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Notes to Accounts of Winsome Yarns Ltd.

Mar 31, 2015

NOTE NO. 2 EXPLANATORY NOTES FROMING PART OF THE ACCOUNT

1. (A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

S.No. Particulars 2014-15 2013-14

(i) Bills discounted with banks - 195.88

(ii) Sales Tax liability in respect of matters under appeal 64.64 64.64

(iii) Excise duty show cause notices / matters under appeal 653.31 653.31

(iv) Income Tax Demand 277.14 182.71

(v) Employee State Insurance Corporation* 17.82 26.29

(vi) Outstanding bank guarantees 102.09 189.00

(vii) Claims against the company not acknowledge as debts* - -

(viii) Customs duty saved Nil (Previous Year Nil) for import of capital good made against EPCG license against which export obligations amounting Rs. 1559.22 lacs (Previous Year Rs. 2407.73 lacs) are pending. Non fulfillment of Export obligation will attract demand of Rs 384.52 Lacs (Previous Year Rs. 589.15 lacs) (including interest and excluding penalty).

* Rs.6.57 lacs (Previous year Nil) paid is shown under short term loans and advances

* Excluding claims payable in case of left employees (amount unascertained)

(B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined.

Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement / finalization of above.

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for is Rs. Nil (Previous year Nil) net of advances Nil (Previous year Nil ), as certified by management.

2.2 (A)

(i) The Corporate Debt Restructuring (CDR) Empowered group (CDR- EG) in their meeting held under CDR mechanism on 17th March 2009 had approved debt restructuring proposal of the Company which was effective from 1st January 2009, implemented based on Master Restructuring Agreement (MRA) as approved on 21st July 2009. In the year 2010, CDR-EG, had approved the rework package for the company effective from 01/04/2010, post this there was certain delay / default in the payment of Interest & Principal repayments.

(ii) As per the above, arrangement / loans is further secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and secured/ to be secured by pledge of 51% (Fifty one percent) of equity share capital (present /future) of the company or 100% of shares held/ to be held by promoters, promoters group/ associate companies, whichever is lower. Accordingly, the entire shareholding held by Promoters except for 13.60 lacs numbers shares held by PSIDC has already been pledged with CDR Lenders.

(iii) During the Current period, CDR EG in their meeting held on 14th November 2014 held that the company exited from the CDR mechanism.

(iv) (a) Prior to exit from the CDR, lenders of the Company initiated recovery proceedings u/s 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) for due amount. The Company has filed its replies to the aforesaid notices received from lenders with other objections including claim on the lenders for losses caused to be suffered by the Company due to their actions / inactions. The lenders of the company initiated recovery proceeding without providing further financial support and issued notice u/s 13(4) of SARFAESI through Consortium Lead Banker (i.e. Punjab National Bank) which was challenged by the company before the Hon'ble Punjab & Haryana High Court, Chandigarh who stayed recovery proceedings and also directed to approach the jurisdictional Debt Recovery Tribunal. Appeals filed by the company under section 17 of the SARFAESI before the Hon'ble Debt Recovery Tribunal, Chandigarh, have been admitted and replies of the lenders / Defendants are awaited.

Post above as directed by the lenders proposed Rehabilitation Cum Settlement Scheme submitted to the lenders, the Company has started work on a fresh Techno Economic Viability Study of its operations.

(b) The Company's requests to the lenders seeking permission for renewal of "Holding-on operations" in the banking accounts(were unilaterally stopped by the banks on several occasions) not been accepted and funds of the Company aggregating Rs.148.22 lacs is lying in the said banking account. The amount is part of Bank Balances in Note 18 of the Financial Statements. The Company has initiated actions for recovery of these amounts.

(v) Canara Bank had filed an applications under section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 before the Hon'ble Debt Recovery Tribunal (DRT) at Chandigarh, which is pending for decision in the said matter.

(B) The Company is in discussions with parties to settle matters in relation to: - (a) petition filed by a lender of the Company before the Hon'ble High Court of Punjab and Haryana at Chandigarh, seeking winding up of the Company for non-payment of dues of the lender and has also initiated proceedings under SARFAESI; and

(b) petitions filed by an overseas parties for recovery of amounts in lieu of obligations performed by the said third parties (other party had extended credit facilities to a subsidiary company on the basis of letter issued by the company) which liabilities are unprovided.

3. (a) In the Extraordinary General Meeting of the Company held on 28/06/2010, the Members of the Company had approved the issue of new capital through Global Depository Receipts (GDRs), and 19,94,125 number of GDR of USD 6.64 each (each GDR converting / equivalent to 100 equity shares - being 1,99,41,250 nos. of equity shares of Rs. 10 each at Rs. 29.70 including premium) had been issued and allotted on 29/03/2011. The GDR is listed for trading at the Luxembourg Stock Exchange. Out of the proceeds of GDRs raised in 2011, an amount of USD 6,954,515 (INR 3721.05 Lacs) stood remitted to India, which had been utilised for augmentation of working capital needs of the Company and a balance amount of US$ 50,72,110 (INR 2679.34 Lacs) continues to remain invested in an overseas Money Market Fund outside India as on 31.3.2015, pending proceeds to be utilised. In this regards, as advised, Company is filing return regularly with the RBI.

(b) The Depository of GDR Issue, The Bank of New York Melon, USA, (BNYM) has resigned to act as Depository w.e.f. 29.10.2014 and also issued a termination notice on 16.3.2015 to terminate the depository agreement w.e.f. 15-06-2015. The GDR is listed at Luxembourg Stock Exchange (LSE). The LSE has issued a notice to the company for withdrawal of GDR issued from the LSE w.e.f. 16-06-2015. The company is in process to appoint new depository.

4. Research and Development Expenditure (as certified by management) amounting to Rs. 32.13 lacs (Previous year Rs. 63.14 lacs ) have been debited to Statement of Profit and Loss.

5. In accordance with Accounting Standard 28-' Impairment of Assets', the Company has identified its garmenting manufacturing facility (Knitwear Unit) located at Plot No. B-58, Industrial Area, Phase - VII, Mohali (Punjab), [Cash Generating Units (CGU)]. The CGU is engaged in manufacture of sweaters, pullover and garments of various sizes. Considering the continuing past losses of the CGU, during the period ended 31st March 2015, the Company on the basis of projected scale of operations and prevailing market conditions assessed that the recoverable value of the above CGU would be lower as compared to the carrying value, thus, indicating impairment. As a result of the impairment testing carried out as at 30th September 2013 by an independent expert, impairment loss of Rs. 2996.00 Lacs was estimated by the Management, based on a comparison of the carrying value of the asset vis-a-vis recoverable value. Post the assessment of value of CGU, the Company has charged an amount of Rs. 630.42 Lacs on account of depreciation, and the assessed amount of impairment loss has since reduced to Rs. 2365.58 Lacs. However, as the reports are under consideration of the Management, Impairment loss will be accounted as and when finally assessed. Further, management is of the view that in recent past with growth in the textile market (consumption) in general and considering the present economic and political scenario, impairment if any, would be much lower than the amount as assessed by the expert.

6. Step down subsidiaries (three nos.) are under liquidation, namely M/s, S. C. Winsome Romania s.r.l, Romania, M/s, IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through it's a subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Necessary provisions in the books of accounts, against this and outstanding in their accounts (as debtors) of Rs. 257.82 Lacs had been made in earlier years.

7. As per the terms of Agreement entered between Company and private equity partners /sellers, the Company was to invest through a subsidiary i.e. WYCL (Winsome Yarns (Cyprus) Ltd) in a Jv Company M/s Newcocot s.r.l. total amounting to Euro 4.64 millions {approx Rs. 3114.37 lacs as on 31.03.15 (including exchange gain/loss)}. In earlier year the Company had made investment in equity and preference share capital of its above stated subsidiary aggregating amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs). Considering the fact that its JV company is under liquidation, pending approval of RBI for write off, the Company had made provision for diminution in value of Rs. 1517.25 Lacs in earlier year.

8. (a) Receivables exceeding six months includes outstanding amount for period over one year of Rs. 6908.79 Lacs (including exchange gain of Rs. 897.41 lacs till 31.03.2015)[excluding as stated in note no. (b) below], where company is in process of filing necessary papers with appropriate authority for extension of time [read with note no.2.9 (A)]. In this regards, management is confident about full recovery / realisability considering the past performance of the customer and recovery initiative taken by the Company.

(b) The trade receivable include certain overdue Trade Receivables/Other Receivables of Rs. 3468.89 lacs. Considering the fact that management is confident about full recovery/realisability, provision there against has not been considered necessary.

(c) (i) Debts (receivables) exceeding six months of Rs.42.64 lacs (including previous year Rs. 42.58 Lacs, provision made in earlier years) and receivable from a Subsidiary Company have been written off, pending necessary approval of the AD/RBI.

(ii) Certain Overseas Advances of Rs. 40.64 lacs (including provided/written off in previous year Rs. 39.19 lacs) have been written off , pending necessary approval of the AD/RBI.

(iii) Certain Overseas payables of Rs. 123.57 lacs have been written back , pending necessary approval of the AD/RBI.

(d) Certain adjustment/ set off in overseas receivables account of Rs. 92.43 Lacs have been carried out during the period, where full detail could not be made available to the auditors as company is in process of compiling informations/details etc.

9. (a) In earlier years, the company had accounted for Commission income and Handling charges under head 'Revenue from Operations' receivable in foreign currency on accrual basis as per the terms of agreements. Company has made provision against outstanding receivable amount of Rs. 944.33 Lacs and shown as part of "Exceptional Items" in the statement of profit and loss in previous year [which includes Commission Income of Rs. 752.42 Lacs and Rs. 191.91 Lacs for Handling Charges (including exchange fluctuations)]. In this regard necessary approval for write off is pending from AD/RBI.

(b) Prior period adjustments Rs. 166.84 Lacs (P.Y. Rs. 64.82 lacs)(net) Includes (i) legal & professional Rs. 7.12 lacs(P.Y. Rs. 45.21 Lacs) (ii) Sales (Dr.) Rs. 53.42 Lacs( Previous Year Nil) (iii) claims and discounts Rs. 4.09 Lacs (Previous year Nil) (iv) Interest* Rs. 90.82 Lacs (Prev. Year Rs. 6.86 lacs)

* Packing credit subsidy not recoverable as assessed by the management has been charged to Interest expenses.

10. Overdue amount include Short Term Loans and Advances of Rs. 2599.32 lacs (including Refunds / Claims Receivables of Rs.349.58 Lacs , TUFS subsidy Rs. 1475.35 lacs, advances and balance with Government Authorities of Rs. 83.30 Lacs and capital advances of Rs. 250 lacs )( net of a provisions of Rs. 83.30 lacs made during the period).In the opinion of the management these are fully realisable and hence considered good. Further, necessary steps have been initiated for recovery of the same.

11. (a) In the opinion of the Board, the Current Assets, Loans and Advances appearing in the Company's Balance Sheet as at period end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet.

(b) The accumulated losses of the Company having exceeded its net worth, based on the audited accounts for the period ended 30th September 2014. Accordingly, the Company have filed an application with the Hon'ble Board for Industrial and Financial Reconstruction, in terms of its statutory obligation under section 3(1)(o) of the Sick Industrial Companies (Special Provisions) 1985 (SICA).Company in terms to the said Act, has been registered since 10th April 2015. Considering the proposed rehabilitation plan of the company and future business plans, present business scenario, stable government policies for the business and expected cash flow in the near future as assessed by the management of the company, accounts are prepared on 'Going Concern' basis.

12. Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

13. Balances of certain Trade Receivables (including subsidiaries oversea overdue trade receivables as stated in note no. 2.8), Bank Balances (including bills discounted and outstanding Letter of Credit), Trade Payables (including of Associate Company of amounting to Rs.567.90 lacs), Secured Loans, Other Liabilities and Loans & Advances are in process of confirmation/ reconciliation. Contingent (read with note no. 2.1) liabilities has been considered as certified by the management as full detail could not be made available to the auditors. The management is of the opinion that adjustment, if any, arising out of such reconciliation would not be material. Further, necessary steps have been initiated to further strengthen system of internal controls w.r.t. accounting of expenses, accounting of income (including sale of licenses and provision written back), payroll payments and of balance reconciliation/ confirmation.

14. Employees Benefits:

(i) Defined Contribution Plan:

Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs.73.16 Lacs (P. Y. Rs. 146.72 lacs) has been recognized as expense for the period under head 'Contributions to Provident and other Funds' of the statement of Profit and Loss.

(ii) Defined Benefit Plan:

The employee' gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

15. The Company has given interest free loan/ advances in the nature of loan, to employees, in the ordinary course of its business. No loan/ advances in the nature of loans have been given to employees/ others for the purpose of investment in securities of the Company.

16. Segment Reporting

(i) The Company is only in one line of business namely Textile (Yarn and Knitting)

(ii) The segment revenue in geographical segments considered for disclosure is as follow:

(a) Revenue inside India includes sales to customers located within India.

(b) Revenue outside India includes sales to customers located outside India.

17. As on 31st March 2015 Company has net deferred tax assets (including of carry over losses and unabsorbed depreciation). However, considering the losses in recent past, deferred tax has been restricted to the amount of liability.

18. Related party disclosures

List of "Related party & Relationship disclosures" are given below: (as identified by the management)

(A) Subsidiary Company

(I) Winsome Yarns (Cyprus) Limited (100% Subsidiary)

(II) Winsome Yarns FZE (Subsidiary of (i) above)

(III) S.C. Winsome Romania s.r.l (Subsidiary of (i) above)

(IV) I.M.M. Winsome Italia s.r.l (Subsidiary of (iii) above)

(V) S.C. Textil s.r.l. (Subsidiary of (iv) above)

(B) Key management personnel and their relatives.

* Shri Satish Bagrodia Chairman

* Shri Manish Bagrodia Managing Director

* Shri Anand Bal Kishan SharmaA Chief Financial Officer

* Shri K.V. SinghalA Company Secretary

* Smt. Kalpana SharmaA Wife of Chief Financial Officer

* Smt. Manju SinghalA Wife of Company Secretary

(C) Organizations where Key Management Personnel & their relative have significant influence.

* Star Point Financial Services (Pvt.) Ltd.

* Shell Business Pvt. Ltd.

* Satyam Combines Pvt. Ltd.

* Winsome Textile Industries LimitedA

19. Profit or loss on sale of stores/raw materials remains adjusted in their respective consumption accounts.

(a) As per the past practice, consumption of raw material and stores & spares is derived as net of opening stock plus purchases less closing stock as item wise records are in process of updation.

(b) Company is in process of carrying out item wise reconciliation between item wise physical stock of Fixed Assets and inventories. To the extent assets and inventories have been physically verified by the management, no material discrepancies have been observed between the book record and physical quantity.

(c) In view of Para (a) above, closing inventory of stock-in- process and finished goods has been considered as taken, valued and certified by the management after providing against old /non-moving inventory as assessed/ estimated by the management and/or based on contracts /subsequent sales realization.

(d) In view of security arrangement in place, the management is confident that there will not be any material adjustment on updation/completion of records of physical verification of inventory and fixed assets.

(v) The Company has temporarily opened an account with Bank which is outside the consortium.

20. Due to financial tightness and losses Company could not make due payments against various statutory dues (TDS, TCS, PF, ESIC, PWF, Service Tax etc.) on time and pending for payment at close of the perriod are on account of Provident Fund Rs. 94.54 lacs, ESI Rs. 0.77 Lacs and PWF Rs. 2.02 Lacs. However, the company will honour all the dues in due course on the revival / availability of fund. Penal interest and penalty in this regard (amount unascertained) if any, will be accounted for as and when the same will be paid.

21. (i) Due to continuous losses and financial tightness, the company has not been able to fully pay due installments & interest of term loan on due dates & certain overdue amount is continuing/ unpaid till date (as detailed in note no.5.6). No provision for interest, as calculated/estimated by the management, on secured loans and short term borrowings of amounting to Rs.1442.87 lacs & Rs. 1830.50 lacs respectively (of banks) has been made in the accounts and the same will be accounted for as and when settled / paid. Further penal interest etc. (amount unascertained) if any, will be accounted for as and when paid/settled.

(ii) Pending receipt of old dues against the TUFS subsidy claim filed, the Company has not recognized TUFS subsidy claim of amounting to Rs.596.01 lacs for the period .

22. In the previous year, certain outstanding payments of Rs. 2585.45 lacs of oversea receivables and payables (balances are subject to confirmations) to the oversea parties have been set off/adjusted where the company has applied for permission/ approval with the AD/RBI.

23. During the current period, the Company has computed depreciation based on useful life of the fixed assets as specified under schedule II of the Companies Act, 2013. The carrying value of the fixed assets which have completed their useful lives as on 1st October, 2014 has been charged to the opening retained earnings of amounting to Rs. 119.11 lacs. Had there not been any change in the useful life of the fixed assets, the depreciation for the period would have been higher by Rs. 212.65 lacs and to that extent loss would have been higher.

24. Company is in process to appoint an independent director.

25. Financial Statements of a subsidiery Company namely Winsome Yarns FZE for the year ended 31.03.2015 is unaudited and as certified by the management.

26. (a) Previous year's figures in Statement of Profit & Loss and Cash Flow Statements are for twelve months ended 30th September 2014. As Current period's figures in Statement of Profit & Loss and Cash Flow Statement are for six months, hence to that extent the same are not strictly comparable.

(b) Figures for the previous year have been re-grouped/recast wherever considered necessary to make them comparable with those of current period.

27. Rights of Shareholders

a. The Company has only one class of Equity Shares having face value of Rs. 10/- each (Previous Year Rs. 10/- each) in its issued, subscribed and paid up Equity share capital. Each shareholder is entitled to one vote per share (except GDR shareholding mentioned at point no. 2.2 below). Each shareholder have the right in profit/surplus in proportion to amount paid up with respect to share holding.

b. The GDR shareholding which is standing in the name of Bank of New York Mellon, as Depositary, has right to dividend but do not have any right to vote.

c. In the event of winding up, the equity shareholders will be entitled to receive the remaining balance of assets, if any,(After payment of all dues/outstanding) in proportionate to their individual shareholding in the paid up equity capital of the company.

d. All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group read with Note no 2.2(A)(ii).

e. The lenders to the Company are holding collateral security in the nature of personal guarantees given by Chairman of Board of Directors of the Company,Managing Director of the Company, and corporate Guarantees from certain Companies considered as promoter group companies and additionally pledge of 25,979,609 fully paid up equity shares of the Company.


Sep 30, 2014

1.1 ADDITIONAL NOTES FORMING PART OF THE ACCOUNTS

(A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

(Rs. in Lacs)

No. Particulars 2013-14 2012-13

(i) Bills discounted with banks 195.88 3278.86

(ii) Outstanding Letter of Credit - 32.67

(iii) Sales Tax liability in respect of 64.64 64.64 matters in appeal

(iv) Excise duty show cause notices / 653.31 543.35 matters in appeal

(v) Income Tax Demand 182.71 308.23

(vi) Employee State Insurance Corporation 26.29 -

(vii) Outstanding bank guarantees 189.00 550.09

(viii) Customs duty saved Nil (Previous Year 89.51 lacs) for import of capital good made against EPCG license against which export obligations amounting Rs. 240773 lacs (Previous Year 2526.84 lacs) are pending. Non fulfillment of Export obligation will attract demand of Rs. 589.15 Lacs (including interest and excluding penalty).

(B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined.

Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement / finalization of above.

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for is Rs. Nil (Previous year Nil) net of advances Nil (Previous year Nil ), as certified by management.

2.2 (A) (i) The Corporate Debt Restructuring (CDR) Empowered group (CDR- EG) in their meeting held under CDR mechanism on 17th March 2009 have approved debt restructuring proposal of the Company which was effective from 1st January 2009 implemented based on Master Restructuring Agreement (MRA) as approved on 21st July 2009. In the year 2010, CDR-EG, had approved the rework package for the company effective from 01/04/2010, post this there was certain delay / default in the payment of Interest & Principal repayments.

(ii) As per the above, arrangement / loans is further secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and further secured/ to be secured by pledge of 51% (Fifty one percent) of equity share capital (present /future) of the company or 100% of shares held/ to be held by promoters, promoters group/ associate companies, whichever is lower. Accordingly, the entire shareholding held by Promoters except for 13.60 lacs numbers shares held by PSIDC has already been pledged on behalf of CDR Lenders.

(iii) (a)The Company had again submitted a restructuring proposal in April''2014 for the deep restructuring with holding on operations till the implementation of the scheme for long term viability and smooth continuity of operations. The bankers/monitoring institution (MI) decided for getting Techno-Economic Viability (TEV) study for appropriately considering the proposal. The CDR-EG also made the decision and directed MI to conduct a TEV study and revert with suitable reconstructions of all lenders. The Company appointed M/S Dun & Bradstreet (approved in the panel of MI) for conducting TEV study and submit their report. M/s Dun & Bradstreet have submitted TEV report of all lenders endorsing the viability of the Company. However lenders were not willing for restructuring and initiated recovery proceeding and issued notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), the Company is preparing suitable reply under guidance of legal expert for withdrawl of notice and reconsider the restructuring proposal in the interest of all stakeholders. The Company considers the lenders liable for the losses suffered by the company on various counts, including those having arisen due the various actions and inactions on the part of lenders.

(b) A lender and a party have filed case in the High Court for the winding up of the company where the Company is in process to reply.

(B) As stated earlier [Note No. (A) (i)] certain covenants /conditions as stipulated in the CDR package was pending for compliance and there was default in payment of interest and also for repayment of principal [read with Note No. 2.23(v) and 2.26].

2.3 In the EGM held on 28/06/2010, shareholders of the company have approved the issue through Global Depository Receipts (GDRs). Pursuant to this 19,94,125 number of GDR of USD 6.64 each (Each GDR comprising of 100 equity shares, now total 1,99,41,250 nos. of equity shares of Rs. 10 each at Rs. 29.70 including premium) had been issued and allotted on 29/03/2011.Out of the total proceeds of the GDRs made in the year 2011, an amount of Rs. 603.21 lacs received during the year, balance Rs. 2679.34 Lacs (including foreign exchange gain) is invested in Money Market Fund and lying outside India as on 30.09.2014, pending proceeds to be utilized. In this regards, as advised, Company is filing return regularly with the RBI.

2.4 (a) Capital Work-In-Progress includes machinery in stock, roads, construction /capital material at site, site development expenses, plant & machinery in transit /under erection. Details of Pre-operative expenses are given below:

(b) Research and Development Expenditure (as certified by management) amounting to Rs. 63.14 lacs (Previous year Rs. 7784 lacs ) have been debited to Statement of Profit and Loss.

2.5 In accordance with Accounting Standard 28-'' Impairment of Assets'', the Company has identified its garmenting manufacturing facility (Knitwear Unit) located at Plot No. B-58, Industrial Area, Phase - VII, Mohali (Punjab), [Cash Generating Units (CGU)]. The CGU is engaged in manufacture of sweaters, pullover and garments of various sizes. Considering the continuing past losses of the CGU, during the period ended 30th September 2014, the Company on the basis of projected scale of operations and prevailing market conditions assessed that the recoverable value of the above CGU would be lower as compared to the carrying value, thus, indicating impairment. As a result of the impairment testing carried out as at 30th September 2013 by an independent professional firm, impairment loss of Rs. 2996.00 Lacs was estimated by the Management, based on a comparison of the carrying value of the asset vis-a-vis recoverable value. However, the Reports are under consideration of the Management & Impairment loss will be accounted as and when finaly assessed. Further, management of the view that due growth in the textile in general and present economic and political scenario impairment would be lower.

2.6 Step down subsidiaries (three nos.) are under liquidation, namely M/s. S. C. Winsome Romania s.r.l, Romania, M/s. IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through it''s a subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Necessary provisions in the books of accounts, against this and outstanding in their accounts (as debtors) had been made in earlier years.

2.7 As per the terms of Agreement entered between Company and private equity partners /sellers, the Company was to invest through a subsidiary i.e. WYCL (Winsome Yarn (Cyprus) Ltd) in a JV Company M/s Newcocot s.r.l. total amounting to Euro 4.64 millions {approx Rs. 3606.21 lacs as on 30.09.14 (including exchange gain/loss)}. In earlier year the Company had made investment in equity and preference share capital of its above stated subsidiary aggregating amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs). Considering the fact that its JV company is under liquidation, pending approval of RBI, the Company had made provision for diminution in value of Rs. 151725 Lacs in earlier year.

2.8 (a) Sale includes Trading sale amounting to Rs. 2028.08 Lacs as detailed below in note no.2.10. Receivables exceeding six months includes outstanding amount for period over one year of Rs. 6846.77 Lacs (including exchange gain of Rs. 823.31 lacs till 30.09.2014) [excluding as stated in note no. (b) below], where company is in process of filing necessary papers with appropriate authority for extension of time [read with note no.2.9 (A)]. In this regards, management is confident about full recovery / reliability considering the past performance of the customer and recovery initiative taken by the Company.

(b) The trade receivable include certain overdue overseas Trade Receivables/Other Receivables of Rs. 820.68 lacs [net of provision made in previous year against oversea receivable as stated in note (c) below]. Considering the fact that management is confident about recovery from them is certain, provision there against has not been considered necessary.

(c) (i) During the previous year, provision for doubtful debts was made of Rs. 196714 lacs, (including 1641.09 Lacs and cummulative exchange difference (gain) on restatement of foreign currency debtors of Rs. 326.05 Lacs) on receipt of approval during the year of Authorised Dealer (AD) of Rs. 1466.24 Lacs, amount has been charged off in the Statement of Profit & Loss.

(ii) Debts exceeding six months of Rs. 42.58 lacs have been written off (provision made in earlier years and receivable from a Subsidiary Company),pending necessary approval of the AD/RBI.

(iii) Certain Advances exceeding six months of Rs. 39.19 lacs have been written off (provision made in earlier years), pending necessary approval of the AD/RBI.

2.9 (A) In earlier years, the company had accounted for Commission income and Handling charges under head ''Revenue from Operations'' receivable in foreign currency on accrual basis as per the terms of agreements. Company has made provision against outstanding receivable amount of Rs. 944.33 Lacs and shown part of ''''Exceptional Items" in the statement of profit and loss [which includes Commission Income of Rs. 751.42 Lacs and Rs. 191.91 Lacs for Handling Charges (including exchange fluctuations)]. In this regard necessary approval for write off is pending from AD/RBI.

(B) Prior period adjustments (net) Rs. 64.82 lacs (P.Y. 20.82 lacs) (Including Legal & Professional charges of Rs. 45.21 lacs, Interest of Rs. 6.86 lacs and others Rs. 12.75 lacs).

2.10 Details of Traded Goods:

2.11 Overdue amount include Short Term Loans and Advances of Rs. 2935.38 lacs (including Refunds / Claims Receivables of Rs. 442.34 Lacs, advances and balance with Government Authorities of Rs. 83.30 Lacs and capital advances of Rs. 250 lacs ), (net of a provisions of Rs. 315 lacs made during the year). In the opinion of the management amount is fully realisable and hence considered good. Further, necessary steps have been initiated for recovery of the same.

2.12 (a) In the opinion of the Board, the Current Assets, Loans and Advances appearing in the Company''s Balance Sheet as at period end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet.

(b) In view of continuing losses, net worth of the company became negative as at 30th September 2014. However, considering future business plans present business scenario, stable government policies for the business and expected cash flow in the near future as assessed by the management of the company, accounts are prepared on ''Going Concern'' basis.

2.13 Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

2.14 Certain outstanding payments of Rs. 2585.45 lacs of overse a receivables and payables (balances are subject to confirmations) to the oversea parties have been adjusted where the company has applied for permission/ approval with the AD/RBI.

2.15 Balances of certain Trade Receivables (including oversea overdue trade receivables as stated in note no. 2.8), Bank Balances (including bills discounted and outstanding Letter of Credit), Trade Payables (including of Associate Company of amounting to Rs. 572.40 lacs), Secured Loans, Contingent & Other Liabilities and Loans & Advances are in process of confirmation/ reconciliation. The management is of the opinion that adjustment, if any, arising out of such reconciliation would not be material. Necessary steps have been initiated to further strengthen system of internal controls w.r.t. accounting of expenses, accounting of income (including sale of licenses and provision written back), payroll payments and of balance reconciliation/confirmation.

2.16 Employees Benefits:

(i) Defined Contribution Plan:

Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs. 146.72 Lacs (P Y Rs. 186.31 lacs) has been recognized as expense for the year.

(ii) Defined Benefit Plan:

The employee'' gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

(i) The estimate of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

(ii) The principal assumptions are the discount rate & salary growth rate. The discount rate is generally based upon the market yields available on Government bonds at the accounting date with a term that matches that of the liabilities.

2.17 The Company has not received full information from vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 (Act) and hence disclosure relating to amount unpaid as at year end together with interest paid/ payable have been given based on the information so far available with the company/ identified by the company management. As required by section 22 of the above said Act the following information is disclosed:

2.18 The Company has given interest free loan/ advances in the nature of loan, to employees, in the ordinary course of its business. No loan/ advances in the nature of loans have been given to employees/ others for the purpose of investment in securities of the Company.

2.19 Segment Reporting

(i) The Company is only in one line of business namely Textile (Yarn and Knitting

(ii) The segment revenue in geographical segments considered for disclosure is as follow:

(a) Revenue inside India includes sales to customers located within India.

(b) Revenue outside India includes sales to customers located outside India.

Information about geographical segments (by location of customers) includes Export Incentives of Rs.465.69 lacs (PY Rs. 988.17 lacs)

2.20 As on 30th September 2014 Company has net deferred tax assets (including of carry over losses and unabsorbed depreciation). However, considering the losses in recent past, deferred tax has been restricted to the amount of liability.

2.21 Earnings per share

Basis for calculation of Basic and Diluted Earnings per Share is as under:

2.22 Related party disclosure

List of "Related party & Relationship disclosures" are given below: (as identified by the management)

(i) (A) Associate Company

Winsome Textile Industries Limited (B) Subsidiary Company

(i) Winsome Yarns (Cyprus) Limited (100% Subsidiary)

(ii) Winsome Yarns FZE (Subsidiary of (i) above)

(iii) S.C. Winsome Romania s.r.l (Subsidiary of (i) above)

(iv) I.M.M. Winsome Italia s.r.l (Subsidiary of (iii) above)

(v) S.C. Textil s.r.l. (Subsidiary of (iv) above)

(ii) Key management personnel and their relatives.

- Shri Satish Bagrodia Chairman

- Shri Manish Bagrodia Managing Director

- Shri Ashish Bagrodia Director (Son of Chairman and brother of MD) (Previous Year till 16.09.2013)

(iii) Organizations where Key Management Personnel & their relative have significant influence

- Star Point Financial Services (Pvt.) Ltd.

- Shell Business Pvt. Ltd.

- Satyam Combines Pvt Ltd.

Transactions with the Related Parties during the year ended 2013-14 (12 months)

Chairman and Managing Director have given guarantees to lenders against loans taken by the Company.

@The payment of remuneration of Rs. 14.82 Lacs (w.e.f. 1st July 2014) is subject to approval of shareholders in General Meeting and also necessary approval of the Central Government.

Profit or loss on sale of stores/raw materials remains adjusted in their respective consumption accounts.

(iv) (a) As per the past practice, consumption of raw material and stores & spares is derived as net of opening

stock plus purchases less closing stock as item wise records are in process of updation.

(b) Company is in process of item wise physical verification of Fixed Assets and inventories. To the extent assets and inventories have been physically verified by the management, no material discrepancies have been observed between the book record and physical quantity.

(c) In view of Para (a) above, closing inventory of stock-in- process and finished goods has been considered as taken, valued and certified by the management after providing against old /non-moving inventory as assessed/estimated by the management and/or based on contracts /subsequent sales realization.

(d) In view of security arrangement in place, the management is confident that there will not be any material adjustment on updation of records and completion of physical verification.

(v) The Company has temporarily opened an account with Bank which is outside the consortium.

2.24 Company could not make payments for the various statutory dues (TDS, PF, ESIC, PWF, Sales Tax, Service Tax etc.) on time due to financial tightness. However, the company will honour all the dues in due course on the revival / availability of fund.

2.25 (a) The Foreign Currency Exposure that are not hedged by a derivative instrument or otherwise are as follows (as certified by the management):

(b) Forward contract Nil (PY USD 850953.77) taken to hedge the foreign currency receivables are outstanding as at 30.09.2014.

2.26 Due to continuous losses and financial tightness, the company has not been able to fully pay due installments & interest of term loan on due dates & certain overdue amount is continuing/ unpaid till date (as detailed in note no.5.5). Interest on overdue amount, penal interest etc. (amount unascertained) has not been provided and as the same will be provided / accounted for as and when paid/settled as the company is in process of getting loans to be restructured by the lenders.

2.27 (a) Previous year''s figures in Statement of Profit & Loss and Cash Flow Statements are for eighteen months ended 30th September 2013. As Current year''s figures in Statement of Profit & Loss and Cash Flow Statement are for twelve months hence to that extent the same are not strictly comparable.

(b) Figures for the previous year have been re-grouped/recast wherever considered necessary to make them comparable with those of current period.

2. Rights of Shareholders

2.1 The Company has only one class of Equity Shares having face value of Rs. 10/- each (Previous Year Rs. 10/- each) in its issued, subscribed and paid up Equity share capital. Each shareholder is entitled to one vote per share (except GDR shareholding mentioned at point no. 2.2 below). Each shareholder have the right in profit/ surplus in proportion to amount paid up with respect to share holding.

2.2 The GDR shareholding which is standing in the name of Bank of New York Mellon, as Depository, has right to dividend but do not have any right to vote.

2.3 In the event of winding up, the equity shareholders will be entitled to receive the remaining balance of assets, if any(after payment of all dues/outstanding), in proportionate to their individual shareholding in the paid up equity capital of the company.

5.1 Term Loan of Rs.24156.66 lacs (PY. Rs 24781.01 Lacs) from banks are secured by mortgage of Immovable properties situated at Village Kurawala, Distt Mohali and at Plot No.B-58, Industrial Area Phase - VII, Mohali and by hypothecation of all the company''s movable properties (save & except book debts) including moveable plant & machinery, spares, tools and accessories both present and future, subject to the prior charges created/ to be created in favour of Company''s bankers on specified movable assets for the working capital facilities . The mortgage and charges created / to be created shall rank pari-passu '' inter-se'' between the Banks and (ii) Term loan of Rs.70.82 Lacs (PY Rs. 70.82 Lacs) from a bank which is secured by sub-servient charges on fixed assets. The loans are repayable in quarterly installments and maturity profile is as follows:

5.2 Working Capital Term Loans of Rs.964.07 Lacs (P.Y. 1413.43 Lacs ) (As per CDR terms) are secured by way of first pari-passu charge on Fixed Assets & second pari-passu charge on current assets. The loans are repayable in quarterly installments and maturity profile is as follows:-

5.3 All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group read with Note no 2.2(A)(ii).

5.4 Vehicle Finance of Rs.15.29 (Previous year 11.31 Lacs)Lacs is secured by hypothetical of specific assets purchased under such arrangements. Maturity Profile of vehicle loan is as under:-

8.1 Working capital demand loan includes packing Credit & Cash Credit which are secured by hypothecation of current assets and also secured by second charge on fixed assets of the company.

8.2 All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group.


Sep 30, 2013

1.1 Basis of Accounting

The Financial Statements are prepared as a going-concern under historical cost convention on an accrual basis except those with significant uncertainty and in accordance with the Companies Act, 1956. Accounting policies not stated explicitly otherwise are consistent with generally accepted accounting principles and mandatory accounting standards.

1.2 Use of Estimates

The presentation of financial statements requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Difference between the actual results and the estimates are recognised in the period in which the results are known /materialized.

1.3 Revenue Recognition

Revenue represents the net invoice value of goods and services provided to third parties after deducting discounts, volume rebates, outgoing sales taxes and duties, and are recognised usually when all significant risks and rewards of ownership of the asset sold are transferred to the customer and the commodity has been delivered to the shipping agent. Revenues from sale of material by-products are included in revenue.

Interest income is recognised on accrual basis in the income statement.

1.4 Borrowing Cost

Borrowing Cost attributable to the acquisition or construction of qualifying assets are capitalised as part of the cost of such assets up to the date when such assets are ready for intended use. Other borrowing costs are charged as expense in the year in which they are incurred.

1.5 Fixed Assets

Fixed Assets are stated at cost of acquisition inclusive of freight, duties, taxes and installation expenses less accumulated depreciation and impairment loss, if any.

1.6 Expenditure during Construction Period

All pre-operative project expenditure (net of income accrued) incurred up to the date of commercial production is capitalized and the same are allocated to the respective assets on the completion of the construction period.

1.7 Depreciation

(i) Depreciation has been provided on Fixed Assets on straight line method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956. In respect of additions arising on account of Insurance spares, on additions/extensions forming an integral part of existing plants and on the revised carrying amount of the assets identified as impaired on which depreciation has been provided over residual life of the respective fixed assets, (read with para (ii) below).

(ii) Depreciation on additions/disposals is provided pro-rata with reference to the month of addition/disposal.

(iii) Amortisation of leasehold land and buildings has been done in proportion to the period of lease.

(iv) Leasehold land, where ownership vests with the Government / local authorities are amortized over the period of lease.

(v) Capital Expenditure on assets not owned are written off over the duration of contract or ten years, whichever is lower.

vi) Fixed Assets costing Rs. 5000/- or less has been depreciated fully in the year of purchase.

1.8 Intangible Assets

Intangible Assets are stated at cost of acquisition less accumulated amortisation. Technical know-how is amortised over the useful life of the underlying plant.

Specialised Software is amortised over an estimated useful period of six year. Amortisation is done on straight line basis.

1.9 Inventories

(i) Inventories are valued at lower of cost or net realisable value except for scrap and by-products which are valued at net realisable value.

(ii) Cost of inventories of finished goods and work-in-process includes material cost, cost of conversion and other related overhead costs.

(iii) Cost of inventories of raw material, work-in-process and stores & spares is determined on weighted Average Cost Basis.

1.10 Investments

Long Term Investments are stated at cost. Provision for diminution in long term investments is made only if such decline is other than temporary. Current investments are carried at lower of cost or market price.

1.11 Foreign Currency Transactions

(i) Transactions denominated in foreign currencies are normally recorded at the exchange rate prevailing at the time of the transaction.

(ii) Monetary items denominated in foreign currencies at the year end are restated at year end rates. In case of monetary items which are covered by forward exchange contracts, the difference between the year end rate and rate on the date of the contract is recognised as exchange difference and the premium paid on forward contracts has been recognised over the life of the contract. Any income or expense on account of exchange difference either on settlement or on translation is recognised in the Statement of Profit and Loss.

(iii) Non monetary foreign currency items are carried at cost.

1.12 Employees Benefits

(i) Defined Contribution Plan:

Employee benefits in the form of Provident Fund (with Government Authorities) are considered as defined contribution plan and the contributions are charged to the Statement of Profit and Loss of the year when the contributions to the respective funds are due.

(ii) Defined Benefit Plan:

Retirement benefits in the form of Gratuity & Long Term compensated leaves are considered as defined benefit obligations and are provided for on the basis of an actuarial valuation, using the projected unit credit method, as at the date of the Balance Sheet.

(iii) Other short term absences are provided based on past experience of leave availed.

Actuarial gain/losses, if any, are immediately recognised in the Statement of Profit and Loss.

1.13 Export Incentives

Duty drawback I DEPB is recognised at the time of exports and the benefits in respect of advance license received by the Company against export made by it are recognised as and when goods are imported against them.

1.14 Government Grants

(i) Grants relating to fixed assets are shown as deduction from the gross value of fixed assets and those of the nature of project subsidy are credited to Capital Reserves.

(ii) Other Government grants including incentives are credited to Statement of Profit and Loss or deducted from the related expenses.

(iii) Capital subsidy under TUFS from the Ministry of Textiles on specified processing machinery has been treated as deferred income which is recognized on systematic and rational basis in proportion of the applicable depreciation over the useful life of the respective assets and is adjusted against the depreciation to the statement of Profit & Loss.

1.15 Provision for Current and DeferredTax

Provision for current tax is made after taking into consideration benefits admissible under the provisions of the Income Tax Act, 1961.

Deferred tax resulting from "timing differences" between book and taxable profit is accounted for using the tax rates and laws that have been enacted or substantively enacted as on the balance sheet date. The deferred tax asset is recognised and carried forward only to the extent that there is reasonable/virtual certainty that asset will be realised in future.

1.16 Impairment of Assets

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. An impairment loss is charged to the statement of Profit and Loss in the year in which an asset is identified as impaired. The impairment loss recognised in prior accounting periods is reversed if there has been a change in the estimate of recoverable amount.

1.17 Provision, Contingent Liabilities and Contingent assets

Provisions involving substantial degree of estimation in measurement are recognised when there is a present obligation as a result of past events and it is probable that there will be an outflow of resources. Contingent Liabilities are not recognised but are disclosed in the notes. Contingent Assets are neither recognised nor disclosed in the financial statements.

NOTE NO. 2:

2.1 ADDITIONAL NOTES FORMING PART OF THE ACCOUNTS

(A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

(Rs. in Lacs)

No. Particulars 2012-13 2011-12

(i) Bills discounted with banks 3278.86 2986.42

(ii) Outstanding Letter of Credit 32.67 202.00

(iii) Sales Tax liability in respect of matters in appeal 64.64 25.85

(iv) Excise duty show cause notices/ matters in appeal 543.35 548.35

(v) Income Tax Demand 308.23 308.23

(vi) Outstanding bank guarantees 550.09 213.59

(vii) Customs duty saved of Rs. 89.51 lacs (Previous Year 3679.50 lacs) for import of capital goods made against EPCG license against which export obligations amounting Rs. 358.04 lacs (Previous Year 27965.79 lacs) are pending.

B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined. Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement/finalization of above.

C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for is Rs. Nil (Previous year 118.83 Lacs) net of advances, Rs. Nil (Previous year Rs. 71.18 lacs), as certified by management.

2.2 (A) (i) The Corporate Debt Restructuring (CDR) Empowered group (CDR- EG) in their meeting held under CDR mechanism on 17th March 2009 have approved debt restructuring proposal of the Company which was effective from 1st January 2009 had been implemented based on the sanctioned so far received from the lenders or the agreement to the restructuring scheme and Master Restructuring Agreement (MRA) as executed on 21st July 2009. In the year 2010, CDR-EG , had approved the rework package for the company effective from 01/04/2010, post this during the period there was certain delay / default in the payment of Interest & Principal repayments.

(ii) As per the above, arrangement / loans is further secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and further secured/ to be secured by pledge of 51% (Fifty one percent) of equity share capital (present/future) of the company or 100% of shares held/ to be held by promoters, promoters group/ associate companies , whichever is lower. Accordingly, the entire shareholding held by Promoters except for 13.60 lacs shares held by PSIDC has already been pledged on behalf of CDR Lenders.

(B) Certain covenants /conditions as stipulated in the CDR package is pending for compliance.

(C) Forms/papers of charge in respect of un secured loan are pending for filing/modifications.

2.3 In the EGM held on 28/06/2010, shareholders of the company have approved the issue through Global Depository Receipts (GDRs). Pursuant to this 1994125 number of GDR of USD 6.64 each (Each GDR comprising of 100 equity shares, now total 1,99,41,250 nos. of equity shares of Rs. 10 each at Rs. 29.70 including premium) had been issued and allotted on 29/03/2011.Out of the total proceeds of the GDRs made in the year 2011,balance Rs. 3195.38 Lacs (including foreign exchange gain) is invested in Money Market Fund and lying outside India as on 30.09.2013, pending proceeds to be utilised. In this regards, as advised, Company is filing return regularly with the RBI.

2.4 (i) Capital Work-ln-Progress includes machinery in stock, roads, construction /capital material at site, site development expenses, plant & machinery in transit /under erection. Details of Pre-operative expenses are given below:

2.5 Research and Development Expenditure (as certified by management) amounting to Rs. 77.84 lacs (Previous year Rs. 46.87 lacs ) have been debited to Statement of Profit and Loss under the head Salaries, Wages & other Allowances.

2.6 In accordance with Accounting Standard 28-'' Impairment of Assets'', the Company has identified its garmenting manufacturing facility (Knitwear Unit) located at B-58, Industrial Area Phase - VII, Mohali (Punjab), [Cash Generating Units (CGU)]. The CGU is engaged in manufacture of sweaters, pullover and garments of various sizes. Considering the continuing past losses of the CGU, during the period ended 30th September 2013, the Company on the basis of projected scale of operations and prevailing market conditions assessed that the recoverable value of the above CGU is lower as compared to the carrying value, thus, indicating impairment.

As a result of the impairment testing carried out as at 30th September 2013 by an independent professional firm, (the firm) impairment loss of Rs. 2996.00 Lacs as estimated by the Management, based on a comparison of the carrying value of the asset vis-a-vis recoverable value. The Reports of the firm is under consideration of the Management& Impairment Loss will be accounted as and when finally assessed. Further, management is of the view that in view of growth in export of textile items in general possible impairment would be lower.

2.7 As per the past practice treatment of gain/ (loss) on account of exchange fluctuation on loan/liability for capital assets, the company continued to charge exchange difference in the statement of Profit and Loss.

2.8 Step down subsidiaries (three nos) are under liquidation, namely M/s, S. C. Winsome Romania s.r.l, Romania, M/s, IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through it''s a subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Necessary provisions against this and outstanding in their accounts (as debtors) have been made in earlier years in the books of accounts.

2.9 As per terms of the Agreement entered between Company and private equity partners /sellers, the Company was to invest through a subsidiary i.e. WYCL (Winsome Yarns (Cyprus) Ltd) in a JV Company M/s Newcocot

S.P.A. total amounting to Euro 4.64 millions (approx. Rs. 3920.34 lacs as on 30.09.2013). In earlier year the Company had made investment in equity and preference share capital of its above stated subsidiary aggregating amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs). Considering the fact that its JV company is under liquidation, pending approval of RBI, during the period Company has provided for diminution of Rs. 1516.71 Lacs (net of Rs. 0.54 lacs provided in earlier years) in above stated investment and included under the head "Exceptional Items".

2.10 Trading sale amounting to Rs. 18593.40 Lacs (as per below note no.2.12) includes sale made to Overseas parties where overdue outstanding is Rs. 8148.78 lacs. It includes outstanding amount for a period over one year of Rs. 933.65 Lacs, where company is in process of filing necessary papers with appropriate authority for extension of time. In this regards, management is confident about full recovery/reliability considering the past performance of the customer and recovery initiative taken by the Company.

2.11. (i) Revenue from Operations (note no.20) includes Commission income and Handling charges receivable in foreign currency amounting to Rs. 752.42 Lacs (including exchange fluctuation gain) and NIL ( Previous Year Rs.929.52 lacs and Rs. 298.12 Lacs) respectively on sale which have been accounted for on accrual basis as per the terms of agreements. Company has initiated necessary steps for recovery of the outstanding amount of Rs. 944.33 Lacs (which includes Commission Income of Rs. 752.42 Lacs and Rs. 191.91 Lacs for Handling Charges).

(ii) Short Term Loans and Advances of Rs. 828.71 Lacs (including Refunds / Claims Receivables of Rs. 403.87 lacs and advances and balance with Government Authorities of Rs. 83.30 lacs), where management is initiating necessary steps for recovery of the same. Hence no provision against these is considered necessary.

2.13 Prior period adjustments (net) Rs. 20.82 lacs (P.Y. Nil) include Legal & Professional charges Rs. 2.78 lacs (P.Y. Nil), and others Rs. 18.04 lacs (P.Y. NIL).

2.14 In the opinion of the Board, the Current Assets, Loans and Advances appearing in the Company''s Balance Sheet as at year end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet. Considering future business plan and expected cash flow in near future by the management of the company, accounts are prepared on ''Going Concern ''basis.

2.15 Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

2.16 (i) The trade receivable include certain overdue overseas Trade Receivables of amounting to Rs.1641.09 Lacs (P.Y. Rs.1641.09 Lacs) and cumulative exchange difference (gain) on restatement of foreign currency debtors of Rs. 326.05 Lacs (P.Y. Rs 326.05 Lacs). For necessary approval, for the extension of time, application has been filed with the appropriate authority. However, considering the fact that recovery from them is not certain, provision there against has been made and included under "Exceptional Items".

(ii) Trade Receivables (including overseas trade receivables of Rs. 24.07 Lacs) and loans and advances amounting to Rs. 205.41 lacs and Rs.139.26 lacs respectively which in the opinion of the Management are not realizable/recoverable hence provision there against has been made during the period.

2.17 Balances of certain Trade Receivables (including oversea overdue trade receivables as stated in note no. 2.10), Trade Payables ( including Associate Company and contingent liabilities are as certified by the management, read with not no. 2.1A), are subject to confirmation/ reconciliation. The management is of the opinion that adjustment, if any; arising out of such reconciliation would not be material.

2.18 Employees Benefits:

i) Defined Contribution Plan:

Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs. 186.31 Lacs (P.Y. Rs. 92.43 lacs) have been recognized as expense for the year.

ii) Defined Benefit Plan:

The employee'' gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

(i) The estimate of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

(ii) The principal assumptions are the discount rate & salary growth rate. The discount rate is generally based upon the market yields available on Government bonds at the accounting date with a term that matches that of the liabilities.

2.19 The Company has not received full information from vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amount unpaid as at period end together with interest paid/ payable have been given based on the information so far available with the company/ identified by the company management. As required by section 22 of the above said Act, the following information is disclosed:

2.20 The Company has given interest free loan/ advances in the nature of loan, to employees, in the ordinary course of its business. No loan/ advances in the nature of loans have been given to employees/ others for the purpose of investment in securities of the Company.

2.21 Segment Reporting

(i) The Company is only in one line of business namely Textile (Yarn and Knitting)

(ii) The segment revenue in geographical segments considered for disclosure is as follow:

(a) Revenue inside India includes sales to customers located within India.

(b) Revenue outside India includes sales to customers located outside India.

2.22 During the period, deferred tax in respect of timing differences and carryover losses have been re-assessed/ re-computed and net deferred tax assets carry over from earlier years of amounting to Rs. 1233.24 lacs have been charged off to Statement of Profit & Loss considering principal of "Virtual Certainty" as perAS-22 notified under Companies (Accounting Standards), Rules 2006.

2.24 Related party disclosures

List of "Related party & Relationship disclosures" are given below: (as identified by the management)

I. (a) Associate Company

Winsome Textile Industries Limited

(b) Subsidiary Company

(i) Winsome Yarns (Cyprus) Limited (100% Subsidiary)

(ii) Winsome Yarns FZE (Subsidiary of (i) above)

(iii) S.C. Winsome Romania s.r.l (Subsidiary of (i) above)

(iv) I.M.M. Winsome Italia s.r.l (Subsidiary of(iii)above)

(v) S.C. Textil s.r.l. (Subsidiary of (iv) above)

II. Key management personnel and their relatives.

-Shri Satish Bagrodia Chairman

- Shri Manish Bagrodia Managing Director

-ShriAshish Bagrodia Director (Since resigned on 16-9-2013)

III. Organisations where Key Management Personnel & their relative have Significant influence. -Star Point Financial Services (Pvt.) Ltd.

-Shell Business Pvt. Ltd.

-Satyam Combines Pvt Ltd.

Transactions with the Related Parties during the period ended 2012-13(18 months).

(iv) (a) As per the past practice, consumption of raw material and stores & spares is derived as net of opening stock plus purchases less closing stock as item wise records are in process of updation.

(b) Company is in process of item wise physical verification of Fixed Assets and Investment. To the extent same has been physically verified by the management, no material discrepancies have been observed between the book record and physical quantity.

(c) In view of para (a) above closing inventory of raw-material, process stock and finished goods has been considered as taken, valued and certified by the management.

(d) In view of security arrangement in place, the management is confident that there will not be any material adjustment on updating of records and completion of physical verification.

(b) Forward contract USD 850953.77(PY USD 4714259.00) taken to hedge the foreign currency receivables are outstanding as at 30/09/2013.

2.27 (a) Current period figures in Statement of Profit & Loss and Cash Flow are for eighteen months which are not strictly comparable with the figures of the previous year.

(b) Figures for the previous year have been re-grouped/recast wherever considered necessary to make them comparable with those of current period.

2. Rights of Shareholders

2.1 The Company has only one class of Equity Shares having face value of Rs. 10/- each (Previous Year Rs. 10/- each) in its issued, subscribed and paid up Equity share capital. Each shareholder is entitled to one vote per share (except GDR shareholding mentioned at point no. 2.2 below). Each shareholder have the right in profit/surplus in proportion to amount paid up with respect to share holding.

2.2 The GDR shareholding which is standing in the name of Bank of New York Mellon, as Depositary, has right to dividend but do not have any right to vote

2.3 In the event of winding up, the equity shareholders will be entitled to receive the remaining balance of assets, if any, in proportionate to their individual shareholding in the paid up equity capital of the company.

2.4 Term Loan of Rs.24781.01 lacs (PY. Rs 28331.35 Lacs) from banks are secured by mortgage of Immovable properties situated at Village Kurawala, Distt Mohali and at Plot No.B-58, Industrial Area, Phase-VII, Mohali and by hypothecation of all the company''s movable properties (save & except book debts) including moveable plant & machinery, spares, tools and accessories both present and future, subject to the prior charges created/to be created in favor of Company''s bankers on specified movable assets for the working capital facilities. The mortgage and charges created I to be created shall rank pari-passu '' inter-se'' between the Banks and (ii) Term loan of Rs.70.82 Lacs (PY Rs. 354.14 Lacs) from a bank which is secured by sub-servant charges on fixed assets. The loans are repayable in quarterly installments and maturity profile is as follows:

2.5 All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group read with Noteno2.2(A)(ii).

2.6 Rs. Nil (Previous year Rs. 366.64 lacs) secured by hypothecation of immovable property owned by a group company and Rs. Nil (Previous year Rs. 105.61 lacs) is secured by pledge of 5000000 nos. (Previous year 5000000 nos.) equity shares of the Company held by a Promoter Company.

2.7 Working capital demand loan includes Packing Credit & Cash Credit which are secured by hypothecation of current assets and also secured by second charge on fixed assets of the company.

2.8 All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group.


Mar 31, 2012

1.1 (A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

(Rs. in Lacs)

No. Particulars 2011-12 2010-11

(i) Bills discounted with banks 2986.42 2540.32

(ii) Outstanding Letter of Credit 202.00 55.91

(iii) Sales Tax liability in respect of matters in appeal 25.85 25.85

(iv) Excise duty show cause notices / matters in appeal 548.35 523.72

(v) Service Tax Matters 0.62 0.62

(vi) Income Tax Demand 308.23 308.23

(vii) Outstanding bank guarantees 213.59 265.00

(viii) Customs duty saved of Rs. 3679.50 Lacs (Previous Year Rs. 5271.17 lacs) for import of capital good made against EPCG license against which export obligations amounting to Rs. 27965.79 Lacs. (Previous Year 22417.23 lacs) are pending.

B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined.

Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement / finalization of above.

C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs.118.83 Lacs ( Previous year 777.46 Lacs) net of advances, Rs 71.18 Lacs (Previous year Rs. 371.21 lacs), as certified by management.

1.2 (A) (i) The Corporate Debt Restructuring (CDR) Empowered Group (CDR- EG) in their meeting held under CDR mechanism on 17th March, 2009 have approved debt restructuring proposal of the Company has been implemented based on the sanctioned so far received from the lenders or the agreement to the restructuring scheme and Master Restructuring Agreement (MRA) as approved on 21st July 2009. Rework package approved by CDR-EG in previous year. The portion of secured loan, the repayment of which is due after 12 months from 31st March 2012 has been shown under the head 'Long Term Borrowings', since in view of the management of the company, certain delay/default in the payment of Interest and Principal repayments are temporary and not regular in nature.

(ii) As per the above, arrangement / loans is additionally secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and further secured/ to be secured by pledge of 51% (Fifty one percent) of paid up equity share capital (present /future) of the company or 100% of shares held/ to be held by promoters, promoters group/ associate companies, whichever is lower.

(iii) CDR Empowered group have also stipulated that promoters shall arrange to bring fund to meet the deficit as stipulated and fund out of investments made in overseas subsidiaries through disinvestment which is in process.

(B) Certain covenants /conditions as stipulated in the CDR package is pending for compliance.

1.3 (A) During the year, warrant holders has exercised their rights of conversion of 120675000 warrants & balance amount comprising of 75% i.e. Rs. 1.20 per warrant {Rs 1.20 on the issue price of Rs 1.60 per warrant (including premium of Rs. 0.60 per warrant)} of such warrant has been received. Accordingly, in the board meeting held on 17.08.11 has allotted 12067500 number of equity shares of Rs. 10 each (consolidated Re. 1/- each share into equity share of Rs. 10/- each) on conversion of said warrants. Issue proceed have been utilized for the purpose as stipulated and balance amount have been parked into Working Capital.

(B) Out of the total issue proceeds of the GDRs in the previous year of Rs.5914.75 Lacs, pending certain compliances Rs. 3077.09 lacs (including foreign exchange gain) is parked in the Bank "Escrow" Account

(ii) During the year, The Company has commissioned 1.75 MW of Hydro power project & the balance 0.75 MW is in process of implementation against which expenditure incurred till 31st March 2012 have been included in CWIP.

1.4 Research and development expenditure amounting to Rs 46.87 lacs (Previous year Rs. 34.48 lacs ) have been debited to Profit and Loss account under the head Salaries, Wages & other Allowances.

1.5 In accordance with the Accounting Standards (AS-28) on "Impairment of Assets" as notified under Companies (Accounting Standards) Rules, 2006, during the year the Company has carried out a broad review of the recoverable value of its certain fixed assets. As the recoverable amount as per projections assessed by the management exceeds the carrying amount, no impairment has been provided in the account.

1.6 As per the past practice treatment of gain/(loss) on account of exchange fluctuation on loan/liability for capital assets, the Company continued to charged to exchange difference in the statement of Profit and Loss.

1.7 Step down subsidiaries (three nos) are under liquidation, namely M/s, S. C. Winsome Romania s.r.l, Romania, M/s, IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through it's a subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Necessary provisions against this and outstanding in their accounts (as debtors) have been made in the books of accounts.

1.8 As per terms of the Agreement entered between Company and private equity partners /sellers, the Company is to invest through a subsidiary i.e. WYCL (Winsome Yarns (Cyprus) Ltd) in a jV Company M/s Newcocot S.P.A. amounting to Euro 4.64 millions (approx Rs 3170.98 lacs). In earlier year the Company has made investment in equity and preference share capital of its above stated subsidiary amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs).

1.9 Diminution in the value of investment made amounting to Rs.1516.71 lacs in subsidiary has not been considered necessary by the Company in view of strategic and long term in nature and considering the intrinsic value of the assets of the subsidiary Company.

1.10 Company does not have taxable income for the year ended as on 31st March, 2012 under the Income Tax Act., 1961 and hence no provision for Income Tax/ Minimum Alternate Tax has been made.

1.11 (i) Commission Income in foreign currency of Rs. 929.52 lacs (Rs. 517.80 lacs since realised) and Handling charges of Rs. 298.12 lacs on sale has been accounted for on accrual basis as per the terms of agreement during the year under the head "Revenue from operations" as in the opinion of the management activities is directly related with its business segment its operates. Company is in process of getting the balance confirmation.

1.12 Prior period adjustments (Net) Nil (P.Y. Rs. 2.64 lacs) include Freight & handling charges Rs. Nil (P.Y. Nil), Legal & Professional charges Nil (P.Y. Rs. 2.49 Lacs ), and others Nil P.Y. Rs. 0.15).

1.13 In the opinion of the Board, the Current Assets, Loans and Advances (including advance given to a step down subsidiary) appearing in the Company's Balance Sheet as at year end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet.

1.14 Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

1.15 The Company has initiated persuasive action for recovery of certain overdue overseas debtors of amounting to Rs 1641.09 Lacs. (P.Y. Rs.1900.18 Lacs.) {excluding cumulative gain on restatement of foreign currency debtors of Rs 326.05 Lacs (P.Y 217.90 Lacs). In the opinion of the management these are good and fully realizable hence no provision there against is considered necessary. However for necessary approval for the extension of time application have been filed with the appropriate authority.

1.16 Balances of certain sundry debtors, Loans & Advances (including capital advances), creditors and other liabilities (including associate company) are in process of confirmation/ reconciliation. The management is of the opinion that adjustment, if any, arising out of such reconciliation would not be material.

1.17 Employees Benefits:

a) Defined Contribution Plan:

Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs 100.93 Lacs (P. Y. Rs. 93.62 lacs) has been recognized as expense for the year.

b) Defined Benefit Plan:

The employee' gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

1.18 The Company has given interest free loan/ advances in the nature of loan, to employees, in the ordinary course of its business. No loan/ advances in the nature of loans have been given to employees/ others for the purpose of investment in securities of the Company.

1.19 Segment Reporting

(i) The Company is only in one line of business namely Textile (Yarn, Knitting & related revenue)

(ii) The segment revenue in geographical segments considered for disclosure is as follow:

(a) Revenue inside India includes sales to customers located within India.

(b) Revenue outside India includes sales to customers located outside India.

Information about geographical segments (by location of customers)

1.20 During the year, deferred tax in respect of timing differences has been re-assessed/ re-computed and Asset (net) amounting to Rs. 1367.66 lacs for the year has been debited to Profit & Loss Account. Deferred tax assets on unabsorbed depreciation and business losses have been recognized based on management's opinion that there is virtual certainty and sufficient taxable income will be generated / available against which such deferred tax assets can be realized.

*The face value of equity share capital has been consolidated on 06.08.2011 from Re 1/- to Rs. 10/ each. Accordingly, the number of equity shares have been decreased and also EPS for the preceeding period(s) have been revised/reinstated.

1.21 Related party disclosures

List of "Related party & Relationship disclosures" are given below: (as identified by the management)

1. (a) Associate Company

Winsome Textile Industries Limited

(b) Subsidiary Company

(i) Winsome Yarns (Cyprus) Limited (100% Subsidiary)

(ii) S.C. Winsome Romania s.r.l (Subsidiary of (i) above)

(iii) I.M.M. Winsome Italia s.r.l (Subsidiary of (ii) above)

(iv) S.C. Textil s.r.l. (Subsidiary of (iii) above)

(v) Winsome Yarns FZE (Subsidiary of (i) above) (w.e.f. 11.7.2011)

- Chairman and Managing Director have given guarantees to lenders against loans taken by the Company.

- Starpoint Financial Services Pvt. Ltd. has given guarantees to lenders against loans taken by the Company.

(b) Forward contract USD 4714259.00 (PY Nil , USD Nil ) taken to hedge the foreign currency receivables are outstanding as at 31/03/12.

1.22 During the year ended 31st March 2012, the revised schedule VI has become applicable to the company. Thus Previous year figures have been reclassified/recasted suitably. The adoption of revised schedule VI does not impact recognition & measurement principle followed for preparation of financial statements except for presentation & disclosures wherever required.

2. Rights of Shareholders

2.1 The Company has only one class of Equity Shares having face value of Rs. 10/- each (Previous Year Rs. 1/- each) in its issued, subscribed and paid up equity share capital. Each shareholder is entitled to one vote per share (except GDR shareholding mentioned at point no. 2.2 below). Each shareholder have the right in profit/surplus in proportion to amount paid up with respect to share holding.

2.2 The GDR shareholding which is standing in the name of Bank of New York Mellon, as Depositary, has right to dividend but do not have any right to vote.

2.3 In the event of winding up, the equity shareholders will be entitled to receive the remaining balance of assets, if any, in proportionate to their individual shareholding in the paid up equity capital of the company.

(a) During the yea, company allotted 1,20,67,500 equity shares of Rs 10/- each at a premium of Rs.6/- per share.

(P.Y 13,03,25,000 equity share of Re. 1 each at a premium of Re.0.60 each) upon conversion of equal number of warrants allotted on preferential basis.(Refer Note 2.3(A).

(b) During the year, the company has issued & allotted Nil Global Depository Receipts(GDRs) (P.Y.19,94,125 GDR's representing 19,94,12,500 equity shares of Re.1/- each at a premium of Rs.1.97 per share)

2.1 Term Loan of Rs. 28331.35 lacs (PY. Rs 29943.70 Lacs) from banks are secured by mortgage of Immovable properties situated at Village Kurawala, Distt Mohali and at Plot No.B-58, Industrial Area Phase - VII, Mohali and by hypothecation of all the company's movable properties (save & except book debts) including moveable plant & machinery, spares, tools and accessories both present and future, subject to the prior charges created/to be created in favour of Company's bankers on specified movable assets for the working capital facilities . The mortgage and charges created / to be created shall rank pari-passu ' inter-se' between the Banks and (ii) Term loan of Rs. 354.14 Lacs (PY Rs. 616.72 Lacs) from a bank which is secured by sub-servient charges on fixed assets. The loans are repayable in quarterly installments and maturity profile is as follows:

2.2 All the aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group read with Note no 2.2(A)(ii).

2.3 Vehicle Finance of Rs 11.80 Lacs is secured by hypothetical of specific assets purchased under such arrangements.The loans and repayable in monthly installments and maturity Profile is as under:-

2.4 Rs.366.64 lacs (Previous Year Rs.616.64 lacs) secured by hypothecation of immovable property owned by a group company and Rs.105.61 Lacs (Previous Year Rs. 177.87 Lacs) is secured by pledge of 50,00,000 nos.(Previous Year Rs. 5,00,00,000 nos.) equity shares of the Company held by a promoter company.

3.1 Working capital demand loan includes Packing Credit & Cash Credit which are secured by hypothecation of current assets and also secured by second charge on fixed assets of the company.

3.2 The aforesaid credit facilities mentioned here in above are also guaranteed by two directors of the Company and by Pledge of Shares of the Company held by the Promoter Group.


Mar 31, 2011

1. (A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

(Rs. in Lacs)

No. Particulars 2010-2011 2009-2010

(i) Bills discounted with banks 2540.32 2884.08

(ii) Outstanding Letter of Credit 55.91 418.34

(iii) Sales Tax liability in respect of matters in appeal 25.85 8.05

(iv) Excise duty show cause notices / matters in appeal 523.72 523.72

(v) Service Tax Matters 0.62 0.62

(vi) Income Tax Demand 308.23 308.23

(vii) Outstanding bank guarantees 265.00 88.79

(viii) Customs duty saved of Rs. 5271.17 lacs (Previous Year Rs. 4151.70 lacs) for import of capital good made against EPCG license against which export obligations amounting to Rs. 22417.23 lacs (Previous Year Rs. 33213.58 lacs) is pending.

(B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined. Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement / finalization of above.

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 777.46 lacs ( Previous year Rs. 862.83 lacs ) net of advances Rs. 479.70 lacs, (Previous year Rs. 460.89 lacs), as certified by management.

2.(A) (i) The Corporate Debt Restructuring (CDR) Empowered group (CDR- EG) in their meeting held under CDR mechanism on 17th March, 2009 have approved debt restructuring proposal of the Company which is effective from 1st January 2009 has been implemented based on the sanctioned so far received from the lenders or the agreement to the restructuring scheme and Master Restructuring Agreement (MRA) as approved on 21st July 2009. During the current year, CDR-EG in their meeting held on 25/06/2010 and 27/07/2010 has approved the rework package for the company effective from 01/04/2010.

(ii) As per the above, arrangement / loans is further secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and further secured/ to be secured by pledge of 51% (Fifty one percent) of paid up equity share capital (present /future) of the company or 100% of shares held/ to be held by promoters, promoters group/ associate companies , which ever is lower.

(iii) CDR Empowered group have also stipulated that promoters shall arrange to bring fund to meet the deficit as stipulated and fund out of investments made in overseas subsidiaries through disinvestment which is in process.

(B) Certain covenants /conditions as stipulated in the CDR package is pending for compliance.

3. (A) In the EGM held on 5th February, 2010 shareholders of the Company have approved the issue of 25,10,00,000 nos. convertible warrant at Rs. 1.60 per warrant (including premium of Rs. 0.60 per warrant) on preferential allotment basis and have received aggregate amount of Rs.1004 lacs (total received Rs.1088 lacs) being applicable 25% (Re.0.40 on issue price of Rs. 1.60 per warrant, including premium of Re.0.60 per warrant) of such warrant and made the allotment of Convertible Warrant in Board of Directors meeting held on 19.02.2010 , with a conversion right of 18 months from the date of allotment of warrant. Further, during the year, warrant holder has exercised their rights of conversion of 130325000 warrants & balance amount comprising of 75% ( Rs 1.20 on the issue price of 1.60 per warrant) of such warrant has been received. Accordingly, the company vide board meeting dated 30/09/2010 has allotted 130325000 number of equity shares of Re. 1 each on conversion of said warrants. Issue proceed have been utilized for the purpose as stipulated and balance amount have been parked into Working Capital. (B) In terms of the resolution passed in the EGM held on 28/06/2010, the company has issued Global Depository Receipts (GDRs) during the year. Pursuant to this 1994125 number of GDR of USD 6.64 each (Each GDR comprising of 100 equity shares) at a price of Rs. 2.97 per share (including premium of Rs. 1.97 per share)) has been issued and allotted on 29/03/2011 and is listed on the stock exchange of Luxembourg. Pending certain compliance, the issue proceeds of the GDRs of Rs.5914.75 lacs (including security premium of Rs.3920.62 lacs) is parked in the Bank “Escrow” Account outside India and accordingly these issue proceeds is pending to be utilized.

(B) During the year, The Company has commissioned 1.4MW of Hydro power project & the 2.5 MW project is in process of implementation against which expenditure incurred till 31st March 2011 have been included in CWIP.

5. Research and development expenditure amounting to Rs.34.48 lacs (Previous year Rs.25.42 lacs) have been debited to Profit and Loss account under the head Salaries, Wages & other Allowances.

6. In accordance with the Accounting Standards (AS-28) on “Impairment of Assets” issued by the Institute of Chartered Accountants of India, during the year the Company has reassessed value in use of its fixed assets and is of the view that no provision for impairment is necessary.

7. In view of the Company (Accounting Standard) Rules, issued by the Ministry of Corporate Affairs for treatment of gain/(loss) on account of exchange fluctuation on loan/liability for capital assets, the Company continued its policy to charge exchange difference to the Profit & Loss Account.

Appointment and remuneration to the Managing Director has been approved by the Ministry of Corporate Affairs, Govt of India vide its letter dated 16/08/2010.

9. Step down subsidiaries (three nos) are under liquidation, namely M/s, S. C. Winsome Romania s.r.l, Romania, M/s, IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through its a subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Necessary provisions against this and outstanding in their accounts (as debtors) have been made in the books of accounts.

10. (A) As per terms of the Agreement entered between Company and private equity partners /sellers, the Company is to invest through a subsidiary i.e. WYCL (Winsome Yarns (Cyprus) Ltd) in a JV Company M/s Newcocot S.P.A. amounting to Euro 4.64 millions (approx Rs 2934.33 lacs). In earlier year the Company has made investment in equity and preference share capital of its above stated subsidiary amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs). (B) Diminution in the value of investment made amounting to Rs.1516.71 lacs in subsidiary has not been considered necessary by the Company in view of strategic and long term in nature and considering the intrinsic value of the assets of the subsidiary Company.

11. Company does not have taxable income for the year ended as on 31st March, 2011 under the Income Tax Act., 1961 and hence no provision for Income Tax/ Minimum Alternate Tax has been made.

12. During the year, the company has provided for income tax in respect of earlier years of Rs 46.13 Lacs.

13. Prior period adjustments (net) Rs. 2.64 lacs (P.Y. Rs. 6.08 lacs) include Legal & Professional charges Rs. 2.49 lacs (P.Y. Rs. 6.08 lacs ), and others Rs. 0.15 lacs (P.Y. Rs. Nil).

14. In the opinion of the Board, the Current Assets, Loans and Advances appearing in the Companys Balance Sheet as at year end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet.

15. Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

16. The Company has initiated persuasive action for recovery of certain overdue overseas debtors of amounting to Rs. 1900.18 Lacs ( P. Y. Rs 1903.39 lacs) {excluding cumulative gain on restatement of foreign currency debtors of Rs. 217.90 lacs}. In the opinion of the management these are good and fully realizable, hence no provision there against is considered necessary. However for necessary approval for the extension of time application have been filed with the appropriate authority.

17. Balances of certain sundry debtors, Loans & Advances (including capital advances), creditors (including Associates Co.), and other liabilities are in process of confirmation/ reconciliation. The management is of the opinion that adjustment, if any, arising out of such reconciliation would not be material.

18. Employees Benefits:

a) Defined Contribution Plan:

Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs. 93.62 lacs ( P. Y. Rs. 83.62 lacs) has been recognized as expense for the year.

b) Defined Benefit Plan:

The employee gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

(i) The estimate of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary.

(ii) The principal assumptions are the discount rate & salary growth rate. The discount rate is generally based upon the market yields available on Government bonds at the accounting date with a term that matches that of the liabilities.

19. The Company has not received full information from vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amount unpaid as at year end together with interest paid/ payable have been given based on the information so far available with the company/ identified by the company management. As required by section 22 of the above said Act the following information is disclosed:

20. The Company has given interest free loan/ advances in the nature of loan, to employees, in the ordinary course of its business. No loan/ advances in the nature of loans have been given to employees/ others for the purpose of investment in securities of the Company.

21. Figures for the previous year have been re-grouped/recast wherever considered necessary to make them comparable with those of current year.


Mar 31, 2010

1. (A) Contingent Liabilities, not provided for in respect of; (As certified by the management)

(Rs. in lacs)

No. Particulars 2009-10 2008-09

(i) Bills discounted with banks 2884.08 1716.54

(ii) Outstanding Letter of Credit 418.34 213.82

(iii) Sales Tax liability in respect of matters in appeal 8.05 8.05

(iv) Excise duty show cause notices / matters in appeal 523.72 559.41

(v) Service Tax Matters 0.62 0.62

(vi) Income Tax Demand 308.23 142.71

ivii) Outstanding bank guarantees 88.79 51.09



(viii) Customs duty saved of Rs. 4151.70 lacs (Previous Year Rs.2677.28 lacs) for import of capital good made against EPCG license against which export obligations amounting Rs. 33213.58 lacs (Previous Year Rs.21418.23 lacs) are pending.

(B) In respect of certain disallowances and additions made by the Income Tax Authorities, appeals are pending before the Appellate Authorities and adjustments, if any, will be made after the same are finally determined.

Considering the past experience, management is of the view that there will not be any material impact on accounts on settlement / finalization of above.

(C) Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. 862.83 Lacs ( Previous year Rs.893.73 lacs) net of advances Rs. 460.89 lacs, (Previous year Rs.511.10 lacs).

2. (A) (i) The Corporate Debt Restructuring (CDR) Empowered group (CDR- EG) in their meeting held under CDR mechanism on 17th March, 2009 have approved debt restructuring proposal of the Company which is effective from 1 st January 2009 has been implemented based on the sanctioned so far received from the lenders or the agreement to the restructuring scheme and Master Restructuring Agreement (MRA) as approved on 21st July 2009. (ii) As per the above, arrangement / loans is further secured by unconditional and irrevocable personal guarantees of promoters, promoters group/ associate companies and further secured/ to be secured by pledge of 51% (Fifty one percent) of equity share capital (present /future) held/to be held by them in the company. (iii) CDR Empowered group have also stipulated that promoters shall arrange to bring fund to meet the deficit as stipulated and fund out of investments made in overseas subsidiaries through disinvestment which is in process. (B) Certain covenants /conditions as stipulated in the CDR package is pending for compliance during the year.

3. (i) In the EGM held on 5th February, 2010, shareholders of the company have approved the issue of 25,10,00,000 nos. convertible warrants at Rs. 1.60 per warrant (including premium of Re. 0.60 per warrant) on preferential allotment basis and have received aggregate amount of Rs.1004 lacs (total received Rs.1088 lacs) being applicable 25% (Re.0.40 on issue price of Rs. 1.60 per warrant, including premium of Re.0.60 per warrant) of such warrants and made the allotment of Convertible Warrants in Board of Directors meeting held on 19.02.2010. (ii) Issue proceed have been utilized for the purpose as stipulated and balance amount have been parked into Working Capital.

4. Research and development expenditure amounting to Rs.25.42 lacs (Previous year Rs.21.84 lacs) have been debited to Profit and Loss account under the head Salaries, Wages & other Allowances.

5. In accordance with the Accounting Standards (AS-28) on "Impairment of Assets" issued by the Institute of Chartered Accountants of India, during the year the Company has reassessed value in use of its fixed assets and is of the view that no provision for impairment is necessary.

6. In view of the Company (Accounting Standard) Rules, issued by the Ministry of Corporate Affairs for treatment of gain/(loss) on account of exchange fluctuation on loan/liability for capital assets, the company continued its policy to charge exchange difference to the Profit & Loss Account.

Appointment and remuneration to the Managing Director w.e.f. 01.07.2009 (amounting to Rs. 17.79 lacs paid) is subject to the approval of Central Government for which application have been filed. .

7. Step down subsidiaries (three nos) are under liquidation, namely M/s, S. C. Winsome Romania s.r.l, Romania, M/s, IMM Winsome Italia s.r.l, Italy and M/s. S.C.Textil s.r.l, Romania. The Company through ifs a. subsidiary have made investment of amounting to Euro 828 (Equivalent to Rs.0.54 lacs) in these subsidiaries. Considering this necessary provisions against this and outstanding in their accounts (as debtors) have been made during previous year.

8. (A) As per terms of the Agreement entered between company and private equity partners /sellers, the company is to invest through a subsidiary i.e. WYCL (Winsome Yarns (Cyprus) Ltd) in a JV Company M/s Newcocot S.RA. amounting to Euro 4.64 millions (approx Rs 2782.95 lacs). In earlier year the Company has made investment in equity and preference share capital of its above stated subsidiary amounting to EURO 2.55 million (Equivalent to Rs.1517.25 lacs). (B) Diminution in the value of investment made amounting to Rs.1516.71 lacs in subsidiary has not been considered necessary by the company in view of strategic and long term in nature and considering the intrinsic value of the assets of the subsidiary company

9. Depreciation on certain Plant & Machinery is provided by considering it as continuous process plant based on technical assessment.

10. Company does not have taxable income for the year ended as on 31st March, 2010 under the Income Tax Act., 1961 and hence no provision for Income Tax/ Minimum Alternate Tax has been made.

11. Prior period adjustments (net) Rs. 6.08 lacs (RY. Rs. 13.66 lacs) include Freight & handling charges Rs. Nil (RY. Rs. 3.03 lacs), Legal & Professional charges Rs. 6.08 lacs (RY Rs. 10.53 lacs), and others Rs. Nil (RY. Rs. 0.10 lacs).

12. In the opinion of the Board, the Current Assets, Loans and Advances appearing in the Companys Balance Sheet as at year end would have a value on realisation in the normal course of business at least equal to the respective amounts at which they are stated in the Balance Sheet.

13. Since it is not possible to ascertain with reasonable certainty/ accuracy the amount of accrual in respect of certain insurance and other claims and interest on overdue bills, the same are continued to be accounted for on settlement/ acceptance basis.

14. The company has initiated persuasive action for recovery of certain overdue overseas debtors of amounting to Rs.1903.39 lacs (RY. Rs. 2028.29 lacs). In the opinion of the management these are good and fully realizable hence no provision there against is considered necessary. However for necessary approval for the extension of time application have been filed with the appropriate authority.

15. Balances of certain sundry debtors, Loans & Advances, creditors (including of associates Company), and other liabilities are in process of confirmation/ reconciliation. The management is of the opinion that adjustment, if any, arising out of such reconciliation would not be material.

16. Employees Benefits:

a) Defined Contribution Plan: Contribution to Defined Contribution Plan, i.e contribution to provident fund amounting to Rs. 83.62 lacs (R Y Rs. 69.61 lacs) has been recognized as expense for the year.

b) Defined Benefit Plan: The employee gratuity fund is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation. The obligation for leave encashment is recognized in the same manner as gratuity.

17. In the AGM held on 23rd Sep 2008 the company had passed a resolution tor issue of 1,55,00,000 nos Convertible Warrants on preferential basis to Non-Promoter Group & Promoter Group. However, this preferential allotment of Convertible Warrants was subsequently withdrawn by the Company vide circular Resolution No.1/2009 dated February 23, 2009, due to non-receipt of consent from a term lender and in-principle approval of the Stock Exchanges. The Company had however received an amount of Rs.216 lacs being the applicable 10% amount (Rs. 1.80 on issue price of Rs. 18/- per warrants, including premium) of such warrants. During the year in the EGM held on 18.06.2009 the Company have passed a resolution for issue of 64,00,000 nos. Convertible Warrants (carrying differential rights as to dividend and voting) of Rs.14/- each (aggregating to Rs.896 lacs) on preferential allotment basis to Non Promoter Group & Promoter Group which was subsequently withdrawn by the Board in their meeting held on 30.07.2009 due to non-receipt of in-principle approval of the Stock Exchanges. Further again in the AGM held on 28.09.2009 company have passed another resolution for issue of 72,00,000 nos. Convertible Warrants on preferential basis to Non-Promoter Group & Promoter Group. However, this preferential allotment of Convertible Warrants was also been subsequently withdrawn by the Board in their meeting held on 09.01.2010 due to non-receipt of consent from a term lender and in principle approval of the stock exchanges.

18. The Company has not received full information from vendors regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosure relating to amount unpaid as at year end together with interest paid /payable have been given based on the information so for available with the company/ identified by the company management. As required by section 22 of the above said Act the following information is disclosed.

19. The company has given interest free loan / advances in the nature of loan, to employees, in the ordinary course of its business. No loan / advances in the nature of loans have been given to employees / others for the purpose of investment in securities of the company.

20. In terms of the resolution passed by the shareholders in their meeting held on 28.08.2009, fully paid up shares of Rs. 10/- each of the Company has been sub-divided into 10 no. fully paid shares of Rs. 1/- each.

21. Related party disclosures.

List of "Related party & Relationship disclosures" are given below: (as identified by the management)

1. (a) Associate Company

Winsome Textile Industries Ltd. (b) Subsidiary Company

(i) Winsome Yarns (Cyprus) Limited (100% Subsidiary) (ii) S.C. Winsome Romania S.R.L. (Subsidiary of (i) above) (iii) I.M.M. Winsome Italia S.R.L. (Subsidiary of (ii) above) (iv) S.C. Textil S.R.L. (Subsidiary of (iiij above)

2. Key Management Personnel and their relatives

- Shri Satisn Bagrodia Chairman

- Shri Manish Bagrodia Managing Director

- Shri Ashish Bagrodia Director

3. Organisation where Key Management Personnel & their relative have significant influence

- Starpoint Financial Services (Pvt.) Ltd.

- Shell Business Pvt. Ltd.

- Satyam Combines Pvt. Ltd.

22. Figures for the previous year have been re-grouped/recast wherever necessary to make them comparable with those of current year.

23. Schedule 1 to 15 form an integral part of the Balance Sheet and Profit & Loss Account.