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Directors Report of Vishnu Chemicals Ltd.

Mar 31, 2015

THE MEMBERS

VISHNU CHEMICALS LIMITED

The Directors are happy to present their Twenty Second Annual Report on the business and operations of the Company and the financial statements for the year ended on 31st March, 2015.

FINANCIAL RESULTS (Rs. in Lakhs) Particulars 2014-15 2013-14

Gross Income 45016.60 37959.59

Profit before Interest, Depreciation & Tax 7787.29 6346.44

Less: Depreciation 1221.81 1302.59

Less: Interest 3147.71 2934.83

Profit for the year before taxes 3417.77 2109.02

Less: Provision for Taxes 1227.06 796.86

Profit after Taxes 2190.71 1312.16

Add: Surplus brought forward from Previous Year 5726.43 4414.27

Surplus Carried forward to Balance Sheet 7917.14 5726.43

Less: Depreciation on life expired assets 13.73 0.00

Less: Appropriations 507.44 0.00

Balance carried forward to next year 7395.97 5726.43

OPERATIONS

Your Company is strong enough to face typhoons like ''Hud Hud'', which has efected Visakhapatnam severely including our unit and our team is equally strong enough and reinstated the operations within three weeks.

This year is a special year for the Company operations as it is entering into Silver Jubilee year of operations. The Company started with a humble turnover of Rs.1 Crore during 1990 and within a span of 25 years the Company has reached almost Rs.500 Crores turnover by building world class plant,world class product quality with world class people. Today infact Vishnu Chemicals Limited is a world class player in this segment and exporting to more than 50 countries all over the world competing against American, European, Russian and German Companies.

During the year of operations the Company''s sales have increased by 19% whereas the Profitability increased by 67% and the earning per Equity share is increased by almost 100%.

For any organization building a strong base is important and having achieved this, now the Company will look forward for the fast growth in the coming years.

No material changes and commitments have occurred after the close of the year till the date of this Report, which afect the financial position of the Company.

There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

FUTURE PLANS

Now the Company''s immediate task is further optimization of the usage of resources i.e., production, marketing, finance and human resources by completing the related balance works and to reach a turnover of Rs. 1000 Crores in next two years.

SUBSIDIARY

The operations of the Vishnu Hong Kong Limited, wholly owned subsidiary of the Company, are yet to be commenced and planning to commence the activities during the current financial year,

DIRECTORS

Your Company has 6 (Six) Directors consisting of 2 (Two) Promoter and Executive Directors (Chairman & Managing Director and Whole-time Director), 1 (One) Promoter and Non- Executive Director and 3 (Three) Independent Directors, as on March 31, 2015.

CHANGES IN DIRECTORS AND KEY MANAGERIAL PERSONNEL

Sri Ch. Siddartha, Whole-time Director of the Company retires by rotation and being eligible ofers himself for re-appointment.

The Board of Directors of the Company has appointed Sri T.S. Appa Rao, as an Additional Director, at their meeting held on 19.03.2015 and his ofce as Additional Director will be ceased at the ensuing Annual General Meeting. The proposal for appointment of Sri T.S. Appa Rao, as Independent Director is being placed before the shareholders for approval and the relevant details are forming part of the AGM notice.

DIRECTORS RESIGNATIONS

During the period under review, Sri V. Vimalanand resigned from the Board of Directors of the Company w.e.f. 19.03.2015. Dr. S. Chandrasekhar resigned from the Board of Directors of the Company w.e.f. 20.05.2015.

COMPANY SECRETARY

The Company has appointed Sri L. Narasimha Rao, a Fellow Member (FCS-7406) of The Institute of Company Secretaries of India, New Delhi as the full time Company Secretary and Compliance Ofcer and also designated as Key Managerial Personnel of the Company with efect from 27.04.2015 and the same was approved by the Board at their meeting held on 20.05.2015, in place of Sri B.S. Harikrishna.

DECLARATION BY AN INDEPENDENT DIRECTOR(S) AND RE- aPPOINtMENt, IF aNY

In compliance of sub-section (7) of Section 149 of the Companies Act, 2013, all the Independent Directors of the Company have submitted their declarations stating that, they meet the criteria of independence as provided in sub-section (6) of Section 149 of the above said Act and Clause 49 of the Listing Agreement with the Stock Exchanges.

CORPORATE GOVERNANCE – CLAUSE 49 OF THE LISTING AGREEMENT

A separate Section on Corporate governance with a detailed compliance report thereon is annexed to the Annual Report. The Practicing Company Secretary''s Certificate with respect to compliance with the provisions of Corporate Governance, as required by clause 49 of Listing Agreement, is also annexed.

DIVIDEND

During the year under review, the Board of Directors had declared and paid an interim dividend of Rs. 1.00 per equity share of Rs.10/- each (10%) for the financial year 2014-15. Your Directors also recommend a fnal dividend of Rs. 1.00 per equity share of Rs.10/- each (10%) for the year ended March 31, 2015 [the total dividend will be Rs.2/- per equity share of Rs. 10/- each (20%)], subject to the approval of the Members at this Annual General Meeting.

TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, an amount of Rs. 161,645/- being unclaimed dividend pertaining to the financial year 2006-07 was transferred to the Investor Education and Protection fund (IEPF) on July 8, 2014.

FIXED DEPOSITS

Your Company has not accepted any deposits covered by the provisions of Section 73 of the Companies Act, 2013 and the Rules framed there under.

INDUSTRIAL RELATIONS

Your Directors are happy to report that the Industrial Relations have been extremely cordial at all levels throughout the year. Your Directors record their appreciation for sincere eforts, support and co-operation of all employees being extended from time to time to accelerate the growth of the Company.

AUDITORS

The Statutory Auditors M/s C.K.S. Associates (Firm Regn. No.007390S), Chartered Accountants, Hyderabad were re- appointed for three years at the last Annual General Meeting held on 30.09.2014, subject to ratifcation by the members at every Annual General Meeting. They have confrmed their eligibility and willingness to accept the assignment as Statutory Auditors of the Company, if ratifed.

AUDITORS'' REPORT

Auditors Observations:

1. The Auditors have mentioned in their Report that, the brought forward reserves are overstated due to capitalisation of interest of Rs.312.82 lakhs on Term Loans during the year 2007-08 in contravention of AS-16 issued by the ICAI, which also resulted in overstatement of fxed assets by Rs.312.82 lakhs, depreciation for the period by Rs.11.13 lakhs and total accumulated depreciation till March 31, 2015 by Rs.96.87 lakhs. As a result, the Profit for the year is understated by Rs.11.13 lakhs.

2. The Auditors have mentioned in their Annexure report as point 7.1 that there is Rs.267.92 lakh of Entry Tax outstanding as at the last day of the financial year under audit for a period of more than six months from the date it became payable.

Management Replies:

1. The management already clarified in the year 2007-08 that since, the operations with respect to the frst line of production, which was commissioned, were at very insignificant level at that point of time and the plant becoming an integrated unit only subsequent to the commissioning of second line, it was not deemed inappropriate to capatalise the interest.

2. The Company has fled Special Leave Petition (Civil) before the Hon''ble Supreme Court of India along with other assesses in this regard and will act based on the decision of the Hon''ble Supreme Court.

COST AUDITOR

Pursuant to Section 148 of the Companies Act, 2013, the Central Government has prescribed Cost Audit of the Company. Based on the recommendations of the Audit Committee M/s. N.V.S Kapardhi (Firm Regn. No. 100231), Cost Accountants, Hyderabad were re-appointed as Cost Auditors of the Company for the year 2015-16.

SHARE CAPITAL

The paid up Equity and Preference Share Capital as on March 31, 2015 was Rs.59.44 Crore. During the year under review, the Company has not issued shares with diferential voting rights nor granted stock options nor sweat equity nor made any provision of money for purchase of or subscription for, shares in the Company, if the purchase of, or the subscription for, the shares by trustees is for the shares to be held by or for the benefit of the employees of the Company as provided in the rules of Companies (Share Capital and Debentures) Rules, 2014. As on March 31, 2015, the Directors of the Company hold shares and convertible instruments of the Company as below:

Sl. Name of the Director Equity Shares in % No Nos.

1. Shri Ch. Krishna Murthy 6219790 52.07

2. Smt. Ch. Manjula 1614048 13.51

3. Shri. Ch. Siddartha 1125668 9.42

Total 8959506 75.00



Details of shares held and Percentage Name of the Director 7% Redeemable Preference % shares in Nos.

Shri Ch. Krishna Murthy 44100000 92.84

Smt. Ch. Manjula 3250000 6.84

Shri. Ch. Siddartha 150000 0.32

Total 47500000 100.00

BOARD MEETINGS

Five meetings of the Board of Directors were held during the period under review and further details are set out in the Corporate Governance Report forming part of the Directors'' Report.

AUDIT COMMITTEE

Four meetings of the Audit Committee of the Board were held during the period under review and further details are set out in the Corporate Governance Report forming part of the Directors'' Report.

INDEPENDENT DIRECTORS'' MEETING

The performances of the members of the Board, the Board level Committees and the Board as a whole were evaluated at the meetings of the Independent Directors and the Board of Directors of the Company held on May 20, 2015.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

Your Company recognizes the value of transparency and accountability in its administrative and management practices. The Company promotes the ethical behavior in all its business activities. The Company has adopted the Whistle Blower Policy and Vigil Mechanism in view to provide a mechanism for the Directors and employees of the Company to approach Audit Committee of the Company to report existing/probable violations of laws, rules, regulations or unethical conduct.

NOMINATION AND REMUNERATION COMMITTEE

Your Company has a Nomination and Remuneration Committee and further details are set out in the Corporate Governance Report forming part of the Directors'' Report.

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Persons (KMP), Senior Management and their remuneration.

PaRtICULaRS OF LOaNS, GUaRaNtEES OR INVEStMENtS UNDER SECTION 186

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 ("the Act") 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 statements are provided in the Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential confict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval.

The particulars of contracts or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 disclosed in Form No. AOC -2 and is set out as Annexure and forms part of this report.

RISK MANAGEMENT

Your Company has a Risk Management Committee and further details are set out in the Corporate Governance Report forming part of the Directors'' Report.

The Company has a Risk Management Policy and framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company''s competitive advantage. The business risk framework defnes the risk management approach across the enterprise at various levels including documentation and reporting.

SECRETARIAL AUDIT REPORT

Pursuant to Section 204 of the Companies Act 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company had appointed M/s L.D. Reddy & Co., Practicing Company Secretaries, Hyderabad as its Secretarial Auditors to conduct the secretarial audit of the Company for the financial year 2014-15. The Company provided all assistance and facilities to the Secretarial Auditor for conducting their audit. The Report of Secretarial Auditor for the financial year 2014-15 is set out as Annexure and forms part of this report.

Secretarial Auditor''s observations:

i. There were delays in the payment of wages to the employees before the due date as per Payment of Wages Act,1936.

ii. All Statutory Payments like Service tax, Income Tax, Professional Tax, Entry tax, P F, ESI, VAT, TDS, Self assessment tax, Excise Duty etc., are paid with delay as per the provisions of the relevant Acts.

iii. A separate meeting of Independent Director was not held during the year as per the provisions of Companies act 2013.

Management replies:

i. The payments of wages to employees are up-to-date. However, the Company is taking all possible steps to pay the wages within the stipulated time.

ii. The Company is taking all possible steps to pay the statutory dues within the stipulated time.

iii. Separate meeting of Independent Directors was held on 20.05.2015 and will be complied in future within the stipulates schedule.

DIRECTORS'' RESPONSIBILITY STATEMENT

The Directors'' Responsibility Statement referred to in clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, shall state that

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

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of afairs of the Company at the end of the financial year and of the Profit and loss of the Company for that period;

(c) the directors had taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, in the case of a listed Company, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating efectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating efectively.

INTERNAL FINANCIAL CONTROLS

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

EXTRACT OF THE ANNUAL RETURN

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extracts of the Annual Return as at March 31, 2015 is set out as Annexure and forms part of this report.

QUALITY

Your Company accord to high priority to quality, safety, training, development, health and environment. The Company endeavours to ensure continuous compliance and improvements in this regard.

INSURANCE

All the properties and insurable assets of the Company, including Building, Plant and Machinery, stocks etc., wherever necessary and to the extent required, have been adequately covered.

LISTING OF COMPANY''S SECURITIES

Your Company''s shares are currently listed on Bombay Stock Exchange Limited (BSE), Ahmedabad Stock Exchange Limited and the Company also listed it''s shares in the National Stock Exchange of India Limited (NSE), Mumbai on 05.03.2015.

DEMATERIALIZATION OF SHARES

Your Company''s shares have been made available for dematerialization through the National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

CORPORATE SOCIAL RESPONSIBILITY

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities is setout as Annexure and forms part of this report.

STAKEHOLDERS'' RELATIONSHIP COMMITTEE

Your Company has a Stakeholders'' Relationship Committee and further details are set out in the Corporate Governance Report forming part of the Directors'' Report.

The Committee will monitor expeditious redressal of investors / stakeholders grievances relating to non-receipt of annual reports, notices, non-receipt of declared dividend / interest, change of address for correspondence etc. and to monitor action taken.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the listing agreement with the Stock Exchanges in India is presented in a separate section forming part of this Annual Report.

EQUITY SHARES IN THE SUSPENSE ACCOUNT

Your Company is not having any shares lying in the suspense accounts in terms of Clause 5A(I) and Clause 5A(II) of the Listing Agreement.

ENERGY CONSERVatION, tEChNOLOGY aBSORPtION aND FOREIGN EXCHANGE EARNINGS AND OUTGO

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

PARTICULARS OF EMPLOYEES

The percentage of increase in remuneration of each Director, Chief Financial Ofcer and Company Secretary during the financial year 2014-15, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year 2014-15 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under:

Remuneration of % increase in Director/KMP for Remuneration Sl. Name of Director/KMP financial year in the No. and Designation 2014-15 Financial Year (in Rs.) 2014-15

1 Sri Ch. Krishna Murthy 6000000 25.00 %

2 Sri Ch. Siddartha 4200000 40.00 %

3 Sri T. Rama Krishna 2700000 36.37 %

4 Sri B.S. Hari Krishna 375000 29.98 %



Ratio of Comparison of the remuneration of each Remuneration of Name of Director/KMP Director/ to median the KMP against the and Designation remuneration of performance of the employees Company

Sri Ch. Krishna Murthy 26.54 Profit before Tax increased Sri Ch. Siddartha 19.30 by 62 % and Profit After Sri T. Rama Krishna 8.20 Tax increased by 67 % in Sri B S Hari Krishan 1.45 financial Year 2014-15

During the period under review, no employee of the Company is employed throughout the financial year and in receipt of Rs.60 lakhs or more, or employed for part of the year and in receipt of Rs.5 lakhs or more a month, under Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their deep and sincere gratitude to the Bankers, Financial Institutions, Customers and Suppliers for their unstinted and continued support to the Company. Your Directors thank the various Central and State Government Departments, Organizations and Agencies for the continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz., customers, banks, members, dealers, vendors and other business partners for the excellent support received from them during the year.

The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company.

By Order of the Board

Ch. Manjula Ch. Krishna Murthy Director Chairman & Managing Director

Place: Hyderabad Date : 20th May, 2015


Mar 31, 2014

Dear members,

The Directors are happy to present their Twenty first Annual Report on the business and operations of the Company and the Financial statements for the year ended 31st March, 2014.

FINANCIAL RESULTS (Rs. in lakhs)

Particulars 2013-14 2012-13

Gross Income 37959.59 35051.85

Profit before Interest, Depreciation & Tax 6346.44 5612.62

Less: Depreciation 1302.59 1223.01

Less: Interest 2934.83 3286.02

Profit for the year before taxes 2109.02 1103.59

Less: Provision for Taxes 796.86 370.17

Profit after Taxes 1312.16 733.41

Add: Surplus brought forward from Previous Year 4414.27 3680.86

Surplus Carried forward to Balance Sheet 5726.43 4414.27

OPERATIONS:

The company performance is on improving trend compared with the previous financial year. During the year of operations, the company sales has increased by 8.3% whereas the profitability increased by 78.91%. Though there is Rs.7.73 earning per share during the current year, the company could not declare dividend in view of banker''s stipulations in order to increase the cash reserves.

FUTURE PLANS:

The company samples are also approved in the North American market and expecting the improved market share for our product in this region. Furthermore the company is expecting government support to increase its domestic market share also by extending better services and support to the customers and make suitability of the product to their needs.

Directos:

Smt. Ch. Manjula Director of the Company retires by rotation and being eligible, offers herself for re-appointment.

Shri. Ch. Siddartha, Whole-time Director of the Company retires by rotation and being eligible offers himself or re-appointment.

DETAILS OF DIRECTORS SEEKING APPOINTMENT / RE-APPOINTMENT AT THE ANNUAL GENERAL MEETING PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT:

I. Name of the Director Shri. U.Dileep Kumar

Qualification Chartered Accountant

Brief Profile Shri. U. Dileep Kumar is a Chartered Accountant, and was associated with Andhra Pradesh State Financial Corporation for more than 31 years. He is having vast experience in banking aspects such as investments banking and other related matters. After working in various branches of Andhra Pradesh State Financial Corporation in various designations, he retired as a Deputy General Manager in the year 2008.

Name(s) of other Companies in which Directorships held Nil

Name(s) of other Companies in which Committee Membership(s)/ Chairmanship(s) held Nil

Total shares held by him in the Company Nil

Relationship with other Shri. U.Dileep Kumar is not related to any directors Director of the Company.

II. Name of the Director Shri. V.Vimalanand

Qualification LLB

Brief Profile Shri. V. Vimalanand is having a vast experience in the law field. He is one of the leading Advocates in the state of Andhra Pradesh and Telangana, dealing in Corporate Suits, Arbitration and other matters both Civil and Criminal. He is a commerce graduate and a bachelor of law.

Name(s) of other Companies in which Directorships held Nil

Name(s) of other Companies in which Committee Membership(s)/ Chairmanship(s) held Nil

Total shares held by him in the Company Nil

Relationship with other Shri. V.Vimalanand is not related to any directors Director of the Company.

III. Name of the Director Dr. S.Chandrasekhar

Qualification Ph. D. in chemical Engineering

Brief Profile Dr. S. Chandrasekhar, FNASc., FASc, is a Chief Scientist and Head, Division of Natural Products Chemistry CSIR-Indian Institute of Chemical Technology, Hyderabad. He has made significant contributions in diverse areas of Organic Chemistry especially in Chiral Chemistry and Total Synthesis of Biologically Active Natural Products. He has 231 Publications and 2 Patents with over 3900 Citations. 36 Students have obtained their Ph.D. award under his able guidance. He is a recipient of The National Academy of Sciences - Reliance Platinum Jubilee award in Physical Sciences and Ranbaxy Research award in Pharmaceutical Sciences in the year 2009. He is a fellow of the Indian Academy of Sciences and National Academy of Sciences. Dr. Chandrasekhar obtained his Bachelors, Masters and Ph. D. degree from Osmania University while the work for Ph. D. was carried out in IICT on total synthesis of Cyclosporin.

Name(s) of other Companies in which Directorships held Nil

Name(s) of other Companies in which Committee Membership(s)/ Chairmanship(s) held Nil

Total shares held by him in the Company Nil

Relationship with other Dr. S.Chandrasekhar is not related to any directors Director of the Company.

CORPORATE GOVERNANCE - CLAUSE 49 OF THE LISTING AGREEMENT:

A separate Section on Corporate governance with a detailed compliance report thereon is annexed to the Annual Report. The Company Secretary''s Certificate with respect to compliance with the provisions of Corporate Governance, as required by clause 49 of Listing Agreement, is also annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT - CLAUSE 49 OF THE LISTING AGREEMENT:

A Separate Section on Management Discussion and analysis with a detailed compliance report thereon is annexed to the Annual Report

DIVIDEND:

The Board of Directors keeping in view the need to augment internal accruals for toning up the financials, has not recommended any Dividend for the current financial year 2013-14.

TRANSFER TO THE INVESTOR EDUCATION AND PROTECTION FUND:

In terms of Section 12S of the Companies Act, 2013, an amount of Rs. 161,645/- being unclaimed dividend pertaining to the financial year 2006-07 was transferred to the Investor Education and Protection Fund (IEPF) on June 26, 2014.

FIXED DEPOSITS:

Your Company has not accepted any deposits covered by the provisions of Section S8AA of the Companies Act and the Rules framed there under.

INDUSTRIAL RELATIONS:

The company has been enjoying cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

AUDITORS :

The Statutory Auditors M/s C K S Associates, Chartered Accountants, Hyderabad retire at the ensuing Annual General Meeting. They have confirmed their eligibility and willingness to accept the assignment as Statutory Auditors of the company, if reappointed.

COST AUDITOR :

Pursuant to Section 148 of the Companies Act, 2013, the Central Government has prescribed Cost Audit of the company. Based on the recommendations of the Audit Committee M/s. N.V.S Kapardhi, Cost Accountant, Hyderabad is eligible for appointment as Cost Auditor of the Company for the year 2014-1S.

COMPANY SECRETARY :

The Company has on its rolls, Shri. B.S. Harikrishna, an Associate member of the Institute of Company Secretaries of India, as the full time Secretary of the Company with effect from 25th April 2013.

REPLIES TO AUDIT OBSERVATIONS :

1. The Auditors have mentioned in their Report, that the brought forward reserves are overstated by Rs. 312.82 lakhs due to capitalization of term loan interest during 2007-08, in contravention of AS16 issued by The Institute of Chartered Accountants of India and fixed Assets of the Company have been overstated by the same amount. Consequently, the depreciation for the year is overstated by Rs. 14.27 lakhs and the total overstatement of depreciation is Rs. 8S.74 lakhs till March 31, 2014.

With respect to the above, the management has already clarified in the year 2007-08, that the part of the plant, which was commissioned is pertaining to the operations with respect to the first line of production, and that the scale was at a very insignificant level at that point of time and that the plant became an integrated unit, only upon commissioning of the second line, subsequently and hence it was not deemed inappropriate to capitalize the interest. However to fall in line with the Auditor''s views, the company has decided to undo the capitalized, interest amount on the term loans during that period, and charge off to P & L A/c in a phased manner spread over a three year period with consequential changes in the Depreciation in respective years, commencing from the year 2014-1S onwards.

2. The Auditors have mentioned in their Annexure report as point 3(d) that there is no terms of repayment of term loans taken from the Directors.

Yes, there are no specific terms for repayment of loans taken from the Directors of the company. As the Directors are fully aware of the financial position, the amounts will be repaid based, on availability of sufficient cash flows and after ensuring that the operations shall not suffer upon repayment.

3. The Auditors have mentioned in their Annexure report as point 9(a) that there is Rs. 302.09 lakh of Entry tax, Rs. 44.06 lakhs of Sales tax and Rs. 74.28 lakhs of Income Tax dues which were outstanding for a period of more than 6 months."

As far as Entry Tax is concerned, liability arose on account of Supreme Court decision for non acceptance of exemption claimed by the company along with other assesses and the company is waiting for Supreme Court Decision. As far as Sales tax is concerned, the company has paid later on. Regarding Income Tax the company is planning to pay before the end of September, 2014.

Due to heavy payment obligation to Banks, the Company could not pay the taxes on time. However the Company is hopeful to clear off all the over dues during the year 2014-1S.

4. The Auditors have mentioned in their Annexure report as point 11 that "interest has fallen due during the year amounting to Rs.53.36 Lakhs".

As mentioned in the Audit Report the amount was debited on the last working day of financial year. Hence the amount was paid in the subsequent month. In fact all the Term Loans pertaining to the Visakhapatnam and Bhilai Plants have since been closed and that no out standing exists.

PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956:

Name Designation Date of Appt.p.m. Salary Shri. Ch. Krishna Murthy Chairman & 02.01.2006 4,00,000 Managing Director

Shri. Ch. Siddartha Whole-time 02.01.2006 2,50,000 Director

Name Experience Age Share holding %

Shri. Ch. Krishna Murthy 28 years 57 52.07

Shri. Ch. Siddartha 8 years 29 9.42

DIRECTORS'' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA):

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

1. That in the preparation of the accounts for the Financial Year ended 31st March, 2014, the applicable accounting standards have been followed along with proper explanation relating to material departures,

2. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the said Financial year and of the Profit of the company for the said financial year,

3. That the Directors have taken proper and sufficient care 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,

4. That the Directors had prepared the accounts for the year ended 31st March, 2014 on a "going concern" basis.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

Particulars required to be disclosed under 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 as Annexure to this Report.

ACKNOWLEDGEMENT:

Your Directors wish to express their sincere thanks to Bankers, Financial Institutions, Customers, suppliers for their continued support to the Company. The Directors also acknowledge with gratitude the continued support received from Investors, Shareholders and various Departments of State and Central governments.

Your Directors place on record their appreciation of the Sincerity, Commitment and Contribution made by the Employees of the company at all levels, for the smooth functioning of the Company, during the year under review.

By Order of the Board

Sd- Sd-

Place: Hyderabad CH.MANJULA CH. KRISHNA MURTHY

Date : 9th August, 2014 Director Chairman & Managing Director.


Mar 31, 2013

To The Members of VISHNU CHEMICALS LIMITED

The Directors are happy to present their Twentieth Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2013.

FINANCIAL RESULTS (Rs. in lakhs)

Particulars 2012-13 2011-12 Gross Income 35051.85 35192.29

Profit before Interest, Depreciation & Tax 5612.62 5620.30

Less: Depreciation 1223.01 1134.36

Less: Interest 3286.02 3153.35

Profit for the year before taxes 1103.59 1332.59

Less: Provision for Taxes 370.17 480.47

Profit after Taxes 733.41 852.12

Add: Surplus brought forward from Previous Year 3680.86 2828.74

Surplus Carried forward to Balance Sheet 4414.27 3680.86

OPERATIONS:

During the year of the operations, the company has successfully completed the alternative fuel facility and the numbers were reflected already in the balance sheet which were only for the later six months period. In fact the total benefit can be seen during the current financial year covering twelve months period which will improve our profitability. The major benefit derived from this facility has been passed on to our customers to be competitive in the market and to get more volume of business and to maximize our customer base.

Further during the year the power cost is increased and the government has allowed company to buy private power through exchanges at a market determined prices. Therefore this may cost high but the continuity of power and the quality of power improved which will have indirect benefit to the units as the running hours of the plant will improve. From the financial figures you can observe that there is an increase in the cost of power by Rs.. 5 crores, though the operation levels are completely same. Thereby the overall profitability also reduced to the tune of Rs.. 5 crores. The external and internal infrastructure of the company also improved during this year and ready to accommodate all the required infrastructure like go down facilities, transport facilities, material handling facilities and distribution facilities. During the year at the marketing channel the go down space has also been increased and storing enough stock to meet the customers requirement from time to time and to gain the customer satisfaction.

Chromic Acid and Chrome Oxide Green production is stabilized. International market and domestic market well accepted our product and getting repeated orders which will enhance the company turnover in the coming period.

FUTURE PLANS:

This year company is planning to complete the White Sodium Sulphate project and Co-generation project at their Visakhapatnam facility which will add up to the turnover and profitability as we have stocked substantial stock of by-product which will be converted into high value product with the completion of WSS plant.

Furthermore the company is also negotiating a long term contract with M/s. Procter and Gamble for supply of White Sodium Sulphate for their detergent industry at Hyderabad. The establishment of P & G unit at Hyderabad is a boon for our industry as the entire by-product can be sold to them.

The company is also concentrating on training and up gradation of skills at all levels to face the challenges and meet the market requirements. As the company is reaching to its Silver Jubilee year by 2015 it is time to consolidate all the areas such as infrastructure, production, marketing and human resources etc.

DIRECTORS:

Sri U.Dileep Kumar, Director of the Company retires by rotation and being eligible, offer himself for re-appointment. Sri V.Vimalanand, Director of the Company retires by rotation and being eligible offer himself for re-appointment.

CORPORATE GOVERNACE - CLAUSE 49 OF THE LISTING AGREEMENT:

A separate Section on Corporate governance with a detailed compliance report thereon is annexed to the Annual Report. The Company Secretary Certificate with respect to compliance with the provisions concerning Corporate Governance, as required by clause 49 of Listing Agreement, is also annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT - CLAUSE 49 OF THE LISTING AGREEMENT:

A Separate Section on Management Discussion and analysis Report with a detailed compliance report thereon is annexed to the Annual Report

DIVIDEND:

The Board of Directors has not recommended any dividend for the current financial year in order to augment internal resources to meet Companies operations.

FIXED DEPOSITS:

Your Company has not accepted any deposits covered by the provisions of Section 5A, 58AA and any other provisions of the Companies Act and Rules framed there under.

INDUSTRIAL RELATIONS:

The company has been enjoying cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company. AUDITORS:

The Statutory Auditors M/s C K S Associates, Chartered Accountants, Hyderabad retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if reappointed.

COST AUDITOR:

Pursuant to Section 233B of the Companies Act, 1956, the Central Government has prescribed Cost Audit of the company. Based on the recommendations of the Audit Committee and with the approval of Central Government Sri N.V.S Kapardhi, Cost Accountant, SRT-148, GHMC No. 7-1-621/468, S.R. Nagar, Hyderabad - 500088 was appointed as Cost Accountant of the Company for the year 2013-14.

COMPANY SECRETARY:

The Company has appointed Sri B.S. Harikrishna, an associate member of the Institute of Company Secretaries of India as whole time Company Secretary of the Company with effect from 25th April, 2013.

REPLIES TO AUDIT OBSERVATIONS:

1. The Auditors have mentioned in their Report that the brought forward reserves being overstated by Rs. 312.82 lakhs due to capitalization of term loan interest during 2007-08, in contravention of AS16 issued by The Institute of Chartered Accountants of India and fixed Assets of the Company have been overstated by the same amount. Consequently, the deprecation for the year is overstated by Rs. 14.27 lakhs and the total overstatement of depreciation is Rs. 71.47 lakhs till March 31, 2013.

With respect to the above, the management already clarified in the year 2007-08 that since, the operations with respect to the first line of production, which was commissioned, were at very insignificant level at that point in time and the plant becoming an integrated one only subsequent to the commissioning of second line, it was not deemed inappropriate to capitalize the interest.

2. The auditors have mentioned in their Annexure report as point 3(d) that there is no terms of repayment of term loans taken from the Directors.

There is no specific term for repayment of loans. The amount will be repaid based on availability of sufficient cash flows.

3. The auditors have mentioned in their Annexure report as point 9(a) that there is Rs. 307.46 lakh of Entry tax, Rs. 43.06 lakhs of Sales tax, Rs.16.69 lakhs of Works Contract Tax Rs. 258.88 lakhs of Income Tax and Rs. 0.23 lakhs of Professional Tax were outstanding for a period of more than 6 months.

As far as Entry Tax is concerned, liability arose on account of High Court decision for non acceptance of exemption claimed by the company along with other assesses and the company is waiting for High Court Decision. As far as Sales tax is concerned, the liability arises due to Input Vat Credit on Stock transfers. The Company has to pay the said amount along with regular taxes and company has sought the commercial tax department for extension of time for making payment in installments. The Company will pay after getting the permission from Commercial Tax Department.

Due to heavy payment obligation to Banks, the Company could not pay the taxes on time. However the Company is hopeful to clear off all the over dues during the year 2013-14. 4. The auditors have mentioned in their Annexure report as point 11 that "interest and principal fallen due during the year Rs. 185.99 lakhs and Rs. 986.28 lakhs respectively".

The company has regularly been paying all installments of Principal and Interest except few monthly installments, due to heavy repayment schedule and tight Cash Flow. However, the company is planning to clear the overdue amount of interest and principal before end of June 2013. PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956:

Name Designation Date of Salary p.m. '' Experience Age Share holding Appoin tment %

Sri. Ch. Krishna Murthy Chairman & Managing Director 02-01-2006 4,00,000 27 years 56 52.07

Sri. Ch. Siddar tha Whole-time Director 02-01-200 2,50,000 7 years 28 9.42

DIRECTORS'' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA):

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

1. that in the preparation of the accounts for the Financial Year ended 31st March, 2013, the applicable accounting standards have been followed along with proper explanation relating to material departures:

2. That the Directors'' had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the said Financial year and of the Profit of the company for the said financial year: 3. That the Directors'' have taken proper and sufficient care 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;

4. That the Directors had prepared the accounts for the year ended 31st March, 2013 on a "going concern" basis. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

Particulars required to be disclosed under 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 as Annexure to this Report.

ACKNOWLEDGEMENT:

Your Directors wish to express their sincere thanks to Bankers, Financial Institutions, Customers, Suppliers for their continued support to the Company. The Directors also acknowledge with gratitude the continued support received from Investors, Shareholders and various Departments of State and Central governments.

Your directors place on record their appreciation of the Sincerity, Commitment and Contribution made by the Employees at all the levels for the smooth functioning of the operations of the Company.

By Order of the Board

Sd- Sd-

Place: Hyderabad CH.MANJULA CH. KRISHNA MURTHY

Date : 30 May, 2013 Director Chairman & Managing Director


Mar 31, 2012

The Directors are happy to present their Nineteenth Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2012.

FINANCIAL RESULTS (Rs. in lakhs)

Particulars 2011-12 2010-11

Gross Income 35192.29 30647.11

Profit before Interest, Depreciation & Tax 5620.30 5144.34

Less: Depreciation 1134.36 1044.99

Less: Interest 3153.35 2473.57

Profit for the year before taxes 1332.59 1625.78

Less: Provision for Taxes 480.47 482.22

Profit after Taxes 852.12 1143.56

Add: Surplus brought forward from Previous Year 2828.74 1685.17

Surplus Carried forward to Balance Sheet 3680.86 2828.74

OPERATIONS:

The fuel oil cost has gone up abnormally during last financial year and the current financial year in view of international barrel price. As the company uses large quantity of fuel oil as energy source by which the profitability of the company during the previous year was affected. Therefore the company has taken up steps to source alternative fuel for saving the cost and improving the profitability which will reflect next financial year. Due to shortage of raw materials the production was not continuous during last financial year. In view of this, we have entered contracts with raw material suppliers during 1st quarter it self for smooth supply for entire year.

FUTURE PLANS:

This year the company is also planning to introduce new product Chrome Oxide Green in its Hyderabad facility which will enhance the company's turnover and profitability significantly. Furthermore the company is also planning for increasing the capacity of derivatives during the current financial year.

The company is striving to achieve the growth @ 40% every year. The necessary basic infrastructure already created and only fine tuning is required to reach the targets. The product mix is already finalized keeping in view of the market requirement and potential. The company also looks for various possibilities to secure long term raw material supplies. The Management is also planning to reduce the debt burden on balance sheet by improving cash accruals.

DIRECTORS:

Sri. Ch.Siddartha Director of the Company retire by rotation and being eligible, offer himself for re-appointment. Sri. Bajrang Lal Bajaj and Smt. Ch.Manjula Directors of the Company retire by rotation and they express their unwillingness for reappointment.

CORPORATE GOVERNACE - CLAUSE 49 OF THE LISTING AGREEMENT:

A separate Section on Corporate governance with a detailed compliance report thereon is annexed to the Annual Report. The Company Secretary Certificate with respect to compliance with the provisions concerning Corporate Governance, as required by clause 49 of Listing Agreement, is also annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT - CLAUSE 49 OF THE LISTING AGREEMENT:

A Separate Section on Management Discussion and analysis Report with a detailed compliance report thereon is annexed to the Annual Report.

DIVIDEND:

The Board of Directors has not recommended any dividend for the current financial year in order to augment internal resources to meet Companies operations.

FIXED DEPOSITS:

Your Company has not accepted any deposits covered by the provisions of Section 58AA of the Companies Act and Rules framed there under.

SHARE CAPITAL:

The Authorized Equity Share Capital of the Company has been increased from Rs.120,000,000/- to Rs. 150,000,000/- and 7% Cumulative Redeemable preference Share Capital of the Company has been increased from Rs. 500,000,000/- to Rs. 600,000,000/- INDUSTRIAL RELATIONS:

The company has been enjoying cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company. AUDITORS:

The Statutory Auditors M/s C K S Associates, Chartered Accountants, Hyderabad retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if reappointed.

REPLIES TO AUDIT OBSERVATIONS:

1. The Auditors have mentioned in their Report as point 4(f)(i) that the brought forward reserves being overstated by Rs. 312.82 lakhs due to capitalization of term loan interest during 2007-08, in contravention of AS16 issued by The Institute of Chartered Accountants of India and fixed Assets of the Company have been overstated by the same amount. Consequently, the deprecation for the year is overstated by Rs. 14.27 lakhs and the total overstatement of depreciation is Rs 57.20 lakhs till March 31, 2012.

With respect to the above, the management already clarified in the year 2007-08 that since, the operations with respect to the first line of production, which was commissioned, were at very insignificant level at that point in time and the plant becoming an integrated one only subsequent to the commissioning of second line, it was not deemed inappropriate to capitalize the interest.

2. The auditors have mentioned in their Annexure report as point 3(d) that there is no terms of repayment of term loans taken from the Directors.

There is no specific term for repayment of loans. The amount will be repaid based on availability of sufficient cash flows.

3. The auditors have mentioned in their Annexure report as point 9(a) that there is "Rs. 250.04 lakh of Entry tax, Rs. 43.06 lakhs of Sales tax and RS. 15.38 lakhs of Works Contract Tax were outstanding for a period of more than 6 months."

As far as Entry Tax is concerned, liability arose on account of High Court decision for non acceptance of exemption claimed by the company along with other assesses and the company is waiting for High Court Decision. As far as Sales tax is concerned, the liability arises due to Input Vat Credit on Stock transfers. The Company has to pay the said amount along with regular taxes and company has sought the commercial tax department for extension of time for making payment in installments. The Company will pay after getting the permission from commercial tax department.

4. The auditors have mentioned in their Annexure report as point 11 that "interest and principal fallen due during the year Rs.149.75 lakhs and Rs. 528.69 lakhs respectively".

The company has regularly been paying all installments of Principal and Interest except few monthly installments, due to heavy repayment schedule and tight Cash Flow. However the same was paid after March 2012. Therefore the company is not in default of repayment.

PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956:

Name Designation Salary p.m. Experience Age

Sri. Ch. Krishna Murthy Chairman & Managing Director Rs.4,00,000 26 years 55

Sri. Ch. Siddartha Whole-time Director Rs.2,50,000 6 years 27

DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA):

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

1. that in the preparation of the accounts for the Financial Year ended 31st March, 2012, the applicable accounting standards have been followed along with proper explanation relating to material departures:

2. That the Directors' had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the said Financial year and of the Profit of the company for the said financial year:

3. That the Directors'have taken proper and sufficient care 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;

4. That the Directors had prepared the accounts for the year ended 31st March, 2012 on a "going concern" basis.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

Particulars required to be disclosed under 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 as Annexure to this Report.

ACKNOWLEDGEMENT:

Your Directors wish to express their sincere thanks to Bankers, Financial Institutions, Customers, suppliers for their continued support to the Company. The Directors also acknowledge with gratitude the continued support received from Investors, Shareholders and various Departments of State and Central governments.

Your directors place on record their appreciation of the Sincerity, Commitment and Contribution made by the Employees at all the levels for the smooth functioning of the operations of the Company.

By Order of the Board

sd/- sd/-

Place: Hyderabad CH.MANJULA CH. KRISHNA MURTHY

Date : July 30, 2012 Director Chairman & Managing Director


Mar 31, 2010

The Directors are happy to present their Seventeenth Annual Report on the business and operations of the Company and the Financial Accounts for the year ended 31st March, 2010.

FINANCIAL RESULTS

(Rs. in lakhs)

Particulars 2009-10 2008-09

Gross Income 22209.46 14406.35

Profit before Interest, Depreciation & Tax 3803.18 1710.56

Less: Depreciation 997.87 762.27

Less: Interest 2103.95 1833.83

Profit for the year before taxes 701.36 (885.54)

Less: Provision for Taxes 540.10 77.63

Profit after Taxes 161.26 (807.91)

Add: Surplus brought forward from Previous Year 1523.91 2331.82

Surplus Carried forward to Balance Sheet 1685.17 1523.91

OPERATIONS:

During the Financial Year 2009-10, the Company has achieved the net sales of Rs.206 Crores, against the projections of Rs.209 Crores thereby achieved 98% sales against the projections. By exports to various countries across globe the quality products, the Company has joined the top list of Chromium Chemicals manufacturers. The Company got recognition among all interested sections of the industry as reliable supplier, buyer and manufacturer. Internally all the systems are in place and all the staff members got excellent training and company in the process of going for various accreditations. Your Company also received excellent support from all our Bankers.

FUTURE PLANS:

Since the new plant operations were stabilized, the company may grow at 50% every year for a continuous period of 5 years subject to favorable market conditions. The company exports may grow at 100% during the current financial year. Your company will shine for excellence in all formats such as Human Relations, Productivity, Quality and Service to the customers.

DIRECTORS:

Sri Bajrang Lal Bajaj and Sri. U. Dileep Kumar, Directors of the Company retires by rotation and being eligible, offer themselves for re-appointment.

CORPORATE GOVERNACE - CLAUSE 49 OF THE LISTING AGREEMENT:

A separate Section on Corporate governance with a detailed compliance report thereon is annexed to the Annual Report. The Company Secretary Certificate with respect to compliance with the provisions concerning Corporate Governance, as required by clause 49 of Listing Agreement, is also annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT - CLAUSE 49 OF THE LISTING AGREEMENT:

A Separate Section on Management Discussion and analysis Report with a detailed compliance report thereon is annexed to the Annual Report.

FIXED DEPOSITS:

Your Company has accepted un secured loans for an amount of Rs.200 lakh and complied with the provisions of section 58A and 58AA read with companies (Acceptance of deposit) rules 1975 and filled statement in lieu of advertisement with the Registrar of Companies, Andhra Pradesh on date 29.05.2010

INDUSTRIAL RELATIONS:

The company enjoyed cordial relations with its employees at all levels. Your Directors record their appreciation of the support and co-operation of all employees in the accelerated growth of the Company.

SHARE CAPITAL:

The Company has issued and allotted 75,00,000 7% Redeemable Preference Shares of Rs. 10/- each during the current Financial Year.

DIVIDEND :

The Board of Directors has not recommended any dividend for the current financial year.

AUDITORS:

The Statutory Auditors M/s C K S Associates, Chartered Accountants, Hyderabad retire at the ensuing Annual General Meeting and have confirmed their eligibility and willingness to accept the office, if reappointed.

REPLIES TO AUDIT OBSERVATIONS:

1. The Auditors have mentioned in their Report as point 4(f) that the brought forward reserves being overstated by Rs.312.82 lakhs due to capitalization of term loan interest during 2007-08, in contravention of AS16 issued by The Institute of Chartered Accountants of India and fixed Assets of the Company have been overstated by the same amount. Consequently, the deprecation for the year is overstated by Rs.14.27 lakhs and the total overstatement of depreciation is Rs.28.66 lakhs till March 31, 2010.

With respect to the above, the management already clarified in the year 2007-08 that since, the operations with respect to the first line of production, which was commissioned, were at very insignificant level at that point of time and the plant becoming an integrated one only subsequent to the commissioning of second line, it was not deemed inappropriate to capitalize the interest.

2. The auditors have mentioned in their Annexure to the report as point 3(d) that there is no terms of repayment of term loans taken from the Directors.

There is no specific term for repayment of loans. The amount will be repaid based on availability of sufficient cash flows.

3. The auditors have mentioned in their Annexure to the report as point 9(a) that "Rs.107.02 lakh of entry tax, Rs.55.46 lakhs of Sales tax, Rs.15.69 lakhs of Works Contract Tax and 0.12 lakhs of TCS were outstanding for a period of more than 6 months."

As far as Entry Tax is concerned, liability arose on account of High Court decision for non acceptance of exemption claimed by the company along with other assesses and the company is making arrangement. As far as Sales tax is concerned, the liability arises due to Input Vat Credit on Stock transfers. The Company has to pay the said amount along with regular taxes and company has sought the commercial tax department for extension of time and making payment in installments and the balance will be paid within short period.

4. The auditors have mentioned in their Annexure to the report as point 11 that "interest and principal fallen due during the year Rs.170.75 lakhs and Rs.533.05 lakhs respectively".

As it has taken more time for stabilization of its Vizag Plant beyond the expected time, the cash flows were tight and hence could not make the payment. However, the Company is taking steps to clear off the dues before June 2010 ending.

PARTICULARS OF EMPLOYEES UNDER SECTION 217 (2A) OF THE COMPANIES ACT, 1956:

Name Designation Salary p.m. Experience Age

Shri. Ch. Krishna Chairman & murthy Managing Rs. 4,00,000 24 years 53 Director

Shri. Ch. Siddartha Whole-time Director Rs. 2,50,000 4 years 25

Smt Ch. Manjula Director Rs. 3,75,000 16 Years 45



Note:

1. Shri. Ch. Siddartha is appointed as Whole-time Director w.e.f 19th September 2009.

2. Smt Ch.Manjula resigned as Whole-time Director w.e.f 31st August 2009 and continuing as Non-executive Director of the company.

DIRECTORS RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA):

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

1. that in the preparation of the accounts for the Financial Year ended 31st March, 2010, the applicable accounting standards have been followed along with proper explanation relating to material departures:

2. That the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the said Financial year and of the Profit/loss of the company for the said financial year:

3. That the Directors have taken proper and sufficient care 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;

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

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo:

Particulars required to be disclosed under 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 as Annexure to this Report.

ACKNOWLEDGEMENT:

Your Directors wish to express their sincere thanks to Bankers, Financial Institutions, Customers, suppliers for their continued support to the Company. The Directors also acknowledge with gratitude the continued support received from Investors, Shareholders and various Departments of State and Central governments.

Your directors place on record their appreciation of the Sincerity, Commitment and Contribution made by the Employees at all the levels for the smooth functioning of the operations of the Company.

By Order of the Board Sd/- Sd/- Place:Hyderabad CH.MANJULA CH.KRISHNA MURTHY Date :29.05.2010 Director Chairman &Managing Director

 
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