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Directors Report of Vardhman Textiles Ltd.

Mar 31, 2016

The Directors of your Company have pleasure in presenting their 43ld Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2016.

1. FINANCIAL RESULTS:

The financial results for the year are as under:- (Rs. in crore)

Particulars 2015-2016 2014-2015

Revenue from operations (Net) 5,587.14 5,742.03

Profit before Depreciation, Interest & Tax (PBDIT) 1,313.42 1,099.66

Interest and Financial expenses 86.85 121.54

Profit before Depreciation and Tax (PBDT) 1,226.57 978.12

Depreciation 361.93 488.85

Profit before Tax (PBT) 864.64 489.27

Provision for Tax - Current 221.82 186.00

- Deferred Tax (Net of Adjustment) (10.23) (55.84)

Profit for the period after tax (PAT) 653.05 359.11

Add: Corporate Dividend Tax written back 13.31 2.20

Less: Depreciation charged to reserves as per Schedule II - 61.10 of Companies Act, 2013

Add: Deferred tax on depreciation charged - 11.83

Balance brought back 942.71 1,057.64

Balance available for appropriation 1,609.07 1,369.68

Appropriations:

Interim Dividend 95.48 -

Proposed Dividend on Equity shares - 63.65

Corporate Dividend Tax 1.08 13.32

Transfer to General Reserve - 350.00

Closing Balance of surplus i.e. Balance in statement of 1,512.51 942.71 Profit & Loss

Earnings per share (Rs.)

- Basic 102.60 56.42

- Diluted 102.60 56.42

Dividend per share (Rs.) 15.00 10.00 (Interim & Final)

2. FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

Production & Sales Review:

During the year under review, your Company has registered Revenue from Operations of Rs.5,587.14 crore as compared to Rs.5,742.03 crore in the previous year. The export of the Company decreased from Rs.2,442.48 crore to Rs.2,274.84 showing a decrease of 6.86% over the previous year. The business wise performance is as under:-

a) Yarn:

The production of Yarn increased from 190,009 MT to 204,142 MT during the year 2015-16. The sales of yarn (including internal transfers) increased from 196,882 MT to 206,914 MT during the year 2015-16.

b) Fabric:

During the year, the production of grey fabric increased from 170 million meter to 175 million meter, showing an increase of 2.94% over the previous year. The production of processed fabric increased from 110 million meter to 112 million meter. The sales of grey fabric (including internal transfers) increased from 170 million meter to 175 million meter. The sales of processed fabric increased from 111 million meter to 112 million meter.

Profitability:

The Company earned profit before depreciation, interest and tax of Rs.1,313.42 Crore as against Rs.1,099.66 Crore in the previous year. After providing for depreciation of Rs.361.93 Crore (Previous Year Rs.488.85 Crore), interest of Rs.86.85 Crore (Previous Year Rs.121.54 Crore), provision for current tax Rs.221.82 Crore (Previous Year Rs.186.00 Crore), deferred tax (net of adjustments) C(10.23) Crore [Previous Year C(55.84) Crore], the net profit from operations worked out to Rs.653.05 Crore as compared to Rs.359.11 Crore in the previous year.

Resources Utilisation:

a) Fixed Assets:

The net fixed assets (including work-in-progress) as at 31st March, 2016 were Rs.2,573.18 crore as compared to Rs.2,573.05 crore in the previous year.

b) Current Assets:

The current assets as on 31st March, 2016 were Rs.3,145.09 Crore as against Rs.2,960.84 Crore in the previous year. Inventory level was at Rs.1,809.12 Crore as compared to the previous year level of Rs.1,636.73 Crore.

Financial Conditions & Liquidity:

The Company enjoys a rating of "AA/stable" from Credit Rating Information Services of India Limited (CRISIL) for long term borrowings and "A1 " for short term borrowings respectively. Management believes that the Company''s liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:-

(Rs. in crore)

Particulars 2015-2016 2014-2015

Cash and Cash equivalents:

Beginning of the year 175.55 52.75

End of the year 276.77 175.55

Net cash provided (used) by:

Operating Activities 868.60 1,210.89

Investing Activities (479.66) (144.18)

Financial Activities (287.72) (943.91)

3. DIVIDEND:

During the year, the Board of Directors in its meeting held on 11th March, 2016 had declared an interim dividend of Rs.15/- per share on the Fully Paid-up Equity Shares of the Company.

This Interim Dividend is the Final Dividend and no further dividend was declared by the Board of Directors of the Company for Financial year 2015-16.

4. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

In terms of Section 125 of the Companies Act, 2013, unclaimed or unpaid Dividend relating to the financial year 2008-09 is due for remittance by the end of September, 2016 to the Investor Education and Protection Fund established by the Central Government.

5. CONSOLIDATED FINANCIAL STATEMENT:

In accordance with the Companies Act, 2013 and Accounting Standard (AS)- 21 on Consolidated Financial Statements read with AS-23 on Accounting for Investments in Associates and AS-27 on Financial Reporting of Interests in Joint Ventures, the Audited Consolidated Financial Statement is provided in the Annual Report.

6. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

During the year under review, no Company has become or ceased to be Company''s subsidiaries, joint ventures or associate companies. Further, the Company does not have any material subsidiary. The Company has following subsidiary and associate companies, the details of their financials for 2015-16 are given below:-

VMT Spinning Company Limited (VMT)

This subsidiary of the Company is a Joint Venture with Marubeni Corporation and Marubeni Hong Kong and South China Limited of Japan. The Revenue from operations of the Company has decreased to Rs.156.58 crore from Rs.167.23 crore in the last year. The Company earned a net profit of Rs.7.36 crore as against the profit of Rs.2.79 crore in the previous year registering an increase of 163.80%. Out of the total present paid-up capital of Rs.20.70 crore, your Company holds 89.44%.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged with the business of investments in the shares etc. The earnings of the Company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of Rs.3.57 crore.

Vardhman Acrylics Limited (VAL)

This subsidiary of the Company is engaged in the business of manufacturing of Acrylic Fibre. Presently, the Company holds 70.75% shares in this subsidiary. During the Financial Year 2015-16, VAL recorded revenue from operations of Rs.411.61 crore (including trading of goods of Rs.131.42 crore) as against Rs.498.08 crore (trading of goods Rs.153.08 crore) in the previous financial year. The net profit for the year has decreased to Rs.29.83 crore from Rs.33.42 crore in the previous year.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird Global, LLC (A&E), is engaged in the business of Threads Manufacturing and Distribution. The Company has a joint venture partnership of 51:49 with A&E, which is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were Rs.728.48 crore as against Rs.696.67 crore in the previous year registering an increase of 4.57%. The Net Profit for the year was Rs.86.55 crore as compared to Rs.72.04 crore during last year registering an increase of 20.14%. This has been possible because of increase in production and sales revenue in all the verticals i.e. Consumers, Industrial and Specialty products.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men''s shirts. During the year, the Revenue from Operations of the Company was Rs.57.69 crore as compared to Rs.47.07 crore in the previous year. The Company earned a Net Profit of Rs.2.00 crore as against a Net Profit of Rs.0.15 crore in the previous year.

Vardhman Special Steels Limited (VSSL)

VSSL is an Associate Company of the Company. The Company holds 31.39% shares of VSSL. During the year, the Revenue from Operations of the Company was Rs.656.56 crore as compared to Rs.661.60 crore in the previous year. The Company earned a Net profit of Rs.5.21 crore as against a Net Loss of Rs.15.13 crore in the previous year.

Vardhman Spinning & General Mills Limited (VSGM)

VSGM is an Associate Company of the Company. The Company holds 50% shares of VSGM. It is a trading Company dealing in trading of Cotton and Fibre. During the year, the Company has not traded any goods. So, the Revenue from Operations is NIL for the Financial Year 2015-16. The Company incurred a Net Loss of Rs.27, 292 as against a Net Loss of Rs.38,062 in the previous year.

Disinvestment in VYTL:

The Board of Directors of your Company in its meeting held on 9th May, 2016 have approved the execution of a Share Sale and Purchase Agreement ("SPA"), the Amended and Restated Shareholders Agreement, and other incidental and ancillary agreements (collectively, "Transaction Documents") to be entered into between the Company, VYTL and A&E. In terms of the SPA, the Company inter alia will sell 22,802,541 (Two crore Twenty Eight Lakh Two Thousand Five Hundred and Forty One) equity shares held by the Company in VYTL aggregating to 40% (Forty per cent) of the issued, subscribed and paid-up equity share capital of VYTL to A&E. The consideration will be based on an equity valuation of Rs.990 crores of VYTL as of 31st March, 2016 and the adjustment formula linked to the closing date.

Post the said acquisition by A&E, the Company will have a ''put option'' and A&E will have a ''call option'' on the remaining 11% (Eleven per cent) issued, subscribed and paid-up equity share capital of VYTL held by the Company, and such put option / call option will be exercisable by the Company or A&E, as the case may be, at any time beginning 3 (Three) years following the closing under the SPA.

7. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate on the date of this report.

8. CORPORATE SOCIAL RESPONSIBILITY:

Your Company is committed to and fully aware of its Corporate Social Responsibility (CSR), the guidelines in respect of which were more clearly laid down in the new Companies Act. The Company''s vision on CSR is that the Company being a responsible Corporate Citizen would continue to make a serious endeavor for a quality value addition and constructive contribution in building a healthy and better society through its CSR related initiatives and focus on education, environment, health care and other social causes.

The Corporate Social Responsibility Committee of the Company in its meeting held on 11th March, 2016 has amended the Corporate Social Responsibility (CSR) Policy of the Company indicating the activities to be undertaken by the Company, which has been approved by the Board.

The Amended CSR policy may be accessed on the Company''s website at the link: https://www.vardhman.com/user_files/investor/CSR%20 Policy%20final.pdf

The Company has identified following focus areas for CSR:-

- Promoting Education: Promoting education by setting up schools, colleges etc. in order to deliver high quality education besides augmenting infrastructure of existing educational institutions. This may include initiatives like grant of scholarships to poor & meritorious students in our schools & colleges.

- Preventive Healthcare: Providing Healthcare equipment and other facilities to local dispensaries and hospitals. This shall include augmenting infrastructure of such facilities.

- Rural Development: Rural development centric CSR initiatives, including electrification through solar power, providing safe drinking water, sanitation etc. This may include participation in Government run welfare projects in partnership with the private sector.

- Skill Enhancement with special emphasis on Women Empowerment: Focus on initiatives enabling functional literacy of women as also employment and livelihood enhancing vocational skills by imparting proper training.

- Environment: Activities to protect the degradation of Environment including preservation of natural resources, energy conservation, recycling of waste products, reduction in emission of harmful pollutants, improving fertility of land, enhancement of green cover etc.

- Public Private Partnership Initiatives: The Company shall also engage in CSR projects which call for a Public Private Partnership for undertaking rural development and helping the underdeveloped community.

- Any other project (as defined in Schedule VII of the Companies Act, 2013) may also be taken up as and when considered necessary.

During the year, the Company has spent Rs.5.01 crores on CSR activities.

The disclosures related to CSR activities pursuant to Section 134(3) of the Companies Act, 2013 read with Rule 9 of Companies (Accounts) Rules, 2014 and Companies (Corporate Social Responsibility) Rules, 2014 is annexed hereto and form part of this report as Annexure I.

9. RISK MANAGEMENT:

The Board of Directors in their meeting held on 7th November, 2014 had constituted Risk Management Committee of the Company. Thereafter, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 became effective from 1st December, 2015. These regulations provide for the obligation to constitute Risk Management Committee only on top 100 Listed Companies. Therefore, the Board of Directors in its meeting held on 9th May, 2016 approved dissolution of the Risk Management Committee of the Company w.e.f 9th May, 2016.

However, the Risk Management Policy of the Company required to be formulated under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been duly formulated and approved by the Board of Directors of the Company. The policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company.

The Risk Management policy may be accessed on the Company''s website at the link: http://www.vardhman.com/user_files/ a4Rs.0a8b00e407cd507553ea7db7f06e89de1272a1436265025.pdf.

10. INTERNAL FINANCIAL CONTROLS:

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

A Report on the Internal Financial Controls under Clause (i) of sub- section 3 of Section 143 of the Companies Act, 2013 is annexed to Independent Auditor''s Report on Standalone Financial Statements as Annexure B and to Independent Auditors Report on Consolidated Financial Statements as Annexure A.

11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm''s length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the provisions of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Policy on dealing with Related Party Transactions as approved by the Board may be accessed on the Company''s website at the link: http://www.vardhman.com/user_files/96Rs.45534e3ab096d9bRs.682f8 eebade0344f915151436264609.pdf.

Your Directors draw attention of the members to Note 41 to the Standalone Financial Statement which sets out related party disclosures.

12. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013:

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in the standalone financial statement (Please refer to Note 14, 15 and 17 to the standalone financial statement).

13. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Mrs. Suchita Jain, Director of the Company, retires by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of the Articles of Association of the Company and being eligible, offers herself for re-appointment. The Board recommended her appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

Declaration under Section 149(6):

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules thereof.

Company''s Policy relating to Directors appointment, payment of remuneration and discharge of their duties:

The Nomination & Remuneration Committee of the Company has formulated the Nomination & Remuneration Policy on Director''s appointment and remuneration including the criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section 178(3) of the Companies Act, 2013.

The Nomination & Remuneration Policy is annexed hereto and form part of this report as Annexure II.

Familiarisation programmes for Board Members:

Your Company has formulated Familiarisation Programme for all the Board members in accordance with Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Schedule IV of the Companies Act, 2013 which provides that the Company shall familiarise the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of Industry in which the Company operates, business model of the Company, etc. through various programmes.

The Familiarisation Programme for Board members may be accessed on the Company''s website at the link: https://www.vardhman.com/user_files/investor/familarisation.pdf Annual Evaluation of the Board Performance:

The meeting of Independent Directors of the Company for the calendar year 2015 was held on 30th March, 2015 to evaluate the performance of Non-Independent Directors, Chairperson of the Company and the Board as a whole.

The evaluation was done by way of discussions on the performance of the Non- Independent Directors, Chairperson and Board as a whole.

A policy on the performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of non-executive directors and executive directors have been formulated by the Company.

14. AUDITORS AND AUDITORS'' REPORT:

Statutory Auditors:

At the Annual General Meeting held on 24th September, 2014, M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi were appointed as Statutory Auditors of the Company to hold office till the conclusion of 44th Annual General Meeting of the Company. In terms of provisions of Section 139 (1) of the Companies Act, 2013, the appointment of Statutory Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. S.C. Vasudeva & Company as Statutory Auditors is placed for ratification by the members.

Further, the Statutory Auditors of the Company have submitted Auditors'' Report on the accounts of the Company for the accounting year ended 31st March, 2016. This Auditors'' Report is self-explanatory and requires no comments.

Secretarial Auditor:

M/s. B.K. Gupta & Associates, Company Secretary in Practice, were appointed as Secretarial Auditors of the Company by the Board of Directors of the Company in their meeting held on 8th May, 2015 for the financial year 2015-16.

The Secretarial Auditors of the Company have submitted their Report in Form No. MR-3 as required under Section 204, of the Companies Act, 2013 for the financial year ended 31st March, 2016. This Report is self- explanatory and requires no comments. The Secretarial Audit Report forms part of this report as Annexure III.

Cost Auditor:

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 of the Accounts for the financial year ended 2016-17. However, as per provisions of Section 148 of the Companies Act, 2013, read with Companies (Cost Records and Audit) Rules, 2014, the remuneration to be paid to the Cost Auditors is subject to ratification by members at the Annual General Meeting. Accordingly, the remuneration to be paid to M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, for financial year 2016-17 is placed for ratification by the members.

15. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW:

Six meetings of the Board were held during the year.

16. AUDIT COMMITTEE DISCLOSURES:

Composition:

The Audit Committee consists of Mr. Prafull Anubhai, Independent Director, Dr. S.K. Bijlani, Independent Director, Mr. Shravan Talwar, Independent Director, Mr. D.B. Jain, Independent Director, Mr. A.K. Kundra, Independent Director and Mr. D.L. Sharma, Director. Mr. Prafull Anubhai is the Chairman of the Committee and Ms. Karan Kamal Walia is the Secretary of the Committee. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism:

The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Uniform Listing Agreement aims to provide a channel to the employees and Directors to report to the management concerns about unethical behavior, actual or suspected fraud or violation of the Codes of Conduct or policy. The mechanism provides for adequate safeguards against victimisation of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman/ Chairman of the Audit Committee in exceptional cases.

The Policy on Vigil Mechanism and whistle blower policy as approved by the Board may be accessed on the Company''s website at the link: http://www.vardhman.com/user_files/20b9bcdbd2cRs.01fde3e8e7d39 2d93573769de1941436265078.pdf.

17. CORPORATE GOVERNANCE:

The Company has in place a system of Corporate Governance. A separate report on Corporate Governance forming part of the Annual Report of the Company is annexed hereto. A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Corporate Governance Clauses of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the report on Corporate Governance.

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

Energy conservation continues to be an area of major emphasis in our Company. Efforts are made to optimise the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are annexed hereto and form part of this report as Annexure IV.

19. ANNUAL RETURN:

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 for the financial year 2015-16 in Form MGT-9 is annexed hereto and form part of this report as Annexure V.

20. HUMAN RESOURCES /INDUSTRIAL RELATIONS:

The Company continues to lay emphasis on building and sustaining an excellent organisation climate based on human performance. Performance management is the key word for the Company. During the year the Company employed around 20,711 employees.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

21. PARTCULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The disclosures in respect of managerial remuneration as required under section 197(12) read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

A statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5 (2) and 5 (3) Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

In terms of section 197(14) of the Companies Act, 2013, the Company does not have any Holding Company. However, the details regarding remuneration or commission received from any holding or subsidiary company of company by any Managing or Whole Time Director is annexed hereto and form part of this report.

All the above details are provided in Annexure VI.

22. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to provisions of Section 134 (5) of the Companies Act, 2013 the Board hereby submit its Responsibility Statement:

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

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, 2016 and of the profit of the Company for the year ended on 31st March, 2016;

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. The Internal financial controls have been laid down to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f. The proper systems has been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

23. GENERAL DISCLOSURES:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

a. Details relating to deposits covered under Chapter V of the Act.

b. Issue of equity shares with differential rights as to dividend, voting or otherwise.

c. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

d. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

VARDHMAN TEXTILES LIMITED EMPLOYEE STOCK OPTION PLAN, 2016:

The Board of Directors in their meeting held on 9th May, 2016 approved introduction of an equity based compensation scheme called "Vardhman Textiles Limited Employee Stock Option Plan 2016" for its eligible employees subject to approval of shareholders of the Company in the ensuing Annual General Meeting of the Company. The Board has delegated necessary power to the Nomination and Remuneration Committee to implement and administer the Plan once approved by the shareholders of the Company.

24. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

For and On Behalf of The Board

Place: Ludhiana (S.P. Oswal)

Dated: 9th May, 2016 Chairman & Managing Director


Mar 31, 2015

Dear Members,

The Directors of your Company have pleasure in presenting their 42nd Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2015.

1. FINANCIAL RESULTS:

The financial results for the year are as under:

(Rs. in crore)

(PARTICULARS 2014-2015 2013-2014

Revenue from operations (Net) 5,742.03 5,171.31

Profit before Depreciation, Interest & Tax (PBDIT) 1,099.65 1,325.34

Interest and Financial expenses 121.54 151.83

Profit before Depreciation and Tax (PBDT) 978.11 1,173.51

Depreciation 488.85 294.13

Profit before Tax (PBT) 489.27 879.38

Provision for Tax - Current 186.00 188.50

- Deferred Tax (Net of Adjustment) (55.84) 39.00

Profit for the period after tax (PAT) 359.11 651.88

Earnings per share (Rs.)

- Basic 56.42 102.41

-Diluted 56.42 102.41

Dividend per share (Rs.) 10.00 11.00

2. FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

Production & Sales Review:

During the year under review, your Company has registered Revenue from Operations of Rs.5,742.03 crore as compared to H5,171.31 crore in the previous year. The export of the Company increased from Rs.2,007.91 crore to Rs.2,442.48 showing a increase of 21.64% over the previous year. The business wise performance is as under:-

a) Yarn:

The production of Yarn increased from 1,68,285 MT to 1,91,046 MT during the year 2014-15. The sales revenue of yarn increased from H2,980.01 crore to Rs.3,365.60 crore during the year under review showing an increase of 12.94%.

b) Fabric:

During the year, the production of grey fabric increased from 154 million meter to 170 million meter, showing an increase of 10.39% over the previous year. The production of processed fabric increased from 107 million meter to 110 million meter. The sales revenue of the fabric (grey and processed) also increased from Rs.1,885.25 crore to H2,032.48 crore showing an increase of 7.81% over the previous year.

Profitability:

The Company earned profit before depreciation, interest and tax of Rs.1,099.65 crore as against Rs.1,325.34 crore in the previous year. After providing for depreciation of H488.85 crore (Previous Year Rs.294.13 crore), interest of H121.54 crore (Previous Year Rs.151.83 crore), provision for current tax H186.00 crore (Previous Year H188.50 crore), deferred tax (net of adjustments) H(55.84) crore (Previous Year H39.00 crore), the net profit from operations worked out to H359.1 1 crore as compared to H651.88 crore in the previous year.

Resources Utilisation:

a) Fixed Assets:

The net fixed assets (including Capital work-in-progress) as at 31st March, 2015 were H2,573.05 crore as compared to H2,859.26 crore in the previous year.

b) Current Assets:

The current assets as on 31st March, 2015 were H2,960.84 crore as against Rs.3,408.75 crore in the previous year. Inventory level was at H1,636.73 crore as compared to the previous year level of H1871.54 crore.

Financial Conditions & Liquidity:

The Company enjoys a rating of "AA/stable" from Credit Rating Information Services of India (CRISIL) for long term borrowings and "A1 " for short term borrowings respectively. Management believes that the Company's liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:

(Rs. in crore)

(PARTICULARS 2014-2015 2013-2014

Cash and Cash equivalents:

Beginning of the year 52.75 26.63

End of the year 175.55 52.75

Net cash provided (used) by:

Operating Activities 1,210.89 705.66

Investing Activities (144.18) (677.47)

Financial Activities (943.91) (2.07)

3. DIVIDEND:

The Board of Directors of your Company has recommended dividend of Rs.10.00/- per share on the Fully Paid-up Equity Shares of the Company.

4. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

In terms of Section 125 of the Companies Act, 2013, unclaimed or unpaid Dividend relating to the financial year 2007-08 is due for remittance by the end of September, 2015 to the Investor Education and Protection Fund established by the Central Government.

5. CONSOLIDATED FINANCIAL STATEMENT:

In accordance with the Companies Act, 2013 and Accounting Standard (AS)- 21 on consolidated Financial Statements read with AS- 23 on Accounting for Investments in Associates and AS- 27 on Financial Reporting of Interests in Joint Ventures, the Audited Consolidated Financial Statement is provided in the Annual Report.

6. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

During the year under review, no Company has become or ceased to be Company's subsidiaries, joint ventures or associate companies. Further, the Company does not have any material subsidiary. The Company has following subsidiaries and associate companies, the details of their financials for 2014-15 are given below:

VMT Spinning Company Limited (VMT)

This subsidiary of the Company is a Joint Venture with Marubeni Corporation and Marubeni Hong Kong and South China Limited of Japan. The Revenue from operations of the Company has increased to Rs.167.23 crore from Rs.157.65 crore in the last year. The Company earned a net profit of Rs.2.79 crore as against the profit of Rs.17.04 crore in the previous year administering a decrease of 83.63% due to depressed margins. Out of the total present paid-up capital of Rs.20.70 crore, your Company holds 89.44%. The Board of Directors of VMT has recommended a dividend @ 10% for the year 2014-15.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged in the business of investments in shares etc. The earnings of the Company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of Rs.3.07 crore.

Vardhman Acrylics Limited (VAL)

This subsidiary of the Company is engaged in the business of manufacturing of Acrylic Fibre. Presently, the Company holds 70.75% shares in this subsidiary. During the Financial Year 2014-15, VAL recorded Revenue from operations of Rs.498.08 crore (including Trading of goods of Rs.153.08 crore) as against Rs.468.49 crore (including trading of goods Rs.133.97 crore). The net profit for the year has decreased to Rs.33.42 crore from Rs.43.67 crore in the previous year administering a decrease of 23.47%. The Board of Directors of VAL has recommended a dividend @ 10% for the year 2014-15.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird Global LLC. (A&E), is engaged in the business of Threads Manufacturing and Distribution. The Company has a Joint Venture partnership of 51:49 with A&E, which is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were Rs.696.62 crore as against Rs.643.05 crore in the previous year registering an increase of 8.33%. The Net Profit for the year was Rs.72.04 crore as compared to Rs.69.99 crore during last year registering an increase of 2.93%. This has been possible because of increase in production and sales revenue in all the verticals i.e. Consumers, Industrial and Specialty products. The Board of Directors of this Company has recommended a dividend @ 60% on it's paid up equity share capital for the year 2014-15.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men's shirts. During the year, the Revenue from Operations of the Company was Rs.47.07 crore as compared to Rs.36.94 crore in the previous year. The Company earned a Net Profit of Rs.0.15 crore as against a net loss of Rs.4.13 crore in the previous year.

Vardhman Special Steels Limited (VSSL)

Vardhman Special Steels Limited (VSSL) is an Associate Company of the Company.The Company holds 31.39% shares of VSSL. During the year, the Revenue from Operations of the Company was Rs.661.60 crore as compared to Rs.370.60 crore in the previous year. The Company incurred a Net loss of Rs.15.13 crore as against a net loss of Rs.9.42 crore in the previous year.

Vardhman Spinning & General Mills Limited (VSGM)

Vardhman Spinning & General Mills Limited (VSGM) is an Associate Company of the Company. The Company holds 50% shares of VSGM. It is a trading Company dealing in trading of Cotton and Fibre. During the year, the Company has not traded any goods. So, the Revenue from Operations is Nil for the financial year 2014-15. The Company incurred a Net Loss of Rs.38,062.00 as against a net loss of Rs.26,155.68 in the previous year.

7. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate and the date of this report.

8. CORPORATE SOCIAL RESPONSIBILITY:

Your Company is committed to and fully aware of its Corporate Social Responsibility (CSR), the guidelines in respect of which were more clearly laid down in the recently overhauled Companies Act. The Company's vision is to pursue a corporate strategy that enables shareholder value enhancement and societal value creation in a mutually reinforcing and synergistic manner.

The Corporate Social Responsibility Committee of the Company has formulated and recommended to the Board, a Corporate Social Responsibility (CSR) Policy indicating the activities to be undertaken by the Company, which has been approved by the Board.

The CSR policy may be accessed on the Company's website at the link: http://www.vardhman.com/user_files/ d622b1c8d626fabfcecf09e145cb1b4e9f4884761436264563.pdf.

The Company has identified following thrust areas for CSR:-

* PROMOTION OF EDUCATION: To continue our endeavour for promoting education by setting up schools, colleges to deliver high quality education to students of all strata of society including wards of employees of the Company.

* ENVIRONMENT PROTECTION AND ENERGY CONSERVATION: To protect environment and to sustain and continuously improve standards of Environment, Health and Safety through the collective endeavour of Company and its employees at all levels towards attaining world class standards.

DEVELOPMENT OF HUMAN CAPITAL: To encourage the development of human capital through skills development, vocational training programmes.

RURAL DEVELOPMENT: To contribute to development in rural areas through agricultural research and knowledge sharing, promoting superior farm practices, improving cotton production, productivity and quality and other agri- extension practices such as soil and moisture conservation and watershed management etc.

OTHER INITIATIVES:

* To contribute to empowering women economically, supplementing primary and secondary education and participating in rural capacity building programmes and such other schemes.

* To respond to emergency situations & disasters by providing timely help to affected victims and their families.

* Any other project/ programme pertaining to activities listed in Schedule VII of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules, 2014.

During the year, the Company has spent Rs.6.00 crores on CSR activities.

The disclosures related to CSR activities pursuant to Section 134(3) of the Companies Act, 2013 read with Rule 9 of Companies (Accounts) Rules, 2014 and Companies (Corporate Social Responsibility) Rules, 2014 is annexed hereto and form part of this report as Annexure - I.

9. RISK MANAGEMENT:

The Board of Directors in their meeting held on 7th November, 2014 had constituted Risk Management Committee of the Company. The Committee has formulated Risk Management Policy of the Company which has been subsequently approved by the Board of Directors of the Company. The aim of risk management policy is to maximise opportunities in all activities and to minimise adversity. The policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company.

The Risk Management policy may be accessed on the Company's website at the link: http://www.vardhman. com/user_f iles/a4c0a8b00e407cd 5075 53ea7d b7 f06e89de1272a1436265025. pdf

10. INTERNAL FINANCIAL CONTROLS:

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the provisions of Clause 49 of the Listing Agreement.

The Policy on dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: http://www.vardhman.com/user_files/96c45534e3ab096d 9bc682f8eebade0344f915151436264609.pdf

Your Directors draw attention of the members to Note 42 to the standalone financial statement which sets out related party disclosures.

12. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013: Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in the standalone financial statement (Please refer to Note 14, 15, 16 and 17 to the standalone financial statement).

13. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Mr. Neeraj Jain, Director of the Company, retires by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of the Articles of Association of the Company and being eligible, offers himself for re-appointment. The Board recommended his re-appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

During the year under review, the members approved the appointments of Mr. Prafull Anubhai, Mr. A.K. Purwar, Dr. S.K. Bijlani, Mr. A.K. Kundra, Mr. Shravan Talwar and Mr. D.B. Jain as Independent Directors of the Company who are not liable to retire by rotation. The members also re-appointed Mr. S.P. Oswal as Chairman & Managing Director of the Company. Mr. Sachit Jain and Mr. Neeraj Jain were appointed as Joint Managing Directors of the Company.

The following persons were appointed as KMPs of the Company:

Sr.No. Whole Time Key Persent position in Managerial personnel Company

1. Mr. S.P. Oswal Managing Director (MD)

2. Ms. Karan Kamal Walia Company Secretary (C.S.)

3. Mr. Rajeev Thapar Chief Financial Officer (CFO)

Declaration under Section 149(6):

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules thereof.

Company's Policy relating to Directors appointment, payment of remuneration and discharge of their duties:

The Nomination & Remuneration Committee of the Company has formulated the Nomination & Remuneration Policy on Director's appointment and remuneration includes the criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section 178(3) of the Companies Act, 2013.

The Nomination & Remuneration Policy is annexed hereto and form part of this report as Annexure - II.

Familiarisation programmes for Board Members:

The Board members are provided with necessary documents/ brochures, reports and internal policies to enable them to familiarise with the Company's procedures and practices. Periodic presentations are made at the Board and Board Committee Meetings on business and performance updates of the Company, global business environment, business strategy and risks involved. Quarterly updates on relevant statutory changes and landmark judicial pronouncements encompassing important laws are regularly circulated to the Directors.

Annual Evaluation of the Board Performance:

The meeting of Independent Directors of the Company was held on 30th March, 2015 to evaluate the performance of Non- Independent Directors, Chairman of the Company and the Board as a whole for the financial year 2014-15. The evaluation was done by way of discussions on the performance of the Non- Independent Directors, Chairman and Board as a whole and the minutes of the meeting was submitted to the Chairman of the Company.

A policy on the performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of Non- Executive Directors and Executive Directors have been formulated by the Company.

14. AUDITORS AND AUDITORS REPORT:

Statutory Auditors:

At the Annual General Meeting held on 24th September, 2014, M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi were appointed as Statutory Auditors of the Company to hold office till the conclusion of 44th Annual General Meeting of the Company. In terms of provisions of Section 139 (1) of the Companies Act, 2013, the appointment of Statutory Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. S.C. Vasudeva & Company as Statutory Auditors is placed for ratification by the members.

Further, the Statutory Auditors of the Company have submitted Auditors' Report on the Accounts of the Company for the accounting year ended 31st March, 2015. This Auditors' Report is self-explanatory and requires no comments.

Secretarial Auditor:

M/s. B.K. Gupta & Associates, Company Secretary in Practice, were appointed as Secretarial Auditors of the Company by the Board of Directors of the Company in their meeting held on 23rd May, 2014 for the financial year 2014-15.

The Secretarial Auditors of the Company have submitted their Report in Form No. MR-3 as required under Section 204, of the Companies Act, 2013 for the financial year ended 31st March, 2015. This Report is self-explanatory and requires no comments. The Report forms part of this report as Annexure - III.

Cost Auditor:

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 of the Accounts for the financial year ended 2015-16. However, as per provisions of Section 148 of the Companies Act, 2013, read with Companies (Cost Records and Audit) Rules, 2014, the remuneration to be paid to the Cost Auditors is subject to ratification by members at the Annual General Meeting. Accordingly, 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.

15. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW:

Four meetings of the Board were held during the year.

16. AUDIT COMMITTEE DISCLOSURES:

Composition:

The Audit Committee consists of Mr. Prafull Anubhai, Independent Director, Dr. S.K. Bijlani, Independent Director, Mr. Shravan Talwar, Independent Director, Mr. D.B. Jain, Independent Director, Mr. A.K. Kundra, Independent Director and Mr. D.L. Sharma, Non-Independent Director. Mr. Prafull Anubhai is the Chairman of the Committee and Ms. Karan Kamal Walia is the Secretary of the Committee. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism:

The Vigil Mechanism of the Company, which also incorporates a Whistle Blower Policy in terms of the Listing Agreement aims to provide a channel to the employees and Directors to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Codes of conduct or policy. The mechanism provides for adequate safeguards against victimisation of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman/ Chairman of the Audit Committee in exceptional cases.

The Policy on Vigil Mechanism and Whistle Blower Policy as approved by the Board may be accessed on the Company's website at the link: http://www.vardhman.com/userfiles/20b9bcdbd2cc01fde3e 8e7d392d93573769de1941436265078.pdf.

17. CORPORATE GOVERNANCE:

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

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

Energy conservation continues to be an area of major emphasis in our Company. Efforts are made to optimise the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, are annexed hereto and form part of this report as Annexure - IV.

19. ANNUAL RETURN:

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 for the financial year 2014-15 in Form No. MGT-9 is annexed hereto and form part of this report as Annexure - V.

20. HUMAN RESOURCES /INDUSTRIAL RELATIONS:

The Company continues to lay emphasis on building and sustaining an excellent organisation climate based on human performance. Performance management is the key word for the Company. During the year, the Company employed around 17,393 employees on permanent rolls.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

21. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The disclosures in respect of managerial remuneration as required under section 197(12) read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

A statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5 (2) and 5 (3) Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

In terms of section 197(14) of the Companies Act, 2013, the Company does not have any Holding Company. However, the details regarding remuneration or commission received from any holding or subsidiary company of Company by any Managing or Whole Time Director is annexed hereto and form part of this report.

All the above details are provided in Annexure - VI.

22. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to provisions of Section 134 (5) of the Companies Act, 2013 the Board hereby submit its responsibility Statement:—

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

b. appropriate accounting policies have been selected and applied consistently and have made judgements 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 of the Company for the year ended on 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. the internal financial controls has been laid down to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f. the proper systems has been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

22. GENERAL DISCLOSURES:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

4. No significant or material orders were passed by the

Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

24. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

Place : Ludhiana (S.P. Oswal) Dated: 8th May, 2015 Chairman & Managing Director


Mar 31, 2014

Dear Members,

The Directors of your Company have pleasure in presenting their 41st Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2014.

Paticular 2013-14 2012-13 (Rsin crore) (Rsin crore)

Revenue from operations (Net) 5,171.31 4,159.71

Profit before Depreciation, Interest & Tax (PBDIT) 1,325.33 883.04

Interest and Financial expenses 151.83 174.35

Profit before Depreciation and Tax (PBDT) 1,173.51 708.69

Depreciation 294.13 253.86

Profit before Tax (PBT) 879.38 454.84

- Provision for Tax-Current 188.50 106.82

- Deferred Tax (Net of Adjustment) 39.00 24.29

Profit for the periodafter tax (PAT) 651.88 323.73

Add: Corporate Dividend Tax written back 1.79 1.21

Balance brought forward 551.90 306.64

Balance available forappropriation 1,205.56 631.58

Appropriations:

Proposed dividend on:

- Equity shares 70.02 38.19

- Corporate Dividend Tax 11.90 6.49

Transfer to General Reserve 66.00 35.00

Closing Balance of surplus i.e. Balance in Statement of 1,057.64 551.90 Profit &Loss

Earnings per share (Rs)

-Basic 102.41 50.86

-Diluted 102.41 50.86

Dividend per share (Rs) 11.00 6.00

A) Financial Analysis and Review of Operations:

Production & Sales Review:

During the year under review, your Company has registered Revenue from operations (turnover) of Rs.5,171.31 crore as compared to Rs.4,1 59.71 crore showing an increase of 24.32% over previous year. The export of the Company increased from Rs.1,599.59 crore to Rs.2,007.91 showing an increase of 25.53% over the previous year. The business wise performance is as under:-

a) Yarn:

The production of Yarn increased from 148,003 MT to 168,285 MT during the year 2013-14. The sales revenue of yarn increased from Rs.2,523.46 crore to Rs.2,980.06 crore during the year under review showing an increase of 18.09%.

b) Fabric:

During the year, the production of fabric (grey and processed) increased from 219 million meter to 261 million meter, showing an increase of 19.18% over the previous year. The sales revenue of the fabric (grey and processed) also increased from Rs.1,366.96 crore to Rs.1,885.27 crore showing an increase of 37.92% over the previous year.

Profitability:

The Company earned profit before depreciation, interest and tax of Rs.1,325.33 crore as against Rs.883.04 crore in the previous year. After providing for depreciation of Rs.294.13 crore (Previous year Rs.253.86 crore), interest of Rs.151.83 crore (Previous Year Rs.174.35 crore), provision for tax Rs.188.50 crore (Previous year Rs.106.82 crore), provision for deferred tax (net of adjustments) Rs.39.00 crore (previous year Rs.24.29 crore), the net profit from operations worked out to Rs.651.88 crore as compared to Rs.323.72 crore in the previous year, an increase of 101.37%.

Resources Utilisation:

a) Fixed Assets:

The fixed assets (including work-in-progress) as at 31st March, 2014 were Rs.2,859.26 crore as compared to Rs.2,548.41 crore in the previous year.

b) Current Assets:

The current assets as on 31st March, 2014 were Rs.3,408.75 crore as against Rs.2,884.65 crore in the previous year.

Inventory level was at Rs.1871.54 crore as compared to the previous year level of Rs.1,499.44 crore.

Financial Conditions & Liquidity:

The Company enjoys a rating of "AA/stable" from Credit Rating Information Services of India (CRISIL) for long term borrowings and "A1 " for short term borrowings respectively. Management believes that the Company''s liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:-

paticular 2013-14 2012-13 (Rsin crore) (Rsincrore)

Cash and Cash equivalents:

Beginning of the year 26.63 58.42

End of the year 52.75 26.63

Net cash provided (used) by:

Operating Activities 718.30 269.18

Investing Activities (690.11) (468.99)

Financial Activities (2.07) 168.03

B) Internal control and adequacy

The Company maintains a system of well-established policies and procedures for internal control of operations and activities. Its internal control systems and procedures are designed to enable reliable reporting of financial statements, reporting timely feedback on achievements of operational/strategic goals and ensure compliance with laws and regulations. The Company''s overall system of internal control is adequate given the size and nature of operations and effective implementation of internal control self-assessment procedures ensure compliance with policies, plans and statutory requirements. Internal Audit in the organisation is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organisation. All significant issues are brought to the attention of the Audit Committee of the Board.

C) Human Resources /Industrial Relations:

The Company continues to lay emphasis on building and sustaining an excellent organisation climate based on human performance. Performance management is the

key word for the Company. During the year the Company employed around 26,000 employees.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

2. Subsidiaries:

The Company has following subsidiary companies the details of profitability of which are given below: -

VMT Spinning Company Limited (VMT)

The business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation and Marubeni Hong Kong and South China Limited of Japan has shown a lot of improvement. The Revenue from operations of the Company has increased to Rs.1 57.65 crore from Rs.147.45 crore in the last year. The Company earned a net profit of Rs.17.04 crore as against the profit of Rs.5.45 crore in the previous year administering an increase of 212.66%. Out of the total present paid-up capita of Rs.20.70 crore, your Company holds 89.44 %. The Board of Directors of VMT has recommended a dividend @ Rs.1.50 per share for the year 2013-14.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged with the business of investments in the shares etc. The earnings of the Company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of Rs.2.14 crore.

Vardhman Acrylics Limited (VAL)

Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. Presently the Company holds 70.01% shares in this subsidiary. During the Financial Year 2013-14, VAL recorded Revenue from operations of Rs.468.49 crore (includes Trading of goods of Rs.133.97 crore) as against Rs.436.49 crore (Trading of goods Rs.134.72 crore). The net profit for the year has increased to Rs.43.67 crore from Rs.24.40 crore in the previous year administering an increase of 78.98%.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird (A&E) global LLC, USA, is engaged in the business of

Threads Manufacturing and Distribution. The Company has a joint venture partnership of 51:49 with A&E, which is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were Rs.643.05 crore as against Rs.537.80 crore in the previous year registering an increase of 19.57%. The Net Profit for the year was Rs.69.99 crore as compared to Rs.43.15 crore during last year registering an increase of 62.20%. This has been possible because of increase in production and sales revenue in all the verticals i.e. Consumers, Industrial and Specialty products. The Board of Directors of this Company has recommended a dividend @ Rs.3.50 per share on it''s paid up equity share capital, for the year 2013-14.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company which is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men''s shirts. During the year, the Revenue from Operations of the Company was Rs.36.60 crore as compared to Rs.17.66 crore in the previous year. The Company incurred a net loss of Rs.4.13 crore as against Rs.4.86 crore in the previous year. This is on account of lower productivity, labour turnover and lack of skilled workers. The Company is expected to stabilise its business operations during the next financial year.

3. Dividend:

The Board of Directors of your Company has recommended dividend of Rs.6/- per share on the Fully Paid-up Equity Shares of the Company. Further to commemorate the Golden Jubilee Year of commencement of operations of the Group, the Board also recommended a special dividend of Rs.5/- per share on fully paid up equity shares of the Company.

4. Directors:

The nomination of Mr. S. Padmanabhan has been withdrawn by IDBI Bank Limited and Mr. Suresh Khatanhar has been nominated as the Director of the Company by IDBI Bank Limited w.e.f 12th April, 2014.

Mr. Sachit Jain, Executive Director of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of the Articles of

Association of the Company and being eligible, offer himself for re-appointment. The Board recommended his appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

5. Corporate Governance:

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

6. Auditors:

M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi, Auditors of the Company, retire at the conclusion of the forthcoming Annual General Meeting of the Company.

7. Auditors'' Report:

The Statutory Auditors of the Company have submitted Auditors'' Report on the accounts of the Company for the accounting year ended March 31, 2014. This Auditors'' Report is self -explanatory and requires no comments.

8. Cost Audit Report:

The Cost Auditors'' Report for the financial year 2013-14 will be forwarded to the Central Government as required under law.

9. 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.

10. 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 the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per

Section 217(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 form part of this report.

11. Directors'' Responsibility Statement:

Pursuant to Section-217 (2AA) of the Companies Act, 1956, the Directors confirm that in the preparation of the annua accounts, the applicable accounting standards have been followed;

a. 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;

b. 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

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

12. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

For and on Behalf of the Board

Place: Mumbai (S. P. Oswal) Dated : 23rd May, 2014 Chairman & Managing Director


Mar 31, 2013

Dear Members,

The Directors of your Company have pleasure in presenting their 40th Annual Report on the affairs of the Company together with the 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 Crore)

PARTICULARS 2012-2013 2011-2012

Revenue from operations (Net) 4,159.71 3,918.00

Profit before Depreciation, Interest & Tax (PBDIT) 883.05 553.35

Interest and Financial expenses 174.35 173.22

Profit before Depreciation and Tax (PBDT) 708.70 380.13

Depreciation 253.86 234.67

Profit before Tax (PBT) 454.84 145.46

Provision for Tax - Current (Including tax adjustment of previous year) 106.82 29.75

- Deferred Tax (Net of Adjustment) 24.29 6.04

Tax adjustment of previous years - (0.002)

Profit for the period after tax (PAT) 323.73 109.67

Add: Corporate Dividend Tax written back 1.21 1.38

Balance brought forward 306.64 243.88

Balance available for appropriation 631.58 354.93

Appropriations:

Proposed dividend on:

-Equity shares 38.19 28.64

-Corporate Dividend Tax 6.49 4.65

Transfer to General Reserve 35.00 15.00

Closing Balance of surplus i.e. Balance in Statement of Profit & Loss 551.90 306.64

Earnings per share (Rs.)

- Basic 50.86 17.23

- Diluted 50.86 17.23

Dividend per share (Rs.) 6.00 4.50

2. SUBSIDIARIES:

The Company has following subsidiary companies, the details of financial performance of which are given below:-

VMT Spinning Company Limited (VMT)

The business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation, Marubeni HongKong and South China Limited and Toho Tenax Limited of Japan has improved as compared to last year. The Revenue from operations of VMT has increased to Rs. 147.45 crore from Rs. 144.51 crore in the last year. The Company earned a net profit of Rs. 5.45 crore as against net loss of Rs. 1.87 crore in the previous year due to better margins available. Out of the total present paid-up capital of Rs. 20.70 crore, your Company holds 73.33 %. The Board of Directors of VMT has recommended a dividend @ 10% on its paid up equity share capital for the year 2012-13.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged with the business of investments in shares, bonds, debentures etc. The earnings of the company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, VTL has earned a net profit of Rs. 2.06 crore.

Vardhman Acrylics Limited (VAL)

Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. The Company held 67.37% shares in VAL as at the end of the year under review. During the Financial Year 2012-13, VAL recorded Revenue from operations of Rs. 436.49 crore (including Trading of goods of Rs. 134.72 crore) as against Rs. 390.14 crore (Including Trading of goods Rs. 88.04 crore) in corresponding period last year. The net profit for the year has decreased marginally to Rs. 24.40 crore from Rs. 24.49 crore in the previous year. During the year, VAL bought back and extinguished 13,906,160 of its Equity Shares of Rs. 10/- each out of maximum of 20,000,000 Equity shares as approved by its Board of Directors.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird Inc. (A&E), is engaged in the business of Threads Manufacturing and Distribution. VYTL is a joint venture partnership of 51:49 with A&E, which is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were Rs. 540.54 crore as against Rs. 464.69 crore in the previous year registering an increase of 16.32%. The Net Profit for the year was Rs. 43.15 crore as compared to Rs. 39.70 crore during last year recording an increase of 8.69%. This has been possible because of increase in production and sales revenue in all the verticals i.e. Consumers, Industrial and Specialty products. The Board of Directors of VYTL has recommended a dividend @ 30%, on it''s paid up equity share capital, for the year 2012-13.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company which is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men''s shirts. During the year, the Revenue from Operations of VNGL was Rs. 17.66 crore as compared to Rs. 7.43 crore in the previous year. VNGL incurred a net loss of Rs. 4.86 crore as against Rs. 4.24 crore in the previous year. This is on account of lower productivity, labour turnover and lack of skilled workers. VNGL is expected to stabilize its business operations during the next financial year.

3. DIVIDEND:

The Board of Directors of your Company has recommended dividend of Rs. 6.00/- per share on the Fully Paid-up Equity Shares of the Company.

4. DIRECTORS:

Mr. A.K. Purwar and Mr. D.L. Sharma, Directors of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of Article 108 of the Articles of Association of the Company and being eligible, offer themselves for re-appointment. The Board recommended their appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

5. CORPORATE GOVERNANCE:

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

6. AUDITORS:

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

7. AUDITORS'' REPORT:

The Statutory Auditors of the Company have submitted Auditors'' Report on the accounts of the Company for the accounting year ended March 31, 2013. This Auditors'' Report is self -explanatory and requires no comments.

8. COST AUDITORS:

The Board of Directors has appointed M/s. Ramanath Iyer & Company, Cost Accountants, New Delhi as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956 read with Cost Audit Rules, 2011 for the year 2013- 14. The Cost Auditors'' Report for the financial year 2012-13 will be forwarded to the Central Government as required under law.

9. STATEMENT OF PARTICULARS OF EMPLOYEES:

A Statement of Particulars of Employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 including amendments thereon is enclosed and forms part of this report.

10. 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 optimize the energy cost 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 form part of this report.

11. DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to Section-217 (2AA) of the Companies Act, 1956, the Directors confirm that in the preparation of the annual accounts, the applicable accounting standards have been followed;

a. 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;

b. 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

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

12. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

(S.P. OSWAL)

PLACE : GURGAON CHAIRMAN &

DATED : 28th May, 2013 MANAGING DIRECTOR


Mar 31, 2012

The Directors of your Company have pleasure in presenting their 39th 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 Crore)

PARTICULARS 2011-2012 2010-2011

Revenue from operations 3,918.00 3,606.81

Profit before Depreciation, Interest & Tax (PBDIT) 553.36 944.45

Interest and Financial expenses 173.22 109.81

Profit before Depreciation and Tax (PBDT) 380.13 834.64

Depreciation 234.67 226.02

Profit before Tax (PBT) 145.46 608.61

Provision for Tax - Current (Including tax adjustment of previous year) 29.75 112.21

- Deferred Tax 6.04 5.07 (Net of Adjustment)

Tax effect (Premium on redemption of FCCBs) - 10.09

Tax expense of discon tinuing operations - 11.54

Profit after Tax (PAT) 109.67 469.70

Corporate Dividend Tax written back 1.38 1.23

Balance brought forward 243.88 131.36 Adjustment of preceding years tax effect in respect

of premium paid on redemption of FCCB - (25.12)

Balance available for appropriation 354.94 577.17 Appropriations:

Proposed dividend on:

-Equity shares 28.64 28.64

-Corporate Dividend Tax 4.65 4.65

Transfer to General Reserve 150.00 300.00

Closing Balance of Surplus i.e. Balance in Statement of Profit & Loss 306.64 243.89 Earnings per share (Rs.)

- Basic 17.23 78.06

- Diluted 17.23 78.06

Dividend per share (Rs.) 4.50 4.50

3. SUBSIDIARIES:

The Company has following subsidiary companies, the details of profitability of which are given below:-

VMT Spinning Company Limited (VMT)

Business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation, Marubeni HongKong and South China Limited and Toho Tenax Limited of Japan slumped due to steep fall in cotton prices during the year. The Revenue from operations of the Company has increased to Rs.144.51 crore from Rs.129.17 crore in the last year. The Company incurred a net loss of Rs.1.87 crores as against a net profit of Rs.14.66 crore in the previous year. Out of the total present paid-up capital of Rs. 20.70 crore, your Company holds 73.33%. The Board of Directors of VMT has recommended a dividend @ 5% i.e. Rs. 0.50 per equity share for the year 2011-12.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged with the business of investments in the shares etc. The earnings of the Company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of Rs.1.51 crores.

Vardhman Acrylics Limited (VAL)

Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. Presently the Company holds 58.74% shares in this subsidiary. During the Financial Year 2011-12, VAL recorded Revenue from operations of Rs. 390.14 crore as against Rs. 398.87 crore, a fall of 2.19% over the previous year. The net profit for the year has decreased to Rs. 24.49 crore from Rs. 37.64 crore in the previous year.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird, Global LLC (A&E), is engaged in the business of manufacturing and distribution of Threads. The Company has a joint venture partnership of 51:49 with A&E, which is the second largest global player in Threads manufacturing and distribution. During the year under review, the Revenue from Operations were Rs. 464.69 crore as against Rs. 427.65 crore in the previous year registering an increase of 8.66%. The Net Profit for the year was Rs.39.70 crore as compared to Rs. 49.31 crore during last year. The Board of Directors of this Company has recommended a dividend @ 23% i.e. Rs. 2.30 per equity share for the year 2011-12.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company is a Joint Venture partnership in ratio of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men's shirts. During the year, the Revenue from Operations of the Company was Rs. 7.43 crore as compared to Rs. 0.01 crore in the previous year. The Company incurred a net loss of Rs. 4.24 crore as against Rs.1.99 crore in the previous year as its operations are still stabilizing.

4. DIVIDEND:

The Board of Directors of your Company has recommended dividend of Rs. 4.50 /- per share on the Fully Paid-up Equity Shares of the Company.

5. DIRECTORS:

Mrs. Suchita Jain, Dr. S.K. Bijlani and Mr. Shravan Talwar, Directors of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of Article 108 of the Articles of Association of the Company and being eligible, offer themselves for re-appointment. The Board recommended their appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

6. CORPORATE GOVERNANCE:

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

7. AUDITORS:

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

8. AUDITORS' REPORT:

The Statutory Auditors of the Company have submitted Auditors' Report on the accounts of the Company for the accounting year ended March 31, 2012. In their report, they have made an observation that loss, if any, on valuation of open derivative options could not be determined by the Company due to certain reasons as specified in Note 36 of the Notes to Financial Statements. The ultimate outcome of these transactions and their effect on these accounts cannot be ascertained at this stage.

As you are aware that a part of revenue of your Company comes from export sales and the Company is also having exposure towards imports and as such Company has foreign currency fluctuation exposure. The Company also hedges its foreign currency fluctuation exposure by way of foreign currency derivative options. The Company has taken various USD/INR options from banks. As at March 31, 2012, there are 10 options (Previous Year 15) against exports and 1 option (Previous Year 5) against Imports having a maturity period up to February, 2016 (Previous Year January 2016). These derivative options are proprietary products of banks which do not have a ready market and are not traceable in the open market. These options are marked to a model, which is bank specific instead of being marked to market. In view of the significant uncertainty associated with the above derivative options, the ultimate outcome of which depends on future events which are not under the direct control of the Company, the resultant gain/loss if any, on such open derivative options cannot be determined at this stage and has accordingly not been accounted for in the books of account. The other points of Auditors' Report are self -explanatory and needs no comments.

9. COST AUDITORS:

The Board of Directors has re-appointed M/s. Ramanath Iyer & Company, Cost Accountants, New Delhi as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956, read with Cost Audit Rules, 2011, for the year 2012-13. The Cost Auditors' Report for the financial year 2011-12 will be forwarded to the Central Government as required under law.

10. 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.

11. 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 optimize the energy cost 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 form part of this report.

12. DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section-217 (2AA) of the Companies Act, 1956, the Directors confirm that in the preparation of the annual accounts, the applicable accounting standards have been followed;

a. 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;

b. 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

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

13. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

(S.P. OSWAL)

PLACE : GURGAON CHAIRMAN &

DATED :9th May, 2012 MANAGING DIRECTOR


Mar 31, 2011

The Directors of your Company have pleasure in presenting their 38th 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 Crore)

PARTICULARS 2010-2011 2009-2010

Turnover 3,636.96 2,767.22

Profit before Depreciation, Interest & Tax (PBDIT) 944.69 594.63

Interest and Financial expenses 109.81 86.73

Profit before Depreciation and Tax (PBDT) 834.88 507.90

Depreciation 226.02 220.87

Profit before Tax (PBT) 608.86 287.02

Provision for Tax - Current 123.75 56.75

- Deferred Tax 4.65 16.51 (Net of Adjustment)

Tax adjustment of previous years 0.66 -

Tax effect (Premium on redemption of FCCBs) 10.09 -

Profit after Tax (PAT) 469.71 213.76

Corporate Dividend Tax written back 1.24 1.95

Balance brought forward 131.35 60.85

Adjustment of preceding years tax effect in respect of premium paid on redemption of FCCB 25.12 -

Balance available for appropriation 577.18 276.56

Appropriations:

Proposed dividend on:

-Equity shares 28.64 17.33

-Corporate Dividend Tax 4.65 2.88

33.29 20.21

Transfer to General Reserve 300.00 125.00

Surplus carried to Balance Sheet 243.89 131.35

577.18 276.56

Earnings per share (Rs.)

- Basic 78.06 37.00

- Diluted 78.06 31.83

Dividend per share (Rs.) 4.50 3.00

2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A) BUSINESS REVIEW:

The global economy kicked off a sputtering growth in FY 2010-11 with developed economies showing faint signs of revival. The main engine of global growth, the United States, moved into a recovery mode with employment coming off highs & retails sales growing month on month, albeit slightly, and consumer confidence improving. This growth was accompanied by a huge surge in world commodity prices, with the Continuous Commodity Index (CCI) surging more than 42% during the year. This rise was mainly attributed to the $600 billion of Quantitative Easing part Deux (QE2) by the Federal Bank of America which released unprecedented amounts of liquidity. This liquidity got channeled into commodities and prices soared.

This also gave rise to supply side inflation and fast growing economies in Asia bore the brunt. Their economies had barely recovered from the financial crises of FY 2008-09 and raising rates at this juncture would have meant putting a spanner in the way of growth. Most Asian economies therefore held off raising interest rates till the second half of the year and then a series of quick rate hikes followed, more particularly in China & India, who have clearly indicated that they dont mind sacrificing growth at the altar of inflation control. As a result, the earnings growth is expected to be hit in the current fiscal. Further, the QE2 will come to an end in June 2011 and the Fed has no plans of a QE3 as of now. In anticipation, the commodities have already come off their lifetime highs.

Cotton & Yarn:

Cotton prices were buoyed by strong global fundamentals, with US Department of Agriculture (USDA) reports forecasting a 6% y/y reduction in end season stocks to 41.5 million bales (of 480 lbs). This compares with 43.9 million bales (mb) in 2009-10 and 60.5mb in 2008-09.

Although global cotton demand dipped by around 1.3% y/y in 2010-11, import demand from China rose by 37% y/y over the same period. Both developments were mainly due to supply constraints and global price rationing following a 8% decline in Chinas cotton output. China traditionally accounts for 30% of global cotton production. Extremely tight global end-season stocks underpinned prices; the stocks-to-use ratio at 35% will be the tightest since the 1993-94 season.

Global Stock-to-use ratio lowest since 1993-94:

In 2010-11, the cotton crop in China & Pakistan was damaged by bad weather and the global production fell. This led to an increase in cotton prices. The boom in prices was also fuelled by speculative trading in commodities which increased prices beyond fundamentals.

India had exported 8.5 million bales of cotton in 2009-10. In September 2010, the Government of India announced a cap of 5.5 million bales of cotton for exports, around 18% of the estimated production of 31.5 million bales (of 375 lbs) in the current cotton season (CS) 2010-11. This lead to lesser availability of cotton for trade and with high import demand from China, international prices rose during the month. Prices in India also increased. The Cotlook A index rose by 133% from $1 per pound in September, 2010 to about $2.33 per pound in March, 2011 due to limited availability for exports on the back of restrictions by India coupled with robust demand from China and traditional importing countries. Indian Shankar 6 rose in tandem from Rs.37,000/ candy in Sept 2010 to Rs.60,000/ candy in March 2011.

In line with cotton prices, cotton yarn prices also continued to remain high. This increase was in fact more than the increase in cotton prices due to pent up demand in the system where the pipeline of yarn stocks was at very low levels and also due to increased demand from a recovering global economy. Cotton yarn prices touched a high of $6.50/kg. To look at this in perspective, the average of the last 20 years was around $3/kg, with $4.5/kg being the previous all time high in cotton yarn prices. These prices have since corrected and touched around $4.50-$5.00 in the middle of May 2011.

In order to curtail the rise in cotton yarn prices, the Indian Government had imposed a limit of 720 mln kgs on cotton yarn to be exported in FY 2010-11.

Outlook for Cotton Prices:

These high prices are not expected to sustain, in part on expectations of increased acreage, particularly in US, China & Africa. Chinas import demand is also expected to slow down on a combination of high market prices, stronger output and competition from synthetic fibres. China has also planned a cotton purchase-and-reserve policy in 2011 with a view to stabilising prices in the new season. Pakistan, where floods devastated cotton crops in the 2010-11 season, is another market which is likely to see a substantial increase in cotton output from previous year.

Overall, the world market is expected to remain structurally tight (although better than FY 2010-11), but this will not be fully apparent until later in the season when the new crop stocks are drawn down. Global cotton production is expected to increase by about 13% from 24.5 million tonnes in cotton season 2010-11 (Oct to Sept) to 27.5 million tonnes in cotton season 2011-12. The closing stock of 2011-12 is expected to be around 10.5 million tons which is higher than last 2 years but still lower than normal closing stock levels in the past. The stock-to-use ratio is expected to improve to about 42% but will still be lower than the normal 48-52% in the past (excluding last 2 years).

In anticipation of a bumper cotton crop this year, global cotton prices as of now have already come off their previous highs. The Dec New York future is significantly lower than the current New York future. Global yarn prices are decreasing in line with the cotton prices. The anticipation in the market is that prices may come off further and therefore the demand for yarn has reduced as buyers are waiting for lower prices to buy.

Overall, this year is likely to be turbulent and may have adverse impact on the operations of the Industry at large. However because of prudent cotton buying practices and conservative financial norms, Vardhman may not get as much affected as the rest of the spinning industry.

Technology Upgradation Fund Scheme (TUFS):

TUFS had been suspended temporarily by the government in June 2010. The Scheme has now been re-instated with a few changes; (i) Capital subsidy will now be available on looms for weaving as well. (ii) a 5% interest reimbursement may be given to the spinning units (against 4% earlier) if the unit is set up with matching downstream capacity in weaving/processing. (iii) A cap of Rs.1,982 crores has been put on the total subsidy which will be given for the next one year. This has been allocated between various sectors.

The sunset clause of the scheme remains unchanged at March 31, 2012. All loans sanctioned till that date will be eligible for subsidy for the life of the loan.

Women Empowerment at Vardhman:

Vardhman Group has a long tradition of non- discriminatory gender neutral Human Resource (HR) policy based on mutual trust, robust value system and transparent procedures. The top managements commitment to the cause has seen growing female participation at all levels of work spanning from high profile corporate assignments to shop floor operations.

The company has seen entry of female in top management right up to executive director position. This is followed by positions occupied by females of all age groups at different corporate positions including several high profile departments.

Inspite of the fact that textile is a hard core manufacturing industry, the organization has witnessed growing numbers of female working at shop floor. The use of technology and rigorous training imparted at various training centers coupled with stringent safety measures, which includes setting up of various female hostels, has led to a situation where women consist of almost one-fourth of the total workforce. This has led to social empowerment of females belonging to semi skilled category especially from rural background. On the other hand, the organization has benefited handsomely in terms of higher commitment and increased discipline at shop floor leading to improved productivity and better working environment.

B) FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

- Production & Sales Review:

During the year under review, your company has registered a turnover of Rs. 3,636.96 crore as compared to Rs. 2,767.22 crore showing an increase of 31.43% over the previous year turnover. The export of the Company increased from Rs. 704.00 crore to Rs.1,218.26 crore, showing an increase of 73.05% over the previous year mainly due to price rise and better product/market penetration. The business wise performance is as under:- a). Yarn:

The production of Yarn increased from 126,146 MT to 130,861 MT during 2010-2011.The sales revenue of yarn increased from Rs. 1,476.99 crore to Rs. 2,041.06 crore during the year under review.

b). Steel:

The steel business of the Company stand vested in Vardhman Special Steels Limited w.e.f 1.1.2011 pursuant to the scheme of Arrangement and Demerge as sanctioned by Honble Punjab & Haryana High Court. However for the nine months ending 31st, December 2010, the production of steel ingots/billets has been 64,581 MT and that of Rolled products has been 57,060 MT.

c). Fabric:

During the year, the production of processed fabric increased from 60.78 million meter to 75.44 million meter, showing an increase of 24.12% over the previous year. The sales revenue of the processed fabric also increased from Rs. 556.52 crore to Rs. 828.20 crore showing an increase of 48.81% over the previous year.

- Profitability:

The Company earned profit before depreciation, interest and tax of Rs. 944.69 crore as against Rs. 594.63 crore in the previous year. After providing for depreciation of Rs. 226.02 crore (Previous year Rs. 220.87 crore), interest of Rs. 109.81 (Previous Year

86.73 Crore), provision for current tax Rs. 134.50 crore (Previous year Rs. 56.75 crore), provision for deferred tax (net of adjustments), Rs. 4.65 crore (Previous year Rs. 16.51 crore), the net profit from operations worked out to Rs. 469.71 crore as compared to Rs. 213.76 crore in the previous year.

- Resources Utilisation:

a). Fixed Assets:

The gross fixed assets (including work-in-progress) as at 31st March, 2011 were Rs. 3,822.83 crore as compared to Rs. 3,611.65 crore in the previous year.

b). Current Assets:

Debtors outstanding for more than six months were Rs. 11.37 crore as compared to Rs. 13.00 crore in the previous year. The net current assets as on 31st March, 2011 were Rs. 2,328.12 crore as against Rs. 1,769.52 crore in the previous year. Inventory level was at Rs. 1,598.39 crore as compared to the previous year level of Rs. 1,107.46 crore.

- Financial Conditions & Liquidity:

The Company presently enjoys a rating of "AA with stable outlook" and "P1+" from Credit Rating Information Services of India (CRISIL) for long term and short term borrowings respectively. Management believes that the Companys liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:- (Rs. in crore)

2010-2011 2009-2010

Cash and Cash equivalents:

Beginning of the year 222.07 357.21

End of the year 48.77 222.07

Net cash provided (used) by:

Operating Activities (24.10) (79.72)

Investing Activities (327.45) (97.06)

Financial Activities 182.63 41.64

Transfer to VSSL on Demerger (4.38) -

C) INTERNAL CONTROL SYSTEM:

The Company has well defined internal control system. The Company takes abundant care to design, review and monitor the working of internal control system. Internal Audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. All significant issues are brought to the attention of the Audit Committee of the Board.

D) MANAGEMENT PERCEPTION OF RISK AND CONCERN:

One of the key challenge to the textile industry is related to raw material prices mainly cotton prices which has seen very steep hike in 2010-11 and the same is still volatile creating uncertainties for textile manufacturers.

The second important challenge is rising energy prices which could adversely impact the profitability of textile mills. The third main issue for the textile industry is the non -availability of skilled manpower coupled with high labour cost prevailing in the country.

Uncertainty in the government export policy is other major challenge for the textile industry under which the government banned cotton yarn exports last year which lead to high inventory cost and losses to the indian textiles manufacturers and there is a fear of withdrawal of duty draw back benefits etc. to the exporters.

We are making all efforts to cope up with the challenges through continuous cost reduction, process improvements, imparting training to the workforce on the continued basis, process improvements and improved customer services to mitigate the growing cost pressure

E) HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance. Performance management is the key word for the company. During the year the Company employed over 24000 employees.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

3. SUBSIDIARIES:

The Company has following subsidiary companies the details of profitability of which are given below:- VMT Spinning Company Limited (VMT)

Business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation and Toho Rayon Company Limited of Japan remained good. The sales revenue of the Company has increased to Rs. 128.34 crore from Rs. 101.65 crore in the last year and the net profits of the Company increased from Rs. 10.13 crore to Rs. 14.67 crore. Out of the total present paid-up capital of Rs. 20.70 crore, your Company holds 73.33 %. The Board of Directors of VMT has recommended a dividend of 12% for the year 2010-2011.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged in the business of investments in the shares etc. The earnings of the company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year the company has earned a net profit of Rs.1.06 crores.

Vardhman Acrylics Limited (VAL)

Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. Presently the company holds 58.74% shares in this subsidiary. During the Financial Year 2010-2011, VAL recorded a sales volume of Rs. 430.33 crore as against Rs. 286.74 crore, an increase of 50.08% over the previous year, however the net profit for the year has decreased to Rs. 37.64 crore from Rs. 43.44 crore in the previous year.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Effird Inc. (A&E), is engaged in the business of Threads Manufacturing and Distribution. The Company has a joint venture partnership of 51:49 with A&E, which is the second largest global player in Threads Manufacturing and Distribution, in VYTL. During the year under review, the gross sales of this Company were Rs. 426.10 crore and the

Profit after tax was Rs. 49.31 crore. The Board of Directors of this Company has recommended a dividend @ 23% for the year 2010-11.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company which is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class shirts started production in the fag end of the year and it incurred a loss of Rs. 1.99 crore as its operations are stabilizing.

Vardhman Special Steels Limited (VSSL)

During the year Vardhman Special Steels Limited was got incorporated as the 100% subsidiary of the Company. Pursuant to the Scheme of Arrangement & Demerger between Vardhman Textiles Limited and Vardhman Special Steels Limited and their respective shareholders & creditors, the Steel Business Undertaking of Vardhman Textiles Limited stand vested in Vardhman Special Steels Limited w.e.f. 01.01.2011 and the shareholders holding shares in Vardhman Textiles Limited were to be allotted one share for every five shares held in Vardhman Textiles Limited as on the relevant record date fixed for the purpose i.e. 30.03.2011. The said allottment of shares was made on 08.04.2011 and Vardhman Special Steels Limited ceased to be a subsidiary of the Company w.e.f. 08.04.2011.

4. QUALIFIED INSTITUTIONAL PLACEMENT :

During the year under review, the Company has made a Qualified Institutional Placement (QIP) to Qualified Institutional Buyers of 58,82,352 Equity Shares of Rs. 10/- each at a premium of Rs. 330/- aggregating to approx. Rs. 200 Crores. Consequently, the paid-up capital of the Company has increased to Rs. 63.65 crores.

5. STEEL BUSINESS RE-STRUCTURING :

During the year under review, pursuant to the Scheme of Arrangement & Demerger between Vardhman Textiles Limited and Vardhman Special Steels Limited and their respective shareholders & creditors as approved by the Board of Directors and Shareholders of respective Companies and sanctioned by the Honble High Court of Punjab & Haryana at Chandigarh under Section 391-394 vide its Order dated 12th January, 2011, the Steel Business Undertaking of the Company has been demerged into a separate Company, Vardhman Special Steels Limited w.e.f 1st January, 2011.

6. DIVIDEND:

The Board of Directors of your Company has recommended dividend of Rs. 4.50 per share on the Fully Paid-up Equity Shares of the Company.

7. DIRECTORS:

The nomination of Ms. Amita Narain, the nominee of IDBI Ltd. on the Board of the Company, was withdrawn by IDBI Ltd. w.e.f. 21.06.2010 and Mr. S. Padmanabhan was nominated in her place.

Mr. Sachit Jain, Mr. Prafull Anubhai and Mr. A. K. Kundra, Directors of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of Article 108 of the Articles of Association of the Company and being eligible, offer themselves for re-appointment. The Board recommended their re-appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

Mr. S.P. Oswal was re-appointed as the Chairman and Managing Director of the Company for a further period of 5 years w.e.f. 01.06.2010.

8. CORPORATE GOVERNANCE:

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

9. AUDITORS:

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

10. AUDITORS REPORT:

The Statutory Auditors of the Company have submitted Auditors Report on the accounts of the Company for the accounting year ended March 31, 2011. In their report, they have made an observation that loss, if any, on valuation of open derivative options could not be determined by the Company due to certain reasons as specified in Note 13 of the Notes to Accounts. The ultimate outcome of these transactions and their effect on these accounts cannot be ascertained at this stage.

As you are aware that a part of revenue of your Company comes from export sales and the company is also having exposure towards imports and as such Company has foreign currency fluctuation exposure. The Company also hedges its foreign currency fluctuation exposure by way of foreign currency derivative options. The Company has taken various USD/INR options from banks. As at March 31, 2011, there are 15 options (Previous Year 7) against exports and 5 options (Previous Year Nil) against Imports having a maturity period up to January 2016 (Previous Year June 2013). These derivative options are proprietary products of banks which do not have a ready market and are not tradeable in the open market. These options are marked to a model, which is bank specific instead of being marked to market. In view of the significant uncertainty associated with the above derivative options, the ultimate outcome of which depends on future events which are not under the direct control of the company, the resultant gain/loss if any, on such open derivative options cannot be determined at this stage and has accordingly not been accounted for in the books of accounts. The other points of Auditors Report are self - explanatory and needs no comments.

11. COST AUDITORS:

The Board of Directors has re-appointed M/s. Ramanath Iyer & Company, Cost Accountants, New Delhi as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956, for the year 2011-12. The Cost Auditors Report for the financial year 2011-2012 will be forwarded to the Central Government as required under law.

12. 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.

13. GROUP:

The Company, inter-alia with the following entities, constitutes a ‘Group as defined under the Monopolies and Restrictive Trade Practices Act, 1969: -

a) Vardhman Holdings Limited

b) Vardhman Special Steels Limited

c) VTL Investments Limited

d) Adinath Investment and Trading Company

e) Devakar Investment and Trading Company Private Limited.

14. 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 optimize the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 217(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 form part of this report.

15. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section-217 (2AA) of the Companies Act, 1956, the Directors confirm that in the preparation of the annual accounts, the applicable accounting standards have been followed;

a. 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;

b. 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

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

16. ACKNOWLEDGMENT:

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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

(S.P. OSWAL) PLACE : NEW DELHI CHAIRMAN &

DATED : 9th May, 2011 MANAGING DIRECTOR


Mar 31, 2010

The Board of Directors of your Company has pleasure in presenting the 37 Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31 March, 2010.

1. FINANCIAL RESULTS:

The Financial Results for the year are as under :- (Rs. in Crore)

PARTICULARS 2009-2010 2008-2009

Turnover 2,767.22 2,495.38

Profit before Depreciation, Interest & Tax (PBDIT) 594.63 371.37

Interest and Financial expenses 86.73 102.34

Profit before Depreciation and Tax (PBDT) 507.89 269.03

Depreciation 220.87 207.32

Profit before Tax (PBT) 287.02 61.71

Provision for Tax -Current 56.75 0.17

- Fringe Benefit Tax - 0.91

- Deferred Tax (Net of Adjustment) 16.51 33.28

Profit after Tax (PAT) from cntinuing operations 213.76 27.35

Profit on sale of discontinued operations - 113.42

Add: Debenture Redemption Reserve - -

Corporate Dividend Tax written back 1.95 1.25

Balance brought forward 60.85 57.34

Balance available for appropriation 276.56 199.36

Appropriations:

Proposed Dividend on:

- Equity shares 17.33 11.55

- Corporate Dividend Tax 2.88 1.96

20.21 13.51

Transfer to General Reserve 125.00 125.00

Surplus carried to Balance Sheet 131.35 60.85

276.56 199.36

Earnings per share (Rs.)

- Basic 37.00 24.37

- Diluted 31.83 18.48 Dividend per share (Rs.) 3.00 2.00

2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

A) Textile Business:

World economy has shown initial indications of recovery after a severe spell of recession. The world economy is expected to grow by 4.2 percent in 2010 and projected to maintain the growth momentum in the next 5 years. However, the consumer confidence in major importing countries like USA and EU has been lagging behind economic growth projections and may take some more time before showing any convincing revival. Though some growth has been seen in the world trade of textile and clothing especially post Sept. 2009. The USA textile and clothing imports, which declined by 13 percent in 2009 over 2008 has increased by 1 percent during Jan-Feb 2010. The partial explanation of increase in textile and clothing imports may be attributed to the pressure on retailers caused by very low inventory levels. It has resulted into creation of demand for textile and clothing products in international market. The domestic market is also showing some signs of improvement leading to overall increase in textile manufacturing in the country.

The industry has attracted investment to the tune of Rs. 2 lacs crore under TUF for capacity expansion and modernization, which has started paying yield. It is evident from the increased textile manufacturing in the country in the form of increased spun yarn production. The spun yarn production is expected to increase at about 4200 mn kg in 2009-10 and expected to grow by about 8% to 4500 mn kg in 2010-11. The domestic deliveries of spun yarn has also been growing consistently showing increased activities in the entire textile value chain.

There are some areas of concerns also, which need to be stated here. Along-with recovery, the textile industry is also facing increase in input prices in sync with the global trends. In addition to appreciating rupee, free export of cotton followed by withdrawal of export incentives on cotton yarn are also causing concerns for the sustained recovery in the textile industry. In our view, there is need for an integrated approach to be adopted for the development of the textile and clothing industry in the country. Such an approach is required to ward off any such situation where the strengths of one segment of the textile industry is being undermined for passing temporary relief to another segment of the industry leading to permanent damage to the complete textile value chain. In our views, if any segment suffers from some systemic disadvantages affecting its global competitiveness, it should be overcome through suitable incentives mechanism without affecting any other segment of the industry.

Vardhman has utilized the opportunity offered by the global recession for introspection to identify areas of improvement i.e. fine tuning supply chain management and resource optimization to strengthen our competitiveness by offering more value to customers in terms of high value added products. It is a matter of pleasure to note that such initiatives have paid us well, enhanced our learning, strengthen our resolve and increase our capabilities to overcome such events in future.

We have a firm faith in the bright future of textile industry in India. The Group is planning expansion in spinning, dyeing, weaving and fabric processing capacities to build on economies of scales and develop capabilities to serve the global market.

B) Steel business:

Our steel business is dependent on demand for auto and other related users. The demand in auto industry which was suppressed because of global economic slow down has now revived since third quarter of 2009-10. Simultaneously, their has been a steep rise in raw material cost like shredded scrap, sponge iron etc. because of which there is more market driven pressure on pricing of finished steel. However, the auto industry is projecting healthy growth during 2010-11 and it is expected that the demand shall remain firm enabling steel plants in India to utilize their installed capacity in full.

The Company is also considering to restructure this business and have appointed the external advisors to help examine various options to restructure the same.

C) Financial Analysis and Review of Operations:

- PRODUCTION & SALES REVIEW:

During the year under review, your company has registered a turnover of Rs. 2,767.22 crore as compared to Rs. 2,495.38 crore showing an increase of 10.89% over the previous year turnover. The export of the Company increased from Rs. 627.04 crore to Rs. 704.00 crore, showing an increase of 12.27% over the previous year owing to enhanced production and better product/market penetration. The business wise performance is as under:- a). Yarn:

The production of Yarn increased from 115,888 MT to 126,146 MT during 2009-2010.The sales revenue of yarn increased from Rs. 1,324.72 crore to Rs. 1,476.99 crore during the year under review.

b). Steel:

During the year, the production of steel ingots/billets has been 62,110 MT compared to 53,078 MT of the previous year and that of Rolled products has been 56,581 MT compared to 51,471 MT of the previous year. The sales revenue of the division has been Rs. 276.38 crore (Previous Year Rs. 321.74 crore).

c). Fabric:

During the year, the production of processed fabric increased from 51.35 million meter to 60.78 million meter, showing an increase of 18.36% over the previous year. The sales revenue of the processed fabric also increased from Rs. 482.17 crore to Rs. 556.52 crore showing an increase of 15.42% over the previous year.

- PROFITABILITY:

The Company earned profit before depreciation, interest and tax of Rs. 594.63 crore as against Rs. 371.37 crore in the previous year. After providing for depreciation of Rs. 220.87 crore, (Previous year Rs. 207.32 crore), interest of Rs. 86.73 (Previous Year 102.34 crore), provision for current tax Rs. 56.75 crore (Previous year Rs. 0.17 crore), provision for deferred tax (net of adjustments), Rs. 16.51 crore (previous year Rs. 33.28 crore), and provision for Fringe Benefit Tax of Rs NIL (Previous Year Rs. 0.91 crore) the net profit from operations worked out to Rs. 213.76 crore as compared to Rs. 27.35 crore in the previous year.

- RESOURCES UTILISATION:

a). Fixed Assets:

The gross fixed assets (including work-in-progress) as at 31 March, 2010 were Rs. 3,611.65 crore as compared to Rs. 3,414.27 crore in the previous year.

b). Current Assets:

Debtors outstanding for more than six months were Rs. 13.00 crore as compared to Rs. 22.87 crore in the previous year. The net current assets as on 31 March, 2010 were Rs. 1,769.52 crore as against Rs. 1370.30 crore in the previous year. Inventory level was at Rs. 1,107.46 crore as compared to the previous year level of Rs. 620.10 crore.

- FINANCIAL CONDITIONS & LIQUIDITY:

The Company enjoys a rating of "AA-" with stable outlook and "P1+" from Credit Rating Information Services of India (CRISIL) for long term and short term borrowings respectively. Management believes that the Companys liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:-

(Rs. in crore) 2009-2010 2008-2009

Cash and Cash equivalents:

Beginning of the year 357.21 62.70

End of the year 222.07 357.21

Net cash provided (used) by:

Operating Activities (79.72) 447.04

Investing Activities (97.06) (125.53)

Financial Activities 41.64 (26.99)

D) Internal Control System:

The Company has well defined internal control system. The Company takes abundant care to design, review and monitor the working of internal control system. Internal Audit in the organization is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organization. All significant issues are brought to the attention of the Audit Committee of the Board.

E) Management perception of Risk and Concern:

One of the major challenges to the textile industry is the continued appreciation in the Indian rupee against US dollar, which has serious implication on textile exports. Being highly competitive industry, increase in the external value of rupee would cripple the competitiveness of the industry. Another important issue is availability, quality and the price of power. The availability of good quality power at reasonable prices is critical for sustainability of the industry. However, the cost of power has been continuously increasing, adding to the input cost pressure in the industry. We hope that power situation will improve in the coming year.

Our major raw material-Cotton is agriculture produce, which suffers from climatic volatility in the major cotton producing countries. In addition, growing demand as well as overall increase in prices of commodities in the world has pushed up the prices of domestic cotton leading to pressure on the textile industry.

The differentiated treatment for different sectors of textile industry in government policy is also a serious development. The proposal to withdraw export incentives on cotton yarn exports can be seen in this respect. The integral approach is required for the growth of the industry in the country. While the country is surplus in cotton and it is anachronistic that we may discourage exports of cotton yarn while we remain committed to raw material i.e. cotton exports.

We are making all efforts to cope up with the challenges through continuous cost reduction, process improvements and improved customer services to mitigate the growing cost pressure.

F). Human Resources/Industrial Relations:

The Company continues to lay emphasis on building and sustaining an excellent organization climate based on human performance. Performance management is the key word for the company. During the year the Company employed over 24,788 employees.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shopfloors of the various plants.

3. SUBSIDIARIES:

The Company has following subsidiary companies the details of profitability of which are given below:- VMT Spinning Company Limited (VMT)

The business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation and Toho Rayon Company Limited of Japan remained steady. However, the sales revenue of the Company has marginally increased to Rs. 101.65 crore from Rs. 100.98 crore but the net profits of the Company decreased from Rs. 15.45 crore to Rs. 10.13 crore due to depressed international market and sharp appreciation of Rupee vis-a-vis US Dollar. Out of the total present paid-up capital of Rs. 20.70 crore, your Company holds 73.33%. The Board of Directors of VMT has recommended a dividend of 12% for the year 2009-2010.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged with the business of investments in the shares etc. The earnings of the company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year the company has earned a net profit of Rs.1.55 crore.

Vardhman Acrylics Limited (VAL)

Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. The works of the company is situated at Jhagadia in Gujarat. Presently the company holds 58.74% shares in this subsidiary. During the Financial Year 2009-2010, VAL recorded a sales volume of Rs. 286.74 crore as against Rs. 253.90 crore, an increase of 12.93% over the previous year. The net profit for the year has substantially increased to Rs. 43.44 crore from Rs. 4.23 crore in the previous year.

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company which is a Joint Venture with American & Effird Inc. (A&E) which is second largest global player in Threads Manufacturing and Distribution with a partnership of 51:49 is engaged in the business of Threads Manufacturing and Distribution. During the year under review, the gross sales of this Company were Rs. 377.16 crore and the Profit after tax was Rs. 41.37 crore.

The Board of Directors of this Company has recommended a dividend @ 19.3%, on its paid up equity share capital, for the year 2009-10.

Vardhman Texgarments Limited (VTGL)

During the year, your Company has entered into a Joint Venture Agreement with Nisshinbo Textile Inc., Japan (“Nisshinbo”) for manufacturing world class shirts with a partnership of 51:49 in this JV Company. Nisshinbo is a world class textile manufacturer with comprehensive operations including spinning, weaving, knitting, finishing and sewing. The foundation stone for the manufacturing facility was laid on 14 November, 2009.The project is being set-up at Focal Point in Ludhiana with a capacity of 1.8 million shirts per annum. The estimated capital cost for the project is Rs. 38 crores, to be financed partly from equity and partly from term loans. The Company will supply majority of its production for international markets through Nisshinbo. The Company shall also manufacture shirts for supply to the domestic brands. Nisshinbo shall provide technical assistance for setting up the facilities and for the manufacturing operations.

4. DIVIDEND:

The Board of Directors of your Company has recommended a dividend of Rs. 3/- per share on the Fully Paid-up Equity Shares of the Company.

5. DIRECTORS:

The Board of Directors had appointed Mr. Shravan Talwar and Mrs. Suchita Jain in its Meeting held on 29 January, 2010 as Additional Directors on the Board of the Company, pursuant to Article 105 of the Articles of Association of the Company and Section 260 of the Companies Act, 1956. Also, Mr. Neeraj Jain was appointed as the Additional Director of the Company w.e.f 01.04.2010 by the Board of Directors in its meeting held on 31 March, 2010, pursuant to Article 105 of the Articles of Association of the Company and Section 260 of the Companies Act, 1956. Further the Board of Directors in its Meeting held on 31 March, 2010 had appointed Mrs. Suchita Jain and Mr. Neeraj Jain as Executive Directors for a period of five years and three years respectively w.e.f 01.04.2010, subject to the approval of the members in the next Annual General Meeting of the Company. The Board of Directors has also re-appointed Mr. Sachit Jain as an Executive Director for a further period of five years w.e.f 30.03.2010 in its Meeting held on 31st March, 2010 and Mr. S. P. Oswal as the Chairman & Managing Director for a further period of five years w.e.f 1.06.2010, in its Meeting held on 7th May, 2010, subject to the approval of the members in the next Annual General Meeting.

The Company has received notices from some members under section 257 of the Companies Act, 1956, proposing the candidature of Mrs. Suchita Jain, Mr. Shravan Talwar and Mr. Neeraj Jain as Directors of the Company. Requisite approval for their appointment is being sought at the ensuing Annual General Meeting.

Mr. A.K. Purwar and Mr. D.L. Sharma, Directors of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of Article 108 of the Articles of Association of the Company and being eligible, offer themselves for re- appointment. The Board recommended their appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

6. CORPORATE GOVERNANCE:

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

7. AUDITORS:

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

8. AUDITORS REPORT:

The Statutory Auditors of the Company have submitted Auditors’ Report on the accounts of the Company for the accounting year ended March 31, 2010. In their report, they have made an observation that loss, if any, on valuation of open derivative options could not be determined by the Company due to certain reasons as specified in Note 13 of the Notes to Accounts. The ultimate outcome of these transactions and their effect on these accounts cannot be ascertained at this stage.

As you are aware that a part of revenue of your Company comes from export sales and as such Company has foreign currency fluctuation exposure. Your Company hedges its foreign currency fluctuation exposure against exports by way of foreign currency derivative options also. During the year, the Company has taken various foreign currency options from various banks and as at March 31, 2010, there were 7 options outstanding having a maturity period up to June 2013. These derivative options are proprietary products of banks which do not have a ready market and are not tradeable in the open market. These options are marked to a model, which is bank specific instead of being marked to market. In view of the significant uncertainty associated with the above derivative options, the ultimate outcome of which depends on future events which are not under the direct control of the company, the loss if any, on such open derivative options cannot be determined at this stage and has accordingly not been provided in the books of account. The other points of Auditors’ Report are self-explanatory and need no comments.

9. COST AUDITORS:

The Board of Directors had re-appointed M/s. Ramanath Iyer & Company, Cost Accountants, New Delhi as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956, for the year 2009-10. The Cost Auditors Report for the financial year 2009-2010 will be forwarded to the Central Government as required under law.

10. 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.

11. GROUP:

The Company, inter-alia with the following entities, constitutes a Group as defined under the Monopolies and Restrictive Trade Practices Act, 1969: -

a) Vardhman Holdings Limited

b) VTL Investments Limited

c) Adinath Investment and Trading Company

d) Devakar Investment and Trading Company Private Limited

12. 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 optimize the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section 217(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 form part of this report.

13. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to Section-217 (2AA) of the Companies Act, 1956, the Directors confirm that in the preparation of the annual accounts, the applicable accounting standards have been followed;

a. appropriate accounting policies have been selected and applied consistently, and have made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 March, 2010 and of the profit of the Company for the year ended on 31 March, 2010;

b. 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

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

14. 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 express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

(S.P. OSWAL) PLACE : NEW DELHI CHAIRMAN &

DATED : 7th May, 2010 MANAGING DIRECTOR

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