequently, OIEPL ceased to be the subsidiary of the Company with effect from 31st March, 2015. Your Company continues to hold 1,000 equity shares of OIEPL.

11. Fixed Deposits

During the year, the Company has not accepted any fixed deposits. The fixed deposits invited/accepted earlier from the public have been paid during the year and there is no outstanding deposit as at 31st March, 2015.

12. Loans, Guarantees or Investments

The particulars of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are given in the financial statements.

13. Company Petition

A petition has been filed by M/s Maschinen Umwelttechnik Transportanlagen GmbH, Austria (a shareholder in F.M. Hammerle Textiles Ltd.) against the Company U/S 397, 398, 402 & 403 of the Companies Act, 1956 in the Hon'ble Company Law Board (CLB), Principal Bench, New Delhi. The said petition is pending at the Hon'ble CLB.

14. Directors' Responsibility Statement

Pursuant to Section 134 of the Act, the Directors state that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(b) 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, 2015 and of the profit and loss of the Company for the year ended 31st March, 2015;

(c) Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) The annual accounts have been prepared on a going concern basis;

(e) Proper internal financial controls were followed by the Company and such internal financial controls are adequate and were operating effectively;

(f) Proper systems are devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

15. Corporate Governance

The Company has in place a comprehensive system of Corporate Governance. A separate report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the Report on Corporate Governance.

16. Related Party Transactions

All related party transactions that were entered into during the financial year were on arm's length basis and in the ordinary course of business. All Related Party transactions were placed before the Audit Committee for approval. The Audit Committee has granted omnibus approval for related party transactions as per the provisions and restrictions contained in the Listing Agreement. There was no material/significant transaction with the directors or the management, their subsidiaries or relatives etc. that have any potential conflict with interest of the Company at large read with details of transactions as disclosed in Notes on Accounts annexed in the Balance Sheet as per Accounting Standard (AS) -18. The Board has approved a policy for related party transactions which has been uploaded on the Company's website.

No Material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of related party transactions as required under Section 134(3)(h) of the Companies Act, 2013 is not applicable.

17. Prevention of Sexual Harassment at workplace

The Company has in place a Prevention of Sexual Harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received any compliant related to sexual harassment during the year 2014-2015.

18. Vigil Mechanism / Whistle Blower Policy

In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behavior, the company has adopted a Vigil Mechanism Policy, which is available at Company's website. This brief contents of the policy are explained in corporate governance report.

19. Auditors

i) Statutory Auditors

M/s S.S. Kothari Mehta & Co. (Firm Registration No- 000756N), Chartered Accountants have been appointed as statutory auditors of the Company at 34th Annual General Meeting held on 30.09.2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Therefore, ratification of appointment of Statutory Auditors is being sought from the members of the Company at the ensuing Annual General Meeting.

ii) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Nesar & Associates, Practising Company Secretary, New Delhi to undertake the secretarial audit of the Company.

iii) Internal Auditors

M/s S C Vasudeva & Associates, Chartered Accountants performs the duties of internal auditors of the Company. The Company is also having full fledged internal audit department headed by qualified chartered accountant and supported by adequate qualified & experienced staff.

iv) Cost Auditors

The Board of Directors has appointed M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, as the Cost Auditors of the Company to conduct cost audit for the financial year ended 31st March, 2016. As per the requirement of Section 148 of the Companies Act, 2013, read with rules made there under, the remuneration to be paid to M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, for financial year 2015-16 is placed for ratification by the members at this Annual General Meeting.

20. Comments on Auditors' Report and Secretarial Auditors' Report Auditors' Report

The Statutory Auditors of the Company have submitted Auditors' Report on the Accounts of the Company for the financial year ended 31st March, 2015. In their reports (standalone and consolidated), they have made certain qualifications/observations. The explanation/comments of the Board on the same are as under:

Standalone Auditor's Report

a) The variance with Accounting Standard (AS-2) 'Valuation of Inventories' and Accounting Standard (AS-10) 'Accounting for Fixed Assets' relating to Real Estate Business, resulted in overstating the reserves, current assets, revenue and of cost of development. The land price has been assessed by the management. The difference between book value and assessed price was transferred to capital reserve, while conversion of land into stock in trade. The capital reserve thus created, will be transferred to the Statement of Profit & Loss in proportion of revenue recognized under the percentage of completion method on entering into an agreement to sales on year to year basis, thus showing actual profit earned on sale of real estate.

b) No provision has been made for other than temporary diminution in the value of investment in one of the subsidiary company, F.M. Hammerle Textiles Limited. We state that in view of continuous losses suffered by the company i.e. F.M. Hammerle Textiles Limited which has eroded 100% of the share capital, the company falls under "Sick Company" under the Sick Industrial and Companies (Special Provisions) Act (SICA) of 1985 and is filing an application to the Board for Industrial and Financial Reconstruction (BIFR).

c) Observation that the company has incurred cash losses in the current financial year but not in the immediately preceding financial year.

We state that the loss incurred during the year is due to volatility in the yarn market which is temporary business phase. The management has initiated steps to control cost and efficient/judicious resource utilization, which will help to improve the margins.

d) Observation in respect to default in repayment of dues to financial institutions/banks in respect of various loans and interest.

We state that the Vardhman Polytex Ltd, is regular in meeting its obligations since January, 2015.

However, in F.M. Hammerle Textiles Ltd, due to financial stress, the delay has happened. Further, the company is making application to BIFR.

Consolidated Auditor's Report

The explanation, of qualifications/observations which are also common in consolidated auditor's report, has been provided above, except observation in point no (xii) regarding 'a fraud committed by canteen contractor in a subsidiary - F.M. Hammerle Textiles Ltd'.

We state that the company i.e. F.M. Hammerle Textiles Ltd has initiated the appropriate civil and/ criminal legal proceeding against the contractor and others for the recovery of the amount assessed.

Other points of Auditors' Reports on the Accounts of the Company for the year under review are self-explanatory and require no comments.

Secretarial Auditors' Report

The Secretarial Auditors' report does not contain any qualifications, reservations or adverse remarks. Report of the secretarial auditor is annexed herewith as 'Annexure II', which forms part of this report.

21. Energy conservation, technology absorption and foreign exchange earnings and outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as 'Annexure III'.

22. Particulars of Employees

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as 'Annexure IV'.

23. Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as 'Annexure V'.

24. Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the Company

There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company.

25. Acknowledgements

Your directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to record their appreciation of the valuable contribution made by the employees in the successful operations of the Company during the year.

26. Cautionary Statement

Certain statements made in the Management Discussion and Analysis Report relating to the Company's objectives, projections, outlook, expectations, estimates and others may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ from such expectations whether expressed or implied. Several factors could make significant difference to the Company's operations. These include climatic and economic conditions affecting demand and supply, government regulations and taxation, natural calamities over which the Company does not have any direct control.

For and on behalf of the Board

Sd/-

Place: Ludhiana (Ashok Kumar Oswal) Dated: 25th May, 2015 Chairman & Managing Director (DIN-00009403)


Mar 31, 2014

Dear Fellow,

The Directors of your Company are presenting their 34th Annual Report on the affairs of the Company together with Audited Financial Statements of the Company for the year ended 31st March, 2014.

1. Financial Results

The financial results for the year are as under:

(Rs. lac) Particulars 2013-14 2012-13

Turnover 92,272.43 78,623.30

Profit/(Loss) before Interest, 10,775.47 9,183.14 Depreciation & Tax

Finance Cost 7,177.39 6,028.24

Profit/(Loss) before 3,598.08 3,154.90 Depreciation & Tax

Depreciation 3,265.85 3,660.07

Profit/(Loss) before Tax 332.23 (505.17)

Provision for Tax (145.28) (622.23)

Profit/(Loss) after Tax 477.51 117.06 Earnings Per Share (EPS) (in Rs.)

* Basic 2.59 0.72

* Diluted 2.28 0.72

2. Business Performance

Your Directors are pleased to report the Company''s business operations performance as follows:

* Sales Revenue

During the year under review, the turnover of the Company was Rs. 92,272.43 lac as against Rs. 78,623.30 lac in 2012-13, registering an increase of 17.36%. The FOB value of exports during the year increased to Rs. 44,123.61 lac from Rs. 30,294.91 lac in 2012-13, registering a growth of 45.65%.

* Profitability

During the year under review, the Company earned a profit before interest, depreciation and tax of Rs. 10,775.47 lac as against of Rs. 9,183.14 lac during the previous year. The Company earned a net profit after tax of Rs. 477.51 lac during the current year against of Rs. 117.06 lac in the previous year.

3. Management Discussion and Analysis Report

(a) Industry structure, Development & Future outlook

India''s textiles and clothing industry is one of the mainstays of the national economy. It is also one of the largest contributing sectors to Indian economy in terms of direct and indirect employment generation and net foreign exchange earnings. Textile sector contributes about 14% to industrial production, 4% to the Gross Domestic Product (GDP) and 27% to the country''s foreign exchange inflows. It provides direct employment to over 45 million people and second largest provider of employment after agriculture. Thus, the growth and all round development of this industry has a direct bearing on the improvement of the national economy.

The Indian textiles industry accounts for about 24% of the world''s spindle capacity and 8% of global rotor capacity. The cotton yarn production in India has increased by about 10% during April 2013- February 2014 and the total cloth production grew by 3% during the period April 2013 - February 2014. The Man-Made Fibers (MMF) in Indian textile has successfully established its presence in almost all the countries across the globe. MMF production recorded an increase of 4% during the period April 2013 - February 2014.

The India''s cotton consumption grew by 12% to 4.8 million tons and is expected to grow by 7% to 5.4 million tons in 2014-15. World ending stocks are forecast to increase by 12% in 2013-14 to 20 million tons, and then to expand by another 5% in 2014-15 to 21 million tons. The projected accumulation of cotton stocks will weight on international cotton prices in 2014-15, particularly as more stocks will be held outside of China.

In the global exports of Textiles, India has improved its ranking to emerge as the second largest textile exporter. Currently, India textiles exports worth US$ 40.2 billion, while the total global textiles exports stand at US$ 772 billion, with India commanding 5.2% of the share. The rise in textile exports from India is largely attributed to the growth in apparel and clothing sector as this account for almost 43% of the share. The Indian textile and apparel industry has potential to reach at size US$ 221 billion by 2021.

Since most of the capacity expansions have taken place in normal/ commodity products, the severity of competition and decrease in profit margins is inevitable. Thus, in order to survive, sustain and thrive in the global market, it would be necessary to differentiate and improve presence in value added products in the near future. Further, Technical textile is expected to grow at a faster pace as compared to other textiles products. It would be prudent to be an early bird and earmark some investments for this area for better and sustainable profitability.

(b) Internal control systems & adequacy

Your Company has an adequate internal control system. There is a system of continuous Internal Audit which aims at ensuring effectiveness and efficiency of systems and operations. The internal audit is conducted by an independent Internal Audit Department leading by a qualified Chartered Accountant alongwith sufficient qualified & experienced staff. The report is reviewed by the Audit Committee of the Board consisting of Independent Directors. The scope of the Internal Audit is not limited to accounts only but includes operations, inventories, costing records, physical verifications of immovable and movable assets etc on regular basis. Further, the Company has also taken steps to develop a mechanism to assess and minimize risks by having a Risk Management Committee.

(c) Human resource management

Your Company gives utmost importance to human resource. It considers "Human Resource as Human Capital" and believes in the development of Human Resource. The Company strongly believes in the Performance Management System and always tries to explore and tap high potential at the Group level to meet new challenges and competition. Our main tool is training and developing talent at various levels. Internal and external trainings are regularly organized for the development of the employees. The Company is having strength of approximate 4,000 employees.

(d) Safety, Health & Environment

The Company''s top priority is safety, with regard to employment. It encourages safety measures at all operational levels, especially at floor level. Regular training programs are conducted to create awareness about the importance of safety at work. Medical camps are organized periodically for welfare of the members. Additionally, regular medical facilities are also provided to them.

(e) Management perception of Risks & Concerns

The performance of textile industry during first three quarters of FY 2013-14 was quite encouraging. However, the last quarter witnessed sudden jerks in demand and price drop from export market, led by china. This was followed immediately by domestic market which adversely affected the market sentiment and profit margins. The upward surge in cotton prices and downward turn in yarn prices along with slack demand is going to hit the bottom line significantly.

To procure cotton more judiciously and carry reasonable inventory by reducing to 2 months instead of previous practices of 6 months shall help minimizing the risk. Further, initiatives towards differentiated/ value added products coupled with cost optimization will lead to better managing the profit margins.

(f) Opportunities and Threats Opportunities:

* Government thrust for textile export.

* Scope for atomization.

* Large overseas and domestic market.

Threats:

* Shortage of skilled labour.

* Ever increasing cost of power & finance.

* Volatile Government policies particularly for raw material.

(g) Financial Performance

* Resource utilisation

a) Fixed assets

The gross fixed assets as at 31st March, 2014 were Rs. 57,057.28 lac as against Rs. 55,911.26 lac in the previous year. The Net block of assets as on 31st March, 2014 was Rs. 28,322.86 lac as against Rs. 29,473.51 lac in the previous year.

b) Current assets

Inventory levels as at 31st March, 2014 were Rs. 9,219.17 lac as against Rs. 5,099.47 lac in the previous year. The trade receivables as at 31st March, 2014 were Rs. 6,595.01 lac as against Rs. 5,670.41 lac in the previous year.

* Financial condition & liquidity

(Rs. lac) Particulars 2013-14 2012-13

Cash & cash equivalents:

Beginning of the year 2,703.33 483.50

End of the year 1,437.33 2,703.33 Net cash provided (used) by:

Operating Activities 6,166.37 7,152.79

Investing Activities (1,068.11) (59.53)

Financial Activities (6,364.26) (4,873.43)

4. Increase in Paid up Share Capital and amendment in Object Clause

During the year under review, paid-up share capital of the Company was increased from Rs. 17.84 crore to Rs. 19.82 crore by allotment of 19.75 lac equity shares of Rs. 10/- each at a premium of Rs. 47.52/- per share to M/s Alma Assets Consultancy Pvt Ltd, promoter/ promoter group company.

The object clause of the Company was amended by inserting new object clause for the commencement of activities/ business relating to real estate.

5. Expansion and Diversification

The Directors of the Company take pleasure to inform you that the spinning project at Nalagarh (HP), has been completed (40,800 spindles) after adding remaining 15,800 spindles.

The residential colony cum commercial project named as ''Vardhman Park'' carved out by the Company at 341 K-1, Mundian Khurd, Chandigarh Road, Ludhiana-141123, is at development stage for various infrastructural facilities.

6. Company Petition

A petition has been filed by M/s Maschinen Umwelttechnik Transportanlagen GmbH, Austria (a shareholder in Oswal F.M. Hammerle Textiles Ltd.) against the Company U/S 397, 398, 402 & 403 of the Companies Act, 1956 in the Hon''ble Company Law Board (CLB), Principal Bench, New Delhi. The said petition is pending for mentioning in the Hon''ble CLB.

7. Directors

During the year under review, Mr Amit Jain was appointed as director of the Company w.e.f. 06.05.2013 and Mr Ashok Kumar Goyal was appointed as an Executive Director of the Company for a period of three years w.e.f. 01.09.2013.

Mr. Ashok Kumar Goyal, Director of the Company, is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re appointment.

Pursuant to Section 149 of the Companies Act, 2013 ("the Act"), the Board at its meeting held on 30.05.2014 recommended appointment of Mr. Ajay Chaudhry, Dr. B. S. Bhatia, Mr. M. D. Kanitkar and Mr. Amit Jain as Independent Directors of the Company, not liable to retire by rotation, for a term of five years till 31st March, 2019, subject to approval of the Members of the Company. These Directors have given the declarations to the Board that they meet the criteria of Independence as provided under Section 149(6) of the Act and also confirmed that they will abide by the provisions as mentioned in Schedule IV of the Act. The Company has received requisite notices in writing from members proposing their appointment as Independent Directors.

8. Subsidiary Companies

The Company has three subsidiaries namely Oswal F.M. Hammerle Textiles Ltd, Oswal Industrial Enterprise Private Ltd. and F.M. Hammerle Verwaltungs GmbH, Austria. During the year, the Board of Directors periodically reviewed the affairs of the subsidiary companies. As per Section 212 of the Companies Act, 1956, the Company is required to attach the Balance Sheet, Statement of Profit & Loss and other documents of its subsidiary companies. The Ministry of Corporate Affairs (MCA) vide its Circular No. 2/2011 dated 8th February, 2011 has exempted the companies from applicability of Section 212 of the Companies Act, 1956, provided such companies publish audited consolidated financial statements in the Annual Report. The Company has published the audited consolidated financial statements for the financial year 2014 and the same forms part of this Annual Report. Accordingly, the Annual Report does not contain the financial statements of our subsidiaries. As per Section 212 of the Companies Act, 1956, the statements showing the interest of the holding company in the subsidiaries and highlighting the financial performance of subsidiaries are annexed with this Annual Report.

The audited financial statements of these subsidiaries and the related information will be made available to any Member of the Company/its subsidiaries seeking such information at any point of time and are also available for inspection at the Registered Office of the Company/its subsidiaries.

9. Listing of securities

The Securities of the Company are listed on National Stock Exchange of India Ltd (NSE) and Bombay Stock Exchange Ltd (BSE). Further, Foreign Currency Convertible Bonds (FCCBs) of the Company are listed at Singapore Exchange Securities Trading Ltd.

10. Registrar and Share Transfer Agent

M/s Alankit Assignments Ltd, 1E/13, Alankit Heights, Jhandewalan Extension, New Delhi -110 055 is the Registrar and Share Transfer Agent of the Company.

11. Fixed Deposit

During the year, the Company has not accepted the fixed deposits. As at 31st March, 2014, fixed deposits as invited earlier from the public were outstanding to the tune of Rs. 4.95 lac which were within the limits prescribed under Section 58A of Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975. There were no overdue deposits as on 31st March, 2014.

The Company proposes to invite and accept Fixed Deposits from the shareholders and the public in accordance with Sections 73 and 76 of the Companies Act 2013 read with Companies (Acceptance of Deposits) Rules, 2014. Attention of the Members is invited to the relevant item in the Notice of the Annual General Meeting and the Explanatory Statement thereto.

12. Dividend

The Board of Directors of your Company has not recommended any dividend for the financial year 2013-14.

13. Corporate Governance

The Company has in place a comprehensive system of Corporate Governance. A report on Corporate Governance alongwith certificate from the auditors of the Company confirming compliance of the conditions as stipulated under Clause 49 of the Listing Agreement is given separately and forms part of this Annual Report.

14. Corporate Social Responsibility

Pursuant to Section 135 of the Companies Act, 2013 the Company has constituted the Corporate Social Responsibility (CSR) Committee of the Board of Directors. The terms of reference of the CSR Committee are as per the provisions of the Companies Act, 2013 read with rules made there under.

15. Auditors

M/s S.S. Kothari Mehta & Co, Chartered Accountants, New Delhi, who are the Statutory Auditors of the Company, hold office until the conclusion of the ensuing Annual General Meeting (AGM). It is proposed to re-appoint them as Statutory Auditors of the Company for a period of three years to hold office from the conclusion of this AGM till the conclusion of the 37th AGM to be held in the year 2017 subject to ratification of their appointment at every AGM. M/s S.S. Kothari Mehta & Co have, under Section 139(1) of the Companies Act, 2013 and the Rules framed thereunder furnished a certificate of their eligibility and consent for re-appointment.

16. Auditors'' Report

The Statutory Auditors of the Company have submitted Auditors'' Report on the Accounts of the Company for the financial year ended 31st March, 2014. In their report, they have made certain observations. The management reply/ comments on the same are as under:

a) Non creation of provision for write-off of investment in subsidiary companies namely M/s Oswal Industrial Enterprise (P) Limited (OIEPL) and Oswal F. M. Hammerle Textiles Limited (OFMH), has not been addressed by the Company:

We state that the said subsidiary companies i.e. OIEPL and OFMH have already started generating positive earnings and expected to improve its present financial position. The recovery in financial health of these companies could have been far better but for market unfavorable conditions including prolonged economic crises in USA/ Europe. However, the Companies are striving hard to turn around in the shortest possible time frame.

b) Improvement in the scope and coverage of Internal Audit:

We state that Internal Audit Department is headed by a qualified Chartered Accountant and supported by adequate qualified & experienced staff. The Internal Audit Department reviews the accounts/ accounting functions apart from systems, SOPs, risk factors, statutory compliances and physical verification movable and fixed assets periodically in all manufacturing units and other offices of the Company.

c) Regarding report on some delay in payment ESI and TDS:

We state that the delay was caused due to oversight. However, Internal Audit has been specifically assigned the responsibility to strengthen the system for statutory compliances.

d) Observation in respect to default in repayment of dues to financial institutions/banks and repayment of FCCB borrowings and premium due thereon:

We state that due to financial stress in the Company, the repayments to financial institutions/banks and FCCB payments were delayed to some extent.

Other points of Auditors'' Report on the accounts of the Company for the year under review are self-explanatory and require no comments.

17. Cost Auditor

M/s Ramanath Iyer & Co., Cost Accountants, 808, Pearls Business Park, Netaji Subhash Place, Delhi - 110 034, Delhi was appointed/re-appointed as Cost Auditors of the Company under Section 233B of the Companies Act, 1956 for the Audit of cost records for the year 2013-14. The Cost Audit report for the financial year ended 31st March, 2013 was filed on 17th September, 2013 well within the prescribed due date of 30th September, 2013.

18. Statement of particulars of employees

Statement showing particulars of the employees as required by the provisions of Section 217(2A) of the Companies Act, 1956 is not given as no employee was in receipt of remuneration equal to or exceeding Rs. 60 lac per annum or Rs. 5 lac per month if employed for the part of the year.

19. Directors'' Responsibility Statement

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

i) In preparation of the annual accounts, applicable accounting standards have been followed;

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 of the profit of the Company for the year ended on 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 and detecting fraud and other irregularities;

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

20. Acknowledgement

Your directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to record their appreciation of the valuable contribution made by the employees in the successful operations of the Company during the year.

For and on behalf of the Board Sd/- Place : Ludhiana (Ashok Kumar Oswal) Dated : 30th May, 2014 Chairman & Managing Director


Mar 31, 2013

Dear Fellow,

The Directors of your Company are presenting their 33rd Annual Report on the affairs of the Company together with Audited Accounts of the Company for the year ended 31st March, 2013.

1. FINANCIAL RESULTS

The Financial Results for the year are as under:-

(Rs.in lac) PARTICULARS 2012-13 2011-12 Turnover 78,623.30 74,927.60

Profit/(Loss) before Interest, 9,183.14 (734.29)

Depreciation & Tax Finance Cost 6,028.24 6,771.95

Profit/(Loss) before Depreciation & Tax 3,154.90 (7,506.24)

Depreciation 3,660.07 2,959.69

Profit/(Loss) before Tax (505.17) (10,465.93)

Tax Expenses (622.23) (2,324.71)

Profit/(Loss) after Tax 117.06 (8,141.22)

Earnings Per Share (EPS)

- Basic and Diluted (in Rs.) 0.72 (50.12)

2. BUSINESS PERFORMANCE

Your Directors are pleased to report the Company''s business operations performance as follows:

- SALES REVENUE

During the year under review, the turnover of the Company was Rs. 78,623.30 lac as against Rs. 74,927.60 lac in 2011-12, registering a marginal increase of 4.93%. The FOB value of exports during the year increased to Rs. 30,294.91 lac from Rs. 28,552.59 lac in 2011-12, registering a growth of 6.10%.

- PROFITABILITY

During the year under review, the Company earned a profit before depreciation, interest and tax of Rs. 9,183.14 lac as against a loss of Rs. (734.29) lac during the previous year. The Company earned a net profit after tax of Rs. 117.06 lac during the current year against a loss of Rs. (8,141.22) lac in the previous year.

3. SHARE CAPITAL

During the year under review, paid-up share capital of the Company was increased from Rs. 16.24 crore to Rs. 17.84 crore by allotment of 16 lac equity shares of Rs. 10/- each at a premium of Rs. 55.67/- per share to M/s Alma Assets Consultancy (P) Ltd, promoter/ promoter group company.

The shareholders vide resolution dated 29.09.2012 approved the issue of 16 lac share warrants to four persons belonging to promoters/ promoter group. However, as per mutual understanding between the promoters and terms of resolution, the whole 16 lac share warrants were allotted to single promoter i.e. M/s Alma Assets Consultancy (P) Ltd.

5. COMPANY PETITION

A petition has been filed by M/s Maschinen Umwelttechnik Transportanlagen GmbH, Austria (a shareholder in Oswal F.M. Hämmerle Textiles Ltd.) against the Company U/S 397, 398, 402 & 403 of the Companies Act, 1956 in the Hon''ble Company Law Board (CLB), Principal Bench, New Delhi. The said petition is pending for mentioning in the Hon''ble CLB.

6. CORPORATE DEBTS RESTRUCTURING (CDR)

The Company has made reference to the CDR cell for its debt restructuring under CDR mechanism/scheme of Reserve Bank of

India. The scheme has been approved vide letter dated 28.12.2012. The implementation of the scheme is under process.

7. DIRECTORS

Mr. Ajay Chaudhry, Director of the Company, is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

The Board of Directors has re-appointed Mr. Ashok Kumar Oswal as Chairman and Managing Director and Mr. Adish Oswal as Executive Director of the Company w.e.f 01.04.2012 for the period of three years.

8. SUBSIDIARY COMPANIES

The Company has three subsidiaries namely Oswal F.M. Hämmerle Textiles Ltd, F.M. Hämmerle Verwaltungs GmbH, Austria and Oswal Industrial Enterprise Private Ltd. As per Section 212 of the Companies Act, 1956, the statements showing the interest of the holding company in these subsidiaries are annexed with this Annual Report.

9. EXEMPTION UNDER SECTION 212 FOR SUBSIDIARIES

Ministry of Corporate Affairs (MCA) vide its Circular No. 2/2011 dated 8th February, 2011 has, subject to compliance with certain conditions, granted general exemption to the companies from applicability of Section 212 of the Companies Act, 1956 for attachment of Balance Sheet, Statement of Profit & Loss, Director''s Report and Auditor''s Report of the subsidiary companies with the Balance Sheet of the Company. The Board of Directors of the Company has decided not to attach the aforesaid documents of the subsidiary companies with the Balance Sheet of the Company and complied the provisions of said Circular.

The Annual Accounts of these subsidiaries and the related detailed information will be made available to any Member of the Company/ its subsidiaries seeking such information at any point of time and are also available for inspection by any Member of the Company/its subsidiaries at the Registered Office of the Company/its subsidiaries.

Further, pursuant to the Listing Agreement with the Stock Exchanges and general exemption granted by the MCA, the Consolidated Financial Statements of the Company, including the financial details of all the subsidiary companies, which forms part of the Annual Report, has been prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India.

10. LISTING OF SECURITIES

The Securities of the Company are listed on National Stock Exchange of India Ltd (NSE) and Bombay Stock Exchange Ltd (BSE). Further, Foreign Currency Convertible Bonds (FCCBs) of the Company are listed at Singapore Exchange Securities Trading Ltd.

11. REGISTRAR AND SHARE TRANSFER AGENT

M/s Alankit Assignments Ltd, 2E/21, Alankit House, Jhandewalan Extension, New Delhi -110 055 is the Registrar and Share Transfer Agent of the Company.

12. FIXED DEPOSIT

As at 31st March, 2013, fixed deposits from the public were outstanding to the tune of Rs. 59.06 lacs which were within the limits prescribed under Section 58A of Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975. There were no overdue deposits as on 31st March, 2013.

13. DIVIDEND

The Board of Directors of your Company has not recommended any dividend for the financial year 2012-13.

14. CORPORATE GOVERNANCE

The Company has in place a comprehensive system of Corporate Governance. A separate report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the auditors of the Company regarding compliance of the conditions of Corporate

Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the Report on Corporate Governance.

15. AUDITORS

M/s S.S. Kothari Mehta & Co, Chartered Accountants, New Delhi, Auditors of the Company, retires at the conclusion of forthcoming Annual General Meeting and being eligible, offers themselves for reappointment.

16. AUDITORS'' REPORT

The Statutory Auditors of the Company have submitted Auditors'' Report on the Accounts of the Company for the financial year ended 31st March, 2013. In their report, they have made the certain observations. The management reply/comments on the same are as under:

a) Non creation of provision for write-off of investment in subsidiary company namely M/s Oswal Industrial Enterprise (P) Limited (OIEL), has not been addressed by the Company:

We state that the said subsidiary company OIEL has already started to generate positive earnings and expected to overcome from its present financial position. The Management has already taken some effective measures to revive its operations which should help the company to perform better in the next financial year and protect its net worth.

b) Improvement in the scope and coverage of Internal Audit:

We state that Internal Audit Department has already been restructured/ strengthened and is lead by a qualified Chartered Accountant alongwith sufficient qualified & experienced staff. The scope of the Internal Audit Department has been extended beyond the accounts and includes operations, inventories, costing records, physical verifications of immovable and movable assets etc on regular basis.

c) Regarding report on some delay in payment of work contract tax:

We state that it was an incidence caused due to clerical mistake and overlooking. Internal Audit has been assigned the responsibility to develop & strengthen the system for statutory compliances.

d) Observation in respect to default in repayment and interest payment of FCCB due on 19.02.2013:

We state that due to financial stress in the company it could not make the payment on time. However, negotiations with the FCCB holders are at advance stage and we expect that the same shall be resolved soon.

Other points of Auditors'' Report on the Accounts of the Company for the year under review are self-explanatory and require no comments.

17. COST AUDITORS

The Board of Directors has re-appointed M/s Ramanath Iyer & Co., Cost Accountants, 808, Pearls Business Park, Netaji Subhash Place,

Delhi – 110 034, as Cost Auditors of the Company under Section 233B of the Companies Act, 1956 subject to the approval of Central Government for the year 2013-2014.

The Cost Audit report for the financial year ended 31st March, 2012 has been filed on time dated 11.01.2013. The due date was 28.02.2013 which was extended by MCA vide circular No. 2/2013 dated 31.01.2013.

18. STATEMENT OF PARTICULARS OF EMPLOYEES

Statement showing particulars of the employees as required by the provisions of Section 217(2A) of the Companies Act, 1956 is not given as no employee was in receipt of remuneration equal to or exceeding Rs. 60 lac per annum or Rs. 5 lac per month, if employed for the part of the year.

19. DIRECTORS'' RESPONSIBILITY STATEMENT

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

i) In preparation of the annual accounts, applicable accounting standards have been followed;

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, 2013 and of the profit 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 and detecting fraud and other irregularities; and

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

20. ACKNOWLEDGEMENT

Your directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to record their appreciation of the valuable contribution made by the employees in the successful operations of the Company during the year.

For and on behalf of the Board

Sd/-

Place : Ludhiana (Ashok Kumar Oswal)

Dated: 30th May, 2013 Chairman & Managing Director


Mar 31, 2012

The Directors of your Company is presenting their 32nd Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended 31st March, 2012.

1. FINANCIAL RESULTS

The Financial Results for the year are as under:-

(Rs. in lac)

PARTICULARS 2011-12 2010-11

Turnover 74,927.60 71,644.39

Profit/(Loss) before Interest, (730.55) 11,022.96

Depreciation & Tax

Finance Cost 6,771.95 4,705.97

Profit/(Loss) before Depreciation & Tax (7,502.50) 6,316.99

Depreciation 2,959.69 2,731.77

Profit/(Loss) before Tax (10,462.19) 3,585.22

Provision for Tax (2,320.97) 915.25

Profit/(Loss) after Tax (8,141.22) 2,669.97

Earnings Per Share - Basic and Diluted (in Rs.) (50.12) 20.02

2. PRESENTATION OF FINANCIAL STATEMENTS

Notification dated 28th February, 2011 issued by the Ministry of Corporate Affairs has stipulated a revised format for disclosure of financial statements under Schedule VI to the Companies Act, 1956. The financial results of the Company for the year ended 31st March, 2012 are, therefore, disclosed as per the Revised Schedule VI and the previous year's figures have been restated to align with the current year's presentation.

3. BUSINESS PERFORMANCE

Your Directors are pleased to report the Company's business operations performance as follows:

- SALES REVENUE

During the year under review, the turnover of the Company was Rs. 74,927.60 lacs as against Rs. 71,644.39 lacs in 2010-11, registering an increase of 4.59%. The FOB value of exports during the year increased to Rs. 28,552.59 lacs from Rs. 21,276.44 lacs in 2010-11, registering a growth of 34.20%.

- PROFITABILITY

During the year under review, the margins of the Company were under pressure. The Company incurred loss before depreciation and interest during the current year of Rs. (730.55) lacs against profit of Rs. 11,022.96 lacs during the previous year. The Company incurred net loss after tax to Rs. (8,141.22) lacs during the current year against profit of Rs. 2,669.97 lacs in the previous year.

5. STATUS OF EXPANSION AT NALAGARH

Directors of the Company take pleasure to inform you that during the year, the spinning project, which was undertaken by the Company with 40,800 spindles at Nalagarh, has been substantially completed. The commercial production of the same was started in the month of January, 2012 with about 25,000 spindles.

6. SHARE CAPITAL

During the year under review, the Authorised Share Capital of the Company was increased from Rs. 30 crore to Rs. 70 crore in two trenches.

7. COMPANY PETITION

A petition has been filed by M/s Maschinen Umwelttechnik Transportanlagen Gesellschaft mbH, Austria (a shareholder in Oswal F.M. Hämmerle Textiles Ltd.) against the Company U/S 397, 398, 402 & 403 of the Companies Act, 1956 in the Hon'ble Company Law Board (CLB), Principal Bench, New Delhi. The said petition is pending for the mentioning in the Hon'ble CLB.

8. CORPORATE DEBTS RESTRUCTURING (CDR)

The Company has made reference to the CDR cell for the its debt restructuring under CDR mechanism/ scheme of Reserve Bank of India.

9. DIRECTORS

Dr. B. S. Bhatia, Director of the Company, is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

The Board of Directors in its meeting held on 11.02.2012 has re-appointed Mr. Ashok Oswal as Chairman & Managing Director and Mr. Adish Oswal as Executive Director of the Company w.e.f 01.04.2012 for the period of three years, subject to the approval of shareholders.

10. SUBSIDIARY COMPANIES

The Company has three Subsidiaries namely Oswal F.M. Hämmerle Textiles Ltd, F.M. Hämmerle Verwaltungs GmbH, Austria and Oswal Industrial Enterprise Private Ltd. As per Section 212 of the Companies Act, 1956, the statements showing the interest of the holding company in these subsidiaries are annexed with this Annual Report.

11. EXEMPTION UNDER SECTION 212 FOR SUBSIDIARIES Ministry of Corporate Affairs vide its Circular No: 51/12/2007-CLIII

dated 8th February, 2011 has, subject to compliance with certain conditions, granted general exemption to the companies from applicability of Section 212 of the Companies Act, 1956 for attachment of Balance Sheet, P&L A/c, Director's Report and Auditor's Report of the subsidiary companies with the Balance Sheet of the Company. The Board of Directors of the Company has decided not to attach the aforesaid documents of the subsidiary companies with the Balance Sheet of the Company and complied the provisions of the said Circular i.e. the Consolidated Financial Statement of the Company for the financial year ended 31st March, 2012 duly audited by Statutory Auditors is included in the Annual Report. The Annual Accounts of these subsidiaries and the related detailed information will be made available to any Member of the Company/ its subsidiaries seeking such information at any point of time and are also available for inspection by any Member of the Company/ its subsidiaries at the Registered Office of the Company/its subsidiaries.

Further, pursuant to the Listing Agreement with the Stock Exchanges and general exemption granted by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Company, including the financial details of all the subsidiary companies, which forms part of the Annual Report, has been prepared in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India.

12. LISTING OF SECURITIES

The Securities of the Company are listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. Further, Foreign Currency Convertible Bonds (FCCBs) of the Company are listed at Singapore Exchange Securities Trading Ltd.

13. REGISTRAR AND SHARE TRANSFER AGENT

M/s Alankit Assignments Limited, 2E/21, Alankit House, Jhandewalan Extension, New Delhi -110 055 is the Registrar and Share Transfer Agent of the Company.

14. FIXED DEPOSIT

During the year under review, the Company invited Fixed Deposits from the Public as per Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975. At the end of the year, fixed deposits from the public were outstanding to the tune of Rs. 61.61 lacs which were well within the limits prescribed under the above said section. There were no overdue deposits as on 31st March, 2012.

15. DIVIDEND

The Board of Directors of your Company has not recommended any dividend for the year 2011-12.

16. CORPORATE GOVERNANCE

The Company has in place a comprehensive system of Corporate Governance. A separate report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the report on Corporate Governance.

17. AUDITORS

M/s S.S. Kothari Mehta & Co, Chartered Accountants, New Delhi, Auditors of the Company, retires at the conclusion of the forthcoming Annual General Meeting and being eligible, offers themselve for reappointment.

18. AUDITORS' REPORT

The Statutory Auditors of the Company have submitted the Auditors' Report on the Accounts of the Company for the year ended 31st March, 2012. In their report, they have made certain observations. One of the observation in respect to non creation of provision for write-off of investment in subsidiary company namely M/s Oswal Industrial Enterprises (P) Limited (OIEL),has not been addressed by the Company. We states that the said subsidiary company OIEL has started to generate positive earnings and expected to overcome from its financial position.

With respect to further observation for delayed payment of interest and principal of Banks during the year 2011-12 , we state that the textile industry presently in India is passing from difficult phase due to slow down of demand, high inventory cost, sharp fluctuation in the prices etc. The Company reported major net loss during the FY 2011-12 and is suffering from severe liquidity. The delay in Bank payments due to current year losses on account of fluctuations in cotton fibre and yarn prices, lesser cash accruals coupled with the repayment has put the company in the stretched liquidity position. Accordingly, the Company has filed an application to CDR for its debt restructuring.

Further, the utilization of short term funds to long term investment by the Company is only due to shifting of current maturities of term loan to current liabilities as per the requirement of Revised Schedule VI of the Companies Act, 1956.

The other points of Auditors' Report on the Accounts of the Company for the year under review are self-explanatory and require no comments. 19. COST AUDITORS

The Board of Directors re-appointed M/s Ramanath Iyer & Co., Cost Accountants, New Delhi as Cost Auditors of the Company under Section 233-B of the Companies Act, 1956 subject to the approval of the Central Government for the year 2012-2013. As mandated by Circular No.15/2011 dated 11 April 2011 issued by the Ministry of Corporate Affairs, Government of India, full particulars of Cost Auditor are given below:-

Name M/s Ramanath Iyer & Co.,

Cost Accountants

Address BL-4 (Paschmi), Shalimar Bagh,

New Delhi - 110088 Details of Cost Audit Report for the financial year ended 31st March 2011

(a) Due date of filing 30th September, 2011

(b) Actual date of filing 21st & 24th September, 2011

20. STATEMENT OF PARTICULARS OF EMPLOYEES

A Statement of Particulars of Employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 is enclosed and forms part of this report.

21. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Energy Conservation continues to be an area of major emphasis in your Company. Efforts are made to optimise energy costs while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are annexed hereto and forms part of this report.

22. 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;

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, 2012 and of the profit 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 and detecting fraud and other irregularities;

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

23. ACKNOWLEDGEMENT

Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to record their appreciation of the valuable contribution made by the employees in the successful operations of the Company during the year.

For and on behalf of the Board

Sd/-

Place : Ludhiana (Ashok Oswal)

Dated: 30th May, 2012 Chairman & Managing Director


Mar 31, 2011

Dear Fellow,

The Directors of your Company have great pleasure in presenting their 31st Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended 31st March, 2011.

1. FINANCIAL RESULTS

The Financial Results for the year are as under:-

(Rs. in lac)

PARTICULARS 2010-11 2009-10

Turnover 71,644.39 52,778.99

Profit before Depreciation, Interest,

Tax & Exceptional Items 10,553.38 6,686.20

Interest & Financial Charges 4,236.40 3,351.05

Profit before Depreciation,

Tax & Exceptional Items 6,316.98 3,335.15

Depreciation 2,731.76 2,830.50

Profit before Tax & Exceptional Items 3,585.22 504.65

Exceptional Items - 3,574.14

Profit before Tax & after Exceptional Items 3,585.22 (3069.49)

Provision for Tax

-Current 15.25 102.00

- Deferred 900.00 (932.67)

Profit after Tax & Exceptional Items 2,669.97 (2,238.82)

Appropriations:

Surplus carried to the Balance Sheet 263.56 (2,406.41)

Earnings Per Share

-Basic (in Rs.) 20.02 (20.31)

-Diluted (in Rs.) 20.02 (20.31)

2. BUSINESS PERFORMANCE

Directors are pleased to report the Company's business operations performance as follows:

- SALES REVENUE

During the year under review, the turnover of the Company was Rs. 7,1644.39 lac as against Rs. 52,778.99 lac in 2009-10, registering an increase of 35.74%. The FOB value of exports during the year increased to Rs. 21,276.44 lac from Rs. 15,070.89 lacs in 2009-10, registering a growth of 41.18%.

- PROFITABILITY

> The profit before depreciation, interest, exceptional items & tax increased by 57.84% to Rs. 10,553.38 lac during the current year from Rs. 6,686.20 lac in the previous year.

> The net profit after tax increased by 219.25% to Rs. 2,669.97 lac during the current year from a loss of Rs. (2238.82) lac in the previous year.

4. EXPANSION PROJECT

During the year under review, your Company undertook the expansion of a spinning project with 40,800 spindles at Nalagarh (H.P.). The project is likely to start production in the second quarter of financial year 2011-12.

5. SHARE CAPITAL AND FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs)

During the year under review, your Company issued an aggregate of 36,17,000 equity shares of Rs. 10/- each consisting of 13,20,000 equity shares upon conversion of convertible warrants to the financial investors belonging to the Promoter Group and 22,97,000 equity shares upon conversion of convertible warrants to the financial investors belonging to the Non-Promoter on a preferential basis at a premium pursuant to SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2009. The proceeds from these preferential issues were used for the purpose of meeting long-term working capital requirements and future expansion projects of the Company.

Of the total issued Foreign Currency Convertible Bonds (FCCBs) of USD 12 million, the Company brought back the FCCBs, having a face value of USD 3.5 million at a discounted rate of 49.88% with a total outflow of USD 1.745 million with the approval of Reserve Bank of India.

6. COMPANY PETITION

A petition has been filed by M/s Maschinen Umwelttechnik Transportanlagen Gesellschaft mbH, Austria (a shareholder in Oswal F.M. Hämmerle Textiles Ltd.) against the Company U/S 397, 398, 402 & 403 of the Companies Act, 1956 in the Hon'ble Company Law Board (CLB), Principal Bench, New Delhi. The said petition is pending for the mentioning in the Hon'ble CLB.

7. DIRECTORS

Mr. M. D. Kanitkar, Director of the Company, is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment.

8. SUBSIDIARY COMPANIES

The Company has three Subsidiaries namely Oswal F.M. Hämmerle Textiles Ltd, F.M. Hämmerle Verwaltungs GmbH, Austria and Oswal Industrial Enterprise Private Ltd (Formerly known as Oswal Retail Private Ltd). As per Section 212 of the Companies Act, 1956, the statements showing the interest of the holding company in these subsidiaries and financial figures of subsidaries as per Circular No. 2/2011 dated 08.02.2011 are annexed with this annual report.

9. LISTING OF SECURITIES

The securities of the Company are listed on the National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. Further, Foreign Currency Convertible Bonds (FCCBs) of the Company are listed at Singapore Exchange Securities Trading Ltd.

10. REGISTRAR AND SHARE TRANSFER AGENT

M/s Alankit Assignments Limited, 2E/21, Alankit House, Jhandewalan Extension, New Delhi -110 055 is the Registrar and Share Transfer Agent of the Company.

11. FIXED DEPOSIT

During the year under review, the Company invited Fixed Deposits from the Public as per Section 58A of the Companies Act, 1956 read with the Companies (Acceptance of Deposit) Rules, 1975. At the end of the year, fixed deposits from the public were outstanding to the tune of Rs. 68.01 lac which were well within the limits prescribed under the above said section. There were no overdue deposits as on 31st March, 2011.

12. DIVIDEND

The Board of Directors of your Company has not recommended any dividend for the year 2010-11, keeping in view the ongoing expansions, modifications and future investment possibilities, deciding to plough back the profit.

13. CORPORATE GOVERNANCE

The Company has in place a comprehensive system of Corporate Governance. A separate report on Corporate Governance forms part of the Annual Report of the Company. A certificate from the Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated under Clause 49 of the Agreement is annexed to the report on Corporate Governance.

14. AUDITORS

M/s S.S. Kothari Mehta & Co, Chartered Accountants, New Delhi, Auditors of the Company, retires at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for reappointment.

15. AUDITORS' REPORT

The Auditors' Report on the Accounts of the Company for the year under review is self-explanatory and requires no comments.

16. COST AUDITORS

The Board of Directors re-appointed M/s Ramanath Iyer & Co., Cost Accountants, New Delhi as Cost Auditors of the Company under Section 233-B of the Companies Act, 1956 subject to the approval of the Central Government for the year 2011-2012. The Cost Auditors' Report for the year 2009-10 was filed with the Central Government within a prescribed time period and will be forwarded to the Central Government for the subsequent year as required under law.

17. STATEMENT OF PARTICULARS OF EMPLOYEES

A Statement of Particulars of Employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 is enclosed and forms part of this report.

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

Energy Conservation continues to be an area of major emphasis in your Company. Efforts are made to optimise energy costs while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are annexed hereto and forms part of this report.

19. 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;

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, 2011 and of the profit of the Company for the year ended on 31st March, 2011;

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 and detecting fraud and other irregularities;

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

20. ACKNOWLEDGEMENT

Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to record their appreciation of the valuable contribution made by the employees in the successful operations of the Company during the year.

For and on behalf of the Board

Sd/-

Place : Ludhiana (Ashok Oswal)

Dated: 14th May, 2011 Chairman & Managing Director



 
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