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Notes to Accounts of Welspun India Ltd.

Mar 31, 2015

(i) Rights, preferences and restrictions attached to shares Equity Shares:

The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend, in case proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(e) Shares alloted as fully paid up pursuant to contract(s) without payment being received in cash (during 5 years immediately preceeding March 31,2015):

10,475,496 equity shares of Rs. 10 each fully paid were issued in January 2013 to the erstwhile shareholders of Welspun Global Brands Limited (Formerly known as Welspun Retail Limited) pursuant to the composite scheme of arrangement between Welspun Global Brands Limited, the Company and Welspun Retail Limited without payment being received in cash.

2 : Long-term Borrowings

(a) Nature of security and terms of repayment for secured debentures :

The Company has alloted 1,000 debentures on March 31,2015 aggregating to Rs. 1,000 million, which carry interest rate of 10.40% p. a. payable half yearly. These debentures are redeemable at the end of 3 years from the date of allotment.

The Company is in the process of creating security against these debentures by way of first pari passu charge on the fixed assets of the Company.

II Defined Benefit Plan

Contribution to Gratuity Fund (Funded Defined Benefit Plan)

1. The Company operates a gratuity plan through the "Welspun India Limited Employees Gratuity Trust". Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.

The liability for leave entitlement and compensated absences as at year end is Rs. 88.03 million (March 31,2014: Rs. 60.79 million).

3 : Contingent Liabilities

(Rs. million)

As at As at Description March 31, 2015 March 31,2014

Excise, Customs and Service Tax Matters 341.24 344.28

Income Tax Matters 135.77 135.77

Stamp Duty Matter 4.46 4.46

Sales Tax 55.41 30.96

Claims against Company not acknowledged as debts 2.24 2.24

a) It is not practicable for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

b) The Company does not expect any reimbursements in respect of the above contingent liabilities.

4 The Company has issued corporate guarantees aggregating Rs. 8,960.83 million as at the year end (March 31, 2014: Rs. 9,913.94 million) on behalf of Welspun Global Brands Limited (WGBL) (formerly known as Welspun Retail Limited), Welspun USA Inc. (WUSA), Welspun Captive Power Generation Limited (WcPGL) and CHT Holdings Limited (CHTHL). Liability outstanding for which corporate guarantees have been issued aggregates Rs. 3,198.89 million as on March 31,2015 (March 31,2014: Rs. 4,809.63 million).

5 In the previous year, with effect from July 1,2013, the management re-assessed the method of providing depreciation on its plant and machinery (other than electrical installations) after taking into consideration the type of assets, nature of their use etc. Based on the re-assessment, the Company changed the method of providing depreciation from straight- line method to reducing balance method as it was considered that it would result in more appropriate preparation and presentation of the Financial Statements of the Company. Accordingly, depreciation was recalculated under the reducing balance method for the period from the date on which the assets came into use upto June 30, 2013 in accordance with Accounting Standard 6 "Depreciation Accounting" notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended]. The incremental depreciation of Rs. 4,630.96 million for the period upto June 30, 2013 arising from the change was provided in the previous year. In addition to the aforementioned incremental depreciation, depreciation for the period July 1, 2013 to March 31,2014 was higher by Rs.107.13 million due to the change in the method. Accordingly, depreciation and amortization expenses for the year ended March 31,2014 was higher by Rs. 4,738.09 million.

6 The Company has utilised deferred tax assets recognized in earlier period aggregating Rs. 310.70 million on the incremental unabsorbed Income-tax depreciation arising out of its treatment of certain Excise and Value Added Tax incentives as 'capital receipts' for income tax purposes. Income Tax authorities have passed orders treating these incentives as revenue in nature. The Company has filed an appeal against the aforesaid orders. If the final decision in the matter is eventually decided against Welspun India Limited, then the current tax expense could be higher by Rs. 310.70 million.

On June 30, 2009, the Company issued Employee Stock Options (ESOP) under the Employee Stock Options Scheme (the "Scheme") to employees of the Company with a right to subscribe to equity shares ("New Options") at a price of Rs. 35.60 per equity share (closing market price as on June 30, 2009). The salient features of the Scheme are as under:

i) Vesting: Options to vest over a period of four years from the date of their grants as under:

- 20% of the Options granted to vest at each of the 1st and 2nd anniversaries of the date of grant.

- 30% of the Options granted to vest at each of the 3rd and 4th anniversaries of the date of grant.

ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise, the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.

The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method as permitted by the SEBI Guidelines and the Guidance Note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India in respect of stock options granted. The value of underlying share has been determined by an independent valuer. Since, on the date of grant of option, quoted market price of the underlying equity shares of the Company was equal to the exercise price of an option, no expense or liability arising from the Scheme has been recognised.

7 : Segment Information for the year ended March 31,2015.

i) Information about Primary Business Segment

The Company is exclusively engaged in the business of Home Textiles which, in the context of Accounting Standard 17 on Segment Reporting is considered to constitute a single primary segment. Thus, the segment revenue, segment results, total carrying amount of segment assets, total carrying amount of segment liabilities, total cost incurred to acquire segment assets, total amount of charge for depreciation during the period are all as reflected in the financial statements for the year ended March 31,2015 and as on that date.

ii) Information about Secondary Geographical Segments:

The Company is primarily engaged in sales to customers located in India. Consequently the Company does not have separate reportable geographical segments for March 2015.

8 : Related Party Disclosures

i) Relationships

(a) Control

Holding Company

Krishiraj Trading Limited (KTL) (through own shareholding and through shares held by its subsidiary company) (Refer Note 3(b))

Subsidiary Companies

Besa Developers and Infrastructure Private Limited (BESA)

Welspun Global Brands Limited (WGBL) (Formerly known as Welspun Retail Limited (WRL)

Welspun Holdings Private Limited, Cyprus (WHPL)

Welspun Home Textiles UK Limited (WHTUKL)

(Held through WHPL)

Welspun UK Limited (WUKL) (Held through CHTL)

CHT Holdings Limited (CHTHL) (Held through WHTUKL)

Welspun USA Inc., USA (WUSA)

Welspun Decorative Hospitality LLC (WDHL)

Welspun Captive Power Generation Limited (WCPGL)

Anjar Integrated Textile Park Developers Private Limited (AITPDPL)

Welspun Anjar SEZ Limited (WASEZ)

Kojo Canada Inc. (Held through WDHL)

Welspun Mauritius Enterprises Limited (WMEL)

Novelty Home Textiles SA de CV (NHTSC) (Held through WMEL)

Christy Home Textiles Limited (CHTL)

(Held through CHTHL)

Christy 2004 Limited (CHT 2004) (Held through WUKL)

Christy Welspun GmbH (CWG) (Held through WUKL)

Christy UK Limited (CUKL) (Held through CHTL)

ER Kingsley (Textiles) Limited (ERK) (Held through CHTL)

Christy Lifestyle LLC, USA (CLL)

Welspun Zucchi Textiles Limited (WZTL) (with effect from January 30, 2015)

(c) Enterprises over which Key Management Personnel or relatives of such personnel exercise significant influence or control and with whom transactions have taken place during the year

Welspun Investments and Commercials Limited (WICL)

Welspun Corp Limited (WCL)

Welspun Steel Limited (WPSL)

Welspun Tradings Limited (WTL)

Welspun Wintex Limited (WWL)

Welspun Mercantile Limited (WML)

Welspun Energy Limited (WEL)

Welspun Logistics Limited (WLL)

Welspun Syntex Limited (WSL)

Welspun Realty Private Limited (WRPL)

Mertz Securities Limited (MSL)

Welspun Polybuttons Limited (WPBL)

Wel-treat Enviro Management Organisation Limited (WEMO)

Welspun Maxsteel Limited (WMSL)

Welspun Projects Limited ( WPL)

Methodical Investment and Trading Company Private Limited (MITCPL) Welspun FinTrade Limited (WFTL)

Welspun Finance Limited (WFL)

Welspun Foundation for Health and Knowledge (WFHK)

Welspun Infra Developers Limited (WIDL)

Technopak Advisors Private Limited (TAPL)

Welspun Infratech Limited (W INFRA)

(d) Key Management Personnel

Balkrishan Goenka (BKG) Rajesh Mandawewala (RRM) Dipali Goenka (DBG)

(e) Relatives of Key

Management Personnel

Radhika Goenka (RBG) Abhishek Mandawewala (ARM) Khushboo Mandawewala (KAM) Yash Mandawewala (YRM)

9 : Leases

Where the Company is a lessee:

Operating Lease

The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.

The aggregate rental expenses of all the operating leases for the year are Rs. 65.96 million (Previous Year: Rs. 86.25 million).

10 : Derivative Instruments outstanding as at March 31,2015 :

The Company is exposed to foreign currency fluctuations on foreign currency assets/ liabilities, payables denominated in foreign currency.

In line with the company's risk management policies and procedures, the Company enters into foreign currency forward contracts and swap contracts to manage its exposure. These contracts are for a period of maximum twelve months and forecasted transactions are expected to occur during the same period.

11 : Interest in Joint Venture

a. The Company has the following investment in a jointly controlled entity:

b. The Company's share of contingent liability of WZTL is Rs. Nil (March 31,2014: Rs. 32.07 million).

12 Prior year comparatives have been reclassified to conform with the current year's presentation, wherever applicable.


Mar 31, 2014

General Information

Welspun India Limited (WIL) is a leading manufacturer of wide range of home textile products, mainly terry towels, bed linen products and rugs. The Company is a public limited company and is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

1.(a) Rights, preferences and restrictions attached to shares Equity Shares:

The company has one class of equity shares having a par value of Rs.10 per share. Each shareholder is eligible for one vote per share held. The dividend, in case proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(b) Shares alloted as fully paid up pursuant to contract(s) without payment being received in cash (during 5 years immediately preceeding March 31, 2014):

10,475,496 equity shares of Rs. 10 each fully paid were issued in January 2013 to the erstwhile shareholders of Welspun Global Brands Limited (Formerly known as Welspun Retail Limited) pursuant to the composite scheme of arrangement between Welspun Global Brands Limited, the Company and Welspun Retail Limited without payment being received in cash.

Note :

The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-process, finished goods, semi finished goods, stores, spares and book debts and other current assets of the Company and second charge on entire fixed assets of the Company.

Note :

Acceptance includes unsecured vendor financing of Rs. 1,262.69 million (Previous year Rs. 111.09 million) from various banks.

Note:

There are no amounts due for payment to the Investor Education and Protection Fund under Section 205C of the Companies Act, 1956 as at the year end.

II Defined Benefit Plan

Contribution to Gratuity Fund (Funded Defined Benefit Plan)

The Company operates a gratuity plan through the "Welspun India Limited Employees Gratuity Trust". Every employee is entitled to a benefit equivalent to fifteen days salary last drawn for each completed year of service in line with the Payment of Gratuity Act, 1972. The same is payable at the time of separation from the Company or retirement, whichever is earlier.

2 Contingent Liabilities

(Rs. million)

As At As At Descrlption March 31, 2014 March 31, 2013

Excise, Customs and Service Tax Matters 344.28 632.08

Income Tax Matters 135.77 135.77

Stamp Duty Matter 4.46 4.46

Sales Tax 30.96 30.96

Claims against Company not acknowledged as debts 2.24 3.66

(a) It is not practical for the Company to estimate the timing of cash outflows, if any, in respect of the above pending resolution of the respective proceedings.

(b) The Company does not expect any reimbursements in respect of the above contingent liabilities.

3 The Company has issued corporate guarantees aggregating Rs. 9,913.94 million as at the year end (March 31, 2013: Rs. 8,852.01 million) on behalf of Welspun Global Brands Limited (WGBL) (formerly known as Welspun Retail Limited), Welspun USA Inc. (WUSA), Welspun Home Textiles UK limited (WHTL), Welspun Captive Power Generation Limited (WCPGL) and CHT Holdings Limited (CHTHL). Liability outstanding for which corporate guarantees have been issued aggregates Rs. 9,065.94 million as on March 31, 2014 (March 31, 2013: Rs. 7,672.85 million)

4 During the quarter ended September 30, 2013, the management re-assessed the method of providing depreciation on its plant and machinery (other than electrical installations) after taking into consideration the type of assets, nature of their use etc. Based on the re-assessment, the Company changed the method of providing depreciation from straight-line method to reducing balance method as it was considered that it would result in more appropriate preparation and presentation of the Financial Statements of the company. Accordingly, depreciation was recalculated under the reducing balance method for the period from the date on which the assets came into use upto June 30, 2013 in accordance with Accounting Standard 6 "Depreciation Accounting" notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended]. The incremental depreciation of Rs. 4,630.96 million for the period upto June 30, 2013 arising from the change has been provided during the year. In addition to the aforementioned incremental depreciation, depreciation for the period July 1, 2013 to March 31, 2014 is higher by Rs.107.13 million due to the change in the method. Accordingly, depreciation and amortization expenses for the year ended March 31, 2014 is higher by Rs. 4,738.09 million and profit before tax for the year ended March 31, 2014 is lower by Rs. 4,738.09 million with a consequential impact on profit after tax for the year.

Had the method of depreciation not been changed, profit before tax for the year ended March 31, 2014 would have been Rs. 5,184.42 million as against the profit before tax of Rs. 446.33 million.

5 The Company has utilised deferred tax assets recognized in earlier period aggregating Rs. 310.70 million on the incremental unabsorbed Income-tax depreciation arising out of its treatment of certain Excise and Value Added Tax incentives as ''capital receipts'' for income tax purposes. Income Tax authorities have passed orders treating these incentives as revenue in nature. The Company has filed an appeal against the aforesaid orders. If the final decision in the matter is eventually decided against Welspun India Limited, then the current tax expense could be higher by Rs. 310.70 million.

6 During an earlier year, the Company had inadvertently made certain investments aggregating Rs. 1,197.29 million in the bonds issued by certain public sector undertakings without obtaining prior approval of the shareholders by way of a special resolution as required under Section 372A of the Companies Act, 1956. Subsequently, these investments were sold. Further, the Company had filed a suo motu application to the Company Law Board in the financial year 2012-13 for compounding of this offence. The offence committed under Section 372A was compounded against the Company, managing director, company secretary and a former director on payment of Rs. 2,000 by each of the aforesaid defaulters.

7 Details of Employees Stock Options

On June 30, 2009, the Company issued Employee Stock Options (ESOP) under the Employee Stock Options Scheme (the "Scheme") to employees of the Company with a right to subscribe to equity shares ("New Options") at a price of Rs. 35.60 per equity share (closing market price as on June 30, 2009). The salient features of the Scheme are as under:

(i) Vesting: Options to vest over a period of four years from the date of their grants as under:

* 20% of the Options granted to vest at each of the 1st and 2nd anniversaries of the date of grant.

* 30% of the Options granted to vest at each of the 3rd and 4th anniversaries of the date of grant.

(ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise, the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.

The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method as permitted by the SEBI Guidelines and the Guidance Note on Accounting for Employee Share Based Payments issued by the Institute of Chartered Accountants of India in respect of stock options granted. The value of underlying share has been determined by an independent valuer. Since, on the date of grant of option, quoted market price of the underlying equity shares of the Company was equal to the exercise price of an option, no expense or liability arising from the Scheme has been recognised.

8 Segment Information for the year ended March 31, 2014.

(i) Information about Primary Business Segment

The Company is exclusively engaged in the business of Home Textiles which, in the context of Accounting Standard 17 on Segment Reporting, issued by the Institute of Chartered Accountant of India, is considered to constitute a single primary segment. Thus, the segment revenue, segment results, total carrying amount of segment assets, total carrying amount of segment liabilities, total cost incurred to acquire segment assets, total amount of charge for depreciation during the period are all as reflected in the financial statements for the year ended March 31, 2014 and as on that date.

(ii) Information about Secondary Geographical Segments:

The Company is exclusively engaged in sales to customers located in India. Consequently the Company does not have separate reportable geographical segments for March 2014.

b. The Company''s share of contingent liability of WZTL is Rs. 32.07 million (March 31, 2013: Rs. 32.07 million).

9 Leases

Where the Company is a lessee:

Operating Lease

The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.

The aggregate rental expenses of all the operating leases for the year are Rs. 86.25 million (Previous Year: Rs. 99.78 million).

* Provision for doubtful loans and advance of Rs.15.56 million (March 31, 2013 : Nil) has been made.

** On March 27, 2013, Welspun AG, an erstwhile wholly owned subsidiary of the Company was liquidated. Hence, loan given to Welspun AG, Switzerland has been written off.

10 Derivative Instruments outstanding as at March 31, 2014 :

The Company is exposed to foreign currency fluctuations on foreign currency assets/ liabilities, payables denominated in foreign currency. In line with the company''s risk management policies and procedures, the Company enters into foreign currency forward contracts and swap contracts to manage its exposure. These contracts are for a period of maximum twelve months and forecasted transactions are expected to occur during the same period.

(a) Net Loss on derivative instruments of Rs. 68.02 million recognised in Hedging Reserve as on March 31, 2014, is expected to be recycled to the Statement of Profit and Loss by March 2015.

(b) As at the Balance Sheet date, the foreign currency exposure not hedged by a derivative instrument or otherwise aggregates Rs. 494.15 million (March 31, 2013 Rs.124.25 million) for receivables (net of provisions) and Rs. 1,009.31 million (March 31, 2013 Rs. 1,418.08 million) for payables.


Mar 31, 2013

1. General Informaton

Welspun India Limited (WIL) is a leading manufacturer of wide range of home textle products, mainly terry towels, bed linen products and rugs. The Company is a public limited company and is listed on the Bombay Stock Exchange (BSE) and the Natonal Stock Exchange (NSE).

2 Contngent Liabilites

(Rs. million)

Descripton As At March As At March 31, 2013 31, 2012

Excise, Customs and Service Tax Maters 696 46 677 48

Income Tax Maters 135 77

Stamp Duty Mater 4 46 4 46

Sales Tax 36 81 36 44

Corporate Guarantees (Refer Note 35) 7,672.85 7,705.13

Bank Guarantees 82 49 166 89

Claims against Company not acknowledged as debts 3 66 5 51

3 The Company has issued corporate guarantees aggregatng Rs. 8,852.01 million as at the year end (March 31, 2012: Rs. 8,891.90 million) on behalf of Welspun Retail Limited (WRL), Welspun USA Inc. (''WUSA''), Welspun Home Textles UK limited (''WHTL''), Welspun Captve Power Generaton Limited (WCPGL) and CHT Holdings Limited (''CHTHL''). Liability outstanding against which corporate guarantees have been issued aggregates Rs. 7,672.85 million as on March 31, 2013 (March 31, 2012: Rs. 7,705.13 million)

4 During an earlier year, the Company had recognised deferred tax assets aggregatng Rs. 296.58 million on the incremental unabsorbed Income-tax depreciaton arising out of its treatment of certain Excise and Value Added Tax incentves as ''capital receipts'' for income tax purposes. Income Tax authorites have passed orders treatng these incentves as revenue in nature. The Company has fled appeals against the aforesaid orders. If the fnal decision in the mater is eventually decided against Welspun India Limited, then the carrying value of the Minimum Alternate Tax Credit Enttlement assets at the year end could be signifcantly impacted.

5 The composite scheme of arrangement (the "Scheme") between Welspun Global Brands Limited (WGBL) (Transferor Company), the Company (First Transferee Company) and Welspun Retail Limited ("WRL"- Second Transferee Company) was approved by the High Court of Gujarat at Ahmedabad by its order dated November 26, 2012. The order has been fled with the Registrar of Companies on December 7, 2012. Pursuant to the Scheme 10,475,496 equity shares of Rs. 10 each included in Share Suspense Account were alloted during the year.

6 The Company''s wholly owned subsidiary in Switzerland, Welspun AG (WAG) has been liquidated on March 27, 2013. Consequently, the Company has writen of investment in WAG aggregatng Rs.739.12 million and outstanding loan and advances aggregatng Rs.1,304.43 million from WAG. The investment and loan had been fully provided in earlier years. Accordingly, the provision has been writen back during the year. Further, the company had made an incremental provision for the aforesaid doubtul loan arising out of the restatement upto the date of liquidaton of the foreign currency balance as at March 31, 2012. The provision aggregatng Rs. 83.85 million has been included in extraordinary items and the corresponding gain on restatement is neted of in other expenses.

7 During the previous year, the Company had inadvertently made certain investments aggregatng Rs. 1,197.29 million in the bonds issued by certain public sector undertakings without obtaining prior approval of the shareholders by way of a special resoluton as required under Secton 372A of the Companies Act, 1956. Subsequent to March 2012, these investments were sold. Further, the Company has fled a suo motu applicaton to the Company Law Board in the Financial Year 2012-13 for the compounding of this ofence and adjudicaton by the Company Law Board is pending.

8 Details of Employees Stock Optons

On June 30, 2009, the Company issued Employee Stock Optons (ESOP) under the Employee Stock Optons Scheme (the "Scheme") to employees of the Company with a right to subscribe to equity shares ("New Optons") at a price of Rs. 35.60 per equity share (closing market price as on June 30, 2009) with an opton to existng grantees, who were granted optons on May 17, 2006 ("Old Optons"), to receive New Optons on surrender of Old Optons. All employees holding Old Optons on June 30, 2009 chose to surrender the Old Optons. The salient features of the Scheme are as under:

(i) Vestng : Optons to vest over a period of four years from the date of their grants as under:

- 20% of the Optons granted to vest at each of the 1st and 2nd anniversaries of the date of grant.

- 30% of the Optons granted to vest at each of the 3rd and 4th anniversaries of the date of grant.

(ii) Exercise : Optons vested with an employee will be exercisable within 3 years from the date of their vestng by subscribing to the number of equity shares in the rato of one equity share for every opton at the Exercise Price. In the event of cessaton of employment due to death, resignaton or otherwise, the Optons may lapse or be exercisable in the manner specifcally provided for in the Scheme.

9 Segment Informaton for the year ended March 31, 2013.

(i) Informaton about Primary Business Segment

The Company is exclusively engaged in the business of Home Textles which, in the context of Accountng Standard 17 on Segment Reportng, issued by the Insttute of Chartered Accountants of India, is considered to consttute a single primary segment. Thus, the segment revenue, segment results, total carrying amount of segment assets, total carrying amount of segment liabilites, total cost incurred to acquire segment assets, total amount of charge for depreciaton during the period are all as refected in the fnancial statements for the year ended March 31, 2013 and as on that date.

(ii) Informaton about Secondary Geographical Segments:

The Company is exclusively engaged in sales to customers located in India. Consequently the Company does not have separate reportable geographical segments for March 2013.

10 Interest in Joint Venture

a. The Company has accounted the investments in Joint Venture in Welspun Zucchi Textles Limited (WZTL) in accordance with Accountng Standard 13, Accountng for Investments.

b. The Company''s share of contngent liability of WZTL is Rs. 32.02 million (March 31, 2012: Rs. 29.76 million).

c. The Company''s share of the aggregate amounts of assets and liabilites as on March 31, 2013 and income and expenditures of WZTL for the year ended March 31, 2013 are as under :

11 Leases

Where the Company is a lessee:

Operatng Lease

The Company has taken various residental, ofce premises, godowns, equipment and vehicles under operatng lease agreements that are renewable on a periodic basis at the opton of both the lessor and the lessee. The inital tenure of lease is generally for eleven months to sixty months.

The aggregate rental expenses of all the operatng leases for the year are Rs. 99.78 million (Previous Year: Rs. 76.30 million).

12 Derivatve Instruments outstanding as at March 31, 2013 :

The Company is exposed to foreign currency fuctuatons on foreign currency assets/ liabilites, payables denominated in foreign currency. In line with the company''s risk management policies and procedures, the Company enters into foreign currency forward contracts and swap contracts to manage its exposure. These contracts are for a period of maximum twelve months and forecasted transactons are expected to occur during the same period.

13 Prior year comparatves have been reclassifed to conform with the current year''s presentaton, wherever applicable.


Mar 31, 2011

1. Contingent Liabilites:

Description As at As at March 31, March 31, 2011 2010 Rs.million Rs. million

Excise, Customs and Service Tax

Alleged improper re-credit of duty paid 318.58 318.58 through PLA under Notification no. 39/2001-CE dated July 31, 2001 in respect of goods sold from the factory during the period from February 2006 to September 2007. The Assistant Commissioner of Central Excise passed the order against the Company.The Company paid pre-deposit of Rs. 100 million as required by Central Excise authorities and obtained stay on payment of remaining amount. The case was remanded back to the lower authority to consider the claim of the Company by Commissioner Appeals.

Further, separate show cause notice had been issued by Commissioner of Central Excise seeking recovery of allegedly improper re-credit of duty along with interest and penalty. The Company is in the process of filing reply against this show cause notice. The case is remanded back by Tribunal to lower authority and directed them for reassessments of liability vide order dated March 29, 2011.

Alleged improper grant of refund for 69.57 69.57 duty paid through PLA by Assistant Commissioner under Rule 18 of Central Excise Rules during the period from September 2005 to July 2006. The Commissioner (Appeals) of Customs and Central Excise had passed the order against the Company. TheCompany has filed Revision Application with the Joint Secretary,Ministry of Finance, Department of Revenue.

Alleged improper Cenvat credit availed 3.67 3.50 and non-payment of excise duty under Notification No. 214/86 -CE dated 25-03-1986, on furnace oil used for manufacturing of goods on job work during the period April 2002 to May 2005. The Company has filed its reply against the show cause notices issued by Joint Commissioner and Commissioner of Customs and Central Excise, Daman.

Alleged improper abatement of service 50.46 47.98 tax on payments made to Goods Transport Agency under Notification No. 32/04-ST dated December 31,2004. The Company has filed its reply against the show cause notice issued by the Commissioner of Central Excise and Customs, Daman.

Alleged availment of service tax credit - 0.16 based on improper documents.The Company has received an order from Commissioner, Central Excise andCustoms, Daman demanding the amount of duty, interest and penalty.The Company filed an appeal against the order with Commissioner of CentralExcise & Customs (Appeals), Daman

Alleged improper Cenvat credit availed on 2.00 1.91 "racks"classified as capitalgoods, which are used for storage of finished goods. The Companyreceived an order from Additional Commissioner, Central Excise &Customs; Daman dated 11.02.2009 demanding the amount of duty,interest and penalty. The Company paid Rs.0.69 million under protest and filed an appeal against the order with Commissioner of Central Excise & Customs (Appeals), Daman in March 2009. The Company has obtained stay order with respect to the payment of duty.

Alleged improper availment of Cenvat - 0.04 credit on service tax paid oninsurance premium paid for availing insurance services that are not used in or in relation to manufacture of final products. During the year Commissioner of Central Excise and Customs (Appeals), Daman decided this matter in favour of the Company.

Alleged non-reversal of cenvat credit 10.52 96.40 contained in raw material stock,raw material in process and raw material contained in finished stock on exit from cenvat scheme. The Commissioner of Central Excise issued a show cause notice seeking recovery of the non- reversed amount. During the year, the Company has received favorable order with respect to part of the amount in dispute.The Company has filed an appeal before Commissioner of Central Excise and Customs (Appeals) for the balance amount disallowed.

Alleged erroneous sanction of refund of 3.04 3.04 service tax by Assistant Commissioner of Central Excise. The Deputy Commissioner of Central Excise issued a show cause notice regarding recovery of the refund erroneously sanctioned. The Company has submitted its reply to the Deputy Commissioner of Central Excise.

Alleged improper availment of Cenvat 20.24 - credit on service tax paid on sales commission.The Company has received a show-cause notice from Assistant Commissioner of Central Excise and Customs, Vapi against which a reply has been filed by the Company.

Alleged improper availment of Cenvat 7.49 - credit on service tax on outward freight of transportation for export clearance. The Company has received a show-cause notice from Additional Commissioner Central Excise Custom and Service Tax (Daman) against which reply has been submitted to Commissioner of Central Excise.

Alleged improper availment of Cenvat 0.04 - credit on service tax on commission on sales. The Company has submitted its reply for the show cause notice received to Commissioner of Central Excise.

Alleged misinterpretation of Notification 1.24 - No 4/ 2006-2007 under the Customs Act for which a reply to the show causes notice has been submitted.

Alleged availment of Cenvat credit on 0.20 - service tax. The Company has received an order from Commissioner, Central Excise and Customs, demanding the amount of duty, interest and penalty. The Company has filed an appeal against the order with Commissioner of Central Excise and Customs (Appeals).

Alleged dual availment of duty drawback 1.14 - and DEPB scheme simultaneously. Appeal of Central Excise department was rejected by Central Excise and Customs (Appeals). The Central Excise Department has filed appeal with Revisionary Authority, New Delhi.

Alleged improper payment of service tax on 0.35 - services received and used in export of goods and applied for refund under 17/2009 -ST without taking credit of the same. The department has rejected the refund claims made by the Company and issued a show cause notice dated March 7, 2011. The Company has filed its reply against the show cause notice to Deputy Commissioner, Central Excise Division, Gandhidham.

Alleged availment by the Company re-credit 3.74 - under 39/2001-CE to the extent of balance of cenvat credit lying as at 31-03-2005, which was rejected by the department. The show cause notice is being contested by the Company with Additional Commissioner of Central Excise and Service tax on the grounds of devoid of merits.

Stamp Duty :

Disputed stamp duty liability on De-merger 4.46 4.46 Scheme. The Company paid Rs.1.74 million under protest.

Sales Tax :

The Deputy Commissioner of Sales Tax has 1.28 1.17 issued an assessment order for the financial year 2003 to 2004 and raised the demand on purchase of Furnace oil during the year 2003 to 2004 in respect of purchases made by the Company at a concessional rate of tax. The Company had deposited Rs. 0.09 million under protest and has filed an appeal with the Joint Commissioner of Sales Tax, Vadodra.

The Deputy Commissioner of Sales Tax has 7.87 7.31 issued an assessment order for the financial year 2004 to 2005 and raised the demand on purchase of Furnace oil during the year 2004 to 2005 in respect of purchases made by the Company at a concessional rate of tax. The Company has filed an appeal with the Joint Commissioner of Sales Tax, Vadodra.

The Assistant Commissioner of Sales Tax has 1.46 1.32 passed an order vide No.3442 dated February 24, 2005 on purchase of Furnace oil during the year 2000-2001 at a concessional rate of tax. Deputy Commissioner Sales Tax re-assessed and passed revised order vide No.3181/83 on December 5,2005 increasing the original demand. The Tribunal has granted stay order for this matter

Others:

Claims against the Company not acknowledged 7.85 2.89 as debts

Bills discounted in respect of export debtors - 75.96

4. During the year, the Company has recognised deferred tax assets aggregating Rs. 303.64 million on the incremental unabsorbed Income-tax depreciation arising out of its treatment of certain Excise and Value Added Tax incentives as ‘capital receipts' for income tax purposes based on the favorable decision received from the Commissioner of Income Tax (Appeals) in its own case and judgment in re Commissioner of Income Tax, Mumbai v/s. Reliance Industries Limited of the Honourable High Court of Judicature at Bombay. However, the judgment given by the High Court of Judicatue at Bombay has been challenged by the tax authorites in the apex court. If the final decision in the mater is eventually decided against the Company, then the carrying value of the deferred tax assets at the year end could be significantly impacted.

2. Pursuant to loan agreement with Welspun USA Inc., the loan outstanding as on March 31,2011, aggregating Rs. 111.49 million recoverable from Welspun USA Inc. is to be converted into equity investments and pending conversion modalities, the same has been disclosed as Share Application Pending Allotment and grouped under Loans and Advances.

3. Borrowing Costs aggregating Rs. Nil (Previous Year: Rs. 15.46 million) (net of interest subsidy of Rs. Nil; Previous Year: Rs. 13.18 million) atributable to the acquisition or construction of qualifying assets are capitalised during the year as part of the cost of such assets.

4. (a) In the meeting of the Board of Directors of the Company held on May 11, 2011, it was resolved that the business of Welspun Mexico S.A. de C.V. (a wholly-owned downstream subsidiary of Welspun AG which, in turn, is a wholly owned subsidiary of the Company), involved in manufacturing decorative bedding products for Welspun AG, shall be re-organised in view of the adverse law and order conditions in the region in which the manufacturing premises of Welspun Mexico S.A. de C.V is situated which has severely impacted its business prospects and its ability to contain the sustained losses and reverse the accumulated losses. Further, there has been breach of the lease agreement by the landlord necessitating the vacating of the premises. The aforesaid business reorganization involves exiting the current manufacturing premises of Welspun Mexico S.A. de C.V. and setting up trading activities only in new premises, disposing of the assets and discontinuing the employment of the majority of its employees. The Board of Directors further resolved in the aforesaid meeting that the consequential impairment in the value of the Company's investments in Welspun AG, and loans given to Welspun AG, shall be determined and recognized. Other than the business of Welspun Mexico S.A. de C.V, Welspun AG does not have any substantial business actvities. As at March 31, 2011, the Company had investments, aggregating Rs. 739.12 million, in Welspun AG, and outstanding loans at zero rate of interest, aggregating Rs. 936.23 million, and other advances, aggregating Rs 1.68 million, due from Welspun AG. Accordingly, a provision of Rs. 739.12 million towards diminution in the value of investments in Welspun AG, and a provision of Rs 937.91 million towards the aforesaid loans and advances to Welspun AG, have been recognized and disclosed as extraordinary items in the Profit and Loss Account for the year.

(b) As at March 31, 2011, the Company has trade receivables aggregating Rs. 696.02 million, due from a related Company, Welspun Retail Limited (WRL), (March 31,2010: Rs. 475.93 million). Of the said amount Rs. 108.33 million (March 31, 2010: Rs. 52.07 million) is outstanding for more than one year. WRL continues to incur significant losses from operations which could impact its ability to settle the aforesaid receivables. In order to turnaround its operations, WRL has made a robust plan for widening its reach in the market by using new marketing strategies with aggressive cost reduction programs. Accordingly, in the opinion of the Management, the aforesaid receivable from the said related Company as at March 31, 2011 is considered good and recoverable.

8. Consequent to the demerger of the marketing arm of the Company efective April 1, 2009, the Company is dependent upon Welspun Global Brands Limited (WGBL) for all marketing of its products and WGBL is the Company's principal customer as regards international sales of its products. Most of the domestic sales of the Company are made to WRL, a subsidiary of WGBL. The Company does not have any long term definitive agreements with either WGBL or WRL for marketing the Company's products. In the event that WGBL or WRL ceased to purchase or market the Company's products, it could have an adverse effect on the business of the Company.

5. The Company has issued a corporate guarantee of Rs. 3,593 million (March 31, 2010: Rs. 3,593 million) on behalf of WGBL in favor of a consortium of bankers in relation to post-shipment debt facilities provided by them to WGBL. WGBL has also given a corporate guarantee of Rs. 5,887.40 million (March 31, 2010: Rs. 5,887.40 million) in favour of the consortium of bankers in relation to pre-shipment debt facilities provided by them to the Company. If WGBL is unable to meet their obligation to bankers as they fall due, the Company would be required to pay the guaranteed amounts, which could adversely affect its financial condition and cash flows.

6.(a) The Company has allotted 15,603,000 equity shares of Rs. 10 each at Rs. 100 per share on April 19,2010 to Qualified Institutional Buyers (QIBs) in accordance with Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. The equity share issue expenses related to Qualified Institutional Placement (QIP) aggregating Rs. 87.64 million has been adjusted against Securities Premium Account as per Section 78 of the Act.

(b) Pursuant to the resolution passed in the Annual General Meeting of the Company held on August 31, 2010 for approval of final dividend for the year ended March 31, 2010; the Company has declared final dividend for equity and preference shareholders of Rs. 106.10 million and paid dividend tax thereon of Rs. 17.63 million (including dividend of Rs. 15.60 million to QIBs referred supra and dividend tax thereon of Rs. 2.6 million). The final dividend paid to QIBs for the year has been presented as Final Dividend for Previous Year as an appropriation in the Profit and Loss Account for the year.

7. On June 30, 2009, the Company issued Employee Stock Options under the Employee Stock Options Scheme (the "Scheme") to employees of the Company and its subsidiaries with a right to subscribe to equity shares ("New Options") at a price of Rs. 35.60 per equity share (closing market price as on June 30, 2009) with an option to existing grantees, who were granted options on May 17, 2006 ("Old Options"), to receive New Optons on surrender of Old Options. All employees holding Old Options on June 30, 2009 chose to surrender the Old Options. The salient features of the Scheme are as under:

(i) Vesting: Options to vest over a period of four years from the date of their grants as under:

- 20% of the Options granted to vest at each of the 1st and 2nd Anniversaries of the date of grant.

- 30% of the Options granted to vest at each of the 3rd and 4th Anniversaries of the date of grant.

(ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option, at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.

The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method. Since, on the date of grant of option, quoted market price of the underlying equity shares of the Company was equal to the exercise price of an option, no expense or liability arising from the Scheme has been recognised.

The fair value of the options as per the ‘Black Scholes' model as on the date of grant was Rs. 17.49. Had the Company adopted fair value method in respect of options granted, the employee compensation cost would have been higher by Rs. 9.11 million (March 31,2010: Rs.13.33 million), Loss after Tax would have been higher by Rs. 6.27 million (March 31, 2010: Profit after tax would have been lower by Rs. 8.80 million) and the basic loss per share would have been higher by Rs. 0.07 (March 31, 2010: basic earnings per share would have been lower by Rs. 0.12) and diluted loss per share would have been higher by 0.07 (March 31, 2010: diluted earnings per share would have been lower by Rs. 0.17), respectively.

8. Pursuant to High Court Order, 500,000 (March 31, 2010 : 500,000) 0% Redeemable Preference Shares of Rs. 100 each fully paid up are redeemable at par on or after repayment of all outstanding term liabilities and preference shares held by banks and financial institutions as on April 1, 2000 and interest and dividend thereon. Accordingly, the Preference Shares are expected to be redeemed by January 2012.

9. (a) Term loans from banks including interest thereon are secured by way of first charge on entire movable and immovable properties of the Company, both present and future, ranking pari passu, subject to prior charge on specific assets as per 13(b) below.

(b) In addition to 13(a) above, term loans from Banks Rs. 11,442.60 million (March 31, 2010: Rs. 3,880.09 million) and interest thereon, are secured by lien on fixed deposits of the Company.

(c) The working capital loans, which includes cash credit and packing credit from banks, are secured by hypothecation of raw materials, stock-in-progress, finished and semi finished goods, stores and spares and book debts and other current assets of the Company and second charge on entire fixed assets of the Company and by a Corporate Guarantee issued by Welspun Global Brands Limited.

10. Loan/ Deposits of Rs. Nil (March 31, 2010: Rs. 48.18 million) were given to Companies in which some of the Directors are interested as members.

11. Interest in Joint Venture

(a) The Company has accounted the investments in Joint Ventures in Welspun Zucchi Textiles Limited (WZTL) and MEP Cotton Limited (MCL) in accordance with Accounting Standard 13, Accounting for Investments.

(b) The Company's share of contingent liability of WZTL is Rs. 13.88 million (March 31, 2010: Rs.14.85 million).

(c) The Company's share of the aggregate amounts of assets and liabilities as on March 31, 2011 and income and expenditures of WZTL for the year ended March 31, 2011 are as under

12. Additional information pursuant to Part II of Schedule VI to the Companies Act, 1956.

a) Licensed Capacity Not Applicable

As per the Industrial Policy declared in July 1991, as amended in April 1993, no licences are required for the products manufactured by the Company.

Installed Capacity as at March 31, 2011 (As certified by Management)

Cotton Terry Towels 41,500 (March 31, 2010 : 41,500) M.T.

Cotton Yarn 33,130 (March 31, 2010 : 33,130) M.T.

Bed Sheets 45,000 (March 31, 2010 : 45,000) 000' Mtrs

Rugs 10,151 (March 31, 2010 : 10,151) M.T.

13. Derivative Instruments outstanding as at March 31, 2011:

The Company is exposed to foreign currency fluctuations on foreign currency assets/ liabilities, forecasted receivable, payables denominated in foreign currency.

In line with the company's risk management policies and procedures, the Company enters into foreign currency forward contracts and swap contracts to manage its exposure. These contracts are for a period of maximum twelve months and forecasted transactions are expected to occur during the same period.

(a) The following are outstanding foreign currency forward, swaps and other derivative contracts against the future forecasted payables.

(b) The movement in Hedging Reserve during the year ended March 31, 2011 for derivatives designated as Cash Flow Hedges is as follows:

The entire balance of Hedging Reserve Account as at March 31, 2009 of Rs. 294.94 million pertaining to ‘Marketing Division' of the Company was transferred to Welspun Global Brands Limited with effect from April 1, 2009, pursuant to demerger and transfer of ‘Marketing Division' to Welspun Global Brands Limited

c) As at the Balance Sheet date, the foreign currency exposure not hedged by a derivative instrument or otherwise aggregates Rs. 1,127.20 million (March 31, 2010 Rs. 678.77 million) for receivables and Rs. 1,008.75 million (March 31, 2010 Rs. 825.21 million) for payables.

14 (i). Related Party Disclosures

(i) Relationships

(a) Subsidiary Companies Welspun AG (WAG) Besa Developers and Infrastructure Private Limited (BESA) Welspun Mexico S.A. de C.V (WMEX) (Held through WAG)

(b) Joint Venture Welspun Zucchi Textiles Limited (WZTL) Companies MEP Cotton Limited (MCL) (up to January 31, 2010)

(c) Associate Company Welspun USA Inc., USA (WUSA) Welspun Holdings Private Limited, Cyprus (WHPL) Welspun Captive Power Generation Limited (WCPGL) (with effect from January 27, 2011)

(d) Enterprises over wh Welspun Global Brands Limited (WGBL) ich Key Management Per Welspun Investments and Commercials sonnel or relatives of Limited (WICL) such personnel exercise Welspun Sorema Europe, S.A. (SOREMA) significant influence Welspun UK Limited (WUKL) or control and with Welspun Home Textiles Limited (WHTL) whom transactions have Welspun Retail Limited (WRL taken place during Welspun Corp Limited (WCL) (Formerly the year known as Gujarat Stahl Rohren Limited (WGSRL)) Welspun Power and Steel Limited (WPSL) Welspun Syntex Limited (WSL) Welspun Trading Limited (WTL) Welspun Wintex Limited (WWL) Welspun Mercantile Limited (WML) Krishiraj Trading Limited (KTL) Welspun Logistics Limited (WLL) Welspun Realty Private Limited (WRPL) Vipuna Trading Limited (VTL) Mertz Securities Limited (MSL) Welspun Polybuttons Limited (WPBL) Wel-treat Enviro Management Organisation Limited (WEMO) Remi Metals Gujarat Limited (RMGL) Welspun Maxsteel Limited (WMSL) Welspun Projects Limited ( WPL) Methodical Investment and Trading Company Private Limited (MITCPL) Welspun FinTrade Limited (WFTL) Welspun Finance Limited (WFL) Welspun Foundation for Health and Knowledge (WFHK) Welspun Urja Gujarat Private Limited (WUGPL)

(e) Key Management B.K.Goenka (BKG) Personnel M. L. Mital (MLM) R. R. Mandawewala (RRM) (Upto October 31, 2009)

(f) Relatives of Key Management Personnel Dipali Goenka (DBG)

15. In accordance with the Company's policy given in Note 1(x) (a) above, net exchange loss of Rs. 42.64 million (Previous Year: net exchange gain Rs. 104.29 million) has been accounted in the Profit and Loss Account.

16. Segment Information for the year ended March 31, 2011.

(i) Information about Primary Business Segment

The Company is exclusively engaged in the business of Home Textiles which, in the context of Accounting Standard 17 on Segment Reporting, issued by the Institute of Chartered Accountants of India, is considered to constitute a single primary segment. Thus, the segment revenue, carrying amount of segment assets and capital expenditure incurred to acquire segment assets during the year are all as refected in the financial statements for the year ended March 31, 2011 and as on that date.

(iii) Notes:

(a) The Segment revenue in the geographical segments considered for disclosure are as follows:

-Revenue within India includes sales to customers located within India and earnings in India.

-Revenue outside India includes sales to customers located outside India, earnings outside India and export benefits on sales made to customers located outside India.

(b) Segment revenue and assets include the respective amounts identified to each of the segments and amounts allocated on a reasonable basis.

17. Leases

B. Where the Company is a lessee:

Operating Lease

The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.

The aggregate rental expenses of all the operating leases for the year are Rs. 94.32 million (Previous Year: Rs. 84.13 million).

18. Prior year comparatives have been reclassified to conform with the current year's presentation, wherever applicable.


Mar 31, 2010

1. Contingent Liabilities

As At As At

March 31, 2010 March 31, 2009

Description

(Rs. million) (Rs. million)

Excise, Customs and Service Tax

Alleged excess clearance of cotton yarn in Domestic Tariff Area over and above the limit specified in - 19.45

para 9.9 (b) of the Exim Policy 1997-2002. The Company had deposited Rs. 0.70 million under protest and filed an appeal with the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad against the order passed by Commissioner (Appeals) of Central Excise and Customs. The case has been settled in the Companys favour during the year.

Alleged improper re-credit of duty paid through PLA under Notification no. 39/2001 –CE dated July 318.58 318.58 31, 2001 in respect of goods sold from the factory during the period from February 2006 to September 2007. The Assistant Commissioner of Central Excise had passed the order against the Company. The Company has paid pre deposit of Rs 100 million as required by Central Excise authorities and obtained stay on payment of remaining amount. The case has been remanded back to the lower authority to consider the claim of the Company by Commissioner Appeals. Further, during the year, a separate show cause notice has been issued by Commissioner of Central Excise seeking recovery of allegedly improper re-credit of duty along with interest and penalty. The Company is in the process of filing reply against this show cause notice.

Alleged improper grant of refund for duty paid through PLA by Assistant Commissioner under Rule 69.57 69.28 18 of Central Excise Rules during the period from September 2005 to July 2006. The Commissioner (Appeals) of Customs and Central Excise has passed the order against the Company. The Company has filed Revision Application with the Joint Secretary, Ministry of Finance, Department of Revenue.

Alleged improper cenvat credit availed and non payment of excise duty under Notification No. 3.50 3.33 214/86 – CE dated 25-03-1986, on furnace oil used for manufacturing of goods on job work during the period April 2002 to March 2008. The Company has filed its reply against the show cause notices issued by Joint Commissioner and Commissioner of Customs and Central Excise, Daman. Based on the review and comments made by the Committee of Chief Commissioners, the Commissioner has made an application to CESTAT to withdraw his order passed in April 2008 in respect of non payment of excise duty.

Alleged improper abatement of service tax on payments made to Goods Transport Agency under 47.98 45.51 Notification No. 32/04-ST dated 3-12-2004. The Company has filed its reply against the show cause notice issued by the Commissioner of Central Excise & Customs, Daman. Alleged service tax credit based on improper documents. The Company has received an order from 0.16 0.15 Commissioner, Central Excise & Customs, Daman demanding the amount of duty, interest and penalty. The Company filed an appeal against the order with Commissioner of Central Excise & Customs (Appeals), Daman

Alleged improper cenvat credit availed on "racks" classified as capital goods, which are used for 1.91 1.82 storage of finished goods. The Company received an order from Additional Commissioner, Central Excise & Customs, Daman dated 11.02.2009 demanding the amount of ]duty, interest and penalty. The Company has paid Rs. 0.70 million under protest and filed an appeal against the order with Commissioner of Central Excise & Customs (Appeals), Daman in March 2009.

Alleged improper availment of cenvat credit on service tax paid on insurance premia paid for 0.04 0.03 availing insurance services that are not used in or in relation to manufacture of final products. The Company has received a show-cause notice from Assistant Commissioner of Central Excise and Customs, Vapi against which it has filed a reply. The Company has paid Rs. 0.02 million under protest.

Alleged non-reversal of cenvat credit contained in raw material stock, raw material in process and 96.40 - raw material contained in finished stock on exit from cenvat scheme. The Commissioner of Central Excise has issued a show cause notice seeking recovery of the non-reversed amount. The Company has submitted its reply to the Commissioner of Central Excise.

Alleged erroneous sanction of refund of service tax by Assistant Commissioner of Central Excise. 3.04 - The Deputy Commissioner of Central Excise has issued a show cause notice regarding recovery of the refund erroneously sanctioned. The Company has submitted its reply to the Deputy Commissioner of Central Excise.

As At As At March 31, 2010 March 31, 2009

Description

(Rs. million) (Rs. million)

Stamp Duty :

Disputed stamp duty liability on De-merger Scheme. The Company has paid Rs. 1.74 million under 4.46 4.46 protest.

Sales Tax :

The Deputy Commissioner of Sales Tax has issued an assessment order for the financial year 2003- 1.17 1.07 04 and raised the demand on purchase of Furnace oil during the year 2003-04 in respect of purchases made by the Company at a concessional rate of tax. The Company has deposited Rs. 0.09 million under protest and has filed an appeal with the Joint Commissioner of Sales Tax, Vadodra.

The Deputy Commissioner of Sales Tax has issued an assessment order for the financial year 2004- 7.31 6.75 05 and raised the demand on purchase of Furnace oil during the year 2004-05 in respect of purchases made by the Company at a concessional rate of tax. The Company has filed an appeal with the Joint Commissioner of Sales Tax, Vadodra.

The Assistant Commissioner of Sales Tax has passed an order vide No. 3442 dated February 24, 2005 1.32 - on purchase of Furnace oil during the year 2000-01 at a concessional rate of tax. Deputy Commissioner Sales Tax re-assessed and passed revised order vide No. 3181/83 on December 5, 2005 increasing the original demand. The Company had filed an appeal with Joint Commissioner, Baroda on October 1, 2006. The demand has been confirmed by the Joint Commissioner. The Company is in process of filing an appeal before the Appellate Tribunal.

FEMA :

The Appellate Tribunal for Foreign Exchange, New Delhi has issued an order for contravention of the - 0.90 provision of Section 18(2) of the Foreign Exchange Regulation Act, 1973 read with Section 49(3) and (4) of Foreign Exchange Management Act, 1999 in respect of non- realisation of export proceeds. The Company had paid Rs. 0.45 million under protest and preferred an appeal with the Appellate Tribunal for Foreign Exchange (ATFE), New Delhi. The said appeal was dismissed by ATFE and the Company has paid the balance amount Rs. 0.45 million in the current year.

Others:

Accumulated dividend on cumulative redeemable preference shares - 17.41

Claims against the Company not acknowledged as debts 2.89 2.65

Bills discounted in respect of export debtors 75.96 684.55

As At As At

Description March 31, 2010 March 31, 2009

(Rs. million) (Rs. million)



2. (a) Guarantees given by banks on behalf of the Company 111.85 30.67

(b) Corporate Guarantees / Undertakings given by the Company :

- Guarantee issued in lieu of the indemnity and undertaking provided in an earlier year in 679.56 724.89 favour of Bank of India, Manchester Branch, for securing loan of GBP 10 million (March 31, 2009 : GBP 10 million) granted to Welspun Home Textiles UK Limited for acquisition of CHT Holdings Limited.

- Guarantees aggregating USD 8.62 million (March 31, 2009 : USD 7.92 million) on behalf 387.04 401.75 of Welspun USA Inc. (WUSA) to Nautica Apparel Inc. in respect of all payment obligations of WUSA under license agreements entered between WUSA and Nautica Apparel Inc.

As At As At

March 31, 2010 March 31, 2009

Description

(Rs. million) (Rs. million)

- Guarantee on behalf of Welspun Mexico SA de CV (WELMEX) (Subsidiary Company) to 300.00 300.00 HSBC México, S.A. Institución de Banca Múltiple, Grupo Financiero (HSBC Mexico) to secure repayment of advances, credit and such other facilities extended / to be extended by HSBC Mexico to WELMEX

- Guarantee of USD 19 million (March 31, 2009: USD 19 million) on behalf of WELMEX to 853.10 963.68 Verde Chihuahua Industrial S de RL de CV (Verde), in respect of all payments by WUSA as a tenant under lease agreement between WELMEX and Verde.

- Guarantee of USD 1.12 million (March 31, 2009: USD 1.12 million) on behalf of WELMEX 50.29 56.81 to Nautica Apparel Inc. in respect of all payment obligations of WELMEX under the License Agreement entered between WELMEX and Nautica Apparel Inc.

- Guarantee on behalf of Welspun Global Brands Limited (WGBL) in favour of Bank of India 210.00 210.00 to secure repayment of loans extended / to be extended by Bank of India to WGBL.

- Guarantee of USD 18 million (March 31, 2009 : Nil) on behalf of Welspun USA, Inc. 808.20 * - (WUSA) in favour of Bank of Baroda, New York (USA) Branch to secure repayment of loans extended / to be extended by Bank of Baroda to WUSA.

- Guarantee on behalf of Welspun Global Brands Limited (WGBL) in favour of consortium 3,593.00 * - of Bankers led by State Bank of Bikaner and Jaipur ("SBBJ Consortium") to secure repayment of facilities extended/ to be extended by SBBJ Consortium to WGBL. In addition guarantee extends to facility of 20% of ad-hoc fund based Working Capital limit under the Gold Card Scheme [Also refer Note 9(e) below].

(c) In accordance with the EPCG Scheme, imports of capital goods are allowed to be made 29.13 55.41 duty free and under Advance License Scheme, imports of raw material are allowed to be made duty free, subject to the condition that the Company will fulfill, in future, a specified amount of export obligation within a specified time. Based on the current operating plan, the Company would fulfill its export obligation within the specified time period. Amount of duty saved on imports of above goods against which export obligation is yet to be fulfilled.

(d) Estimated amount of contracts (net of advances) remaining to be executed on capital 1,046.73 36.22 account and not provided for.

* These guarantees are subject to approval of the shareholders under Section 372A of the Companies Act, 1956.

3. On November 30, 2009, Welspun India Limited entered into a subordination agreement with its wholly owned subsidiary, Welspun AG. By virtue of this agreement, loans aggregating Rs. 371.30 million were converted into a subordinated loan at zero rate of interest. The exchange difference of Rs. 12.89 million arising on translation of this subordinated loan is accounted in Foreign Exchange Translation Reserve.

4. As on April 1, 2009, the Company was holding 3,320,000 equity shares of Rs.10 each of MEP Cotton Limited, a joint venture with Mr. K. K. Mittal formed for ginning of cotton. The Company transferred its entire shareholding in MEP Cotton Limited to Welspun Investments and Commercials Limited at book value on February 1, 2010.

5. On July 25, 2009, the Company invested in 184,210 shares of Welspun USA Inc. for a consideration of Rs. 33.92 million (USD 700,000).

6. On September 24, 2009, the Company invested in 1,500 shares of Welspun Holdings Private Limited for a consideration of Rs. 116.13 million (GBP 1,500,000).

7. (a) The Company has investments aggregating Rs. 739.12 million in its wholly owned subsidiary in Switzerland, Welspun AG (WAG). Further, the Company has given a subordinated loan of Rs. 371.30 million at zero rate of interest and other loans aggregating Rs. 105.27 million. Interest accrued on such loans aggregated Rs. 42 million as at March 31, 2010. The accumulated losses of WAG as at March 31, 2010 aggregated Rs. 910.62 million. The Company considers WAG a strategic long term investment. Based upon the financial support of the Company and the future growth plans of embarking in the domestic market with aggressive cost reduction programs, WAG is expected to yield positive results in the coming years. Accordingly, in the opinion of the management, the aforesaid investments and the loan amounts including interest accrued on such loans outstanding as at March 31, 2010 are considered good and recoverable.

(b) As at March 31, 2010, the Company has trade receivables aggregating Rs. 475.93 million due from a related Company, Welspun Retail Limited (WRL). Of the said amount Rs. 159.75 million is outstanding for more than 180 days. WRL continues to incur significant losses from operations which could impact its ability to settle the aforesaid receivables. In order to turnaround its operations, WRL has made a robust plan for widening its reach in the market by opening new stores, using new marketing strategies with aggressive cost reduction programs. Accordingly, in the opinion of the management, the aforesaid receivable from the said related Company as at March 31, 2010 is considered good and recoverable.

(a) The Scheme of Arrangement between Welspun India Limited (WIL), Welspun Global Brands Limited (WGBL) and Welspun Investments and Commercials Limited (WICL) and their respective members and creditors (the "Scheme") was approved by the High Court of Gujarat at Ahmedabad by its order dated May 8, 2009. Pursuant to the Scheme, assets and liabilities of the marketing division of WIL (as tabulated in (c) below) were transferred to WGBL with effect from the appointed date (April 1, 2009). Upon the transfer, WGBL issued one equity share of Rs. 10 each credited as fully paid up to the shareholders of WIL for every ten equity shares held by them in WIL. Accordingly, 7,308,952 equity shares of Rs. 10 each of WGBL were allotted to the shareholders of WIL on July 14, 2009. Further, 500,000 equity shares held by WIL in WGBL as at March 31, 2009 were cancelled.

(b) Further, as per the Scheme, the assets and liabilities of the Investment and Treasury Division of WIL were transferred to WICL with effect from the appointed date. Upon the transfer, WICL issued one equity share of Rs. 10 each credited as fully paid up to the shareholders of WIL for every 20 equity shares held by them in WIL. Accordingly, 3,654,476 equity shares of Rs. 10 each of WICL were allotted to the shareholders of WIL on July 14, 2009. Further, 50,000 equity shares held by WIL in WICL as at March 31, 2009 were cancelled.

(c) Transfer of assets, liabilities and reserves pursuant to the Scheme

(d) As a result of the demerger, the Company is dependent upon WGBL for all marketing of its products and WGBL is the companys only customer as regards international sales of its products. Further, as a result of the demerger, all retail brands used in relation to the Companys products are owned by WGBL. Further, with effect from April 1, 2009, most of the domestic sales of the Company are made to WRL, a subsidiary of WGBL. The Company does not have any long term definitive agreements with either WGBL or WRL for marketing the Companys products. In the event that WGBL or WRL ceased to purchase or market the Companys products, it could have an adverse effect on the business of the Company.

(e) Consequent to the demerger, the Company has issued a corporate guarantee of Rs. 3,593 million on behalf of WGBL in favour of a consortium of bankers in relation to post-shipment debt facilities provided by them to WGBL. WGBL has also given a corporate guarantee of an equivalent amount in favour of the consortium of bankers in relation to pre-shipment debt facilities provided by them to the Company. If WGBL is unable to meet their obligation to bankers as they fall due, the Company would be required to pay the guaranteed amounts, which could adversely affect its financial condition and cash flows.

8. Pursuant to the Scheme, with effect from April 1, 2009, authorised share capital of the Company stood as Rs. 800,000,000 divided into 75,000,000 equity shares of Rs. 10 each and 500,000 Redeemable preference shares of Rs. 100 each. Further, during the year, the authorised share capital has been increased by Rs. 500,000,000 by creating 50,000,000 equity shares of Rs. 10 each, pursuant to the resolution passed by the shareholders at the Extra Ordinary General Meeting held on December 14, 2009.

9. Subsequent to the year end, the Company has issued 15,603,000 equity shares of Rs. 10 each at Rs. 100 per share pursuant to a Qualified Institution Placement in accordance with Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

10. On June 30, 2009, holders of outstanding 1, 290,000 options surrendered their options. The Company then granted 22, 65, 000 Employee Stock Options under the Employee Stock Options Scheme (the "Scheme") to Employees of the Company and its subsidiaries with a right to subscribe to equity shares at a price of Rs. 35.60 per equity share (closing market price as on June 30, 2009) (Exercise Price).

The salient features of the Scheme are as under:

(i) Vesting: Options to vest over a period of four years from the date of their grants as under :

- 20% of the Options granted to vest at each of the 1st and 2nd Anniversaries of the date of grant.

- 30% of the Options granted to vest at each of the 3rd and 4th Anniversaries of the date of grant.

(ii) Exercise: Options vested with an employee will be exercisable within 3 years from the date of their vesting by subscribing to the number of equity shares in the ratio of one equity share for every option, at the Exercise Price. In the event of cessation of employment due to death, resignation or otherwise the Options may lapse or be exercisable in the manner specifically provided for in the Scheme.

Information in respect of options outstanding as at March 31, 2010

The compensation costs of stock options granted to employees are accounted by the Company using the intrinsic value method. Since, on the date of grant of option, quoted market price of the underlying equity shares of the Company was equal to the exercise price of an option, no expense or liability arising from the Scheme has been recognised.

The fair value of the options as per the Black Scholes model is Rs. 17.49. Had the Company adopted fair value method in respect of options granted, the employee compensation cost would have been higher by Rs. 13.33 million, Profit After Tax lower by Rs. 8.80 million and the basic and diluted earning per share would have been lower by Rs. 0.12 and by 0.17 respectively.

13. 500,000 (March 31, 2009 : 500,000) 0% Redeemable Preference Shares of Rs. 100 each fully paid up are redeemable at par on or after repayment of all outstanding term liabilities and preference shares held by banks and financial institutions as on April 1, 2000 and interest and dividend thereon.

14. a) Term loans from banks including interest thereon are secured by way of first charge on entire movable and immovable properties of the Company,both present and future, ranking pari passu, subject to prior charge on specific assets as per 14(b) below and on current assets as per 14(c) and (d) below against borrowing from banks for working capital finance.

b) In addition to 14(a) above, term loans from Banks Rs. 3,880.09 million (March 31, 2009 : Rs. 4,215.75 million) and interest thereon, are secured by lien on fixed deposits of the Company.

c) The working capital loan towards overdraft facility aggregating Rs. Nil (March 31, 2009 : Rs. 266.50 million) is secured by Technology Upgradation Fund subsidy receivable from Government of India for textile industries towards term loan borrowing by the Company and against collateral of post dated cheques and a subservient charge on Companys entire current assets.

d) The working capital loans (other than referred in 14(c) above), which includes cash credit, packing credit, and from banks, are secured by hypothecation of raw materials, stock-in-progress, finished and semi finished goods, stores and spares and book debts and other current assets of the Company and second charge on entire fixed assets of the Company and by a Corporate Guarantee issued by Welspun Global Brands Limited.

15. (a) Sundry Debtors include Rs. Nil (March 31, 2009: Rs. 1,121.08 million) due from subsidiaries as below:

*Less than Rs.10,000

** Ceased to be a subsidiary effective April 1, 2009.

(b) Loan/ Deposits of Rs. 48.18 million (March 31, 2009: Rs. Nil) given to companies in which some of the Directors are interested as members.

16. Interest in Joint Venture

(a) The Company has accounted the investments in Joint Ventures in Welspun Zucchi Textiles Limited (WZTL) and MEP Cotton Limited (MCL) in accordance with Accounting Standard 13, Accounting for Investments.

(b) The Company sold all of its shares in MCL on February 1, 2010.

(c) The Companys share of contingent liability of WZTL and MCL is Rs.14.85 million (March 31, 2009: Rs. 7.43 million) and Rs. Nil (March 31, 2009 : Rs.15.61 million), respectively.

(d) The Companys share of the aggregate amounts of assets and liabilities as on March 31, 2010 and income and expenditures of WZTL and MCL for the year ended March 31, 2010 are as under:

16. Managerial Remuneration and Sitting Fees paid/ payable to directors:

Note: Provisions for leave entitlement and post retirement benefits which are based on actuarial valuations done on an overall company basis are excluded above.

Computation of Net Profit for the year ended March 31, 2010 in accordance with Section 198 of the Companies Act, 1956:

17. Disclosure for Micro and Small Enterprises:

* less than Rs. 1,000

The above information and that given in Schedule 12 - "Current Liabilities and Provisions" regarding micro and small enterprises has been determined to the extent such parties have been identified on the basis of information available with the Company

18. Details of Purchase and Sale of Investments during the year ended March 31, 2010

19. Additional information pursuant to Part II of Schedule VI to the Companies Act, 1956.

Notes:

1. Previous Year figures are given in brackets.

2. Terry Towel production includes captive consumption of 2,817.96 MT (Previous Year : Nil)

3. Cotton Yarn production includes captive consumption of 30,013.42 MT (Previous Year : 26,455.80 MT).

4. Sales Rugs includes Nil (Previous Year : 309.54 MT) of Rs. Nil (Previous Year : Rs.118.83 million) sold during Trial Run.

5. Sales Others Includes Rs. Nil (Previous Year Rs. 0.58 million) sold during Trial Run.

20 Disclosure of Derivative Instruments

A. Derivative instruments outstanding at the year end :

B. As of the Balance Sheet date, the foreign currency exposure not hedged by a derivative instrument or otherwise aggregates Rs. 678.77 million (March 31, 2009 : Rs. 913.17 million) for receivables and Rs. 543.52 million (March 31, 2009 : Rs. 860.86 million) for payables.

The following table summarizes activity in the Hedging Reserve related to all derivatives classified as cash flow hedges during the year ended March 31, 2010

Note:

The entire balance of Hedging Reserve Account as at March 31, 2009 of Rs. 294.95 million pertaining to marketing Division of the Company was transferred to Welspun Global Brands Limited (WGBL) with effect from April 1, 2009 pursuant to demerger and transfer of Marketing Division as referred in Note 9 above, to WGBL.

21 The Company has classified the various benefits provided to employees as under :-

Note:

Includes Gratuity Fund balance of Rs. 5.75 million held by the employee group gratuity trust of the Company, for the employees transferred to the Welspun Global Brands Limited pursuant to the scheme of demerger of the Company.

The liability for leave entitlement and compensated absences as at year end is Rs. 39.17 million (March 31, 2009: Rs. 41.53 million).

22 (i). Related Party Disclosures

* Ceased to be a subsidiary effective April 1, 2009 ** Ceased to be an associate effective April 1, 2009

23. In accordance with the Companys policy given in Note 1(x)(a) above, net exchange gain of Rs. 104.29 million (Previous Year: net exchange loss of Rs. 1,060.59 million) has been accounted in Profit and Loss Account.

24. Borrowing Costs aggregating Rs. 15.46 million; Previous Year: Rs. 99.99 million (net of interest subsidy of Rs. 13.18 million; Previous Year: Rs. 90.66 million) attributable to the acquisition or construction of qualifying assets are capitalised during the year as part of the cost of such assets.

25. Segment Information for the year ended March 31, 2010. (i) Information about Primary Business Segment

The Company is exclusively engaged in the business of Home Textiles which, in the context of Accounting Standard 17 on Segment Reporting, issued by the Institute of Chartered Accountants of India, is considered to constitute a single primary segment. Thus, the segment revenue, segment results, total carrying amount of segment assets, total carrying amount of segment liabilities, total cost incurred to acquire segment assets, total amount of charge for depreciation during the year are all as reflected in the financial statements for the year ended March 31, 2010 and as on that date.

(iii) Notes:

(a) The Segment revenue in the geographical segments considered for disclosure are as follows:

- Revenue within India includes sales to customers located within India and earnings in India.

- Revenue outside India includes sales to customers located outside India, earnings outside India and export benefits on sales made to customers located outside India.

(b) Segment revenue and assets include the respective amounts identified to each of the segments and amounts allocated on a reasonable basis.

26. Leases

B. Where the Company is a lessee: Operating Lease

The Company has taken various residential, office premises, godowns, equipment and vehicles under operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. The initial tenure of lease is generally for eleven months to sixty months.

The aggregate rental expenses of all the operating leases for the year are Rs. 84.13 million (Previous Year: Rs. 88.97 million). 78

27. Earnings per Share

28. As required by the Clause 32 of the listing agreement, the following disclosure is made:

* ceased to be a subsidiary effective April 1, 2009. ** ceased to be an associate effective April 1, 2009.

29.Prior year comparatives have been reclassified to conform with the current years presentation, wherever applicable. Prior year amounts are not strictly comparable with the current years amounts due to reason stated in Note 9(a) above.

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