Notes to Accounts of Zenith Fibres Ltd.

Mar 31, 2018

Notes Forming Part of Financial Statements

1. Corporate Information

Zenith Fibres Limited (“the Company”) is a Public Limited Company incorporated in India and governed by the Companies Act, 2013 (“the Act”). The Company is engaged in the manufacturing of Manmade Fibres. The shares of the Company are listed on the Bombay Stock Exchange.

The Company’s registered office is located at 205, Marol Bhavan, 2nd Floor, Marol Co-op Industrial Estate Limited, M.V. Road, J.B. Nagar Post, Andheri (E), Mumbai - 400059.

2. Statement of compliance and basis of preparation and presentation

2.1 Statement of compliance

Compliance with Indian Accounting Standards (Ind AS)

The financial statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended by the Companies (Indian Accounting Standards)(Amendment) Rules, 2016, notified under Section133 of the Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 (“the Act”).

For all periods up to year ended 31st March, 2017, the Company prepared its financial statements in accordance with accounting standards notified under the Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP). These financial statements for the year ended 31st March, 2018 are the first financial statements prepared in accordance with Ind AS.

2.2 Basis of preparation

The financial statements have been prepared under historical cost convention on accrual basis except for the items that have been measured at fair value as required by relevant Ind AS.

2.3 Significant Accounting judgements, estimates and assumptions

The preparation of these financial statements requires management judgements, estimates and assumptions that effect application of accounting policies, the accounting disclosures made and the reported amounts of assets, liabilities, income and expenses.

Estimates and underlying assumptions are reviewed on a periodic basis, Revisions to accounting estimates are made in the period, in which, the estimates are revised and in any future periods, effected pursuant to such revision.

2.4 Functional Currency

The functional currency of the Company is the Indian Rupees (INR). These financial statements are presented in Indian Rupees at full values, except where otherwise indicated.

2.5 Classification of current or non-current assets and liabilities

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III (Division II) to the Companies Act, 2013. Based on the nature of products and the time between the acquisition of assets for processing and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as 12 months for the purpose of current or noncurrent classification of assets and liabilities.

2.6 Fair Value Measurement

The Company measures financial instruments, such as investments (other than equity investments in Associates) and derivatives at fair values at each Balance Sheet date. Fair value is the price that would be received on selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities (for which fair value is measured or disclosed in the financial statements) are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities, that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The management determines the policies and procedures for recurring fair value measurement, such as derivative instruments and unquoted financial assets measured at fair value, and for non-recurring measurement, such as assets held for disposal in discontinued operations.

2.7 First-time adoption of Ind AS Transition to Ind AS

These are the Company’s first financial statements prepared in accordance with Ind AS.

The accounting policies set out in following notes have been applied in preparing the financial statements for the year ended 31st March, 2018, the comparative information presented in these financial statements for the year ended 31st March, 2017 and in the preparation of an opening Ind AS Balance Sheet at 1st April, 2016 (the Company’s date of transition). In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flows is set out in the following tables and notes.

Exemptions Availed

i) Deemed Cost for Property, Plant and Equipments and Intangible Assets

The Company has elected to continue with the carrying value of all its property, plant and equipment and intangible assets recognized as of 1st April, 2016 (the transition date), measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date.

ii) Equity investment in Associate

The Company has elected to apply Indian GAAP carrying amount as deemed cost on the date of transition to Ind AS for its equity investments in associates.

3 OTHER NOTES:

3.1.1 a. CONTINGENT LIABILITIES AND COMMITMENTS

b. Claims against the Company not acknowledged as debts

Excise department has raised demand of Rs. 90,48,505/- (including penalty of Rs. 59,74,353/-) pertaining to the period 01.04.2010 to 31.03.2011 vide order of Commissioner, Central Excise and Customs dated 28.08.2014. No provision for the same is made as the Company has contested the same before the higher authority and as per the legal advice received, the Company is hopeful of favorable decision.

c. Commitments:

Capital Commitments

2.1.2 Proposed Dividend

The Directors have recommended a dividend of Rs. 1.50 per equity share of Rs. 10 each for the financial year ended 31st March, 2018. Total Amount of dividend, if approved by the shareholders in ensuing General Meeting, would be Rs. 66,33,519/- and dividend distribution tax (dDT) of Rs. 13,63,539/-. (As at 31.03.2017: Rs. 2/-per fully paid equity share amounting to Rs. 88,44,692/- and Rs. 18,00,574/- DDT thereon).

3.1.3 Segment Reporting

The Company’s operations fall under single segment namely “Manmade Fibres” hence no separate disclosure of segment reporting is required to be made as required under Ind AS 108 ‘Operating Segments’.

3.2 As per the information available with the company and identification of the parties there are no amounts outstanding to Micro, Small and Medium Enterprises as at March 31, 2018 and no amount were overdue for which disclosure requirements under Micro, Small and Medium Enterprises Development Act, 2006 are applicable.

3.3 Related Party Disclosures

a) Names of related parties and nature of relationships:

b) Details of Transactions with the related parties during the year and amount outstanding:

3.4 The Company has taken premises under operating lease. Rental expenses towards cancellable operating leases charged to statement of profit and loss account amounts to Rs. 29,54,888/- (previous year Rs. 21,99,474/)

3.5 Foreign Currency Risk

The carrying amount of foreign currency denominated monetary assets and monetarily liabilities at the end of the reporting period is NIL (Previous Year NIL).

3.6 Fair Value Measurement Financial Instrument by Category

Set out below is a comparison by class of the carrying amounts and fair value of the Company’s financial assets and liabilities that are recognized in the financial statements.

Fair valuation techniques used to determine fair value

The Company maintains procedures to value financial assets or liabilities using the best and most relevant available data. The fair values of the financial assets and liabilities are included at the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between participants at the measurement date.

The following assumptions were used to estimate the fair values:

1. Fair value of trade receivables, cash and cash equivalents, other bank balances, trade payables, deposits and other financial assets and liabilities are approximate at their carrying amount.

2. Fair value of quoted financial instruments are derived from quoted market prices in active market.

3. Investment in Equity and Bonds are measured at cost.

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

1. Level 1- Quoted prices / published NAV in active markets for financial instruments like mutual funds for which net assets value (NAV) is published by mutual fund operator at the balance sheet date.

2. Level 2- Inputs for fair valuation which are observable, either directly or indirectly, other than quoted prices included within Level 1 for the assets or liabilities.

3. Level 3 - Inputs which are unobservable inputs for the assets or liabilities reflecting significant modifications to the observable related market data or Company’s assumptions about pricing by market participants.

The following table provides hierarchy of the fair value measurement of Company’s financial instruments/assets, grouped into Level 1 (Quoted prices in active market) as described below:

Notes on Reconciliation: -As at 1st April, 2016

1. The Components of amount transferred to other equity are as under:

2. During F.Y. 17-18, Company has changed method of inventory valuation from weighted average basis to FIFO. The effect of changes has been given with effect from 1st day of April, 2016. On account of change in accounting policy on inventory valuation, value of inventory as on 1st day of April, 2016 is lower by Rs. 9,01,601/-.

3. The sum of Rs. 1,59,67,895/- being reversal of provision is the amount of proposed dividend Rs. 1,32,67,038/- and tax thereon Rs. 27,00,857/-. Under previous GAAP, proposed dividend recognized as a provision in the financial statements, even if declared after the balance sheet date. Under Ind AS, dividend is recognized when declared hence provision is reversed.

The effect of Rs. 1,59,67,895 is transferred to Other Equity.

As at 31st March, 2017

1. The Company has measured financial instrument being Mutual funds as fair value through statement of profit and loss. The gain on account of fair valuation of mutual fund Rs. 71,72,778/- added to the fair value mutual funds as on 31st March, 2017. During F.Y. 17-18, Company has changed method of inventory valuation from weighted average basis to FIFO. The effect of changes has been given with effect from 1st day of April, 2016. The changed method resulted into upward valuation of inventory as on 31 st March, 2017 by Rs. 8,77,428.

2. The net effect of Ind AS transition and changes in accounting policy Rs. 56,79,256/- is transferred to Other Equity as under:

3. The Components of increase in deferred tax liability on implementation of Ind As are as under:

Notes on effects of transition to Ind AS

1. Fair Valuation of Mutual Funds through statement of profit and loss

Under previous GAAP, investment in Mutual Funds were measured at cost. Under Ind AS, non-current investment (other than investment in equity of associate) are measured at fair value through statement of profit and loss. Consequently, difference of Rs. 71,72,778/-, as at the date of transition, respectively between carrying value as per previous GAAP and fair value, are reflected in total equity and statement of profit and loss.

2. Employee Benefit Expenses

Under previous GAAP, actuarial gain and losses on employees defined benefit obligations were recognized in statement of profit or loss Account. Under Ind AS, the actuarial gains and losses on re-measurement of net defined benefit obligation are recognized in other comprehensive income. This resulted in a re-classification of Rs. 17,86,901/- between statement of profit and loss and other comprehensive income.

3. Deferred tax

Previous GAAP requires deferred tax accounting using the income statement approach, which focuses on differences between taxable profits and accounting profits for the period. Ind AS 12 requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on difference between the carrying amount of an asset or liability in the Balance Sheet and its tax base. It requires recognition of tax consequences of differences between the carrying amounts of assets and liabilities and their tax base. As a result deferred tax liability has been increased by Rs. 29,61,753/- as at 31st March, 2017 with corresponding decrease in retained earnings and net profit respectively.

4. Re-measurement of defined benefit obligation

Under previous GAAP, actuarial gain and losses on employees defined benefit obligations were recognized in statement of profit and loss Account. Under Ind AS, the actuarial gains and losses on re-measurement of net defined benefit obligation are recognized in other comprehensive income. This resulted in a re-classification of Rs. 17,86,901/- between Statement of profit or loss Account and other comprehensive income.

5. Tax effect on Re-measurement of defined benefit obligation

The Component of deferred tax assets Rs. 5,90,803/- pertaining to actuarial gain or loss Rs. 17,86,901/-, is reclassified to other comprehensive income.

3.7 Financial Risk Management

The Financial risk management is practices and procedures that a Company uses to optimize the amount of risk it handles with financial interest. The Risk management is done to identify how risks associated with the Company will be identified, analyzed, and managed. It outlines how risk management activities will be performed, recorded, and monitored by the Company. The basic objective of risk management plan is to implement an integrated risk management approach to ensure all significant areas of risks are identified, understood and effectively managed, to promote a shared vision of risk management and encourage discussion on risks at all levels of the organization to provide a clear understanding of risk/benefit trade-offs, to deploy appropriate risk management methodologies and tools for use in identifying, assessing, managing and reporting on risks.

Credit Risk

Credit risk is the risk that a counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities, primarily in respect of trade receivables, including deposits with banks, foreign exchange transactions and other financial instruments. The Company deals on advance payment basis with customers in majority of the cases and credit is restrictively offered to very old and credit worthy customers only. Company has minimal credit risk which also assessed on regular basis. Hence, no provision towards credit loss was considered necessary.

Market Risk

PP Fibre is used primarily in India for three applications - in the manufacture of Filter Fabrics used for almost all kinds of liquid filteration, in the manufacture of automotive and exhibition carpets and for the construction and geo-textile sector.

Due to its inherent properties, PP fibre is the primary requirement for the filteration application and is irreplaceable. As long as there will be consumption of pharmaceutical liquids, juices, drinking water, etc. this market will always remain.

Until automotive vehicles will be manufactured and as long as marriages and exhibitions will take place, there will always be the requirement of carpets.

There is varied demand for PP Fibre in the construction and geo-textile sector.

In view of the above, sufficient margin is expected to be maintained.

Foreign Exchange Rate Risk

The Company’s exposure to foreign currency changes for all other currencies is not material. The Company does not have exposure to foreign currency as at the end of financial year.

Liquidity Risk

There is no apparent Liquidity risk is to the Company in view of the substantial liquid funds available. The Company does not have any immediate need of cash or funds. Company holds its surplus funds in various financial instruments which can easily be sold in the market to cover the liquidity requirement. The Company has enough liquidity to meet its financial obligation in the near future.

The table below provides undiscounted cash flows towards financial liabilities into relevant maturity based on the remaining period at the balance sheet to the contractual maturity date.

Compared to above, the Company has cash and cash equivalents of Rs. 14.48 crores and investments in mutual funds, which is liquid, is Rs. 18.12 crores which is sufficient to meet this liability.

Capital Management

For the purpose of Company’s capital management, capital includes issued capital and all other equity reserves. The primary objective of the Company’s capital management is to maximize shareholders value. Equity comprises all components including other comprehensive income and net of debt. Below table outlines the total equity net of debt.

3.8 Employee Benefits

As per Ind AS 19 ‘Employee Benefits’, the disclosure of Employee benefits as defined in the Ind AS are given below:

a) Defined Contribution Plan - Provident Fund:

The eligible employees of the Company are entitled to receive the benefits of Provident fund, defined contribution plan, in which both employees and the Company make monthly contribution at a specified percentage of the covered employees’ salary which are charged to statement of profit and loss on accrual basis. The provident fund contribution are paid the Regional Provident Fund Commissioner by the Company. During the year, the company has recognized the Company’s Contribution to Employees Provident Fund amounting to Rs. 16,42,533/- (Rs. 16,00,619/-) as part of Remuneration and other benefits to the employees.

b) Defined Benefit Plan GRATUITY:

The employees’ Gratuity Fund is managed by the Life Insurance Corporation of India. The Company makes contributions to approved gratuity fund. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit method, which recognized each period of service as given rise to additional unit of employee benefit entitlement and measures each unit separately to build up final obligation.

The Company funds the cost of gratuity expected to be earned on a yearly basis to Life Insurance Corporation of India, which manages the plan asset. The actual return on plan asset is Rs. 6,42,264/-.

Significant actuarial assumptions for the determination of the defined benefit obligation are discount rate and expected salary increase. The sensitivity analysis below has been determined based on reasonably possible changes of the respective assumption occurring at the end of the reporting period.

COMPENSATED ABSENCES

The Company provides for the compensated absences subject to Company’s certain rules. The employees are entitled to accumulate leave subject to certain limits for availing in future. The liability is provided based on the number of days of unavailed leave at each Balance Sheet date on the basis of an independent actuarial valuation using the Projected Unit Credit method.

3.9 Earnings Per Share

3.10 The Company has changed its method of determining cost of inventories from weighted average method to FIFO necessitated to value the inventory at the fair valuation representing by the current cost of purchases, considering the changes in raw material prices so as to provide more reliable and relevant information and also considering basis concept and fundamental principle of fair valuation envisaged in Ind AS. Such change has been applied on retrospective basis. The effect of changes and adjustments made are as under:

3.11 Figures of the previous year have been regrouped and/or reclassified wherever considered necessary to confirm to the grouping of the current year.

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Mar 31, 2016

1. OTHER NOTES:

(i) CONTINGENT LIABILITIES AND COMMITMENTS:

a) Contingent Liabilities: Bank Guarantee Rs. 41,50,000/- (Rs. 30,60,000/-)

b) Claims against the Company not acknowledged as debts-

Excise department has raised demand of Rs. 90,48,505/- (Including Penalty of Rs. 59,74,353/-) pertaining to period 01/04/2010 to 31/03/2011 vide order of Commissioner, Central Excise and Customs dated 28/08/2014. No provision for the same is made as the Company has contested the same before the higher authority and as per the legal advice received, the Company is hopeful of favorable decision.

c) Commitments:

Estimated amount of contracts remaining to be executed and not provided for in respect of Capital purchases (Net of Advance) Rs. 31,500/- (NIL).

(ii) In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realized in the ordinary course of business and provision for all known liabilities is adequate.

(iii) No interest is payable on account of amount outstanding to Micro, Small and Medium Enterprises. The identification of Vendor as a "Supplier" under the Micro, Small and Medium Enterprise Development Act, 2006 has been done on the basis of information available with the company. This has been relied upon by the Auditors.

(iv) Company''s operations comprise of only one segment i.e. "manufacturing of manmade fibres" in terms of the guidelines stated in AS-17 issued by the Institute of Chartered Accountants of India.

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Mar 31, 2015

I) CONTINGENT LIABILITIES AND COMMITMENTS :

(a) CONTINGENT LIABILITIES : Bank Guarantee Rs. 30,60,000/- (Rs. 51,86,122/-)

(b) Claims against the Company not acknowledged as debts:- Excise department has raised demand of Rs. 90,48,505/- ( Including Penalty of Rs. 59,74,353/-) pertaining to period 01/04/2010 to 31/03/2011 vide order of Commissioner, Central Excise and Customs dated 28/08/2014. No provision for the same is made as the Company has contested the same before the higher authority and as per the legal advice received is hopeful of favourable decision.

In previous year the company has received show cause notice from the Central Excise department for demand of Rs. 3,60,80,795/- which has been reduced to Rs. 90,48,505/- by order referred above.

(c) COMMITMENTS :

Estimated amount of contracts remaining to be executed and not provided for in respect of Capital purchases (Net of Advance) NIL (Rs. 1,12,500 /-).

(ii) In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realized in the ordinary course of business and provision for all known liabilities is adequate.

(iii) No interest is payable on account of amount outstanding to Micro, Small and Medium Enterprises. The identification of Vendor as a "Supplier" under the Micro, Small and Medium Enterprise Development Act, 2006 has been done on the basis of information available with the Company. This has been relied upon by the Auditors.

(iv) Company's operations comprise of only one segment i.e. "Manufacturing of Man-made Fibres" in terms of the guidelines stated in AS-17 issued by the Institute of Chartered Accountants of India.

(v) The amount of lease payment in respect of operating (cancellable) leases recognized in the profit and loss account was Rs. 23,94,010/- (Rs. 21,90,399/-) and future minimum lease payments are as follows :

(vi) Amount of Rs. 62.74 Lacs against prior period items is in respect of excess provision of depreciation on fixed assets of earlier year written back.

(vii) Pursuant to the provisions of the Companies Act, 2013, and based on Technical Advise, the Company has reviewed and revised the estimated useful lives of the fixed assets, primarily Plant & Machinery, effective April 1, 2014. The useful lives of certain machines have been reassessed at 20 years (earlier 25 years) and other Plant & Machinery at 10 years (earlier 25 years).

In respect of assets having completed their useful life, as a 1st April, 2014 depreciation has been recalculated and amount of Rs. 11.24 Lacs (net of tax) has been adjusted against the opening balance of the retained earnings in accordance with the transitional provisions provided in Note 7 of Schedule II of the Companies Act, 2013.

(viii) Advances Recoverable in Cash or kind includes

a) MOT charges of Rs. 1,41,625/- (Rs. 1,41,625/-) deposited under protest with Central Excise Authority on account of overtime charge demanded by Excise Authorities for Export Clearances during normal working hours. As per advise of legal expert the company is hopeful of getting refund of this amount and hence no provision made.

b) Short term Loans and Advances include Cenvat Credit of Service Tax charged by commission agents Rs. 14,02,998/- (Rs. 9,59,451/-), which could not be availed of in view of decision of Hon. Gujarat High Court in the case of Cadila Health Care Ltd. However, as per advise of legal expert appeal of Cadila Health Care Ltd. is pending before the Hon. Supreme Court of India and favourable decision is expected. The Company would make adjustment of Cenvat Credit once the issue is decided

(ix) The Company has invested Rs. 1,00,00,000/- in equity shares of Rainy Properties Pvt.Ltd. in earlier year. The said investment is of long term strategic nature. Financial Results of the said company for the year ended March 31, 2015 are yet not finalized. However, as per the latest audited financial results for the year ended March 31,2014 available, the accumulated losses were Rs. 56,85,720/- against paid up share capital of Rs. 3,23,22,000/-. However, this being long term and strategic investment and also in view of the projected profitable operations of the investee company, the management is of the view that there is no diminution other than temporary in the value of this investment.

x) a) Defined Contribution Plan - Provident Fund :

During the year, the company has recognized the Company's Contribution to Employees Provident Fund amounting to Rs. 11,64,152/- (Rs. 8,56,298/-) as part of Remuneration and other benefits to the employees.

b) Defined Benefit Plan

The benefit of gratuity is Funded Defined Benefit Plan. For this purpose the company has obtained qualifying insurance policy from Life Insurance Corporation of India.

The company provides benefits to its employees under the leave encashment pay plan which is a noncontributory defined benefit plan

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Mar 31, 2013

(i) CONTINGENT LIABILITIES AND COMMITMENTS :

(a) CONTINGENT LIABILITIES : Bank Guarantee 51,86,122/- (NIL)

(b) COMMITMENTS : Estimated amount of contracts remaining to be executed and not provided for in respect of capital purchases (Net of Advance) Rs. 3,12,750/- ( Rs. 14,27,591 /-)

(ii) In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realized in the ordinary course of business and provision for all known liabilities is adequate.

(iii) No interest is payable on account of amount outstanding to Micro, small and Medium Enterprises. The identification of vendor as a "Supplier" under the Micro, Small and Medium Enterprise Development Act, 2006 has been done on the basis of information available with the company. This has been relied upon by the Auditors,

(iv) Company''s operations comprise of only one segment i.e. "manufacturing of manmade fibres" in terms of the guidelines stated in AS-17 issued by the Institute of Chartered Accountants of India.

(v) The amount of lease payment in respect of operating (cancellable) leases recognized in the profit and loss account was f 20,43,065/- ( Rs. 19,30,878/-) and future minimum lease payments are as follows :

Current Year Previous Year (Rs.) (Rs.)

Not later than one year. , 11,86,064/- 19,39,508/

Later than one year but not later than five years 14,96,736/- 26,76,620/

Later than five years and above NiL Nil

vi) The Company has paid MOT charges of Rs. 1,41,625/- (Rs. 1,41,625/-) during earlier years to the Central Excise Authority under protest. The Company is hopeful of getting the refund of this amount as per advise of the expert. Similarly, during the year the Company has reversed Cenvat Credit of Service Tax, charged by the Commission Agent Amounting to Rs. 4,05,026/- availed of, under protest and also paid interest ofRs. 33,857/- on such reversal as per the directions of the Central Excise Authority in view of decision of Honorable Gujarat High Court in the case of Cadila Healthcare Limited. The Company has not accounted these as expenses but disclosed the same as advance recoverable as per the advise of expert and pending appeal of Cadila Healthcare Ltd. before the Honorable Supreme Court of India.

vii) a) Defined Contribution Plan - Provident Fund :

During the year the company has recognized the Company''s Contribution to Employees Provident Fund amounting to Rs. 7,92,529/- (Rs. 7,76,422/-) as part of Remuneration and other benefits to the employees.

b) Defined Benefit Plan

The benefit of gratuity is Funded Defined Benefit Plan. For this purpose the company has obtained qualifying Insurance policy from Life Insurance Corporation of India.

The company provides benefits to its employees under the leave encashment pay plan which is a non contributory defined benefit plan.

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Mar 31, 2012

I) CONTINGENT LIABILITIES AND COMMITMENTS :

(a) CONTINGENT LIABILITIES: NIL (NIL)

(b) COMMITMENTS : Estimated amount of contracts remaining to be executed and not provided fori n respect of capital purchases (Net of Advance) Rs. 14,27,591/- (Rs. NIL)

ii) The Revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements. This has significantly impacted the disclosure and presentation made in the financial statements. Previous Years' figures have been regrouped/reclassified wherever necessary to correspond with the current year's classification/disclosure.

iii) In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realized in the ordinary course of business and provision for all known liabilities is adequate.

iv) No interest is payable on account of amount outstanding to Micro and small Enterprises. The identification of vendor as a "Supplier" under the Micro, Small and Medium Enterprise Development Act, 2006 has been done on the basis of information available with the company. This has been relied upon by the Auditors.

v) Company's operations comprise of only one segment i.e. " manufacturing of man made fibres" in terms of the guidelines stated in AS-17 issued by the Institute of Chartered Accountants of India.

vi) The Company has deposited MOT charges of t 1,41,625/- {I 101260/-)with Excise Authority Under Protest, hence the same is not Accounted as expense.

vii) a) Defined Contribution Plan - Provident Fund :

During the year,the company has recognized the Company's Contribution to Employees Provident Fund amounting to Rs. 776422/- (Rs. 751405/-) as part of Remuneration and other benefits to the employees.

b) Defined Benefit Plan

The benefit of gratuity is Funded Defined Benefit Plan. For this purpose the company has obtained qualifying insurance policy from Life Insurance Corporation of India.

The company provides benefits to its employees under the leave encashment pay plan which is a non contributory defined benefit plan.

viii) The following table sets out the funded status of the gratuity plan and unfunded status of leave encashment plan. The amount recognized in the company's financial statement as at 31st March, 2012.

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Mar 31, 2010

1 CONTINGENT LIABILITIES:

Capital Commitments Nil (Previous year Rs. Rs.50000/-)

2 Figures for the previous year are regrouped wherever considered necessary.

3 In the opinion of the Board, Current Assets, Loans and Advances are approximately of the value stated if realised in the ordinary course of business and provision for all known liabilities is adequate.

4 Amount Due to Micro and Small Enterprises Nil (Rs.27820/-)

No interest is payable on account of amount outstanding to Micro and small scale Enterprises.

The identification of vendor as a"Supplier" under the Micro, Small and Medium Enterprises Development Act, 2005 has been done on the basis of information avilable with the company .This has been relied upon by the Auditors.

5 Managerial Remuneration : Sitting Fees to Directors Rs.31,000/-(Rs.31,000/-).

6 Companys operations comprise of only one segment i.e." manufacturing of man made fibres" in terms of the guidelines stated in AS-17 issued by the Institute of Chartered Accountants of India.

7 Taxation

i) Provision for Fringe Benefit Tax Rs.17327/- is for earlier year. (Rs.42654/-)

ii) Provision for Taxation includes Rs. 478948/- for earlier year. (Rs.302762/-)

iii) Demand of Rs.1,14,136/-(Rs.1,14,136/-) has been raised by Income Tax Authority for A.Y. 2004-05. However no provision has been made in the Books of Accounts as the Company has preferred second Appeal before Income Tax Appellate Tribunal and is hopeful of getting favourable decision in view of decision on similar issue in earlier years.

8 The Company has deposited MOT charges of Rs.49780/- (Nil) with Excise Authority Under Protest, hence the same is not Accounted as expense.

9 Employee Benefits AS 15 (Revised)

i) Defined Contribution Plan - Provident Fund :

During the year, the company has recognized the Companys Contribution to Employees Provident Fund amounting to Rs. 748917/- (Previous Year Rs 694673/-) as part of Remuneration and other benefits to the employees.

ii) Defined Benefit Plan

The benefit of gratuity is Funded Defined Benefit Plan. For this purpose the company has obtained qualifying insurance policy from Life Insurance Corporation of India.

The company provides benefits to its employees under the leave encashment pay plan which is a non contributory defined benefit plan.