Notes to Accounts of Kallam Textiles Ltd.

Mar 31, 2025

m) PROVISIONS, CONTINGENT LIABILITIES AND
CONTINGENT ASSETS

Provisions are recognised when there is a present
obligation as a result of past event, it is probable that the
company will be required to settle the obligation and a
reliable estimate of the amount of obligation can be made.
Where the effect of time value of money is material, the
amount of provision is the present value of the expenditure
to be required to settle the obligation. These estimates are
reviewed at each reporting date and adjusted to reflect
the current best estimates.

Contingent liability is disclosed for (i) Possible obligation
which will be confirmed only by future events not
wholly within the control of the Company or (ii) Present
obligations arising from past events where it is not
probable that an outflow of resources will be required to
settle the obligation or a reliable estimate of the amount
of the obligation cannot be made. The company does not
recognise contingent liabilities but the same are disclosed
in the notes.

Contingent assets are not recognized in the financial
statements since this may result in the recognition of
income that may never be realized.

n) FINANCIAL INSTRUMENTS
Initial recognition:

The company recognizes financial assets and liabilities
when it becomes a party to the contractual provisions
of the instruments. All financial assets and liabilities are
recognized at fair value on initial recognition. Transaction
costs that are directly attributable to the acquisition or issue
of financial assets and liabilities (other than the financial
assets and liabilities at fair value through profit and loss)
are added to or deducted from the fair value of financial
assets and liabilities, as appropriate, on initial recognition.
Transaction costs that are directly attributable to the
acquisition or issue of financial assets and liabilities at fair
value through profit or loss are recognized immediately in
profit or loss.

Subsequent measurement:

i) Financial assets carried at amortized cost:

A financial asset is subsequently measured at
amortized cost if it is held within a business model
whose objective is to hold the asset in order to collect
contractual cash flows, and the contractual terms of
the financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding.

(ii) Financial assets at fair value through other
comprehensive income.

A financial asset is subsequently measured at fair
value through other comprehensive income if it is held
within a business model whose objective is achieved
by both collecting contractual cash flows and selling
financial assets and the contractual terms of the
financial asset give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding. Further, in cases
where the Company has made an irrevocable election
based on its business model, for its investments which
are classified as equity instruments, the subsequent
changes in fair value are recognized in other
comprehensive income.

(iii) Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the
above categories is subsequently fair valued through
profit or loss.

De-recognition of financial asset

The company de-recognises financial assets when
the contractual right to the cash flows from the asset
expires or when it transfers the financial asset and
substantially all the risks and rewards of ownership of
the asset to another party.

(iv) Financial liabilities

Financial liabilities are subsequently carried at
amortized cost using the effective interest method.
The effective method is a method of calculating
the amortization cost of a financial liability and of
allocating interest expense over the relevant period.
The effective interest is the rate that exactly discounts
estimated future cash payments through the expected
life of the financial liability to the net carrying amount
on initial recognition.

De-recoanition of financial liability

The company de-recognises financial liabilities when
the companyâs obligations are discharged, cancelled
or expired. The difference between the initial carrying
amount of the financial liabilities and their redemption
value is recognized in the statement of profit and loss
over the contractual terms using the effective interest
method.

o) EARNING PER EQUITY SHARE

Basic earning per equity share is computed by dividing
the net profit attributable to the equity shareholders of
the company by the weighted average number of equity
shares during the period. The company did not have any
potentially dilutive securities in any of the years presented.

The number of equity shares are adjusted retrospectively
for all periods presented for any share splits and bonus
shares issues including for changes effected prior to the
approval of financial statements by the board of directors.

p) CASH FLOW STATEMENT

Cash flows are reported using indirect method whereby
the profit for the period is adjusted for the effects of
transactions of a non-cash nature, any deferrals or

accruals of past or future operating cash receipts or
payments and items of income or expenses associated
with investing or financing cash flows. The cash flows
from operating, investing and financial activities of the
company are segregated.

q) DIVIDENDS

Final dividends on shares are recorded as a liability on
the date of approval by the shareholders i.e the year in
which the dividends are approved and interim dividends
are recorded as a liability on the date of declaration by the
companyâs board of directors.

r) RECENT ACCOUNTING PRONOUNCEMENTS

Ministry of Corporate Affairs ("MCAâ) notifies new
standards or amendments to the existing standards
under Companies (Indian Accounting Standards) Rules
as issued from time to time. During the year ended
March 31, 2025, MCA has notified Ind AS 117 - Insurance
Contracts and amendments to Ind AS 116 - Leases,
relating to sale and lease back transactions, applicable
from April 1, 2024. The Company has assessed that there
is no significant impact on its financial statements.

On May 9, 2025, MCA notifies the amendments to
Ind AS 21 - Effects of Changes in Foreign Exchange
Rates. These amendments aim to provide clearer
guidance on assessing currency exchangeability and
estimating exchange rates when currencies are not
readily exchangeable. The amendments are affective for
annual periods beginning on or after April 1, 2025. The
Company is currently assessing the probable impact of
these amendments on its financial statements.

Nature and purpose of Reserves:

Retained earnings : Retained earnings are the profits that the Company has earned till date, less any transfers to
general reserve, dividends or other distributions paid to shareholders.

Securities premium : Securities Premium represents the surplus of proceeds received over the face value of shares,
at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares
in accordance with the provisions of the Companies Act, 2013.

General reserve : General Reserve is used from time to time to transfer profits from retained earnings for appropriation
purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an
item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to
statement of profit and loss.

Revaluation Surplus : Revaluation surplus represents revaluation of its immovable properties being land and
buildings at its fair market value and the resultant excess of its fair value over its book value is transferred to other
equity as Revaluation surplus.

1) The term loans from banks are secured by way of hypothecation of assets funded under the said facility.

Further, the loans are guaranteed by two directors in their personal capacities.

2) The above loans carries interest varies from 7.8% to 13.65%

3) The above loans are repayable in monthly/quarterly instalments.

4) The non-current portion of above term loans are repayable in following manner.

Banks : 2026-27 Rs.1401 lakhs: 2027-28 Rs.976 lakhs

2028-29 Rs.345 lakhs and 2029-30 Rs.334 lakhs

5) The company made defaults in repayment of instalments in respect of term loans and the following amounts were
due as on 31.3.2025.

Union bank of India - Principal Rs. 3481 lakhs and Interest Rs.1454 lakhs.

Indian bank - Principal Rs. 4664 lakhs and Interest Rs. 1691 lakhs.

6) The company availed term loans and working capital loans from Union bank of India and Indian bank and as at

31.12.2023, the company has defaulted in repayment of term loan instalments (Incl. interest). The banks have
classified these loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of

SARFAESI Act, 2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of

the said Act. The lenders are also applied for recovery of debts before Debt Recovery Tribunal, Visakhapatnam
and proceedings are pending before DRT. Auction notices were also issued by the banks for sale of immovable
properties offered as security and proceedings are pending. The company applied for restructure of these loans
and same is pending with the lender banks. Meanwhile, the Advocate-Commissioners, as appointed by Court of
the Chief Judicial Magistrate-Cum-Senior Civil Judge, Ongole, in response to the petition filed by Indian bank and
the Chief Manager and Authorised officer of Indian bank issued notice for taking physical possession of properties
located in Weaving division and Spinning divisions respectively and on request from company, the possession of
the properties are kept pending. The total outstanding dues pending for remittance to banks as on 31.3.2025 was
Rs. 28048.88 lakhs (Includes Interest on term loans Rs.3022.59 lakhs and working capital loans Rs.1795.84 lakhs
and term loan instalments Rs.8145.68 lakhs and Working capital loans which are repayable on demand Rs.15084.75
lakhs).

EMPLOYEE BENEFITS

a. Defined contribution plans

The Company makes Provident Fund and Employeesâ State Insurance Scheme contributions which are defined contribution
plans, for qualifying employees. The Company recognised Rs. 27.31 lakhs (Year ended March 31, 2024: Rs. 33.19 lakhs)
for provident fund contributions, and Rs. 6.08 lakhs (Year ended March 31, 2024: Rs. 7.40 lakhs) towards Employeesâ State
Insurance Scheme contributions in the Statement of Profit and Loss.

b. Defined benefit plans

The Company provides to the eligible employees defined benefit plans in the form of gratuity.The gratuity plan provides for
a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an
amount equivalent to 15 daysâ salary payable for each completed year of service. Vesting occurs upon completion of five
continuous years of service. The measurement date used for determining retirement benefits for gratuity is March 31.

(i) Balance Sheet

The assets, liabilities and surplus / (deficit) position of the defined benefit plans at the Balance Sheet date were:

The sensitivity analysis above have been determined based on reasonably possible changes of the respective assumptions
occurring at the end of the year and may not be representative of the actual change. It is based on a change in the key
assumption while holding all other assumptions constant. When calculating the sensitivity to the assumption, the same
method used to calculate the liability recognised in the Balance Sheet has been applied. The methods and types of
assumptions used in preparing the sensitivity analysis did not change compared with the previous year.

vi) Discontinuance of liability

Amount payable upon discontinuance of all employees is Rs. 87.47 lakhs (Pr. Year Rs. 95.15 lakhs)

vii) Best estimate of contribution during the year

The best estimate contribution of the company during the year would be Rs. Nil since the company is not contributing to any fund.

(vii) Maturity analysis

Maturity profile of defined benefit obligation :

Fair value hierarchy Note No.44

The fair value of financial instruments as referred to above note have been classified into three categories depending
on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active
markets for identified assets or liabilities [Level 1 measurements] and lowest priority to unobservable inputs [Level 3
measurements]

The categories used are as follows:

Level 1: Quoted prices for identified instruments in an active market.

Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and
Level 3: Inputs which are not based on observable market data.

This note provides information about how the Company determines fair values of various financial assets and financial

liabilities.

Fair value of the Companyâs financial assets and financial liabilities are measured at fair value on a recurring basis.

Some of the Companyâs financial assets are measured at the fair value at the end of each reporting period.

The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade
receivables, trade payables and Short Term Borrowings at carrying value because their carrying amounts approximate
the fair value because of their short term nature. Difference between carrying amounts and fair values of bank borrowings,
other financial assets and financial liabilities subsequently measured at amortised cost is not significant in each of the
years presented.

Note No.45

The Company financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company
financial assets comprise mainly of cash and cash equivalents, trade and other receivables.

The Companyâs business activities are exposed to a variety of financial risks namely credit risk, liquidity risk and foreign
currency risk. The Companyâs senior management has the overall responsibility for establishing and governing the
Companyâs risk management framework. The Companyâs risk management policies are established to identify and
analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the
changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are
also placed before the Board of Directors of the Company.

A. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligation. To manage
this, the company periodically assesses the financial reliability of customers, taking into account the financial condition,
current economic trends and analysis of historical bad debts and ageing of the account receivables. Individual risk limits
are set accordingly.

Receivables from customers

Concentration of credit risk with respect to trade receivables are limited, due to Companyâs customer base being large
and diverse. All trade receivables are reviewed and assessed for default on a monthly basis.

On historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to
be a single class of financial assets.

Other financial assets

The Company maintains exposure in cash and cash equivalents and margin money deposits with banks.

The Companyâs maximum exposure of credit risk as at March 31, 2025 and March 31, 2024 is the carrying value of each
class of financial assets.

B. Foreign currency risk management

"Foreign currency risk is the risk that the Fair value or Future cashflows of an exposure will fluctuate due to changes in
foreign currency rates. Exposures can arise on account of various assets and liabilities which are denominated in
currencies other than indian rupee. The Company has not entered into any forward exchange contract to hedge against
currency risk.â

The Company manages currency exposures within prescribed limits. The aim of the Companyâs approach to management
of currency risk is to leave the Company with no material residual risk.

Foreign currency sensitivity analysis

A 5% strengthening of the INR against key currencies to which the Company is exposed would have led to approximately an
additional Rs. 0.29/- gain in the Statement of Profit and Loss. A 5% weakening of the INR against these currencies would have
led to an equal but opposite effect.

C. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The objective of
liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The
Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities
when due. Also, the Company has availed credit limits with banks. The Company maintained a cautious liquidity strategy, with
a positive cash balance throughout the year ended March 31, 2025 and March 31, 2024 . Cash flow from operating activities
provides the funds to service the financial liabilities on a day to day basis. Due to unfavourable market conditions, the company
is incurring continous losses and is unable to meet its financial committments to banks as and when due and an amount of Rs.
12934.12 lakhs is pending due to the banks as on 31.3.2025. The company is taking necessary steps to repay the said debt
and is in the process of negoitiations with the banks for restructure of its debt obligations.

The Company regularly maintains the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational
needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other
operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess if any, is invested
in interest bearing term deposits.

The company is repaying its borrowings as per the schedule of repayment and no amount was pending for remittance beyond
its due date. Except of some normal delays.

All the amounts due to trade payables falls due within one year and the company is able to meet its obligations within the due
dates.

In case of borrowings from banks, the maturity pattern and status on overdues has been given under Note no. 14 and 19.

The table summarises the maturity pattern of the companyâs financial liabilities based on contractual undiscounted payments.

D. Interest risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of
changes in market interest rates. In order to optimize the Companyâs position with regards to interest income and interest
expenses and to manage the interest rate risk, the managment performs a comprehensive corporate interest rate risk
management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

According to the Company, interest rate risk exposure is only for floating rate borrowings. For floating rate liabilities, the
analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding
for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key
management personnel and represents managementâs assessment of the reasonably possible change in interest rates.

E. Capital Management

Equity share capital and other equity are considered for the purpose of Companyâs capital management.

The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns
to shareholders. The capital structure of the Company is based on Managementâs judgment of its strategic day-to-day
needs with a focus on total equity so as to maintain investor, creditors and market confidence.

The Management and the Board of Directors monitors the return on capital as well as the level of dividends to shareholders.
The Company may take appropriate steps in order to maintain, or is necessary, adjust its capital structure. The funding
requirement is met through a mixture of equity, internal fund generation and other non current borrowings. The company
monitors capital using geraing ratio which is debt divided by total capital.

47. Other disclosures

Additional regulatory and other information as required by the Schedule III to the Companies Act 2013

(a) Relationship with Struck off Companies

The Company did not have any transactions with Companies struck off under Section 248 of Companies Act, 2013
or Section 560 of Companies Act,1956 considering the information available with the Company.

(b) Compliance with number of layers of companies

The Company do not have any parent company and accordingly, compliance with the number of layers prescribed
under clause (87) of section 2 ofthe Act read with Companies (Restriction on number of Layers) Rules, 2017 is not
applicable for the year under consideration.

There are no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237 of the
Companies Act, 2013 during theyear.

(d) Advance or loan or investment to intermediaries and receipt of funds from intermediaries

The company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other
sources or kind of funds) to anyother person(s) or entity(ies), including foreign entities (Intermediaries) with the
understanding (whether recorded in writing or otherwise) that theIntermediary shall (i) directly or indirectly lend
or invest in other persons or entities identified in any manner whatsoever by or on behalf of thecompany (Ultimate
Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

The company has also not received any fund from any person(s) or entity(ies), including foreign entities (Funding
Party) with the understanding(whether recorded in writing or otherwise) that the company shall (i) directly or indirectly
lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party
(Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like on behalf of theUltimate Beneficiaries.

(e) Undisclosed Income

The Company do not have any transaction which are not recorded in the books of accounts that has been surrendered
or disclosed as income in thetax assessments under the Income Tax Act, 1961 during any of the years.

(f) Details of Crypto Currency or Virtual

The company has not traded or invested in Crypto currency or vitrual currency during the financial year.

(g) The company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory
period

48. The term loans and working capital loans borrowed by the company from the banks were classified as NonÂ¬
performing assets (NPAâs) by Union bank of India and Indian bank and an amount of Rs. 12934.12 lakhs was overdue
for payment as on 31.3.2025 towards instalments in respect of term loans borrowed. The banks have classified these
loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act,
2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of the said Act. The
company applied for restructure of these loans and same is pending with the lender banks.

49. The Board of directors has not recommended any dividend for the financial year ended 31.3.2025.

50. Previous year figures have been regrouped where ever necessary.

As per our report of even date
For BRAHMAYYA & CO

Firm Registration Number : 000513S
Chartered Accountants

For and on behalf of the Board

Sd/- Sd/-

(Karumanchi Rajaj) ^{P Venkateswara Redd}y

Managing Director

Partner

Membership No: 202 309 Sd/-

G.V. Krishna Reddy

Place : Guntur Joint Managing Director

Date : 30-05-2025 Sd/-

M.V. Subba Reddy

UDIN : 25202309BMIMDB7635 Whole Time Director & CFO

Mar 31, 2024

m) PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are recognised when there is a present obligation as a result of past event, it is probable that the company will be required to settle the obligation and a reliable estimate of the amount of obligation can be made. Where the effect of time value of money is material, the amount of provision is the present value of the expenditure to be required to settle the obligation. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

Contingent liability is disclosed for (i) Possible obligation which will be confirmed only by future events not wholly within the control of the Company or (ii) Present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The company does not recognise contingent liabilities but the same are disclosed in the notes.

Contingent assets are not recognized in the financial statements since this may result in the recognition of income that may never be realized.

n) FINANCIAL INSTRUMENTS Initial recognition:

costs that are directly attributable to the acquisition or issue of financial assets and liabilities (other than the financial assets and liabilities at fair value through profit and loss) are added to or deducted from the fair value of financial assets and liabilities, as appropriate, on initial recognition. Transaction costs that are directly attributable to the acquisition or issue of financial assets and liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Subsequent measurement:

i) Financial assets carried at amortized cost:

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows, and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding..

(ii) Financial assets at fair value through other comprehensive income

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Further, in cases where the Company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.

(iii) Financial assets at fair value through profit or loss

A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.

De-recognition of financial asset

The company de-recognises financial assets when the contractual right to the cash flows from the asset expires or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

(iv) Financial liabilities

Financial liabilities are subsequently carried at amortized cost using the effective interest method. The effective method is a method of calculating the amortization cost of a financial liability and of allocating interest expense over the relevant period. The effective interest is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.

De-recoanition of financial liability

The company de-recognises financial liabilities when the companyâs obligations are discharged, cancelled or expired. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognized in the statement of profit and loss over the contractual terms using the effective interest method.

o) EARNING PER EQUITY SHARE

Basic earning per equity share is computed by dividing the net profit attributable to the equity shareholders of the company by the weighted average number of equity shares during the period. The company did not have any potentially dilutive securities in any of the years presented.

The number of equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of financial statements by the board of directors.

p) CASH FLOW STATEMENT

Cash flows are reported using indirect method whereby the profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and items of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financial activities of the company are segregated.

q) DIVIDENDS

Final dividends on shares are recorded as a liability on the date of approval by the shareholders i.e the year in which the dividends are approved and interim dividends are recorded as a liability on the date of declaration by the companyâs board of directors.

r) RECENT ACCOUNTING PRONOUNCEMENTS

This amendment has introduced a definition of âaccounting estimatesâ and included amendments to Ind AS 8 to help entities distinguish changes in accounting policies from changes in accounting estimates. This amendment does not have any impact on financial statements.

Nature and purpose of Reserves:

Retained earnings : Retained earnings are the profits that the Company has earned till date, less any transfers to general reserve, dividends or other distributions paid to shareholders.

Securities premium : Securities Premium represents the surplus of proceeds received over the face value of shares, at the time of issue of shares. This reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

General reserve : General Reserve is used from time to time to transfer profits from retained earnings for appropriation purposes. As the General Reserve is created by a transfer from one component of equity to another and is not an item of other comprehensive income, items included in the General Reserve will not be reclassified subsequently to statement of profit and loss.

Revaluation Surplus : Revaluation surplus represents revaluation of its immovable properties being land and buildings at its fair market value and the resultant excess of its fair value over its book value is transferred to other equity as Revaluation surplus.

The company also made delays in repayment of instalments agregating to Rs.930.22 lakahs to Union bank of India and Indian bank which varies from 1 day to 83 days.

6) The company availed term loans and working capital loans from Union bank of India and Indian bank and as at 31.12.2023, the company has defaulted in repayment of term loan instalments (Incl. interest) to the extent of Rs.5491.16 lakhs. The banks have classified these loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act, 2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of the said Act. The company applied for restructure of these loans and same is pending with the lender banks.

7) All the borrowings were utilised for the purpose for which they were raised.

8) The company is not declared as wilful defaulter by any bank or financial institution in accordance with the guidelines issued on wilful defaulters issued by Resrve Bank of India.

EMPLOYEE BENEFITS

a. Defined contribution plans

The Company makes Provident Fund and Employeesâ State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. The Company recognised Rs. 33.20 lakhs (Year ended March 31, 2023: Rs. 37.08 lakhs) for provident fund contributions, and Rs. 7.40 lakhs (Year ended March 31, 2023: Rs. 8.02 lakhs) towards Employeesâ State Insurance Scheme contributions in the Statement of Profit and Loss.

b. Defined benefit plans

The Company provides to the eligible employees defined benefit plans in the form of gratuity.The gratuity plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 daysâ salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service. The measurement date used for determining retirement benefits for gratuity is March 31.

(i) Balance Sheet

The assets, liabilities and surplus / (deficit) position of the defined benefit plans at the Balance Sheet date were:

The categories used are as follows:

Level 1: Quoted prices for identified instruments in an active market.

Level 2: Directly or indirectly observable market inputs, other than Level 1 inputs; and Level 3: Inputs which are not based on observable market data.

This note provides information about how the Company determines fair values of various financial assets and financial liabilities.

Fair value of the Companyâs financial assets and financial liabilities are measured at fair value on a recurring basis.

Some of the Companyâs financial assets are measured at the fair value at the end of each reporting period.

The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, trade payables and Short Term Borrowings at carrying value because their carrying amounts approximate the fair value because of their short term nature. Difference between carrying amounts and fair values of bank borrowings, other financial assets and financial liabilities subsequently measured at amortised cost is not significant in each of the years presented.

Financial Risk Management Note No.45

The Company financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company financial assets comprise mainly of cash and cash equivalents, trade and other receivables.

The Companyâs business activities are exposed to a variety of financial risks namely credit risk, liquidity risk and foreign currency risk. The Companyâs senior management has the overall responsibility for establishing and governing the Companyâs risk management framework. The Companyâs risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors of the Company.

A. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligation. To manage this, the company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends and analysis of historical bad debts and ageing of the account receivables. Individual risk limits are set accordingly.

Receivables from customers

Concentration of credit risk with respect to trade receivables are limited, due to Companyâs customer base being large and diverse. All trade receivables are reviewed and assessed for default on a monthly basis.

On historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.

Other financial assets

The Company maintains exposure in cash and cash equivalents and margin money deposits with banks.

The Companyâs maximum exposure of credit risk as at March 31, 2024 and March 31, 2023 is the carrying value of each class of financial assets.

B. Foreign currency risk management

"Foreign currency risk is the risk that the Fair value or Future cashflows of an exposure will fluctuate due to changes in foreign currency rates. Exposures can arise on account of various assets and liabilities which are denominated in currencies other than indian rupee. The Company has not entered into any forward exchange contract to hedge against currency risk.â

The Company manages currency exposures within prescribed limits. The aim of the Companyâs approach to management of currency risk is to leave the Company with no material residual risk.

Foreign currency sensitivity analysis

A 5% strengthening of the INR against key currencies to which the Company is exposed would have led to approximately an additional Rs. 0.29/- gain in the Statement of Profit and Loss. A 5% weakening of the INR against these currencies would have led to an equal but opposite effect.

C. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has availed credit limits with banks. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2024 and March 31, 2023 . Cash flow from operating activities provides the funds to service the financial liabilities on a day to day basis. Due to unfavourable market conditions, the company is incurring continous losses and is unable to meet its financial committments to banks as and when due and an amount of Rs. 5491.16 lakhs is pending due to the banks as on 31.3.2024. The company is taking necessary steps to repay the said debt and is in the process of negoitiations with the banks for restructure of its debt obligations.

The Company regularly maintains the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess if any, is invested in interest bearing term deposits.

The company is repaying its borrowings as per the schedule of repayment and no amount was pending for remittance beyond its due date. Except of some normal delays.

All the amounts due to trade payables falls due within one year and the company is able to meet its obligations within the due dates.

In case of borrowings from banks, the maturity pattern and status on overdues has been given under Note no. 14 and 19.

The table summarises the maturity pattern of the companyâs financial liabilities based on contractual undiscounted payments.

D. Interest risk

Interest rate risk is the risk that the fair value of future cash flows of the financial instruments will fluctuate because of changes in market interest rates. In order to optimize the Companyâs position with regards to interest income and interest expenses and to manage the interest rate risk, the managment performs a comprehensive corporate interest rate risk management by balancing the proportion of fixed rate and floating rate financial instruments in its total portfolio.

According to the Company, interest rate risk exposure is only for floating rate borrowings. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents managementâs assessment of the reasonably possible change in interest rates.

E. Capital Management

Equity share capital and other equity are considered for the purpose of Companyâs capital management.

The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders. The capital structure of the Company is based on Managementâs judgment of its strategic day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence.

The Management and the Board of Directors monitors the return on capital as well as the level of dividends to shareholders. The Company may take appropriate steps in order to maintain, or is necessary, adjust its capital structure. The funding requirement is met through a mixture of equity, internal fund generation and other non current borrowings. The company monitors capital using geraing ratio which is debt divided by total capital.

47. Other disclosures

Additional regulatory and other information as required by the Schedule III to the Companies Act 2013

(a) Relationship with Struck off Companies

The Company did not have any transactions with Companies struck off under Section 248 of Companies Act, 2013 or Section 560 of Companies Act,1956 considering the information available with the Company.

(b) Compliance with number of layers of companies

The Company do not have any parent company and accordingly, compliance with the number of layers prescribed under clause (87) of section 2 ofthe Act read with Companies (Restriction on number of Layers) Rules, 2017 is not applicable for the year under consideration.

There are no Scheme of Arrangements approved by the Competent Authority in terms of sections 230 to 237 of the Companies Act, 2013 during theyear.

(d) Advance or loan or investment to intermediaries and receipt of funds from intermediaries

The company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to anyother person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that theIntermediary shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of thecompany (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries.

The company has also not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding(whether recorded in writing or otherwise) that the company shall (i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or (ii) provide any guarantee, security or the like on behalf of theUltimate Beneficiaries.

(e) Undisclosed Income

The Company do not have any transaction which are not recorded in the books of accounts that has been surrendered or disclosed as income in thetax assessments under the Income Tax Act, 1961 during any of the years.

(f) Details of Crypto Currency or Virtual

The company has not traded or invested in Crypto currency or vitrual currency during the financial year.

(g) The company does not have any charges or satisfaction which is yet to be registered with ROC beyond the statutory period

48. The term loans and working capital loans borrowed by the company from the banks were classified as Nonperforming assets (NPAâs) by Union bank of India and Indian bank and an amount of Rs.5491.16 lakhs was overdue for payment as on 31.3.2024 towards instalments in respect of term loans borrowed. The banks have classified these loans as NPA and issued notices on 10.1.2024 for recovery of these dues u/s 13(2) r.w.s 13(3) of SARFAESI Act, 2002. Further, the banks also taken possession of the properties offered as security u/s 13(4) of the said Act. The company applied for restructure of these loans and same is pending with the lender banks.

49. The Board of directors has not recommended any dividend for the financial year ended 31.3.2024.

50. Previous year figures have been regrouped where ever necessary.

As per our report of even date For BRAHMAYYA & CO

Firm Registration Number : 000513S Chartered Accountants

For and on behalf of the Board

Sd/- Sd/-

(Karumanchi Rajaj) ^{P Venkateswara Redd}y

Managing Director

Partner

Membership No: 202 309 Sd/_-

G.V. Krishna Reddy

Place : Guntur Joint Managing Director

Date : 29-5-2024 Sd/-

M.V. Subba Reddy

UDIN : 23202309BGVTIG8915 Whole Time Director & CFO

Mar 31, 2018

Note no.1

I. CORPORATE INFORMATION

Kallam Textiles Limited (Formerly known as "Kallam Spinning Mills Limited") incorporated on 18^th February, 1992. It is a leading textile company engaged in the business of Manufactuirng of Cotton Yarn, Dyed Yarn, Grey Fabric and Dyed Fabric. The Company has its Corporate office at Chowdavaram, Guntur.

II. Standards Issued but not effective

On March 28, 2018, the Ministry of Corporate Affairs (MCA) has notified Ind AS 115 - Revenue from Contract with Customers and certain amendments to existing Ind AS. These amendments shall be applicable to the company from April 01, 2018.

a) Issue of Ind AS 115 - Revenue from Contracts with Customers

Ind AS 115 will supersede the current revenue recognition standard Ind AS-18 Revenue, Ind AS-11 Construction Contracts and the related interpretations. Ind AS-115 provides a single model of accounting for revenue arising from contracts with customers based on the identification and satisfaction of performance obligations.

b) Amendment to Existing Ind AS

The MCA has also carried out amendments in some of the existing standards but application of said standards are not expected to have any significant impact on the Companyâs Financial Statements.

FIRST TIME ADOPTION OF IND AS:

The company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effected from 1st April, 2017 with transition date of 1st April, 2016. These financial statements for the year ended 31st March, 2018 are the first Ind As financial statements. For all periods upto and including the year ended 31st March, 2017, the company prepared its financial statements in accordance with the accounting standards notified under section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (Previous GAAP).

The adoption of Ind AS has been carried out in accordance with Ind AS 101, First time adoption of Indian Accounting Standards requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS financial statements be applied retrospectively and consistently for all financial years presented. Accordingly, the company has prepared financial statements which comply with Ind AS for the year ended 31st March, 2018 together with the comparative information as at and for the year ended 31st March, 2017 and the opening Ind AS balance sheet as at 1st April, 2016, the date of transition to Ind AS.

In preparing these Ind AS financial statements, the company has availed certain exemptions and exceptions in accordance with Ind AS 101. The resulting difference between the carrying values of the assets and the liabilities in the financial statements as at the transition date under Ind AS and previous GAAP have been recognized directly in equity.

A. Exceptions from retrospective application.

(i) Estimates exception: Upon an assessment of the estimates made under Previous GAAP, the Company has concluded that there was no necessity to revise such estimates under Ind AS except where estimates were required by Ind AS and not required by Previous GAAP.

(ii) Classification and measurement of financial assets: The Company has determined the classification of financial assets in terms of whether the meet the amortised cost creteria or the fair value through other comprehensive income creteria based on the facts and circumstances that existed as of the transition date.

(iii) Deemed cost for property, plant and equipment and intangible assets: The Company has elected to continue with carrying value of all its property plant and equipment, and intangible assets recognised as of April 1, 2016 (transition date) measured as per the previous GAAP and use that carrying value as its deemed cost as of the transition date except in case of land where fair value was adopted. The excess amount of fair value over its carrying amount was transferred to revaluaton surplus and grouped under Reserves and Surplus.

(iv) Interest free loans from Government: The requirements of Ind AS 20- Accounting for Government Grants and Disclosure of Government Assistance and Ind AS 109- Financial Instruments, in respect of recognition and measurement of interest free loans from government authorities is opted to be applied prospectively to all grants received after the date of transition to Ind AS. Consequently, the carrying amount of such interest free loans as per the financial statements of the Company prepared under Previous GAAP is considered for recognition in the opening Ind AS Balance Sheet.

B. Transition to Ind AS - Reconciliations.

The following reconciliations provide a quantification of the effect of significant differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

(i) Adjustments made by the company in restating the financial statements prepared under previous GAAP, including the balance sheet as at 1st April, 2016 and the financial statements as at and for the year ended 31st March, 2017.

(ii) Reconciliation of Equity as at 1st April, 2016 and 31st March, 2017

(iii) Reconciliation of Total Comprehensive Income for the year ended 31st March, 2017

Notes to Reconciliation between previous GAAP and Ind AS

1. Deferred Government grants

Under previous GAAP, government grants received in the nature of EPCG and other subsidies are deducted in the value of the asset and the net amount is capitalised in the books of accounts. Under Ind AS, government grants received have been recognised separately in the financial statements with the name Deferred Government grants under Other current liabilities. The deferred grant is recognised in the Statement of Profit and Loss in proportion of depreciation charged on such assets.

2. Dividend and Tax on Dividend

Under previous GAAP, dividend payable is recorded as a liability in the period to which it relates and under Ind AS dividend is recognised as a liability in the period in which the obligation to pay is established.

3.Remeasurement of net defined benefit plans :

Under previous GAAP, actuarial gains and losses were recognised in the statement of profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of net defined benefit liability which is recognised in other comprehensive income in respective years. However, such a change does not have any effect on total comprehensive income or total equity.

4. Cost of Property, plant and equipment

The company has elected to measure all its property, plant and equipment and intangible assets at the previous GAAP carrying amount as its deemed cost at the date of transition to Ind AS except in case of land where fair value was adopted.

The excess amount of fair value over its carrying amount was transferred to revaluation surplus and grouped under Reserves and Surplus .

5. Interest free sales tax loan

In the financial statements prepared under Previous GAAP, the carrying value of Interest free loan was recognised at the principal amounts payable by the company. Under Ind AS, Interest free borrowing being a financial liability is required to be recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. The difference between such fair value and the carrying value is recognised as deferred income disclosed under Other liabilities.

On the date of transition, there is no change in the amount of Interest free loan since the Company has opted for exemption from retrospective application for fair valuation of such financial instruments. However, the company has not received any such loans subsequent to the date of transition.

6. Deferred Tax :

Under previous GAAP, deferred tax was accounted using the income statement approach, on the timing differences between the taxable profit and accounting profits for the period. Under IND AS, deferred tax is recognized following balance sheet approach on the temporary differences between the carrying amount of asset or liability in the balance sheet and its tax base. In addition, various transitional adjustments has also lead to recognition of deferred taxes on new temporary differences.Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as deferred tax asset if there is convincing evidence that the company will pay normal Income Tax.

Note :

(i) The mode of valuation of inventories has been stated in significant accounting Policies.

(ii) The cost of inventories recognised as an expense for the year ended 31st March, 2018 was Rs. 1,88,20,92,825/-(for the year ended 31st March, 2017: Rs. 1,77,27,93,287/-)

(iii) All the above inventories are offered as security in respect of working capital loans availed by the company from all the banks.

(iv) There are no inventories expected to be recovered after more than twelve months.

Note :

a) The average credit period of trade receivables varies from 15-45 days.

b) The above does not include any amount due from related parties.

c) The company has used practical expedient by computing the expected credit loss for doubtful trade receivables based on the ageing of receivables, history of recoverability from the customers, credit worthiness of the customers etc.,

d) During the year, the company has recognised loss allowance of Rs.Nil under 12 months expected credit loss model.

Note: During the year 2016-17, the company has sub divided one equity share of Rs.10/- each into 5 equity shares of Rs.2/- each. During the year 2017-18, the company has issued and alloted Nos.85,63,875 of Equity shares as fully paid up bonus shares in the ratio of 1:4 one (1) equity share for every four (4) equity shares held by capitalizing retained earnings.

Rights, Preferences and restrictions attached to Equity shares

The Company has only one class of Equity shares having a face value of Rs.2/- each. Each holder of equity share is entitled to one vote per share on poll and have one vote on show of hands. In the event of liquidation of Company, the equity share holders are eligible to receive the remaining assets of the company in proportion to their shareholding after distribution of payments to preferential creditors.

Out of last five financial years, during the financial year 2017-18, the company has issued bonus shares Nos.85,63,875 in ratio of 1:4 i.e one equity share for every four shares held by capitalizing part of retained earnings. None of the shares were alloted in pursuant to contract without payment being received in cash.

Note :

a) The above amount includes Rs. 60,81,86,602/- being measurement of Land at fair value and the value represents excess of fair value over its carrying amount. The fair value model was adopted for land on 1st time adoption of Ind AS on 1.4.2016 and the difference amount was adjusted against Reserves and surplus.

b) The company subsequent to the adoption of Ind AS, remeasured its land and revalued its buildings on 31.3.2018 and the difference amount of Rs. 503,820,677/- (Net of deferred tax) was recognised under Other comprehensive Income.

Nature of reserves:

a) Revaluation surplus

The revaluation surplus represents revaluation of land by the company as at 1st April, 2016 at its fair market value and the resultant excess amount over its book value was transferred to other equity as Revaluation Surplus.

During the year ended on 31.3.2018, the company keeping in view of changes in fair value of land, remeasured the land at fair value and differential amount was transferred to revaluation surplus through other comprehensive income.

During the year ended on 31.3.2018, subsequent to recognition of buildings at deemed cost on 1st April, 2016, being the date of transition to Ind AS, the company adopted revaluation model for its buildings and consequent to that decision, valued its buildings at their fair value. The resultant increase over its carrying value was transferred to Revaluation surplus through other comprehensive income.

b) General reserve

The general reserve is created by way of tranfer of part of the profits before declaring dividend pursuant to the provisions of Companies Act, 1956. Mandatory transfer to general reserve is not required under the Companies Act, 2013.

c) Retained Earnings

Retained earnings are the profits that the company has earned till date less transfers to general reserves and dividends paid to share holders.

I) HYDEL POWER PLANT :

i) IREDA :

a) Term loan from IREDA is secured by first charge on all the movable and immovable assets of the company''s power division of 0.8 MW small hydro project at 16th & 17th branch canal at mile # 3, Nela kondapalli Village & Mandal, Khammam Dist., Telangana. Further guaranteed by six promoter directors of the company and corporate guarantee of two companies.

b) The above loan carry interest @10%.

c) The above loan is repayable in following manner. 2019-20 Rs. 16,19,252/- ; 2020-21: Rs.16,20,418/

d) There are no defaults in repayment of above loan.

ii) ANDHRA BANK :

a) Term loan from Andhra Bank is secured by way of charge on movable and immovable assets of power plant at Nelakondapalli and Bhairavanipalli of Khammam Dist., Telangana., excluding those assets specifically charged to IREDA which are exclusively created out of said loan. The said loan is further guaranteed by two directors in their personal capacities.

b) The above loan carry interest @ 12.25%

c) The above loan is repayable in following manner. 2019-20: Rs.3,11,00,000/

d) There are no defaults in repayment of above loan.

(II) SPINNING UNIT :

i) ANDHRA BANK :

a) Term loans from Andhra Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carry interest @ 12.25%, 11.50%, 11.00%, 11.50%, 11.25%, 12.25% and 10.4%.

c) The above loans are repayable in following manner. 2019-20 Rs.4,98,00,000/- ; 2020-21: Rs.9,93,00,000/- ; 2021-22: Rs.10,82,67,030/- ; 2022-23: Rs.7,89,65,500/- ; 2023-24: Rs.9,28,19,805 ; 2024-25 : Rs.2,01,86,589/- ; 2025-26 : Rs.7,56,39,119/

d) There are no defaults in repayment of above loans.

ii) INDIAN BANK :

a) Term loans from Indian Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carry interest @ 12.70% and 10%.

c) The above loans are repayable in following manner. 2019-20 Rs.5,00,00,000/- ; 2020-21: Rs.6,25,00,000/

d) There are no defaults in repayment of above loans.

III. WEAVING UNIT :

i) INDIAN BANK :

a) Term loans from Indian Bank are secured by exclusive charge on all the movable and immovable assets of weaving division at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carry interest @10.00%, 10.00%, 10.00% and 11.10%.

c) The above loans are repayable in following manner. 2019-20 : Rs.16,80,00,000/-; 2020-21: Rs.21,00,00,000/-; 2021-22 Rs.14,90,00,000/- ; 2022-23 : Rs.18,00,00,000/-; 2023-24: Rs.20,31,95,900/- and 2024-25: Rs.'' 6,30,00,000/

d) There are no defaults in repayment of above loans.

IV. DYEING UNIT :

i) BANK OF BARODA :

a) Term loan from Bank of Baroda is secured by way of first charge on fixed assets of Company''s Dyeing Unit at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

b) The above loan carry interest @11.80%.

c) The above loan is repayable in following manner. 2019-20: Rs.2,00,00,000/- ; 2020-21: Rs.2,75,00,000/and 2021-22 Rs.3,15,00,000/

d) There are no defaults in repayment of above loan.

V. INTEREST FREE SALES TAX LOAN :

a) The Company availed interest free sales tax loan for the period from 1995-96 to 2008-09 aggregating to Rs.2,54,75,992/-. The said loan is repayable within a period of 10/14 years from each year of availment. The Company has to pay an amount of Rs.3,03,900/- as on 31-03-2018 and entire amount is due for payment during financial year 2018-19.

VI. Loans accepted from promoters, directors and their relatives are interest free and are accepted as per the conditions of sanction of term loans from banks and shall not be repayable during the currency of term loans.

EMPLOYEE BENEFITS

a. Defined contribution plans : The Company makes Provident Fund and Employees'' State Insurance Scheme contributions which are defined contribution plans, for qualifying employees. The Company recognised Rs.41,53,321/-(Year ended March 31, 2017: Rs.29,56,720/- ) for provident fund contributions, and Rs. 7,00,980/- (Year ended March 31, 2017: Rs. 5,37,453/-) towards Employees'' State Insurance Scheme contributions in the Statement of Profit and Loss.

b. Defined benefit plans : The Company provides to the eligible employees defined benefit plans in the form of gratuity. The gratuity plan provides for a lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days'' salary payable for each completed year of service. Vesting occurs upon completion of five continuous years of service. The measurement date used for determining retirement benefits for gratuity is March 31.

(VII) Discontinuance Liability

Amount payable upon discontinuance of all employment is Rs.79,62,547/-

(VIII) Best Estimate of Contribution During the Next Year

The Best Estimate Contribution for the Company during the next year would be Rs. Nil , Since the company is not contributing to any fund.

Note : The company received government grants in the nature of export incentives. During the year, the company received incentives under EPCG Schemes and same is utilised against import of capital goods and capitalised to Property, plant and equipment.

The deferred government grant will be recognised in statement of profit and loss over the period in proportion in which depreciation expense on the assets is recognised.

Note : A. Secured

a) Working Capital Loan from Andhra Bank is secured by way of exclusive charge on current assets of spinning division of all units at Chowdavaram Village , Guntur Dt. This loan carries interest @ 9.5%.

b) Working Capital loan from Indian Bank is secured by way of Hypothecation of stocks of cotton, stock in process, Finished Goods, Stores and Spares , Book Debts , Goods in Transit .This loan is also secured by way of Extension of EM/ Second and exclusive charge by way of EM of Land admeasuring AC 25.72 at Weaving Division of the Company at kunkupadu and Hypothecation of Plant& Machinery, Spares and Other assets Acquired ( Existing and Future).This Loan carries interest @ 9%.

c) Working Capital Loan from Bank of Baroda is secured by way of Hypothecation of Stocks and Book debts and further secured by way of personal guarantee of 2 Directors .This Loan carries interest @ 11.80%.

B. Unsecured

a) Loan from Directors is Interest free and no specific terms of repayment were defined for the same , hence categorised as short term.

2. Dividend:

The Board of directors at its meeting held on 28.05.2018 have recommended a dividend Rs. 0.20/ share of face value of Rs. 2/- each (ie 10% dividend) for the financial year ended 31.03.2018. The above is subject to approval at the ensuing Annual general meeting of the company and hence not recognised as a liability.

3. Foreign exchange earnings on exports during the year calculated on FOB basis Rs.89,04,12,531/- (Previous year Rs.41,79,26,429/-

4. FAIR VALUE HIERARCHY

The fair value of financial instruments as referred to above note have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active markets for identified assets or liabilities [Level 1 measurements] and lowest priority to unobservable inputs [Level 3 measurements] The categories used are as follows:

Level 1 : Quoted prices for identified instruments in an active market.

Level 2 : Directly or indirectly observable market inputs, other than Level 1 inputs; and Level 3 : Inputs which are not based on observable market data.

This note provides information about how the Company determines fair values of various financial assets and financial liabilities. Fair value of the Company''s financial assets and financial liabilities that are measured at fair value on a recurring basis. Some of the Company''s financial assets are measured at the fair value at the end of each reporting period.

The Company has disclosed financial instruments such as cash and cash equivalents, other bank balances, trade receivables, trade payables and Short Term Borrowings at carrying value because their carrying amounts approximate the fair value because of their short term nature. Difference between carrying amounts and fair values of bank borrowings, other financial assets and financial liabilities subsequently measured at amortised cost is not significant in each of the years presented.

5. FINANCIAL RISK MANAGEMENT

The Company financial liabilities comprise mainly of borrowings, trade payables and other payables. The Company financial assets comprise mainly of cash and cash equivalents, trade and other receivables.

The Company''s business activities are exposed to a variety of financial risks namely credit risk, liquidity risk and foreign currency risk. The Company''s senior management has the overall responsibility for establishing and governing the Company''s risk management framework. The Company''s risk management policies are established to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Board of Directors of the Company.

A. Credit Risk

Credit risk is the risk of financial loss to the Company if a customer fails to meet its contractual obligation. To manage this, the company periodically assesses the financial reliability of customers, taking into account the financial condition, current economic trends and analysis of historical bad debts and ageing of the account receivables. Individual risk limits are set accordingly.

Receivables from customers

Concentration of credit risk with respect to trade receivables are limited, due to Company''s customer base being large and diverse. All trade receivables are reviewed and assessed for default on a monthly basis.

On historical experience of collecting receivables is that credit risk is low. Hence, trade receivables are considered to be a single class of financial assets.

Other financial assets

The Company maintains exposure in cash and cash equivalents and margin money deposits with banks. The Company''s maximum exposure of credit risk as at March 31, 2018, March 31, 2017 and April 1, 2016 is the carrying value of each class of financial assets.

B. Foreign currency risk management

Foreign currency risk is the risk that the Fair value or Future cashflows of an exposure will fluctuate due to changes in foreign currency rates. Exposures can arise on account of various assets and liabilities which are denominated in currencies other than Indian rupee. The Company has not entered into any forward exchange contract to hedge against currency risk. The Company manages currency exposures within prescribed limits. The aim of the Company''s approach to management of currency risk is to leave the Company with no material residual risk.

Foreign currency sensitivity analysis

A 5% strengthening of the INR against key currencies to which the Company is exposed would have led to approximately an additional Rs. 38,09,998/- gain in the Statement of Profit and Loss (2016-17: Rs.19,23,043/- Loss ). A 5% weakening of the INR against these currencies would have led to an equal but opposite effect.

C. Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The objective of liquidity risk management is to maintain sufficient liquidity and ensure that funds are available for use as per requirements. The Company manages its liquidity risk by ensuring, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. Also, the Company has availed credit limits with banks. The Company maintained a cautious liquidity strategy, with a positive cash balance throughout the year ended March 31, 2018 , March 31, 2017 and on 01st April 2016 . Cash flow from operating activities provides the funds to service the financial liabilities on a day to day basis. The Company regularly maintains the rolling forecasts to ensure it has sufficient cash on an on-going basis to meet operational needs. Any short-term surplus cash generated, over and above the amount required for working capital management and other operational requirements, is retained as cash and cash equivalents (to the extent required) and any excess if any, is invested in interest bearing term deposits.

The company is repaying its borrowings as per the schedule of repayment and no amount was pending for remittance beyond its due date. All the amounts due to trade payables falls due within one year and the company is able to meet its obligations within the due dates. In case of borrowings from banks, the maturity pattern has been given under Note no. 13.

D. Capital Management

Equity share capital and other equity are considered for the purpose of Company''s capital management.

The Company manages its capital so as to safeguard its ability to continue as a going concern and to optimise returns to shareholders. The capital structure of the Company is based on Management''s judgment of its strategic day-to-day needs with a focus on total equity so as to maintain investor, creditors and market confidence.

6. General:

Previous year figures have been regrouped where ever necessary.

7. Paise have been rounded off to the nearest rupee.

Mar 31, 2016

1. The Company has only one class of Equity shares having a par value of Rs. 10/- each. Each holder of equity share is entitled to one vote per share on poll and have one vote on show of hands. In the event of liquidation, the equity share holders are eligible to receive the remaining assets of the company in proportion to their shareholding after distribution of payments to preferential creditors.

2. Details of share holders holding more than 5% of total number of shares

3. The company in neither a holding company nor a subsidiary company to any other company.

4. Reconciliation of number of Equity shares :

5. The company has not issued any bonus shares during the last five financial years.

6. None of the shares were allotted in pursuant to contract without payment being received in cash.

7. Hydel Power plant:

8. IREDA :

9. Term loan from IREDA is secured by first charge on all the movable and immovable assets of the companyâs power division of 0.8 MW small hydro project at 16^th & 17^th branch canal at mile # 3, Nelakondapalli Village & Mandal, Khammam Dist., Telangana State. Further guaranteed by six promoter directors of the company and corporate guarantee of two companies.

10. The above loan carries interest @10%.

11. The above loan is repayable in following manner.

2017-18 Rs. 23,55,792/-; 2018-19 Rs. 23,55,792/-; 2019-20 Rs. 5,88,950/-.

12. There are no defaults in repayment of above loan.

13. ANDHRA BANK:

14. Term loans from Andhra Bank are secured by way of charge on movable and immovable assets of power plant at Nelakondapalli and Bhairavanipalli of Khammam Dist., Telangana State excluding those assets specifically charged to IREDA which are exclusively created out of said loan. The said loan is further guaranteed by two directors in their personal capacities.

15. The above loans carry interest @12.75% & 12.75%

16. The above loans are repayable in following manner.

2017-18 Rs. 1,51,45,000/-; 2018-19 Rs. 2,23,00,000/-; 2019-20 Rs. 3,11,00,000/-.

17. There are no defaults in repayment of above loans.

18. SPINNING UNIT :

19. ANDHRA BANK :

20. Term loans from Andhra Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

21. The above loans carry interest @ 12%, 12.75%, 12.75%, 12.75%, 11.50% and 12.00%.

22. The above loans are repayable in following manner.

2017-18 Rs. 73,00,000/-; 2018-19 Rs. 1,07,00,000/-; 2019-20 Rs. 2,18,00,000/-; 2020-21 Rs. 7,13,00,000/-; 2021-22 Rs. 8,82,67,030/-; 2022-23 Rs. 7,40,00,000/-; 2023-24 Rs. 8,14,09,633.

23. There are no defaults in repayment of above loans.

24. INDIAN BANK :

25. Term loans from Indian Bank are secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

26. The above loans carry interest @11.90%, 12.90% and 12.90%.

27. The above loans are repayable in following manner.

2017-18 Rs. 6,54,25,000/-; 2018-19 Rs. 5,22,18,798/-; 2019-20 Rs. 5,00,00,000/-; 2020-21 Rs. 6,25,00,000/

28. There are no defaults in repayment of above loans.

29. WEAVING UNIT :

30. INDIAN BANK :

31. Term loans from Indian Bank are secured by exclusive charge on all the movable and immovable assets of weaving division at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

32. The above loans carry interest @11.9%, 11.9% and 11.45%.

33. The above loans are repayable in following manner.

2017-18 Rs. 8,40,00,000/-; 2018-19 Rs. 12,40,00,000/-; 2019-20 Rs. 15,60,00,000/-; 2020-21 Rs. 198000000/-; 2021-22 Rs. 13,10,00,000/-; 2022-23 Rs. 18,00,00,000/- and 2023-24 Rs. 20,02,98,683/-:

34. There are no defaults in repayment of above loans.

35.. DYEING UNIT :

36. BANK OF BARODA :

37. Term loan from Bank of Baroda is secured by way of first charge on fixed assets of Companyâs proposed Dyeing Unit at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

38. The above loan carries interest @12.40%.

39. The above loans are repayable in following manner.

2017-18 Rs. 50,00,000/-; 2018-19 Rs. 60,00,000/-; 2019-20 Rs. 2,00,00,000/-; 2020-21 Rs. 2,75,00,000/- and 2021-22 Rs. 3,15,00,000/

40. There are no defaults in repayment of above loan

41. INTEREST FREE SALES TAX LOAN :

42. The Company availed interest free sales tax loan for the period from 1995-96 to 2008-09 aggregating to Rs. 2,54,75,992/-. The said loan is repayable within a period of 10/14 years from each year of availment. The Company has to pay an amount of Rs. 40,47,511/- as on 31-03-2016 of which an amount of Rs. 23,38,431/- is due for payment during financial year 2016-17.

43. Loans accepted from promoters and their relatives are interest free and are accepted as per the conditions of sanction of term loans from banks and shall not be repayable during the currency of term loans.

44. Disclosure required by the AS - 15 (revised) - Employee benefits

45. Defined Benefits Plans

Reconciliation for changes in present value of defined benefits obligation

Note :46. The above loans were secured by way of hypothecation of inventories and book debts. Further secured by way of second charge on pari passu on fixed assets of the company other than those exclusively charged to IREDA. Further guaranteed by two directors in their individual capacities.

The working capital loans from Andhra Bank carries interest @ 9.75% and 12% and from Indian Bank carries interest @ 9.65% and 11.9%.

No amounts were overdrawn during the year by the company than the limits sanctioned.

47. a) Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties.

48 In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated.

49. (i) The Dyeing division of the company commenced commercial production on 23-09-2015.

50. Revenue expenditure capitalized to fixed assets/ Capital works under progress during the year and details of expenses included under unallocated capital expenditure incurred and pending allocation as on the date of balance sheet :

51. DISCLOSURE REQUIREMENTS PURSUANT TO âACCOUNTING STANDARD - 18 RELATED PARTY DISCLOSURESâ: A) List of Related Parties:

1) Key Management Personnel:

1. P.Venkateswara Reddy, Managing Director

2. G.V.Krishna Reddy, Joint Managing Director

3. M.V.Subba Reddy, Whole Time Director

2) Relatives of Key management Personnel:

1. Kallam Venkata Subbayamma Sister of P.Venkateswara Reddy

2. Poluri Siva Nagendramma Wife of P.Venkateswara Reddy

3. Movva Uma Sankara Reddy Brother of M.V.Subba Reddy

4. Poluri Govardhana Reddy Son of P.Venkateswara Reddy

5. Poluri Venugopal Reddy Son of P.Venkateswara Reddy

6. Gurram Nitin Son of G.V.Krishna Reddy

7. Movva Kavitha Wife of M.V.Subba Reddy

8. M.Srinvivasa Nagarjuna Reddy Son of M.V.Subba Reddy

9. M.Murali Sairam Krishna Reddy Son of M.V.Subba Reddy

3) Companies controlled by Key management personnel/Relative of Key Management Personnel:

1. Kallam Agro products & Oils Private Limited, Guntur

2. Kallam Brothers Cottons Pvt Ltd, Guntur

Notes:

52. The Andhra Pradesh Electricity regulatory commission issued orders refixing the purchase price of power purchased from the company at Rs. 2.52/unit w.e.f 01.04.2004. The company contested the said order in High Court of A.P along with the other members of small hydro power developers association, the High Court issued an interim order directing APTRANSCO to pay 50% of the differential between the revised rate and previous rate in force up to 31.03.2004 subsequently the High Court transferred the case to the Appellate Tribunal for electricity, New Delhi. The Appellate Tribunal for electricity decided the matter in favour of company vide its order dated 02.06.2006 and ordered the APTRANSCO to pay the difference amount between the revised rate and the previous rate in force up to 31.03.2004. However the APTRANSCO preferred an appeal before the Supreme Court against the order of Appellate Tribunal for matter to APERC with a direction that APERC shall hear the non conventional energy generators afresh and determine the tariff expeditiously for purchase of electricity in accordance with law. APERC has ordered the APPCC to make payment @ Rs. 2.66/unit up to the completion of 10th year i.e. March 2012 APERC has also set out guide lines to APPCC for fixing the rate per unit after 10 years as follows.

a) Balance loan repayment period

b) Fixed cost determination based on O&M expenditure

c) Return on equity

d) Variable cost

e) Residual depreciation if any,

However the TSTRANSCO is settling the bills @ Rs. 2.39/unit as per the APERC revised order.

The Company received part payment in earlier year towards arrears in unit rate difference as per the instruction of Appellate Tribunal for electricity, New Delhi. Honâble Appellate Tribunal for electricity also directed DISCOMS that interest on arrears should also be paid at the rate of 12% to be compounded on quarterly. DIS-COMS are allowed to pay the arrears & interest to the hydel power developers in 6 monthly installments commencing from july 2013. TSTRANSCO has preferred an appeal in Honâble Supreme Court against the orders of appellate tribunal for electricity & the same is pending with Honâble Supreme Court.

Moreover TSTRANSCO filed a petition in Hobâble Supreme Court requesting for permission to waive the balance arrears in unit rate difference without payment to small hydel power projects and the same is pending with Honâble Supreme Court.

53. The Andhra Pradesh Electricity Regulatory Commission vide its order dated 23.02.2004 has increased the wheeling charges from 2% to 12.81% on the electricity wheeled from the power plants of the company by the APTRANSCO. The company has filed writ petition in the Honâble High Court of AP & the said court has transferred the case to the Appellate Tribunal for Electricity New Delhi. The Appellate Tribunal for Electricity passed the final order on 08.09.2005 directing the APTRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred on appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi in view of the order passed by the Appellate Tribunal for Electricity, the company has accounted wheeling charges only @ 2% pending final orders in the matter.

54. General:

Previous year figures have been regrouped where ever necessary.

Mar 31, 2015

1. The Company has only one class of Equity shares having a par value of Rs. 10/- each. Each holder of equity share is entitled to one vote per share on poll and have one vote on show of hands. In the event of liquidation, the equity share holders are eligible to receive the remaining assets of the company in proportion to their shareholding after distribution of payments to preferential creditors.

3. The company in neither a holding company nor a subsidiary company to any other company.

4. Reconciliation of number of Equity shares :

5. The company has not issued any bonus shares during the last fve financial years.

6. None of the shares were allotted in pursuant to contract without payment being received in cash.

I) HYDAL POWER PLANT:

i) IREDA:

a) Term loan from IREDA is secured by first charge on all the movable and immovable assets of the company's power division of 0.8 MW small hydro project at Nandigama branch canal at mile # 3, Kotha Kothuru of Nela konda palli village, Khammam Dist., Telangana. Further guaranteed by six promoter directors of the company and corporate guarantee of two companies.

b) The above loan carries interest @10%.

c) The above loan is repayble in following manner.

2016-17 Rs. 2355792/- : 2017-18

Rs. 2355792/-: 2018-19

Rs. 2355792/-: 2019-20 Rs. 588950/-:

d) There are no defaults in repayment of above loan.

ii) ANDHRA BANK :

a) Term loans from Andhra Bank is secured by way of charge on movable and immovable assets of power plant at Kotha Kothuru excluding those assets specifically charged to IREDA and Bhairavanipalli of Khammam Dist., A.P. which are exclusively created out of said loan. The said loan is further guaranteed by two directors in their personal capacities.

b) The above loans carries interest @13.75%.

c) The above loans are repayable in following manner.

2016-17 Rs. 11472000/-: 2017-18 Rs. 15145000/-: 2018-19 Rs. 22300000/-: 2019-20 Rs. 31100000/-:

d) There are no defaults in repayment of above loan.

II SPINNING UNIT: i) ANDHRA BANK:

a) Term loans from Andhra Bank is secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carries interest @ 12%, 12.50%, 13.25% and 13.75%.

c) The above loans are repayble in following manner.

2016-17 Rs. 23366595/-: 2017-18 Rs. 7300000/-: 2018-19 Rs. 10700000/-: 2019-20 Rs. 21800000/-: 2020-21 Rs. 71300000/-: 2021-22 Rs. 88267030/-: 2022-23 Rs. 74000000/-:and 2023-24Rs.31455149/-.

d) There are no defaults in repayment of above loan.

ii) INDIAN BANK:

a) Term loans from Indian Bank is secured on pari passu basis by way of first charge on all the movable and immovable assets of spinning division (all units at Chowdavaram, Guntur Dist.) of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carries interest @ 12.45 and 13.45%.

c) The above loans are repayble in following manner.

2016-17 Rs. 66820000/-: 2017-18 Rs. 65425000/-: 2018-19 Rs. 52218798/-: 2019-20 Rs. 50000000/-: 2020-21 Rs. 62500000/-:

d) There are no defaults in repayment of above loan.

III WEAVING UNIT :

- INDIAN BANK:

a) Term loans from Indian Bank is secured by exclusive charge on all the movable and immovable assets of weaving division at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

b) The above loans carries interest @12.45% and 12.25%.

c) The above loans are repayble in following manner.

22016-17 Rs. 54000000/-: 2017-18 Rs. 82000000/-: 2018-19 Rs. 122000000/-:

2019-20 Rs. 154000000/-: 2020-21 Rs. 196000000/-: 2021-22 Rs. 127000000/-: 2022-23 Rs.

172000000/-: and 2023-24 Rs. 179827820/-:

d) There are no defaults in repayment of above loan.

IV DYEING UNIT :

- BANK OF BARODA:

a) Term loan from Bank of Baroda is secured by way of first charge on fixed assets of Company's proposed Dyeing Unit at Kunkupadu Village, Addanki Mandal, Prakasam Dist. of the company. Further guaranteed by two directors in their personal capacities.

b) The above loan carries interest @12.75%.

c) The above loans are repayble in following manner.

2016-17 Rs. 4000000/-: 2017-18 Rs. 5000000/-: 2018-19 Rs. 6000000/-: 2019-20 Rs. 20000000/-: 2020-21 Rs. 27500000/-: and 2021-22 Rs.31500000/- d) There are no defaults in repayment of above loan

V) INTEREST FREE SALES TAX LOAN:

a) The Company availed interest free sales tax loan for the period from 1995-96 to 2008-09 aggregating to Rs. 25475992/-. The said loan is repayable within a period of 10/14 years from each year of availment. The Company has to pay an amount of Rs 44,26,741/- as on 31.03.2015 of which an amount of Rs. 3,79,230/- is due for payment during financial year 2015-16.

VI) Loans accepted from promoters are interest free and are accepted as per the conditions of sanction of term loans from Andhra Bank and shall not be repayable during the currency of term loans. As per the Companies Act, 2013 any amount received from relatives of Promoter(s)/Director(s) will be treated as deposit. So, during the year, unsecured loan took from relatives of Promoter(s)/Director(s) before the commencement of Companies Act, 2013, were repaid on 30-03-2015.

Note : The above loans are secured by way of hypothecation of Inventories and book debts. Further secured by way of second charge on pari passu basis on fixed assets of the company other than those exclusively charged to IREDA. Further guaranteed by two directors in their individual capacities.

The working capital loans from Andhra bank carries interest @10.25% and 12.50% and from Indian bank carries interest @10.25% and 12.50%. No amounts were overdrawn during the year by the company than the limits sanctioned.

Disclosures required under the Micro, Small and Medium Enterprises Development Act, 2006.

Based on and to the extent of information available with the company regarding the status of their creditors under Micro, Small and Medium enterprises development Act, 2006 on which the auditors have relied upon, the disclosure requirement under the said Act,with regard to the payment made/due to Micro, Small and medium enterprises are given below.

* The Unclaimed Dividends represent those relating to the years 2007-08 to 2013-14 and no part thereof has remained unpaid or unclaimed for a period of 7 years or more from the date they become due for payment requiring transfer to the investor education and protection fund.

** Other liabilities include liablility towards electricity charges, FSA charges etc.,

Note :

a) Sale of power includes Rs.37,65,913/- as part payment received being the differential sale price for the period 01.04.2004 to 31.03.2012 as per final judgment of Appellate Tribunal for electricity.

b) The above sales includes Rs. 64,35,514/- being gain on Foreign exchange rate fluctuations. (Pr.Year gain Rs.45,86,478/-)

c) FOB value of export made during the year Rs.41,09,75,193/- (Pr. Year Rs. 39,05,27,520/-)

7. a) Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties.

b) In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated.

c) Interdivisional stock transfers are made at market prices.

8. Pursuant to the provision of Schedule II of companies Act, 2013 effective from 01.04.2014, the company has Provided deprecation on fixed assets based on useful lives as prescribed said schedule. As per transitional provisions, the WDV of assets as on 31.03.2014 whose life is already exhausted amounting to Rs. 28.63 lakhs has been charged to General Reserves. Had the company followed the method of providing depreciation on its fixed assets as followed up to previous year, the depreciation change for the current year would have been higher by Rs. 203.48 lakhs.

(i) The Weaving division of the company commenced commercial production on 01.09.2014.

(ii) Revenue expenditure capitalized to fixed assets/ Capital works under progress during the year and details of expenses included under unallocated capital expenditure incurred and pending allocation as on the date of balance sheet:

9. DISCLOSURE REQUIREMENTS PURSUANT TO "ACCOUNTING STANDARD Â 18 RELATED PARTY DISCLOSURES"

A) List of Related Parties:

1) Key Management Personnel:

1. P. Venkateswara Reddy, Managing Director

2. G.V. Krishna Reddy, Joint Managing Director

3. M.V. Subba Reddy, Whole Time Director

2) Relatives of Key management Personnel:

1. Kallam Venkata Subbayamma Sister of P. Venkateswara Reddy

2. Poluri Siva Nagendramma Wife of P. Venkateswara Reddy

3. Movva Uma Sankara Reddy Brother of M.V.Subba Reddy

4. Poluri Govardhan Reddy Son of P. Venkateswara Reddy

5. Poluri Venugopal Reddy Son of P. Venkateswara Reddy

6. Gurram Nitin Son of G.V. Krishna Reddy

7. Movva Kavitha Wife of M.V. Subba Reddy

8. M. Srinivasa Nagarjuna Reddy Son of M.V. Subba Reddy

9. M. Murali Sairam Krishna Reddy Son of M.V. Subba Reddy

3) Companies controlled by Key management personnel/Relative of Key Management Personnel :

1. Kallam Agro products & Oils Private Limited, Guntur.

2. Kallam Brothers Cottons Pvt Ltd, Guntur.

NOTES :

33. The Andhra Pradesh Electricity regulatory commission issued orders refxing the purchase price of power purchased from the company at Rs 2.52/unit w.e.f 01.04.2004. The company contested the said order in High Court of A.P along with the other members of small hydro power developers association, the High Court issued an interim order directing APTRANSCO to pay 50% of the differential between the revised rate and previous rate in force up to 31.03.2004 subsequently the High Court transferred the case to the Appellate Tribunal for electricity, New Delhi. The Appellate Tribunal for electricity decided the matter in favour of company vide its order dated 02.06.2006 and ordered the APTRANSCO to pay the difference amount between the revised rate and the and the previous rate in force up to 31.03.2004. However the APTRANSCO preferred an appeal before the Supreme Court against the order of Appellate Tribunal for matter to APERC with a direction that APERC shall hear the non conventional energy generators afresh and determine the tariff expeditiously for purchase of electricity in accordance with law. APERC has ordered the APPCC to make payment @ Rs 2.66/unit up to the completion of 10th year i.e. March 2012 APERC has also set out guide lines to APPCC for fixing the rate per unit after 10 years as follows:

a) Balance loan repayment period

b) Fixed cost determination based on O&M expenditure

c) Return on equity

d) Variable cost and

e) Residual depreciation if any,

However the APTRANSCO is settling the bills @ Rs.2.39 per unit as per the APERC revised order.

TThe Company received Rs 37,65,913/- as part payment during the financial year 2014-15 towards arrears in unit rate difference as per the instruction of Appellate Tribunal for electricity, New Delhi. Hon'ble Appellate Tribunal for electricity also directed DISCOMS that interest on arrears should also be paid at the rate of 12% to be compounded on quarterly. DISCOMS are allowed to pay the arrears & interest to the hydel power developers in 6 monthly installments commencing from july 2013. TSTRANSCO has preferred an appeal in Hon'ble Supreme Court against the orders of appellate tribunal for electricity & the same is pending with Hon'ble Supreme Court.

Moreover TSTRANSCO filed a petition in Hob'ble Supreme Court requesting for permission to waive the balance arrears in unit rate difference without payment to small hydel power projects and the same is pending with Hon'ble Supreme Court.

More over small hydro power developers association again approached Appellate Tribunal for Electricity to fx the rate per unit and Appellate Tribunal for Electricity instructed the APERC to re-fx the rate keeping in view of its own guidelines.

10. The Andhra Pradesh Electricity Regulatory Commission vide its order dated 23.02.2004 has increased the wheeling charges from 2% to 12.81% on the electricity wheeled from the power plants of the company by the APTRANSCO. The company has fled writ petition in the Hon'ble High Court of AP & the said court has transferred the case to the Appellate Tribunal for Electricity New Delhi. The Appellate Tribunal for Electricity passed the final order on 08.09.2005 directing the APTRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred on appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi in view of the order passed by the Appellate Tribunal for Electricity, the company has accounted wheeling charges only @ 2% pending final orders in the matter.

11. After the division of Andhra Pradesh State, NPDC of Telangana Ltd had not adjusted generated units during the months of August 2014 and thereafter, since the company requested the NPDCTSL for captive utilization as the production facilities of power are situated in Telangana State and spinning mill is situated in New Andhra Pradesh State. The company has not made payment of electricity bills relating to captive power utilization. However NPDCTSL has requested the company to enter fresh interstate open access agreement by taking prior approvals from the nodal agency as the existing intra state open access/ wheeling agreement entered by the company shall be deemed to be cancelled. The company filed a suit in Hon'ble High Court to issue orders requesting the adjustment of generated power for captive consumption of the company situated in New Andhra Pradesh State. The Hon'ble High Court stayed the disconnection of power supply to the company service connection for the month of September, 2014 to the spinning production located at Dasaripalem in Guntur district, New Andhra Pradesh State. The company again filed a petition in the Hon'ble High court, Hyderabad to issue a direction to AP Transco and Telangana State Transmission Corporation Ltd for allowing the 70% of the generated power units for captive consumption.

The Hon'ble High court, Hyderabad in its final judgement held that power generated by the company shall be treated as banked energy and allowed a period of 3 months to obtain open access licences. The company made an amendment in the agreement adding M/s Sagar Cements Ltd, Nalgonda as its consumer in Telangana state and submitted all the required documents to TSSPDCL. However the TSSPDCL has not yet appropriated the generated power to M/s Sagar Cements Ltd, Nalgonda and the company has not received any intimation from TSSPDCL till date pertaining to the generated power up to February, 2015.

Northern Power Distribution Company of Telangana State Limited has also conformed that the company has banked power of 54,80,405 units as on 28.02.2015.

12. General :

Previous year figures have been regrouped where ever necessary.

Paise have been rounded off to the nearest rupee.

Mar 31, 2014

1. CONTINGENT LIABILITIES NOT PROVIDED FOR:

As at 31.03.2014 As at 31.03.2013

a) Counter guarantees given 4,52,13,866 15,75,20,325 to bank in respect of Bank guarantees and letter of credit issued in favour of various constituents.

b) Estimated amounts of 8,54,75,273 13,76,35,803 contracts remaining to be executed on Capital accounts, and not provided for

c) State levies on Electricity 28,03,957 60,22,398

2. a) Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties.

b) In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated.

3. a) Details of Expenses included under unallocated capital expenditure incurred and pending allocation as on the date of balance sheet:

4. The Andhra Pradesh Electricity regulatory Commission issued orders refixing the purchase price of Power purchased from the company at Rs.2.52 per unit w.e.f 01.04.2004. The company contested the said order in High Court of Andhra Pradesh along with the other members of small hydro power developers Association. The High Court issued an interim order directing APTRANSCO to pay 50% of the differential between the revised rate and the previous rate in force up to 31.03.2004. Subsequently the High Court transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate tribunal for Electricity decided the matter in favour of the company vide its order dated 02.06.06 and ordered the APTRANSCO to pay the difference amount between the revised rate and the previous rate in force up to 31.03.2004. However the APTRANSCO preferred an appeal before the Supreme Court against the order of the Appellate Tribunal for Electricity. The Supreme Court set out guidelines and remanded the matter to APERC with a direction that APERC shall hear the non-conventional energy generators afresh and determine the tariff expeditiously for purchase of electricity in accordance with law. APERC has ordered the APPCC to make payment @ 2.66 per unit upto the completion of 10th year i.e. March, 2012. APERC has also set out guidelines to APPCC for fixing the rate per unit after 10 years as follows:

a) Balance loan repayment period

b) Fixed cost determination based on O&M expenditure

c) Return on equity

d) Variable cost and

e) Residual depreciation if any,

However the APTRANSCO is settling the bills @ Rs.2.48 per unit instead of billing rate of Rs.2.74 per unit ignoring the APERC guidelines.

The Company received part payment of Rs. 16,60,604/- in the financial year 2012-13 and Rs. 39,92,119/-in the financial year 2013-14 towards arrears in unit rate difference as per the instruction of Appellate Tribunal for Electricity, New Delhi. Hon''ble Appellate Tribunal for electricity also directed DISCOMS that interest on arrears should also be paid at the rate of 12% to be compounded on quarterly. DISCOMS are allowed to pay the arrears and interest to the hydel power developers in 6 monthly installments commencing from July,2013. APTRANSCO has preferred an appeal in Hon''ble Supreme Court against the orders of Appellate Tribunal for Electricity and the same is pending with Hon''ble Supreme Court.

More over small hydro power developers association again approached Appellate Tribunal for Electricity to fix the rate per unit and Appellate Tribunal for Electricity instructed the APERC to re-fix the rate keeping in view of its own guidelines.

5. The Andhra Pradesh Electricity Regulatory Commission vide its order dated 23.02.2004 has increased the wheeling charges from 2% to 12.81 % on the Electricity wheeled from the Power Plants of the Company by the AP TRANSCO. The Company has filed writ petition in the Hon''ble High Court of Andhra Pradesh and the said Court has transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate Tribunal for Electricity passed the final order on 08.09.2005 directing the AP TRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred an appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi. In view of the order passed by the Appellate Tribunal for Electricity, the company has accounted wheeling charges only at 2% pending final orders in the matter.

6. General :

Previous year figures have been regrouped where ever necessary.

Paise have been rounded off to the nearest rupee.

e-voting instructions

Pursuant to provisions of Section 108 of the Companies Act, 2013, read with the Companies (Management and Administration) Rules, 2014, the Company is pleased to offer e-voting facility to the members to cast their votes electronically on all resolutions set forth in the Notice convening the 22nd Annual General Meeting to be held on Saturday, 27th September 2014, at 3.00 PM IST. The Company has engaged the services of Central Depository Services Limited (CDSL) to provide the E-Voting facility.

The instructions for members for voting electronically are as under :-The E-Voting Event Number and period of E-voting are set out below :

EVEN (E-VOTING EVENT NUMBER) : 140820005

COMMENCEMENT OF E-VOTING : 22 September 2014 at 9.00 A.M

END OF E-VOTING : 24 September 2014 at 6.00 P.M

STEPS FOR E-VOTING :

(A) In case of members receiving e-mail:

i) If you are holding shares in Demat form and had logged on to www.evotingindia.com and casted your vote earlier for EVSN of any Company, then your existing login id and password are to be used.

ii) Log on to the e-voting website www.evotingindia.com.

iii) Click on "Shareholders" tab to cast your votes.

iv) Now, select the Electronic Voting Sequence Number - "EVSN" along with "COMPANY NAME" from the drop down menu and click on "SUBMIT"

v) Now, fill up the following details in the appropriate boxes:

For Members holding shares For Members holding shares in in Demat Form Physical Form

User ID For NSDL: 8 Character DP ID Folio Number registered followed by 8 Digits with the Company Client ID For CDSL: 16 digits beneficiary ID PAN*

Enter your 10 digit alpha-numeric *PAN issued by Income Tax Department when prompted by the system while e-voting (applicable for both demat shareholders as well as physical shareholders)

DOB#

Enter the Date of Birth as recorded in your demat account or in the company records for the said demat account or folio in dd/mm/yyyy format.

Dividend Bank Details#

Enter the Dividend Bank Details as recorded in your demat account or in the company records for the said demat account or folio.

Members who have not updated their PAN with the Company/Depository Participant are requested to use the default number: in the PAN field.

# Please enter any one of the details in order to login. Incase either of the details are not recorded with the depository please enter the value in the DOB column or the in the Dividend Bank details field.

vi) After entering these details appropriately, click on "SUBMIT" tab.

vii) Members holding shares in physical form will then reach directly the EVSN selection screen. However, members holding shares in demat form will now reach ''Password Creation'' menu wherein they are required to mandatorily enter their login password in the new password field. The new password has to be minimum eight characters consisting of at least one upper case (A-Z), one lower case (a-z), one numeric value (0-9) and a special character(@ # $ %& *). Kindly note that this password is to be also used by the demat holders for voting for resolutions of any other company on which they are eligible to vote, provided that company opts for e-voting through CDSL platform. It is strongly recommended not to share your password with any other person and take utmost care to keep your password confidential. Kindly note that this changed password is to be also used by the Demat holders for voting for resolutions for the Company or any other Company on which they are eligible to vote, provided that Company opts for e-voting through CDSL platform.

viii) Click on the relevant EVSN on which you choose to vote.

ix) On the voting page, you will see Resolution Description and against the same the option "YES/NO" for voting. Select the option YES or NO as desired. The option YES implies that you assent to the Resolution and option NO implies that you dissent to the Resolution.

x) Click on the "Resolutions File Link" if you wish to view the entire Resolutions.

xi) After selecting the resolution you have decided to vote on, click on "SUBMIT". A confirmation box will be displayed. If you wish to confirm your vote, click on "OK", else to change your vote, click on "CANCEL" and accordingly modify your vote.

xii) Once you "CONFIRM" your vote on the resolution, you will not be allowed to modify your vote.

(II) In case of members receiving the physical copy of Notice of AGM [for members whose e-mail IDs are not registered with the company/ depository participant(s) or requesting physical copy]:

(B) Please follow all steps from sl. no. (ii) to sl. no. (xii) above, to cast vote.

(C) Institutional shareholders (i.e. other than individuals, HUF, NRI etc.) are required to log on to https://www.evotingin-dia.co.in and register themselves, link their account which they wish to vote on and then cast their vote. They should upload a scanned copy of the Board Resolution in PDF format in the system for the scrutinizer to verify the vote.

(D) The voting period begins on 22 September 2014 (9.00 A.M IST) and ends on 24 September 2014 (6.00 P.M IST). During this period shareholders'' of the Company, holding shares either in physical form or in dematerialized form, as on the cut-off date (record date) of 22nd August 2014, may cast their vote electronically. The e-voting module shall be disabled by CDSL for voting thereafter. Once the vote on a resolution is cast by the shareholder, the shareholder shall not be allowed to change it subsequently.

(E) In case you have any queries or issues regarding e-voting, you may refer the Frequently Asked Questions ("FAQs") and e-voting manual available at www.evotingindia.com under help section or write an email to helpdesk.evoting@ cdslindia.com.

(F) M/s K.Srinivasa Rao & Co., Company Secretaries Guntur (Entity ID: 34721) has been appointed as the Scrutinizer to Scrutinize the e-voting process in a fair and transparent manner.

Mar 31, 2013

1. CONTINGENT LIABILITIES NOT PROVIDED FOR:

As at As at 3103 2013 3103 2013

a) Counter guarantees given to bank in respect of Bank guarantees and letter of credit issued in favour of various constituents. 15,75,20,325 4,09,46,170

b) Estimated amounts of contracts remaining to be executed on Capital accounts, and not provided for 13,76,35,803 3,98,525

c) State levies on Electricity 60,22,398 38,47,661

2. a) Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties. b) In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated

3. a) Revenue expenditure capitalized to fixed assets/ Capital works under progress during the year Includes:

4. DISCLOSURE REQUIREMENTS PURSUANT TO "ACCOUNTING STANDARD 18 RELATED PARTY DISCLOSURES":

A) List of Related Parties:

1) Key Management Personnel:

1. K.HaranadhaReddy, Non Executive Chairman

2. PVenkateswara Reddy, Managing Director

3. G.V.Krishna Reddy, Joint Managing Director

4. M.V.Subba Reddy, Whole Time Director

2) Relatives of Key management Personnel:

1. Kallam Venkata Subbayamma Wifeof K.HaranadhaReddy

2. Poluri Siva Nagendramma WifeofP.VenkateswaraReddy

3. Movva UmaSankaraReddy BrotherofM.V.SubbaReddy

4. Poluri Govardhan Reddy Son of P.Venkateswara Reddy

5. Poluri Venugopal Reddy Son of P.Venkateswara Reddy

6. GurramNitin Son of G.V.Krishna Reddy

7. Movva Kavitha Wife of M.V.Subba Reddy

8. Kallam Mohan Reddy Son of K.HaranadhaReddy

9. M.Srinvivasa Nagarjuna Reddy Son of M.V.Subba Reddy

10. M.Murali Sai Ramakrishna Reddy Son of M.V.Subba Reddy ''11. G.Vijayalakshmi Wifeof G.V.Krishna Reddy

12.G.AppiReddy Fatherof G.V.Krishna Reddy

3) Companies controlled by Key management personnel/Relative of Key Management Personnel:

1. Kallam Agro products SOils Private Limited, Guntur

2. Kallam Brothers Cottons Pvt Ltd, Guntur

5. The Andhra Pradesh Electricity regulatory Commission issued orders refixing the purchase price of Power purchased from the company at Rs.2.52 per unit w.e.f 01.04.2004. The company contested the said order in High Court of Andhra Pradesh along with the other members of small hydro power developers Association. The High Court issued an interim order directing APSPDCL to pay 50% of the differential between the revised rate and the previous rate in force up to 31.03.2004. Subsequently the High Court transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate tribunal for Electricity decided the matter in favour of the company vide its order dated 02.06.06 and ordered the AP TRANSCO to pay the difference amount between the revised rate and the previous rate in force up to 31.03.2004.

However the APTRANSCO preferred an appeal before the Supreme Court against the order of the Appellate Tribunal for Electricity. The Supreme Court set out guidelines and remanded the matter to APERC with a direction that APERC shall hear the non-conventional energy generators afresh and determine the tariff expeditiously for purchase of electricity in accordance with law APERC has ordered the APPCC to make payment @ 2.66 per unit upto the completion of 10''" year i.e. March, 2012. APERC has also set out guidelines to APPCC for fixing the rate per unit after 10 years as follows:

a) Balance loan repayment period

b) Fixed cost determination based on 0 & M expenditure

c) Return on equity

d) Variable cost and

e) Residual depreciation if any,

However the APSPDCL is settling the bills @ Rs.2.48 per unit instead of billing rate of Rs.2.74 per unit ignoring the APERC guidelines.

More over small hydro power developers association again approached Appellate Tribunal for Electricity to fix the rate per unit and Appellate Tribunal for Electricity instructed the APERC to re-fix the rate Keeping in view of its own guidelines.

6. The Andhra Pradesh Electricity Regulatory Commission vide its order dated 23.02.2004 has increased the wheeling charges from 2% to 12.81 % on the Electricity wheeled from the Power Plants of the Company by the AP TRANSCO. The Company has filed writ petition in the Hon''ble High Court of Andhra Pradesh and the said Court has transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate Tribunal for Electricity passed the final order on 08.09.2005 directing the AP TRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred an appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi. In view of the order passed by the Appellate Tribunal for Electricity, the company has accounted wheeling charges only at 2% pending final orders in the matter.

7. General:

Consequent to the amendments made to Schedule-VI of the Companies Act, 1956, the financial statements for the year ended 31s1 March, 2013 are prepared under revised Schedule-VI. Accordingly, the previous year figures have also been reclassified to confirm to this year''s classification.

Mar 31, 2012

1. The company has only one class of Equity shares having a par value of Rs. 10/- each. Each holder of equity share is entitled to one vote per share on poll and have one vote on show of hands. In the event of liquidation, the equity share holders are eligible to receive the remaining assets of the company in proportion to their shareholding after distribution of payments to preferential creditors

2. The company has not issued any bonus shares during the last five financial years.

3. None of the shares were allotted in pursuant to contract without payment being received in cash.

i. IREDA:

a. Term loan from IREDA is secured by first charge on all the movable and immovable assets of the company's power division of 0.80MW small hydro project at Nandigama branch canal at mile #3, Kotha Kothuru of Nela kondapalli village, Khammam dist., A.P. Further guaranteed by six promoter directors ofthe company and corporate guarantee of two companies.

b. The above loan carries interest @10%

c. the above loan is repayable in following manner.

2013-14 Rs. 3455320/-: 2014-15 Rs. 3455320/-: 2015-16 Rs. 2285984/-: 2016-17 Rs. 2355792 : 2017-18 Rs. 2355792:2018-19 Rs. 2355792/- and 2019-20 Rs. 588950/-

d. There are no defaults in repayment of above loan.

ii. Andhra Bank:

- Power unit:

a. Term loan from Andhra Bank is secured by way of charge on movable and immovable assets of power plant at Kotha Kothuru and Bhairavanipalli of Khamma Dist., A.P. which are exclusively created out of said loan. Also secured by way of second charge on fixed assets of spinning mill unit. The said loan is further guaranteed by two directors in their personal capacities.

b. The above loans carries interest @ 13.5% and 14%

- Spinning Unit: ,

a. Term loan from Andhra Bank is secured on paripassu basis by way of first charge on all the movable and immovable assets of spinning division of the company. Further guaranteed by two Directors in their personal capacities.

b. The above loans carries interestÃÂ® 12.75/- 13.5%and 14%

c. The above loans are repayable in following manner.

2013-14 Rs. 90016000/-: 2014-15 Rs. 84990992: 2015-16 Rs. 83026542/-: 2016-2017 Rs. 31838595: 2017-18 Rs. 19445000/-: 2018-19 Rs. 29000000/-: 2019-20 Rs. 47900000/-: 2020-21 Rs. 65274689: and 2021-22 Rs. 15299954/-

d. There are no defaults in repayment of above loans.

iii. Indian Bank:

a. Term loan from Indian Bank is secured on paripassu basis by way of first charge on all the movable and immovable assets of spinning division of the company. Further guaranteed by two directors in their personal capacities.

b. The above loans carries interest @13% and 14%

c. The above loans are repayable in following manner,

2013-14 Rs. 28770000/-: 2014-15 Rs. 35038400:2015-16 Rs. 39670000/-: 2016-17 Rs. 66820000: 2017-18 Rs. 65425000/-: 2018-19 Rs. 52218798/-: 2019-20 Rs. 50000000/-: 2020-21 Rs. 47010240

d. There are no defaults in repayment of above loans

iv. Bank of Baroda:

a. Term loan from Bank of Baroda is secured by way of first charge on fixed assets of company's proposed Dyeing unit and further guaranteed by two directors in their personal capacities. However, the loan proceeds are not yet availed by the company.

b. The above loan carries interest @ 13.25%

v. Interest free sales tax loan:

a. The company availed interest free sales tax loan for the period from 1995-96 to 2008-09 aggregating to Rs. 25475992/- The said loan is repayable within a period of 10/14 years from each year of availment

4. CONTINGENT LIABILITIES NOT PROVIDED FOR

As at As at 31-03-2012 31-03-2011

i. Counter Guarantees given to Bank in respect of Bank guarantees and letter of credit issued in favor of various constituents 4,09,46,170 7,05,67,634

ii. Estimated amounts of contracts remaining to be executed on Capital Accounts, and not provided for. 3,98,525 3,66,94,573

iii. State levies on Electricity 38,47,661 37,38,227

5. a. Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties.

b. In the opinion of the Management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated.

6. a. Revenue expenditure capitalized to fixed assets / capital works under progress during the year

includes borrowing costs as per As-16- 2011-12 2010-11

Interest paid on term loans and processing charges 10,05,790 72,46,984

(Net after interest subsidy received under TUF Scheme)

7. Interest paid is net after crediting subsidy received under TUf Scheme 3,20,59,084 3,33,27,632

8. Sales includes an amount of Rs. 9,03,020/- being gain on exchange fluctuation, (previous year Rs. 27,01,789/-)

9. The Andhra Pradesh Electricity regulatory Commission issued orders refixing the purchase price of power purchased from the company at Rs.2.52 per Unit w.e.f. 01-04-2004. The Company contested the said order in High Court of Andhra Pradesh along with the other members of Small Hydro Power Developers Association. The High Court issued an interim order directing APSPDCLto pay 50% of the differential between the revised rate and the previous rate in force up to 31-03-2004. Subsequently the High Court transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate Tribunal for Electricity decided the matter in favour of the Company vide its order dated 02-06-06 and ordered the APTRANSCO to pay the difference amount between the revised rate and the previous rate in force up to 31 -03-2004. However the APTRANSCO preferred an appeal before the Supreme Court against the order of the Appellate Tribunal for Electricity. The Supreme Court set out guidelines and remanded the matter to APERC with a direction that APERC shall hear the non-conventional energy generators afresh and determine the tariff expeditiously for purchase of Electricity in accordance with Law and pending the orders of APERC, APSPDCL is making payment of Rs. 1.92 per unit w.e.f. September, 2010, instead of billed rate of Rs. 2.74 per unit.

10. The Andhra Pradesh Electricity regulatory commission vide its order dated 23-02-2004 has increased the wheeling charges from 2% to 12.81% on the Electricity wheeled from the Power Plants of the Company by the APTRANSCO. The company has filed writ petition in the Hon'ble High Court of Andhra Pradesh and the said Court has transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate tribunal for Electricity passed the final order on 08-09-2005 directing the APTRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred an appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi. In view of the order passed by the Appellate Tribunal for Electricity, the Company has accountant for wheeling charges only at 2% pending final orders in the matter.

The above details were prepared based on information furnished by the respective suppliers and available with the company regarding the status under Micro, Small & Medium Enterprises Development Act, 2006. The said information to the extent furnished by the suppliers has been relied upon by the Company and its Auditors for the said purpose.

11. Group Gratuity:

The Company has a defined benefit Gratuity Plan. Every Employee who has completed 5 years or more of service gets gratuity on departure at 15days salary (last drawn) for each completed year of sen/ice subject to limits as per Payment of Gratuity Act 1972. The Company has not contributed to any fund of its Gratuity Liability.

1. Companies controlled by Key Management personnel / relatives of Key Management personnel

1. KallamAgro Products & Oils Private Limited, Guntur

2. Kallam Brothers Cottons Private Limited, Guntur

12. General:

Consequent to the amendments made to Schedule-VI of the Companies Act, 1956, the Financial statements for the year ended 31 st March, 2012 are prepared under revised schedule - VI. Accordingly, the previous year figures have also been reclassified to confirm to this year's classification.

Mar 31, 2010

1. SECURED LOANS : SPINNING DIVISION

A. Term Loans from banks are secured on parri passu basis by way of charge on all the immovable and movable assets of the Spinning division of the company. Further guaranteed by the Chairman, Managing Director and Joint Managing Director individually in their personal capacity.

B. Short Term Loan from banks are secured by hypothecation of stocks of raw-materials, work-in progress, finished goods, stores & spares, book debts, etc, Also secured by second charge on all the fixed assets of the company excluding assets financed by IREDA for power division. Further guaranteed by the Chairman, the Managing Director and the Joint Managing Director of the company in their personal capacity.

POWER DIVISION:

C. Term Loan from Indian Renewable Energy Development Agency Limited (IREDA) is secured by first charge on all the immovable and movable assets of Companys Power Division of 0.80 MW Small Hydro Project at Nandigama branch canal at mile # 3, Kotha Kothuru of Nelakonda Palli Village, Khammam (Dist) in the State of Andhra Pradesh under Project Financing Scheme (Project NO. 1349). Further guaranteed by K.Haranadha Reddy, G.V.Krishna Reddy, M.V.Subba Reddy, K.Nagi Reddy, N.Prabhakara Rao and M.R.Naik in their personal capacity. The said loan is further guaranteed by two companies Kallam Agro Products & Oil Products Limited and Janapadu Hydro Power Projects Limited.

D. Term Loan from Andhra Bank is secured by first charge on all movable and immovable properties both present and future pertaining to 1.60MW capacity of Hydro Project at Nandigama Branch Canal at drop No.5-5-600 at Kotha Kothuru of Nelankondapalli Village in Khammam district Andhra Pradesh and further secured by second charge on fixed assets of Spinning Division. Further guaranteed by the Chairman, the Managing Director and the Joint Managing Director individually in their personal capacity.

2 CONTINGENT LIABILITIES NOT PROVIDED FOR

i) Counter guarantees given to bank in respect of Bank guarantees and letter of credit issued in favour of various 1,42,02,480 1,64,98,026 constituents.

ii) Minimum guarantee repurchase amount promised to teak -- 17,550

plantation Unit holders. iii) Estimated amounts of contracts remaining to be executed 5,13,71,500 2,56,95,913 on Capital accounts, and not provided for.

iv) State levies on Electricity 37,33,908 37,33,908

3. Balances with Scheduled Banks in Fixed Deposits represents Rs. 56,45,923/- held as Margin Money Deposit against Bank Guarantee and letter of credits issued by them. (Previous year 75,36,941/-).

4. Balances in personal accounts of various parties are subject to confirmation by and reconciliation with the said parties.

5. In the opinion of the management, all the amounts stated under Current Assets, Loans and Advances are recoverable at the values at which they are stated.

6. Sales includes an amount of Rs.5,69,201/- being gain on exchange fluctuation.

7. The Andhra Pradesh Electricity regulatory Commission issued orders refixing the purchase price of Power purchased from the company at Rs.2.52 per Unit w.e.f 01.04.2004. The company contested the said order in High Court of Andhra Pradesh along with the other members of Small Hydro Power Developers Association The High Court issued an interim order directing AP Transco to pay 50% of the differential between the revised rate and the previous rate in force upto 31.03.2004. Subsequently the High Court transferred the case to the Appelleate Tribunal for Electricity, New Delhi. The Applleate tribunal for Electricity decided the matter in favour of the company vide its order dated 02.06.06 and ordered the AP TRANSCO to pay the difference amount between the revised rate and the previous rate in force up to 31.03.2004. However the APTRANSCO preferred an appeal before the Supreme Court against the order of the Applleate Tribunal for Electricity and pending the orders of the Supreme Court, the Company billed theAPTRANSCO at the rate of Rs.2.785 per Unit.

8. The Andhra Pradesh Electricity Regulatory Commission vide its order dated 23.02.2004 has increased the wheeling charges from 2% to 12.81 % on the Electricity wheeled from the Power Plants of the Company by the AP TRANSCO. The Company has filed writ petition in the Honble High Court of Andhra Pradesh and the said Court has transferred the case to the Appellate Tribunal for Electricity, New Delhi. The Appellate Tribunal for Electricity passed the final order on 08.09.2005 directing the AP TRANSCO to continue to collect the wheeling charges only at 2%. However the APTRANSCO preferred an appeal before the Supreme Court against the orders of the Appellate Tribunal for Electricity, New Delhi. In view of the order passed by the Appellate Tribunal for Electricity, the company has accounted for wheeling charges only at 2% pending final orders in the matter.

9. In compliance with the treatment prescribed in Accounting Standard -11 "The Effects of Changes in Foreign Exchange Rates" notified in Companies (Accounting Standards) Rules, 2006, the company has recognized the foreign currency exchange differences, in respect of restatement of its liability incurred towards Fixed Assets acquired from a Country outside India, as an expense amounting to Rs Nil in Profit and Loss account. (Previous year Rs. 18,08,573/-)

The above details were prepared based on information furnished by the respective suppliers and available with the company regarding their status under Micro, Small & Medium Enterprises Development Act, 2006. The said information to the extent furnished by the suppliers has been relied upon by the Company and its auditors for the said purpose.

10. GROUP GRATUITY:

The Company has a defined benefit gratuity plan. Every employee who has completed 5 years or more of service gets gratuity on departure at 15 days salary (Last drawn) for each completed year of service subject to limits as per Payment of Gratuity Act, 1972. The company has not contributed to any fund of its gratuity Liability.

11. DISCLOSURE REQUIREMENTS PURSUANT TO "ACCOUNTING STANDARD -18 RELATED PARTY DISCLOSURES".

A) List of Related Parties :-

(1) Key Management Personnel:

1. K. Haranadha Reddy , Chairman

2. P. Venkateswara Reddy, Managing Director

3. G.V. Krishna Reddy, Joint Managing Director

4. M.V.Subba Reddy, Whole Time Director

(2) Relatives of Key management Personnel:

1. Kallam Venkata Subbayamma Wife of K. Haranadha Reddy

2. Poluri Siva Nagendramma Wife of P.Venkateswara Reddy

3. Movva Uma Sankara Reddy Brother of M.V.Subba Reddy

4. Poluri Govardhana Reddy Son of P.Venkateswara Reddy

5. Poluri Venugopal Reddy Son of P. Venkateswara Reddy

16. Gurram Nitin Son of G.V.Krishna Reddy

7. Gurram Namratha Daughter of G.V.Krishna Reddy

8. Movva Kavitha Wife of M.V.Subba Reddy

9. Kallam Mohan Reddy Son of K.Haranadha Reddy

10. M.Srinvivasa Nagarjuna Reddy Son of M.V.Subba Reddy

11. M.Murali Sairam Krishna Reddy Son of M.V.Subba Reddy

12. G. Vijayalakshmi Wife of G.V. Krishna Reddy

13. G. Appi Reddy Father of G.V. Krishna Reddy

(3) Companies Controlled by Key Management Personnel/Relatives of Key Management Personnel

1. Kallam Agro Products & Oils Private Limited

2. Kallam Brothers Cottons Pvt Ltd.,

12 General

(a) Paise have been rounded off to nearest Rupee

(b) Figures for the previous year have been regrouped wherever necessary.

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