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Directors Report of KDDL Ltd.

Mar 31, 2017

Dear Members,

The Directors present this 37th Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2017.

OPERATIONS AND PROSPECTS

Financial Results (Standalone and Consolidated)

The summary of operating results for the year 2016-17 and appropriation of divisible profits is given below:

(Rs. in million'')

Particulars

Standalone

Consolidated

2016-17

2015-16

2016-17

2015-16

Gross Operating Income

3

1234.4

4605.7

4542.2

Profit before interest, depreciation and exceptional item

238.7

228.2

2

341.5

Less: Finance Cost

55.1

62.2

143.7

150.2

Gross Profit

183.6

166.0

157.5

191.3

Less: Depreciation and amortization

72.5

68.9

116.7

112.3

Profit before exceptional Items and tax

111.1

97.1

40.8

79.0

Less/(Add): Exceptional items

0.0

0.0

0.0

0.0

Profit Before tax

111.1

97.1

40.8

79.0

Less: Provision for Income Tax, Deferred Tax

39.6

31.3

40.0

37.1

Profit after tax but before minority Interest

71.5

65.8

0.8

41.9

Less: Share in Profit / (Loss) of associates

0.0

0.0

0.0

0.1

Adjustment for Minority interest

0.0

0.0

5.7

11.1

Net Profit / (Loss) for the Year

71.5

65.8

5

53.1

Add: Profit brought forward from previous year

106.0

78.4

-49.1

-49.1

Profit available for appropriation

177.5

144.2

6

4.0

Appropriated as under:

Differed tax adjustments for earlier years

0.0

0.0

0.0

2.7

Transfer of Reserves of Joint venture (SJDL) on account of acquisition of remaining 50% shares

0.0

0.0

18.0

0.0

Transfer to Minority reserve

0.0

0.0

-3.9

-3.9

Proposed Dividend

0.0

15.1

0.0

15.1

Corporate Dividend Tax

0.0

3.1

0.0

3.1

Transfer to General Reserve

20.0

20.0

20.0

20.0

Dividend on Cumulative Preference Shares (Net of Excess Provision)

0.0

0.0

23.5

16.1

Total Appropriation

20.0

38.2

57.6

53.1

Surplus carried forward to Balance Sheet

157.5

106.0

-100.2

-49.1

PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved consolidated sales revenue of Rs. 4606 million against Rs. 4542 million in the previous year, a growth of 1.4%. Profit before tax declined from Rs. 79 million to Rs. 40.8 million.

Sales revenue from manufacturing operations on standalone basis grew by 6% to Rs. 1308 Million from Rs. 1234 Million in the previous year. The company earned net profit after-tax of Rs. 72 million against Rs. 66 million in the previous year.

Sales revenue in ETHOS, the retail business of the company decreased from Rs. 3287 million in the previous year to Rs. 3276 million, registering a decline of 0.3%;the loss before tax increased to Rs. 74.8 million from Rs. 46.2 million in previous year.

Manufacturing Business Segments

The main revenue of the manufacturing business of from watch components segment. The Swiss watch market, the main destination for our exports, faced one of its worst years in 3 decades, and this impacted our sales significantly. Despite the very soft export market conditions the revenue of the company from watch components improved marginally by 1%; the improved domestic market helped significantly. The other major segment of revenue is from the precision engineering business, wherein the company registered a growth of 28% over the previous year. The revenue growth from domestic and exports market was 45% and 15% respectively. The revenue from ornamental packaging business of the company witnessed a decline of 3%.

We are continuing the move to consolidate and restructure the watch components manufacturing facilities. This is being supplemented by multiple initiatives to enhance capabilities to manufacture more complex products and improved productivity and delivery compliance. Better results even in a sluggish market are already visible and we expect larger gains as the market conditions improve during the year.

The revenue from the precision engineering business of the Company is expected to maintain a healthy growth as we continue to expand our capabilities and capacity. Your company has established its reputation as a quality supplier with the ability to meet sophisticated customer needs. By focusing on the vital levers of operational performance while adding key technical capabilities and show-casing our capabilities at leading international trade exhibitions and on digital platforms, we are confident of healthy growth and returns in the ensuing periods. The expansion project for the precision engineering business is progressing on schedule. The Company continues to believe that this business segment will be a major source of growth and profitability in the future.

Retail Business Segments:-

FY 16-17 has been an extremely challenging year for the luxury watch retail business. Close on the heels of the introduction of PAN requirement for transactions above Rs. 2 lakhs, there were further regulatory changes that were enacted. In July 2016, a new requirement for collecting TCS for all transaction in cash above Rs. 3 lakhs was introduced. Thereafter, on November 8, 2017, the government banned all Rs. 500 and Rs. 1000 notes. Subsequently, an announcement was made in the Union Budget 2017, that cash transactions above Rs. 2 lakhs would be banned with effect from 1 April 2017.

These changes have had a cumulative impact on the revenues of the company. The sales of the company have declined by 3% over the sales of the previous year from Rs. 328.6 crores to Rs. 327.3 crores. The impact of these regulatory changes was also felt on the margins of the company. The decline in sales and the margins of the company percolated to the EBIDTA level, which declined from 2.2% in FY15-16to 1.2% in FY16-17.The loss for the year FY16-17 stood at Rs. 7.48 crores.

However, the factors that made the market opportunity for luxury watches attractive are still as robust as they were before these regulatory changes. The penetration of luxury watches continues to remain low, the number of HNI households continues to rise and the demographics continue to remain favorable. Your Company is recalibrating its strategy to realign with the new environment with a greater emphasis on accessible luxury price points, and sharper focus on margin improvement, operating leverage and capital efficiency.

The Company is also investing in its omni-channel capabilities with a view to provide a seamless connect between the digital and physical stores. Further, the Company is expanding its footprint of stores to cities where the Company has little or no presence. In this regard, the Company has signed up 7 new locations and continues to scout for more opportunities for growth.

The Company''s Swiss subsidiary, Pylania SA in Switzerland reports financial performance as per the expected levels, made possible by adding some new streams of the revenue and curtailing overheads. The recently implemented "Swiss Made" regulations and guidelines in Switzerland will create new opportunities for the watch component business of the Company through Pylania.

During the year, the former Joint Venture company, Satva Jewellery and Design Limited (SJDL) (50:50 with Pascal Vincent Vaucher, SA of Switzerland), became a 100% subsidiary of KDDL. Now the joint venture agreement has been terminated and your company''s Board has approved merger of this company with KDDL for greater efficiency in operations and better utilization of resources and assets of SJDL.

LISTING OF SHARES

The equity shares of the company are listed at National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE). The Company has paid the Annual Listing Fees to both the stock exchanges for the financial year 2017-18.

DETAILS OF SUBSIDIARY, JOINT VENTURE OR ASSOCIATES

As per the provisions of Section 129 of the Companies Act, 2013 read with Companies (Accounts)Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies/ Associate Companies is prepared in Form AOC-1 and the same is enclosed as Annexure-1 to this Report.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company''s Management in accordance with the requirements of Accounting Standard 21 issued by The Institute of Chartered Accountants of India (ICAI) and as per the provisions of the Companies Act, 2013.

As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its subsidiaries on its website www.kddl.com and a copy of separate audited financial statements of its subsidiaries will be provided to the shareholders at their requests.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return, in Form MGT -9 for the Financial Year 2016-17 has been enclosed with this report as Annexure 2.

NUMBER OF BOARD MEETINGS

The detail of number of meetings of the Board held during the financial year 2016-17 forms part of the Report on Corporate Governance in terms of Regulation 34(3) of Securities & Exchange Board of India ( Listing obligations and Disclosure requirements) Regulations, 2015.

DIRECTOR''S RESPONSIBILITY STATEMENT

In accordance with the provisions of section 134(3)(c) of The Companies Act, 2013 the Board confirms and report that:-

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

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

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

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

NOMINATION & REMUNERATION COMMITTEE POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management Personnel of the Company. This policy also lays down criteria for selection and appointment of Board Members. The detail of this policy is explained in the Report on Corporate Governance which forms part of this report.

AUDITORS ANDTHEIR REPORT

As per the provisions of section 139 of The Companies Act, 2013, other relevant rules and as per resolution passed by the shareholders, the term of office of M/s Walker Chandiok & Co. LLP, Chartered Accountants, Statutory Auditors of the Company, who were appointed for a period of two years at the 35th Annual General Meeting of the company, expires with the conclusion of this Annual General meeting.

Further, the company has received offer from M/s BSR & Co. LLP, Chartered Accountants, (Firm Registration No.l01248W/W-100022)for appointment of Statutory auditors of the company for a period of two years and as per terms of appointment, their appointment is subject to ratification by shareholders in the ensuing Annual General Meeting. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 139 of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of section 141 of the Companies Act,2013.

The Notes on Accounts referred to in the Auditors'' Report are self-explanatory and therefore do not call for any further comments.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s P. S. Dua & Associates, a firm of Company Secretaries (C.P. No.3934.) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report in prescribed format MR-3 given by aforesaid Secretarial Auditors is annexed to this Board Report as Annexure 3 and forms an integral part of this report.

There is no qualification or observation made by the Secretarial Auditors in their report.

PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186

Details of Loans, Guarantees and Securities, and Investments covered under Section 186 of the Companies Act, 2013 given during the year under review have been given under Annexure -4 to the Directors Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act 2013 for the Financial Year 2016-17 in the prescribed Form AOC 2 has been enclosed with the report as Annexure-4.

AMOUNTS TRANSFERREDTO RESERVES

The Board of Directors of the Company has decided to transfer Rs 20 million to its General Reserves.

DIVIDEND

Your directors have recommended a dividend of 15% i.e. Rs. 1.50 per equity share for the year ended 31st March, 2017. The dividend shall be paid after the approval of the shareholders at the Annual General Meeting.

The total financial outgo of the dividend to be paid to shareholders will be approximately Rs. 19.57 million (inclusive of Dividend Distribution Tax).

The dividend payout for the year under review has been formulated in accordance with the Company''s policy to pay sustainable dividend linked to long term growth objectives of the company.

TRANSFER OF UNPAID ANDUNCLAIMED AMOUNTS''TOINVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, the company has duly transferred the Unclaimed Dividend up to the financial years 2007-08 to the Investor Education and Protection Fund established by the Central Government. As no dividend was declared during 2008-09, hence no amount was required to be transferred to the said fund during the year.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no Material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2017 to the date of signing of the Director''s Report.

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

RISK MANAGEMENT POLICY

The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risks.

Some of the risks that the Company is exposed to are:

Risks of Specific Nature

Company as a part of normal business monitoring review and development plans, identifies the specific risks for each business segment and develops necessary action plan to minimise the impact of same on business performance. Based on the present operations and areas of interest for the company, following specific nature risks are identified:

- Risks due to decline in overall demand for watches and over dependence on watch segment;

- Risks pertaining to over dependence on few customers;

- Foreign Exchange Risks;

- Risk related to availability of Skilled manpower;

- Risks related to compliance and statutory requirements

Risk Strategy

Company recognizes that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and effective manner. The Company believes that the Risk cannot be eliminated but it can be better managed by

- Transferred to another party, who is willing to take risk, say by buying an insurance policy or entering into a forward contract in case of business involving use of Foreign exchange;

- Reduced, by adopting good internal controls;

- Avoided, by not entering into risky businesses;

- Retained, to either avoid the cost of trying to reduce risk or in anticipation of higher profits by taking on more risk, and;

- Shared, by following a middle path between retaining and transferring risk.

Risk Management Framework

Company adopts systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and compliance with the regulations. The Company believes that this would ensure mitigating steps proactively and help to achieve the risk management effectively.

The Company has constituted a Risk Management Committee of Chief Executive Officer, Chief Financial Officer, Chief Marketing Officer and Business Heads as its regular members and other senior functional heads on invitation basis. The Committee is committed to review periodically the various risks associated with the Company and report the same to the Board.

Focus of the Company is on the three key elements, viz., Risk Assessment / Identification, Risk Management and Risk Monitoring.

- Potential Risks are identified and analyzed, considering likelihood and its impact, as a basis for determining how they should be managed.

- Risk Assessment consists of a detailed study of threats and vulnerability and resultant exposure to various risks. Based on the assessment and identification of the risks, the committee decided the proactive steps for managing and monitoring these risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company is committed to discharge its social responsibility as a good corporate citizen. As part of its social responsibility, the Company has contributed to KDDL-Ethos foundation and the projects are undertaken by the trust formed for the same purpose. These projects have been undertaken to carry services and in compliance to the provision of the Section 135 of the Companies Act, 2013 read with Schedule VII and rules made there under and in accordance with Company''s CSR Policy. The Report on CSR required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure -5 forming part of this report.

MECHANISM FOR EVALUATION OF BOARD, COMMITTEES AND INDIVIDUAL DIRECTORS

Pursuant to the provisions of the Companies Act, 2013 and regulation 17(10) of SEBI (LODR) Regulations, 2015, a structured procedure was adopted after taking into consideration the various aspects of the Board''s functioning, composition of the Board and its various Committees, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was completed in time. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expresses its satisfaction with the evaluation process.

DIRECTORS

During the year, Mr. R.K.Saboo has communicated to the Board his desire to relinquish the position as the Chairman of the Board and the Director of the Company with effect from 1st December 2016, with a view to spend more time on social activities in which he is already involved and also spare more time for himself. The Board agreed to his request with great reluctance. The Board noted and placed on record that Mr. R.K.Saboo has rendered yeoman service and enormous contributions in establishment, growth and progress of KDDL Limited and several group companies of Saboo Business Group in past three decades. Under his able leadership, as Chairman of the Board for thirty years, the Company has grown from strength to strength. The Board further decided that in recognition of Mr R K Saboo''s invaluable contribution to the Company''s affairs over the last three decades the honorary title of Chairman Emeritus be conferred on him following his stepping down from the Board of Directors with effect from 1st December 2016.

Due to his pre-occupations, Mr. Chandra Mohan resigned as Director of the company w.e.f. 7th October 2016.

Mr. Jai Vardhan Saboo and Mr. Sanjiv Sachar were appointed as Additional Directors by the Board of Directors on 12th December 2016 and 7th March 2017 respectively.

Both of the Additional Directors hold office till conclusion of this Annual General meeting and it is proposed and recommended to appoint Mr. Jai Vardhan Saboo and Mr. Sanjiv Sachar as Non Executive Directors.

Mr. Vishal Sati''nderSood retires as Director of the company and being eligible, offers himself for re-appointment.

DEPOSITS

The details of deposits, covered under Chapter V of the Companies Act, 2013 is given hereunder:

1. Deposits Accepted/renewed during the year : Rs. 54,415,000

2. Deposits outstanding at the end of the year : Rs. 112,482,000

3. Deposits remained unpaid or unclaimed as at the end of the year : Nil

4. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved : NIL

5. The details of deposits which are not incompliance with the : NIL Requirements of Chapter

STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS

A strong internal control culture is an important focus and thrust area in the company. The company has comprehensive internal systems, controls and policies for all the major processes to ensure the reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources.

The formalized systems of control facilitate effective compliance as per applicable laws. The company also has well documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs.

The Internal Auditors of the company continuously monitor the efficacy of internal controls/ compliance with SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organization''s risk management, control and governance processes.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit scope and guidelines, approved by the Audit Committee. Internal Auditors develop a risk based annual audit plan with inputs from major stake holders and the major focus areas as per previous audit reports.

All significant audit observations are reviewed periodically and follow-up actions thereon are reported to the Audit Committee. The Audit Committee also meet the company''s Statutory Auditors and Internal Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the company.

The top and senior management of the company also assesses opportunities for improvement in business processes, systems and controls, provides recommendations, designed to add value to the organization and follow up on the implementation of corrective actions and improvements in business processes.

The senior management of the company meets periodically to assess the performance of each business segment and key functions of the company and areas for improvement of performance / controls are identified and reviewed on continuous basis.

Report on adequacy of Internal Financial Control is annexed with auditors report on financial statements.

CHANGES IN SHARE CAPITAL

During the Financial Year ended on 31st March, 2017, the paid up equity share capital of the Company has increased from Rs. 10,08,48,700/- to Rs. 10,83,95,860/- pursuant to the issue and allotment of 754,716 equity shares at the price of Rs 265/- per share (including a premium of Rs. 255/- per share) by way of preferential allotment to SAIF Partners India V Limited, as authorized by the shareholders by way of Special Resolution passed at Extra Ordinary General Meeting held on 8th November 2016.

Further, the Company has neither issued any shares with differential voting rights nor any Sweat equity shares.

DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS

Details as required in Rule 12(9) of Companies (Share Capital and Debenture Rules, 2014) and pursuant to clause 12 (Disclosure in the Directors Report) of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are enclosed as a Annexure-6

DECLARATION BY INDEPENDENT DIRECTORS

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(6) of SEBI (LODR) Regulations, 2015.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure-7 forming an integral part of this Report.

CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business of the Company during the year under review.

MANAGERIAL REMUNERATION

Disclosure pursuant to section 197(12) of the Companies Act, 2013 and Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed with this report as Annexure-8.

RECEIPT OF ANY COMMISSION BY MD / WTD FROM A COMPANY OR FOR RECEIPT OF COMMISSION / REMUNERATION FROM ITS HOLDING OR SUBSIDIARY

During the year under review, Mr. Yashovardhan Saboo, CEO received remuneration of Rs. 3 lacs per month w.e.f. October 2016 onwards from the subsidiary company, Ethos Limited as its Managing Director which is in accordance with the provisions of The Companies Act, 2013 and relevant rules made there under.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors of the Company has adopted Whistle Blower Policy which aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy of the Company is available at the link http://www.kddl.com/pdf/2015/KDDL_Whistle_Blower_Policy.pdf.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & RE-DRESSAL) ACT, 2013

The Company is employing about 259 women, both permanent as well as contractual in various fields within the factory premises and offices. The Company has in place a policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Re-dressal) Act, 2013. There was no complaint received from any employee during the financial year 2016-17 and hence no complaint is outstanding as on 31st March, 2017.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Schedule-V of SEBI (LODR) Regulations, 2015 is annexed to this report as Annexure - 9.

CORPORATE GOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in SEBI (LODR) Regulations, 2015 during the year ended on 31st March, 2017 as per Report on Corporate Governance annexed as Annexure -10 and a Certificate from the Auditors to this effect for the year ended on 31st March, 2017 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 34(2) of SEBI (LODR) Regulations, 2015, the Cash Flow Statement for the year ended on 31st March, 2017 forms an integral part of the Financial Statements.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to perform better.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company''s endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGMENTS

Your Directors take this opportunity to thank all the investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

For and on behalf of the Board of Directors

Date: 30thMay,2017 (YashovardhanSaboo)

Place: Chandigarh Vice-Chairman-cum-Managing Director


Mar 31, 2016

Dear Members,

The Directors present this 36th Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2016.

OPERATIONS AND PROSPECTS

Financial Results (Standalone and Consolidated)

The summary of operating results for the year 2015-16 and appropriation of divisible profits is given below:

Amount in Rs millions

Particulars

Standalone

Consolidated

2015-16

2014-15

2015-16

2014-15

Gross Operating Income

Profit before interest, depreciation and exceptional item Less: Finance Cost

1234.4

228.2

62.2

1310.4

259.9

80.6

4542.2

341.5

150.2

4157.1

410.4

153.4

Gross Profit

166.0

179.3

191.3

257.0

Less: Depreciation and amortization

68.9

73.9

112.3

118.2

Profit before exceptional Items and tax

97.1

105.4

79.0

138.8

Less/(Add): Exceptional items

0.0

1.4

0.0

0.0

Profit Before tax

97.1

104.0

79.0

138.8

Less: Provision for Income Tax, Deferred Tax

31.3

38.9

37.1

50.8

Profit after tax but before minority Interest

65.8

65.1

41.9

88.0

Less: Share in Profit/(Loss) of Associates

-

-

0.1

-

Adjustment for Minority interest

-

-

11.1

(1.5)

Net Profit / (Loss) for the Year

65.8

65.1

53.1

86.5

Add: Profit brought forward from previous year

78.4

80.9

-49.1

-40.8

Profit available for appropriation

144.2

146.0

4.0

45.7

Appropriated as under:

Adjustment in reserves pursuant to applicability of

schedule II of Companies Act, 2013

0.0

24.0

0.0

27.1

Deferred tax adjustments for fixed assets written off

0.0

-8.3

2.7

-9.3

Transfer to Minority reserve

0.0

0.0

-3.9

0.1

Proposed Dividend

15.1

18.2

15.1

18.2

Corporate Dividend Tax

3.1

3.7

3.1

3.7

Transfer to General Reserve

20.0

30.0

20.0

30.0

Dividend on Cumulative Preference Shares

0.0

0.0

16.1

25.0

(Net of Excess Provision)

Total Appropriation

38.2

67.6

53.1

94.8

Surplus carried forward to Balance Sheet

106.0

78.4

-49.1

-49.1

PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved consolidated sales revenue of Rs. 4542 million against Rs. 4157 million in the previous year, witnessing a growth of 9.3%. The profit before tax declined from Rs. 139 million to Rs. 79 million, representing a decline of 43%.

Sales revenue from manufacturing operations on standalone basis was Rs. 1234 Million against Rs. 1310 Million in the previous year, thereby registering a decline of 5.8%. The company earned net profit after tax of Rs. 66 million against Rs. 65 million in the previous year.

Sales revenue in retail business of the company (Ethos) increased from Rs. 2810 million in previous year to Rs. 3287 million registering a healthy growth of 17%, but the profit after tax declined from Rs. 24 million to a loss of Rs. 59 million.

Manufacturing Business Segments

All manufacturing units of the Company faced sluggish market environments which lead to decline in turnover during the year. The total revenue from watch components segment declined by 4.8%, primarily because of major slowdown in export markets. The total revenue of precision engineering business during the year declined by 6.5%, primarily on account of decline in direct and indirect exports. The revenue of the precision engineering business from domestic market grew by more than 25%. The ornamental packaging business of the company witnessed a revenue decline of 16%.

The decline in revenue and profitability of the company was also due to reduction of export incentives on the watch components from 5% in the previous year to zero in the first part of the year under review and later restored partially only to 2% .

The requirement of watch components from domestic watch industry was also irregular compared to the previous year which led to sub optimal utilization of the capacities and resources.

Your Company''s continuing efforts for improving the average price realization by manufacturing components with additional features and higher complexity is moving in the right direction and it will lead to improved and better financial performance in the coming periods. The strategic actions of management for enhancing operational performance are in the right direction and with the improvement in market environment and conditions, better results are expected in the coming periods.

The Company continues to focus on improving the productivity with dedicated steps for skill enhancement, better utilization of machines and optimizing business and manufacturing processes.

The Precision Engineering business of the Company is likely to witness a healthy growth in revenue from next year onwards. Your company has identified the key additional capabilities and structurally making progress in the identified markets and improving the critical levers of operational performance, which will yield healthy growth and returns in the ensuing period.

Efforts for improving the reach to customers by show-casing our capabilities and competitiveness are bearing fruits. Your company has established its reputation as a quality supplier with the ability to meet sophisticated customer needs. The Company continues to believe that this business segment will be a major source of growth in revenue and profitability in the coming years. Company is judiciously investing and moving in the direction of a high growth trajectory in various emerging opportunities.

Retail Business Segments:-

During the course of the year, the retail business ETHOS continued its top line growth. The company''s net sales grew from Rs. 281 crores in FY14-15 to Rs. 329 cr in FY15-16, ( 17%), with a healthy like-to-like growth of billings at store level at 12%. However, the implementation of Rs. 2,00,000 PAN card threshold rule had a large immediate impact on the sales of the company, especially during the last quarter. Further, the company also faced margin pressures due to the higher competitive environment, brought about partly by the new PAN rules, and also due to unfavourable exchange rate and higher taxes. As a result of these challenges the business recorded a loss before tax of Rs. 4.63 Cr in the year compared to profit of Rs. 3.54 Cr in the previous year. The EBIDTA recorded by the business in the year is Rs. 7.40 Cr, about 2.3% of the net sales of the year.

The impact of the new PAN rules is likely to diminish gradually as the rules gain wider acceptance amongst the watch customers. The business is already witnessing a recovery of growth. The business is also taking proactive steps to modify its growth strategy to counter the negative impact of the PAN rules on the very high price points and to nullify the margin pressures in general.

The Directors are hopeful of the introduction of GST in the near future. This will have a very healthy impact on the Company. The Company has a pan India presence but archaic laws make it very difficult and expensive to leverage this presence. In addition, the levy of multiple taxes, especially customs, service tax, sales tax, etc. has an impact on the profitability of the Company. The introduction of GST will not just lead to administrative ease for serving customers across geographies, it will also have direct positive impact on the profitability of the Company.

The Packaging division operational revenue was lower due to decline in order position from jewellery and writing instruments market segment. However, the efforts of the company in consolidation of the manufacturing facilities and control of overheads lead to sharp reduction in losses from the business. The major segments of the business are showing irregular and cyclic fluctuations in the demand, which leads to a pressure on the operational continuity. The Company is taking necessary proactive actions to add new customers and move into higher average realizations to contain losses and turn around this division.

The Company''s Swiss subsidiary, Pylania SA in Switzerland financial performance is as per the expected levels and continuously improving year on year by adding new streams of the revenue and curtailing the overheads. We foresee that the watch component manufacturing business of Company will witness recovery with the implementation of the new "Swiss Made" regulations that will be implemented from January 2017.

The operations of the Joint venture Company Satva Jewellery and Design Limited, the 50:50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland remained suspended during the year. The Company is in discussion with the JV partner for finding out the alternatives for restructuring / realigning the business of the Company.

LISTING OF SHARES

During the year, the Equity shares of the company were also listed at National Stock Exchange of India Limited, (NSE) w.e.f. 23rd March 2016. The Equity Shares of the Company are already listed on the BSE Limited

The Company has paid the Annual Listing Fees to National Stock Exchange of India Limited and The BSE Ltd. for the financial year 2016-17.

DETAILS OF SUBSIDIARY, JOINT VENTURE OR ASSOCIATES

As per the provisions of Section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the Subsidiary Companies/ Associate Companies/Joint Ventures is prepared in Form AOC-1 and the same is enclosed as Annexure-1 to this Report.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company''s Management in accordance with the requirements of Accounting Standard 21 issued by The Institute of Chartered Accountants of India (ICAI) and as per the provisions of the Companies Act, 2013.

As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its subsidiaries on its website www.kddl.com and a copy of separate audited financial statements of its subsidiaries will be provided to the shareholders at their requests.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return, in Form MGT -9 for the Financial Year 2015-16 has been enclosed with this report as Annexure 2.

NUMBER OF BOARD MEETINGS

The detail of number of meetings of the Board held during the financial year 2015-16 forms part of the Report on Corporate Governance in terms of Regulation 34(3) of Securities & Exchange Board of India( Listing obligations and Disclosure requirements) Regulations, 2015.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of section 134(3)(c) of The Companies Act, 2013, the Board confirm and report that:-

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

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

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

(e) the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively;

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

NOMINATION & REMUNERATION COMMITTEE POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of

Directors, Key Managerial Personnel and Senior Management Personnel of the Company. This policy also lays down criteria for selection and appointment of Board Members. The detail of this policy is explained in the Report on Corporate Governance which forms part of this report.

AUDITORS

M/s Walker Chandiok & Co. LLP, Chartered Accountants, Statutory Auditors of the Company were appointed for a period of two years at the last Annual General Meeting of the company and as per terms of appointment, their appointment is subject to ratification by shareholders in the ensuing Annual General Meeting. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 139 of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of section 141 of the Companies Act, 2013.

The Notes on Accounts referred to in the Auditors'' Report are self-explanatory and therefore do not call for any further comments.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s P. S. Dua & Associates, a firm of Company Secretaries (C.P. No. 3934) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report in prescribed format MR.-3 given by aforesaid Secretarial Auditors is annexed to this Board Report as Annexure 3 and forms an integral part.

There is no qualification or observation or remarks made by the Secretarial Auditors in their report.

PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186

Complete details of Loans, Guarantees and Securities, and Investments covered under Section 186 of the Companies Act, 2013 given during the year under review is provided below:

Details of Investments:-

SL

Date of

Details

Am ount

Purpose for

Date of

Date of

Expected

No

invest

of

(in Rs.)

which the

Board

Special

rate of

ment

Investments

proceeds from investment is proposed to be utilized by the recipient

Resolution

Resolution (if any)

return

1

29.07.15

279720 Equity Shares of Rs. 10/- each at a premium of Rs. 133 per share.

400 lacs

Investment in subsidiary c ompany Ethos Limited

28.05.2015

28.08.2014

N.A.

2

08.09.15

Investment in Equity Capital

CHF

300000

Investment in Wholly owned subsidiary Kamla

International Holdings SA

14.08.2015

28.08.2014

N.A.

3.

16.12.15

Purchase of 1,14,350 12% Cumulative Convertible Preference Shares @ Rs. 56 per share

64,03,400/-

Investment in subsidiary company Mahen

Distribution Ltd.

31.10.2015

28.08.2014

12% p.a.

4

03.11.15

279720 Equity Shares of Rs. 10/- each at a premium of Rs. 133 per share.

400 lacs

Investment in subsidiary company Ethos Limited

31.10.2015

28.08.2014

N.A.

5

06.02.16

209790 Equity Shares of Rs. 10/- each at a premium of Rs. 133 per share.

300 Lacs

Investment in subsidiary company Ethos Limited

06.02.2016

28.08.2014

N.A.

Details of Guarantee / Security Provided:

Sl

No

Date of providing security/ Guarantee

Details of recipient

Amount (in Rs.)

Purpose for which the security/ guarantee is proposed to be utilized by the recipient

Date of Board Resolution

Date of Special Resolution (if any)

Commission

1

31.10.15

IDBI Bank Limited

1.75

crores

Enhancement of Working Capital Facilities of the subsidiary Company Ethos Limited

31.10.2015

28.08.2014

Nil

2

31.10.15

Bank of Maharashtra

12.00

crores

Working Capital Facilities for subsidiary Company Ethos Limited

31.10.2015

28.08.2014

NIL

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act 2013 for the Financial Year 2015-16 in the prescribed Form AOC 2 has been enclosed with the report as Annexure 4.

TRANSFER TO RESERVES

The Board of Directors of the Company has decided to transfer Rs 20 million to its General Reserves.

DIVIDEND

During the Financial Year 2015-16, the Board of Directors have declared and paid Interim Dividend @ 15% , i.e. Rs. 1.50 per share to the shareholders whose names appeared on the register of members as on record date , i.e. 26th February 2016. In order to conserve the financial resources for the overall growth of the company, your directors have decided to confirm the interim dividend as final dividend for the year.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, the Unclaimed Dividend of Rs. 2,20,646 relating to the financial years 2007-08 was transferred to the Investor Education and Protection Fund established by the Central Government during the year.

MATERIAL CHANGES AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no Material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2016 to the date of signing of the Director''s Report.

There is no significant and material orders passed by any regulators or courts or tribunals against the company impacting the going concern status and company''s operations in future.

RISK MANAGEMENT POLICY

The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risks.

Some of the risks that the Company is exposed to are:

Risks of Specific Nature

Company as a part of normal business monitoring review and development plans, identifies the specific risks for each business segment and develops necessary action plan to minimize the impact of same on business performance. Based on the present operations and areas of interest for the company, following specific nature risks are identified:

- Risks due to decline in overall demand for watches and overdependence on watch segment;

- Risks pertaining to over dependence on few customers;

- Foreign Exchange Risks;

- Risk related to availability of Skilled manpower;

- Risks related to compliance and statutory requirements

Risk Strategy

Company recognizes that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and effective manner. The Company believes that the Risk cannot be eliminated but it can be better managed by

- Transferred to another party, who is willing to take risk, say by buying an insurance policy or entering into a forward contract in case of business involving use of Foreign exchange;

- Reduced, by adopting good internal controls;

- Avoided, by not entering into risky businesses;

- Retained, to either avoid the cost of trying to reduce risk or in anticipation of higher profits by taking on more risk, and;

- Shared, by following a middle path between retaining and transferring risk.

Risk Management Framework

Company adopts systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and compliance with the regulations. The Company believes that this would ensure mitigating steps proactively and help to achieve the risk management effectively.

The Company has constituted a Risk Management Committee of Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Marketing Officer and Business Heads as its regular members and other senior functional heads on invitation basis. The Committee is committed to review periodically the various risks associated with the Company and report the same to the Board.

Focus of the Company is on the three key elements, viz., Risk Assessment / Identification, Risk Management and Risk Monitoring.

- Potential Risks are identified and analyzed, considering likelihood and its impact, as a basis for determining how they should be managed.

- Risk Assessment consists of a detailed study of threats and vulnerability and resultant exposure to various risks. Based on the assessment and identification of the risks, the committee decided the proactive steps for managing and monitoring these risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company is committed to discharge its social responsibility as a good corporate citizen. The company has duly constituted CSR Committee which is responsible for fulfilling the CSR objectives of the Company. As on 31st March, 2016 the Committee comprised of 5 (five) Directors viz. Mr. R. K. Saboo as Chairman and Mr. Yashovardhan Saboo, Ms. Ranjana Agarwal, Mr. Jagesh Khaitan and Mr. Chandra Mohan as members.

As part of its social responsibility, the Company has constructed new borewell for the toilet blocks to ensure permanent supply of water at Derabassi, Punjab. The company has also contributed to Mutiple Sclerosis Society of India (MSSI), Mumbai and KDDL-Ethos foundation. These projects have been undertaken to carry services and in compliance to the provision of the Section 135 of the Companies Act, 2013 read with Schedule VII and rules made there under and in accordance with Company''s CSR Policy. The Report on CSR required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure -5 forming part of this report, and is also available on company''s website www.kddl.com.

MECHANISM FOR EVALUATION OF BOARD, COMMITTEES AND INDIVIDUAL DIRECTORS

Pursuant to the provisions of the Companies Act, 2013 and regulation 17(10) of SEBI (LODR) regulations, 2015, a structured procedure was adopted after taking into consideration the various aspects of the Board''s functioning, composition of the Board and its various Committees, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was completed in time. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expresses its satisfaction with the evaluation process.

DIRECTORS/KEY MANAGERIAL PERSONNEL

The term of appointment of Mr. Dinesh Agrawal as Chief Operating Officer of the company expired on 31st March 2016. Mr. Dinesh Agrawal has expressed his desire to resign as Director and his resignation was accepted by the Board w.e.f. 30th May, 2016. The Board of Directors record their appreciation for the commendable work done by Mr. Dinesh Agrawal during his tenure as Director of the company. Mr. Dinesh Agrawal has been one of the architects of company''s foundation in 1983 and its growth over last 33 years. During his tenure with company, he held various positions in different roles of the units and he handled difficult situations and challenging environments very efficiently. He was a perfect combination of technocrat with business acumen and skills. He strongly upheld the values and ethics of the company. Mr Agrawal with his in depth analysis, calm and positive approach, strong relationship management and clear vision was a pillar of strength for the organization.

In order to comply with the various provisions of relevant clauses of the Investment Agreement executed between the Company and SAIF India V FII Holdings Limited (a non-promoter), a Qualified Institutional Buyer (''Investor''), Mr. Vishal Satinder Sood , nominee of the said Investor was appointed as an Additional Director of the Company at the Board of Directors meeting held on 02-09-2015 in accordance with Clause 98-A of the Articles of Association of the Company, who holds office till ensuing Annual General meeting of the company. As per the said clause, 98-A, the director so appointed shall be reappointed on retirement by rotation.

Mr. Sanjeev Kumar Masown of the company was also appointed as whole time Director with functional designation of Chief Financial Officer by the Board of Directors on 30th May 2016.

Both of the Additional Directors hold office till conclusion of ensuing Annual General meeting and it is proposed and recommended to appoint Mr. Vishal Satinder Sood and Mr. Sanjeev Kumar Masown as Directors liable to retire by rotation.

As per provision of the Companies Act, 2013, Mr. R.K.Saboo retires by rotation as Director in ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his reappointment.

DEPOSITS

The following details of deposits, covered under Chapter V of the Companies Act, 2013 is given hereunder:

1. Deposits Accepted during the year : Rs. 55,056,000

2. Deposits outstanding at the end of the year : Rs. 113,698,000

3. Deposits remained unpaid or unclaimed as at the end of the year : NIL

4. Whether there has been any default in repayment of deposits or

payment of interest thereon during the year and if so, number : NIL

of such cases and the total amount involved

5. The details of deposits which are not in compliance with the : NIL

requirements of Chapter

STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS

A strong internal control culture is an important focus and thrust area in the company. The company has comprehensive internal systems, controls and policies for all the major processes to ensure the reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources.

The formalized systems of control facilitate effective compliance as per applicable laws. The company also has well documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs.

The Internal Auditors of the company continuously monitor the efficacy of internal controls/ compliance with SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organization''s risk management, control and governance processes.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit scope and guidelines, approved by the Audit Committee. Internal Auditors develop a risk based annual audit plan with inputs from major stake holders, and the major focus areas as per previous audit reports.

All significant audit observations are reviewed periodically and follow-up actions thereon are reported to the Audit Committee. The Audit Committee also meet the company''s Statutory Auditors and Internal Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the company.

The top and senior management of the company also assesses opportunities for improvement in business processes, systems and controls, provides recommendations, designed to add value to the organization and follows up on the implementation of corrective actions and improvements in business processes.

The senior management of the company meets periodically to assess the performance of the each business segment and key functions of the company and areas for improvement of performance / controls are identified and reviewed on continuous basis .

Report on adequacy of internal financial control is annexed with auditors report on financial statements.

CHANGES IN SHARE CAPITAL

During the Financial Year ended on 31st March, 2016, the paid up equity share capital of the Company has been increased from Rs. 9,07,64,700/- to Rs. 10,08,48,700/- pursuant to the issue and allotment of 1008400 equity shares at the price of Rs 297.50 per share (including a premium of Rs. 287.50 per share) by way of preferential allotment to SAIF India V Holdings Limited, a Category II Foreign Portfolio Investor, as authorized by the shareholders by way of Special Resolution passed at Annual General Meeting held on 24th August 2015.

Further, the Company has neither issued any shares with differential voting rights nor any Sweat equity shares.

DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS

Details as required in Rule 12(9) of Companies (Share Capital and Debenture Rules, 2014) and pursuant to clause 12 (Disclosure in the Directors Report) of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are enclosed as a Annexure-6

DECLARATION BY INDEPENDENT DIRECTORS

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and regulation 16(b) of SEBI(LODR) Regulations, 2015.

During the financial year under the review, Mr. Praveen Gupta was appointed as Independent Director by the share holder at the previous AGM.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure - 7 forming an integral part of this Report.

CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business of the Company during the year under review.

MANAGERIAL REMUNERATION

Disclosures pursuant to section 197(12) of the Companies Act, 2013 and Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed with this report as Annexure --8.

RECEIPT OF ANY COMMISSION BY MD / WTD FROM A COMPANY OR FOR RECEIPT OF COMMISSION / REMUNERATION FROM ITS HOLDING OR SUBSIDIARY

During the year under review, the Managing Director and Whole time Director neither received any Commission from the company nor any remuneration from the Subsidiary Companies of the company.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors of the Company has adopted Whistle Blower Policy which aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy of the Company is available at the link http://www.kddl.com/pdf/2015/KDDL_Whistle_Blower_Policy.pdf.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has been employing about 259 women employees, both permanent as well as contractual in various fields within the factory premises and offices. The Company has in place a policy in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. There was no complaint received from any employee during the financial year 2015-16 and hence no complaint is outstanding as on 31st March, 2016.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Scheduled V of SEBI(LODR) Regulations, 2015 is annexed to this report as Annexure - 9.

CORPORATE GOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in SEBI(LODR) Regulations, 2015 during the year ended on 31st March, 2016 as per Report on Corporate Governance annexed as Annexure -10 and a Certificate from the Auditors to this effect for the year ended on 31st March, 2016 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 34(2) of SEBI(LODR) Regulations, 2015, the Cash Flow Statement for the year ended on 31st March, 2016 forms an integral part of the Financial Statements.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to perform better.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company''s endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGMENTS

Your Directors take this opportunity to thank all the investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

For and on behalf of the Board of Directors

Date: 30-5-2016 (Anil Khanna) (Yashovardhan Saboo)

Place: Chandigarh Director Vice Chairman-cum-CEO

DIN-00012232 DIN-00012158


Mar 31, 2015

Dear Members,

The Directors have pleasure in presenting this 35th Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2015.

OPERATIONS AND PROSPECTS

Financial Results (Standalone and Consolidated)

The summary of operating results for the year 2014-15 and appropriation of divisible profits is given below:

Amount in Rs millions Standalone Particulars 2014-15 2013-14

Gross Operating Income 1310.4 1154.9

Profit before interest, depreciation and

exceptional item 260.0 214.4

Less: Finance Cost 80.5 81.9

Gross Profit 179.5 132.5

Less: Depreciation and amortisation 74.0 59.2

Profit before exceptional Items and tax 105.5 73.3

Less/(Add): Exceptional items 1.4 5.9

Profit Before tax 104.1 67.4

Less: Provision for Income Tax, Deferred Tax 39.0 25.0

Profit after tax but before minority Interest 65.1 42.4

Less: Minority interest - -

Net Profit / (Loss) for the Year 65.1 42.4

Add: Profit brought forward from previous year 81.0 56.6

Profit available for appropriation 146.0 99.0

Appropriated as under:

Adjustment in reserves pursuant to applicability of

schedule II of Companies Act, 2013 (refer note 13) 24.0 0.0

Deffered tax adjustments for fixed assets written off -8.3 0.0

Transfer to Minority reserve 0.0 0.0

Proposed Dividend 18.2 13.6

Corporate Dividend Tax 3.7 2.3

Transfer to General Reserve 30.0 2.1

Dividend on Cumulative Preference Sahres 0.0 0.0

Total Appropriation 67.6 18.0

Surplus carried forward to Balance Sheet 78.5 81.0



Particulars Consolidated 2014-15 2013-14

Gross Operating Income 4159.2 3386.1

Profit before interest, depreciation and 410.3 336.2 exceptional item

Less: Finance Cost 153.4 141.6

Gross Profit 256.9 194.6

Less: Depreciation and amortisation 118.0 80.2

Profit before exceptional Items and tax 138.9 114.4

Less/(Add): Exceptional items 0.0 5.6

Profit Before tax 138.9 108.8

Less: Provision for Income Tax, Deferred Tax 50.8 19.7

Profit after tax but before minority Interest 88.1 89.1

Less: Minority interest 1.3 3.8

Net Profit / (Loss) for the Year 868 853

Add: Profit brought forward from previous year -40.8 -92.7

Profit available for appropriation 46.0 -7.4 Appropriated as under:

Adjustment in reserves pursuant to applicability of

schedule II of Companies Act, 2013 (refer note 13) 27.1 0.0

Deffered tax adjustments for fixed assets written off -9.3 0.0

Transfer to Minority reserve 0.1 0.0

Proposed Dividend 18.2 13.6

Corporate Dividend Tax 3.7 2.3

Transfer to General Reserve 30.0 2.1

Dividend on Cumulative Preference Sahres 25.0 15.4

Total Appropriation 94.8 33.4

Surplus carried forward to Balance Sheet -48.8 -40.8



PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved consolidated sales revenue of Rs. 4159 million against Rs. 3386 million in the previous year, witnessing a growth of 23%. The profit before tax improved from Rs. 109 million to Rs. 139 million, representing a growth of 28%.

The sales revenue from manufacturing operations on standalone basis was Rs. 1310 Million against Rs. 1155 Million in the previous year, thereby registering an increase of 13%. The company earned net profit after tax of Rs. 65 million against Rs. 42 million in the previous year.

Manufacturing Business Segments

All major manufacturing units of the Company except Packaging business reported increase in turnover during the year. The major growth in percentage terms was from Precision Engineering business, which witnessed a growth of 27%, primarily from higher direct and indirect exports. The watch components manufacturing units also registered a growth of 12%, primarily driven by growth in revenue from domestic market, wherein the revenue increased by 21% compared to previous year and exports revenue increased by 9%. The higher turnover in all segments and increase in export markets, led to improved margins and higher profitability.

The requirement of watch components from domestic watch industry were better than the previous year, but it still continues to be low and irregular for ensuring optimum utilization of the capacities and resources.

Your Company's continuing efforts for improving the average price realization by manufacturing components with additional features and higher complexity are showing favorable results in financial terms and also better customer confidence. The strategic actions of management are in the right direction and yielding desired results.

The Company continues to focus on improving the productivity with dedicated steps for skill enhancement, better utilization of machines and optimizing business and manufacturing processes.

The Precision Engineering business of the Company is witnessing a healthy growth in revenue. Efforts for improving the reach to customers by show-casing our capabilities and competitiveness are bearing fruits. Your company has established its reputation as a quality supplier with the ability to meet sophisticated customer needs. The Company believes that this business segment will be a major source of growth in revenue and profitability in the coming years. The Company has engaged the services of external agencies in developing the strategic plan and proposing the alternatives for a high growth trajectory in various emerging opportunities.

Retail Business Segments:-

During the course of the year, the Company continued its topline growth. The company's billings grew from Rs. 247 crores in FY13-14 to Rs 316 crores in FY14-15, a growth of approximately 28%. The growth in billings has been achieved on the back of healthy like-to-like growth of billings at store level at 13%. A key part of this growth has been the Company's continued commitment to its online initiatives. In the year, the Company attracted online traffic of 3.7 million unique visitors, a growth of 83% from the previous year. Further, the on-line initiatives contributed to more than 24% of the overall sales achieved by the Company, compared to 16% in the previous year.

The luxury watch market in India continues to grow faster than the overall growth of the Swiss Watch exports which grew at about 2% only in the calendar year 2014. However, the Indian market did see a temporary low growth period during the first quarter of the year due to political and economic uncertainties; it rebounded in the subsequent quarters and is estimated to have grown by about 15% over the previous year.

The Packaging division continues to operate at stagnant revenues. Despite success in establishing our presence in new market segments like writing instruments, and obtaining orders from India and abroad , the volumes from these segments remain low. At this level of business the division has continued to incur losses. The Company is taking necessary proactive actions to contain losses and turn around this division.

The Company's Swiss subsidiary, Pylania SA in Switzerland restricted the manufacturing operations in 2013 and concentrated efforts on eliminating losses by cutting cost and tapping alternate revenue streams. The efforts of the Company yielded desired results and the profitability of the Company is much better as compared to previous year. We foresee that the watch component manufacturing business of Company will witness recovery with the implementation of the new "Swiss Origin" regulations that are under discussions in the Swiss parliament in process of being adopted in Swiss Law.

The operations of the Joint venture Company Satva Jewellery and Design Limited, the 50:50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland remained suspended during the year. The Company is in discussion with the JV partner for finding out the alternatives for restructuring / realigning the business of the Company.

LISTING OF SHARES

The Equity Shares of the Company are listed on the BSE Limited (formerly Bombay Stock Exchange Ltd.) and the Company has paid the Annual Listing Fees to BSE for the financial year 2014-15 as well as for 2015-16.

The Company has also applied for the Listing of its equity shares with the National Stock Exchange of India Limited (NSE) since it was complying with the requisite norms and its application is under consideration of the NSE.

DETAILS OF SUBSIDIARY, JOINT VENTURE OR ASSOCIATES

As per the provisions of Section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies/ Associate Companies/Joint Ventures is prepared in Form AOC-1 and the same is enclosed as Annexure-1 to this Report.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company's Management in accordance with the requirements of Accounting Standard 21 issued by The Institute of Chartered Accountants of India (ICAI) and as per the provisions of the Companies Act, 2013.

As per the provisions of Section 136 of the Companies Act, 2013, the Company has placed separate audited accounts of its subsidiaries on its website www.kddl.com and a copy of separate audited financial statements of its subsidiaries will be provided to the shareholders at their requests.

EXTRACTOFANNUALRETURN

The extract of Annual Return, in Form MGT -9 for the Financial Year 2014-15 has been enclosed with this report as Annexure 2.

NUMBER OF BOARD MEETINGS

The detail of number of meetings of the Board held during the financial year 2014-15 forms part of the Report on Corporate Governance in terms of Clause 49 of the Listing Agreement.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of section 134(5) the Board confirm and report that:—

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

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

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

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

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

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

NOMINATION & REMUNERATION COMMITTEE POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management Personnel of the Company. This policy also lays down criteria for selection and appointment of Board Members. The detail of this policy is explained in the Report on Corporate Governance prepared in accordance with Clause 49 of the Listing Agreement.

RE-APPOINTMENT OF INDEPENDENT AUDITOR

M/s Walker Chandiok & Co. LLP, Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and is eligible for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 139 of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of section 141 of the Companies Act, 2013.

The Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s P. S. Dua & Associates, a firm of Company Secretaries (C.P. No.3934) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report in prescribed format MR.-3 given by aforesaid Secretarial Auditors is annexed to this Board Report as Annexure 3 and forms an integral part.

The Secretarial Auditor has neither qualified the Secretarial Audit Report nor given any adverse remark for which explanation may be required to be given in the Director's Report.

PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186

Complete details of Loans, Guarantees and Securities, and Investments covered under Section 186 of the Companies Act, 2013 given during the year under review is provided below:

Details of Loans:

Date of Details Amount Purpose for Time making of (in Rs.) which the period loan Borrower loan is to be for utilized by which the it is recipient given 25.12. Dinesh 1200000/- Personal 12 2014 Agarwal Use months

Date of Date Date of Rate of Security making loan of Special Interest Board Resolution Resol (if required) ution

25.12.2014 06/08/2014 N.A 10.00% Nil

Details of Loans:

Date of Details Amount Purpose for which investment of (in Rs.) the proceeds Investment from investment is proposed to be utilized by the recipient

25.11.2014 14% CCCPS 2499900 For working Capital

Date of Board Date of Special Expected rate of Resolution Resolution return 08/11/2014 28.08.2014 14%

Details of Guarantee / Security Provided :

Date of Details Amount Purpose for which Providing of (in Rs.) the security/ security/ Recipient guarantee is guarantee proposed to be utilized by the recipient

21/10/2014 IDBI 5.00 Enhancement of Bank crores Working Capital Limited Facilities of the subsidiary Company Ethos Limited

04/08/2014 Bank 8.00 Working Capital of crores Facilities for Maharastra subsidiary Company Ethos Limited

08/11/2014 Bank 5.00 Bank Guarantee of Crores (Foreign) Limts India for Subsidiary Company - Pylania S.A

Date of Board Date of Special Commission Resolution Resolution

21.10.2014 28/08/2014 Nil

05.02.2014 06/08/2014 NIl

08.11.2014 06/08/2014 At Actual Cost to the Company

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act 2013 for the Financial Year 2014-15 in the prescribed Form AOC 2 has been enclosed with the report as Annexure 4.

AMOUNTS TRANSFERRED TO RESERVES

The Board of Directors of the Company has decided to transfer Rs 30.00 million to its General Reserves.

DIVIDEND

Your Directors have recommended a dividend of 20% i.e. Rs 2/- (Two) per share on equity shares of the Company for the financial year ended 31st March, 2015 (last year 15% i.e. Rs 1.50/- per equity share). The Dividend shall be paid after the approval of the shareholders at the ensuing Annual General Meeting.

The total outgo of the dividend to be paid to shareholders will be Rs 21.87 million (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, the Unclaimed Dividend of Rs. 2,20,746/relating to the financial years 2007-08 is due for remittance on 05.09.2015 to the Investor Education and Protection Fund established by the Central Government

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no Material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2015 to the date of signing of the Director's Report.

RISK MANAGEMENT POLICY

The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risks.

Some of the risks that the Company is exposed to are:

Risks of Specific Nature

Company as a part of normal business monitoring review and development plans, identifies the specific risks for each business segment and develops necessary action plan to minimise the impact of same on business performance. Based on the present operations and areas of interest for the company, following specific nature risks are identified:

- Risks due to decline in overall demand for watches and overdependence on watch segment;

- Risks pertaining to over dependence on few customers;

- Foreign Exchange Risks;

- Risk related to availability of Skilled manpower;

- Risks related to compliance and statutory requirements

Risk Strategy

Company recognizes that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and effective manner. The Company believes that the Risk cannot be eliminated but it can be better managed by

- Transferred to another party, who is willing to take risk, say by buying an insurance policy or entering into a forward contract in case of business involving use of Foreign exchange;

- Reduced, by adopting good internal controls;

- Avoided, by not entering into risky businesses;

- Retained, to either avoid the cost of trying to reduce risk or in anticipation of higher profits by taking on more risk, and;

- Shared, by following a middle path between retaining and transferring risk.

Risk Management Framework

Company adopts systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and compliance with the regulations. The Company believes that this would ensure mitigating steps proactively and help to achieve the risk management effectively.

The Company has constituted a Risk Management Committee of Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Marketing Officer and Business Heads as its regular members and other senior functional heads on invitation basis. The Committee is committed to review periodically the various risks associated with the Company and report the same to the Board.

Focus of the Company is on the three key elements, viz., Risk Assessment / Identification, Risk Management and Risk Monitoring.

- Potential Risks are identified and analyzed, considering likelihood and its impact, as a basis for determining how they should be managed.

- Risk Assessment consists of a detailed study of threats and vulnerability and resultant exposure to various risks. Based on the assessment and identification of the risks, the committee decided the proactive steps for managing and monitoring these risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company is committed to discharge its social responsibility as a good Corporate Citizen. As part of its social responsibility, the Company has constructed Toilet Blocks for boys and girls with the facility of Tube well to ensure a permanent supply of water, and has taken initiatives to promote education, in the rural areas of the Country. These projects have been undertaken in compliance to the provision of the Section 135 of the Companies Act, 2013 read with Schedule VII and rules made there under and in accordance with Company's CSR Policy. The Report on CSR required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure -5 forming part of this report.

MECHANISM FOR EVALUATION OF BOARD

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured procedure was adopted after taking into consideration the various aspects of the Board's functioning, composition of the Board and its various Committees, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Independent Directors was completed well in time. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expresses their satisfaction with the evaluation process.

DIRECTORS

The tenure of the appointment of Mr. Rajendra Kumar Saboo, Chairman and Mr. Yashovardhan Saboo as Managing Director of the Company ended on 30th November, 2013 and 31st March, 2014 respectively. The shareholders have re- appointed them for a further period of 3 (three) years w. e. f. 1st December, 2013 and Ist April, 2014 respectively at the 34th Annual General Meeting of the Company held on 06th August, 2014.

To broad base and strengthen the Board processes, Mr. Praveen Gupta has been appointed as an Additional Director on the Board of Company at the Board Meeting held on 8th November, 2014. In terms of section 161 of the Companies Act, 2013 Mr. Praveen Gupta holds office only up to the date ensuing Annual General Meeting. The Company has received requisite Notice in writing from a member proposing his name for the office of Director. As he complies with the provisions of section 149(6) and is a professionally qualified person, so he is being recommended for appointment as Independent Director by the Board for a period of five years as mentioned in the Notice of the forthcoming Annual General Meeting.

Pursuant to clause 49 of the Listing Agreement, detail of director retiring and being appointed is given as a part of the Notice of the ensuing Annual General Meeting.

Dr. T. N. Kapoor, a Director of the Company, retire by rotation at the ensuing Annual General Meeting of the Company. Dr. Kapoor has expressed his unwillingness for re-appointment as a director liable to retire by rotation.

Mr. Mannil Venugopalan had resigned from the Company effective from close of office hours on 30.04.2015 due to his re-

location to his home town in Kerala and his resignation was accepted by the Board at their meeting held on 28.05.2015.

The Board of Directors records their appreciation of the good work done by Dr. T N. Kapoor and Mr. Mannil Venugopalan and acknowledges their contribution to the growth and prosperity of the Company during their tenure as professional Directors.

Mr. Sanjeev Kumar Masown has been designated as Chief Financial Officer of the Company on 27th May, 2014 pursuant to provisions of Section 203 of the Companies Act, 2013.

DEPOSITS

The following details of deposits, covered under Chapter V of the Companies Act, 2013 is given hereunder:

1. Deposits Accepted during the year : Rs 3,56,86,000/-

2. Deposits remained unpaid or unclaimed as at the end of the year ; Rs 5,04,000/-

3. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if

so, number of such cases and the total amount involved ; NIL

4. The details of deposits which are not in compliance with the ; NIL

requirements of Chapter

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

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

STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS

A strong internal control culture is an important focus and thrust area in the company. The company has comprehensive internal systems, controls and policies for all the major processes to ensure the reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources.

The formalized systems of control facilitate effective compliance as per Clause 49 of the Listing Agreement. The company also has well documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs.

The Internal Auditors of the company continuously monitors the efficacy of internal controls/ compliance with SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organization's risk management, control and governance processes. The scope and authority of the Internal Audit activity are well defined in the Internal Audit scope and guidelines, approved by the Audit Committee. Internal Auditors develops a risk based annual audit plan with inputs from major stake holders, and the major focus areas as per previous audit reports.

All significant audit observations are reviewed periodically and follow-up actions thereon are reported to the Audit Committee. The Audit Committee also meet the company's Statutory Auditors and Internal Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the company.

The top and senior management of the company also assesses opportunities for improvement in business processes, systems and controls, provides recommendations, designed to add value to the organization and follows up on the implementation of corrective actions and improvements in business processes.

The senior management of the company meets periodically to assess the performance of the each business segment and key functions of the company and areas for improvement of performance / controls are identified and reviewed on continuous basis.

CHANGES IN SHARE CAPITAL, IF ANY

During the Financial Year ended on 31st March, 2015, the paid up equity share capital of the Company has been increased from Rs. 9,03,67,200/- to Rs. 9,07,64,700/- pursuant to the allotment of 39,750 equity shares of Rs 120/- (including a premium of Rs. 110/- per share) by exercise of the vested options by eligible employees under KDDL Employee Stock Option Scheme,2011 of the Company.

The Shareholders at the Extra Ordinary General Meeting of the Company held on 16th April, 2015, have approved the further issue of Equity Shares up to Rs 30 (Thirty Crores) through Qualified Institutional Placement(QIP) in terms of Chapter VIII of SEBI (Issue of Capital and Disclosures Requirement) Regulations, 2009 as amended up to date and the 'In-Principle Approval' for the listing of aforesaid QIP issue has been obtained from BSE Limited vide its letter no.DCS/IPO/NP/24(a)/75/2015-16 dated 20th April,2015.The aforesaid issue is valid for 12 months and the same is under active consideration of the Board.

Further, the Company has neither issued any shares with differential voting rights nor any Sweat equity shares. DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS

Details as required in Rule 12(9) of Companies (Share Capital and Debenture Rules, 2014) and pursuant to clause 12 (Disclosure in the Directors Report) of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are enclosed as a Annexure-6

DECLARATION BY INDEPENDENT DIRECTOR

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure - 7 forming an integral part of this Report.

CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business of the Company MANAGERIAL REMUNERATION

Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed with this report as Annexure -8.

RECEIPT OF ANY COMMISSION BY MD / WTD FROM A COMPANY OR FOR RECEIPT OF COMMISSION / REMUNERATION FROM ITS HOLDING OR SUBSIDIARY

During the year under review, the Managing Director and Whole time Director neither received any Commission nor any remuneration from the Company or its Subsidiary Companies.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors of the Company has adopted Whistle Blower Policy effective from 02nd February, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has been employing about 134 women employees in various fields within the factory premises and offices. The Company has in place an Anti Harassment policy in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. There was no complaint received from any employee during the financial year 2014-15 and hence no complaint is outstanding as on 31st March, 2015.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report as Annexure - 9.

CORPORATE GOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with BSE Limited during the year ended on 31st March, 2015 as per Report on Corporate Governance annexed as Annexure -10 and a Certificate from the Auditors to this effect for the year ended on 31st March, 2015 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 32 of the Listing Agreement, the Cash Flow Statement for the year ended on 31st March, 2015 forms an integral part of the Financial Statements.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to perform better.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company's endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank all the investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

For and on behalf of the Board of Directors

( R.K.Saboo) Chairman

Date :- 28.05.2015 Place :- Chandigarh


Mar 31, 2014

THE MEMBERS

The Directors have pleasure in presenting this 34th Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2014.

OPERATIONS AND PROSPECTS

Financial Results

The summary of operating results for the year 2013-14 and appropriation of divisible profits is given below:

(Figures in Millions of Rupees)

Particulars 2013-14 2012-13

Gross Operating Income 1154.88 992.77

Profit before interest and depreciation 208.50 124.45

Less : Interest 81.88 71.04

Depreciation 59.26 141.14 56.83 127.87

Profit/(Loss) before tax 67.36 (3.42)

Provision for Income Tax, Deferred tax 24.97 0.15

Profit/(Loss) after tax 42.39 (3.57)

Profit/(Loss) brought forward from 56.57 76.71 previous year

Net Profit/(Loss) 98.96 73.14

Appropriated as under :

Proposed Dividend 13.56 9.04

Corporate Dividend tax 2.30 1.46

Transfer to General Reserve 2.12 0.00

Adjustment pursuant to merger 0.00 6.07

Surplus carried to Balance Sheet 80.98 56.57

PERFORMANCE AND PROJECTIONS

During the year under review, the company achieved sales revenue of Rs. 1155 Million against Rs. 993 million in the previous year, thereby registering an increase of 16%. The company earned net profit after tax of Rs. 42 million against a net loss after tax of Rs. 3.6 million in the previous year.

WATCH COMPONENTS

The increase in turnover during the year was primarily from the watch segment business in the export markets, which led to improved margins and higher profitability. The financial year commenced with depressed market conditions due to continuing lethargy in European and inventory accumulation in Asian region. However conditions improved in the second half of the year.

The domestic watch industry continued to operate at sub- optimal levels and the inflow of watch dials orders from domestic market further declined during the year. In order to optimise our production facilities through consolidation, the management closed two units for manufacturing and assembly of watch dials at Parwanoo and Barwala.

The major focus of the Company continues to be increased average realization from international customers by manufacturing products with more sophisticated specifications and higher quality standards. The outlook for the watch components segment in the coming years is positive and we expect that the premium and luxury segment will continue to witness healthy growth.

ETHOS

The watch retail and distribution business of the group, being managed through our subsidiary company Ethos Limited continues to show strong growth and improved performance. The turnover of the Ethos Limited improved from Rs 1.72 billion (billing of Rs1.94 billion) to Rs 2.20 billion (billing of Rs2.47 billion) registering a growth of 27%.

The ETHOS chain comprises of 45 active stores at some of the best retail destinations in the country, spread across 14 cities. Eight new stores were opened during the year, while 5 non-performing stores were also closed down. World famous brands like IWC and Panerai were introduced and an innovative retail agreement finalized with FOSSIL Group to jointly open stores under the name and style of WSI by ETHOS.

The Company continues to focus on increasing the turnover and profitability by enhancing presence in the growing market and also using its leadership in the internet marketing space. The company is poised for substantial growth in turnover and also improvement in financial parameters in the coming years.

OTHER BUSINESS

The precision stamping division, Eigen Engineering, achieved marginally better business than the last year, growing by 4%. During the year, the Company''s focus was on realigning the business towards profitable segments. The Company has also increased efforts for exports to specific high growth sectors. We believe that the precision engineering segment will witness healthy growth in the coming period.

The Packaging division continues to operate at stagnant revenue, while still not being profitable. Company will be taking necessary proactive steps and actions to contain losses.

The Company''s Swiss subsidiary, Pylania SA in Switzerland restricted the manufacturing operations due to low order position and concentrated on eliminating losses by cutting cost and tapping alternate revenue streams. We foresee that the manufacturing business of Company will witness a strong recovery with the implementation of the new "Swiss Origin" regulations that are now in the process of being adopted in Swiss Law.

The operations of the Joint venture Company Satva Jewellery and Design Limited, the 50:50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland remained suspended during the year due to no orders. The Company is in discussion with the JV partner for finding out the alternatives for restructuring / realigning the business of the Company.

During the year, the Company deferred further investment into the e-commerce website platform. However, the Company provided this platform to its subsidiary, Ethos Limited, to generate the necessary traffic, viewership and interest in the business. The Company plans to again take up the e-commerce business in due course of time.

DIVIDEND

Your Directors have recommended a dividend of 15% i.e. Rs 1.50 per share on equity shares of the Company for the

financial year ended 31st March, 2014 (last year 10% i.e. Rs 1.00 per equity share). The Dividend shall be paid after the approval of the shareholders at the ensuing Annual General Meeting.

The total outgo of the dividend to be paid to shareholders will be Rs 15.86 million (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company.

DIRECTORS

The tenure of the appointment of Mr. Rajendra Kumar Saboo, Chairman and Mr. Yashovardhan Saboo as Vice Chairman and Chief Executive Officer of the Company ended on 30th November, 2013 and 31st March, 2014 respectively. The Board has re-appointed them for a further period of 3 (three) years w.e.f. 1st December, 2013 and Ist April,2014 respectively subject to approval of shareholders in the General Meeting and subject to such other approvals of financial institutions or other statutory authorities, as may be necessary.

Mrs. Ranjana Agarwal, a Chartered Accountant by profession, was appointed as an Additional Director of the Company w.e.f.09.09.2013. In terms of section 161 of the Companies Act, 2013 Mrs. Ranjana Agarwal holds office only up to the date of ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing her name for the office of Director. As she complies with the provisions of section 149(6) and is a professionally qualified person, so she is being appointed as Independent Director as recommended by the Board.

The Company had pursuant to the provisions of clause 49 of the Listing agreement and Companies Act,2013 appointed Mr. Mannil Venugopalan, Mr. Anil Khanna, Mr. Jagesh Khaitan and Mr. Chandra Mohan as Independent Directors of the Company.

In accordance with the provisions of section 149 of the Act, these directors are being appointed as Independent Directors to hold office as per their tenure of appointment mentioned in the Notice of the forthcoming Annual General Meeting of the Company.

Pursuant to clause 49 of the Listing Agreement, details of all directors being appointed as Independent Directors is being provided in separate annexure.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standard AS-21 prescribed by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company are annexed to this Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 31st March, 2014, the applicable accounting standards have been followed and that there has been no material departures;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2014 on a ''going concern'' basis.

LISTING OF SHARES

The Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (BSE) and the Company has paid the Annual Listing Fees to BSE for the financial year 2013-14.

The Company has also applied for the Listing of its equity shares with the National Stock Exchange of India Limited (NSE) since it was complying with the requisite norms and its application is under consideration of the NSE.

SUBSIDIARY COMPANIES

A statement pursuant to section 129(3) of the Companies Act, 2013, containing the salient features of the financial performance of our subsidiary Companies is attached to the Accounts. The audited financial statements and related information of subsidiaries are available on our Website: www.kddl.com. Moreover,the Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

Details of major subsidiaries of the Company are covered in the Management Discussion and Analysis Report forming part of the Annual Report as Annexure C.

FIXED DEPOSITS

Fixed Deposits from the public, shareholders and employees as on 31st March, 2014 stood at Rs. 117.41 million. There were no overdue deposits as on 31st March, 2014. All the provisions of Sections 58A and 58AA of the Companies Act, 1956 had been complied with.

The above deposits have been accepted as per provisions of the Companies Act, 1956 after complying with the requirements stated therein. However as per provisions of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014, all the deposits accepted pursuant to provisions of the Companies Act, 1956 and the rules made there under are required to be mandatorily repaid within one year from the date of commencement of the New Act i.e. 1st April, 2014 or from the date on which such payments are due whichever is earlier or as per extended date by the NCLT. Henceforth, the fixed deposits will be accepted either from the members'' u/s 73 or from public under section 76 after complying with the conditions mentioned in the sections respectively. We are taking necessary steps to comply with the new provisions as mentioned above.

APPOINTMENT OF COST AUDITORS

Pursuant to the Cost Audit Order No.F.No.52/26/CAB- 2010 dated 06.11.2012 and on the recommendations of the Audit Committee, the Board of Directors of your Company have appointed M/s Khushwinder Kumar & Associates, Cost Accountants, Ludhiana, as the Cost Auditor to carry on the Cost Audit of the Company for the year 2013-14. Cost Audit Report of the Financial year 2012-13 was filed on 06.09.2013 (Due date- 30.09.2013).The above firm has also been appointed as Cost Auditors of the Company for the Financial year 2014- 15 as well.

AUDITORS

M/s Walker Chandiok & Co.LLP, (Formerly known as Walker, Chandiok & Co.) Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re- appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 139(1) of the Companies Act, 2013 and that they are not disqualified for such appointment within the meaning of section 141 of the Companies Act, 2013.

The Notes on Accounts referred to in the Auditors'' Report are self-explanatory and therefore do not call for any further comments.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the relevant amounts which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

CORPORATE SOCIAL RESPONSIBILITY

As the provision of Section 135 of the Companies Act, 2013 relating to Corporate Social Responsibility (CSR) are applicable to your Company, so in order to comply with the provisions, your directors have constituted a Corporate Social Responsibility Committee headed by Shri Rajendra Kumar Saboo, Chairman of the Company. The said committee has been entrusted with the responsibility of forming a CSR Policy and recommending to the Board for CSR programmes and activities to be undertaken and monitored by the Committee.

PARTICULARS OF EMPLOYEES

None of the employee has received salary of Rs 60.00 lacs per annum or Rs 5.00 lacs per month or more during the financial year 2013-14. Accordingly, no particulars of employees are to be given pursuant to the provisions of section 217(2A) of the Companies Act, 1956.

EMPLOYEE STOCK OPTION PLAN

The information relating to the "KDDL Employee Stock Option Plan - 2011" required to be disclosed in terms of the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is enclosed as per Annexure - A to this report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure - B forming an integral part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report as Annexure - C.

CORPORATE GOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Bombay Stock Exchange Limited during the year ended on 31st March, 2014 as per Report on Corporate Governance annexed as Annexure - D and a Certificate from the Auditors to this effect for the year ended on 31st March, 2014 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 32 of the Listing Agreement, the Cash Flow Statement for the year ended on 31st March, 2014 is annexed in the financial statements.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co- operation, have enabled the Company to withstand the impact of slowdown.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company''s endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

for and on behalf of the Board

Date : 27.05.2014 Yashovardhan Saboo Anil Khanna

Place : Chandigarh Vice-Chairman and CEO Director


Mar 31, 2013

TO THE MEMBERS

The Directors have pleasure in presenting this 33rd Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2013.

OPERATIONS AND PROSPECTS

Financial Results

The summary of operating results for the year 2012-13 and appropriation of divisible profits is given below:

(Figures in Millions of Rupees)

Particulars 2012-13 2011-12

Gross Operating Income 992.77 1041.52

Profit before interest and 124.45 228.73 depreciation

Less: Interest 71.04 50.75

Depreciation 56.83 127.87

Profit/(Loss) before tax (3.42) 134.51

Provision for Income Tax, 0.15 46.42

Deferred tax

Profit/(Loss) after tax (3.57) 88.09

Profit/(Loss) brought forward 76.71 33.58 from previous year

Net Profit/(Loss) 73.14 121.67

Appropriated as under:

Proposed Dividend 9.04 27.11

Corporate Dividend Tax 1.46 4.40

Transfer to General Reserve 0.00 12.20

Dividend and Dividend Tax for prior year 0.00 1.25

Adjustment pursuant to merger 6.07 0.00

Surplus carried to Balance Sheet 56.57 76.71

PERFORMANCE AND PROJECTIONS

During the year under review, the company achieved sales revenue of Rs. 993 Million against Rs. 1042 million in the previous year, thereby registering a decline of 5%. The company earned net loss after tax of Rs. 3.6 million against a net profit of Rs. 88 million in the previous year. The decline in turnover and profitability was due to the deep and persistent slow- down and recession in exports market, which is a strategic and key focus area for the company. The year commenced with the healthy trend in the market, however, quarter by quarter, the market position witnesses the impact of inventory accumulations in Asia region, which is a major consumption centre for the Swiss watches. The economic turmoil in European region, another vital market for luxury watches, had also impact on the industry. The profitability of the company was also affected by the one time impact of the manpower rationalization in the dials manufacturing units and impact of the merger of Himachal Fine Blank Limited during the year.

The turnover decline was witnessed in all the watch component business segments; however, the decline in watch dials was more significant as compared to watch hands. During the current year, the major international brands in the watch segment deferred their new product developments and the decline in the international market was more in the low and medium priced watches whereas the premium and high priced watches continued to witness growth. This trend was visible in both the domestic and export markets. This year the impact of the recession was more severe compared to the previous recession as the order position from domestic major players was also on decline, a trend different from the previous period.

Company has taken the necessary corrective steps in the watch components segment for cost reduction, restructuring and capacity consolidation. The Company is also focussing on some new customer segments and for further improving manufacturing excellence.

The outlook for the watch components segment has turned positive as the inevitable corrections in global inventory levels have started correcting. The company has started getting enquiries and orders for the new product developments across product categories including high profit segments. The company''s efforts of tie-ups with the new customers and market segments is also moving with requisite pace. We are confident that this will help in further improving the turnover and performance of the company.

Another positive development in the Swiss exports market is that the Swiss parliament has deferred the passage and implementation of the "Swiss Origin" law, which will lead to continued imports of watch components from the low cost manufacturing countries like India and China. The efforts of the company during last few years to upgrade the capabilities for moving up the value chain by offering high featured more complex components will also yield the results in the coming quarters and company remains confident of improved performance and recovery at a fast and healthy pace.

In the precision stamping division, Eigen engineering, business turnover was better than the last year by registering a growth of 36% in sales. The company is now moving to enhance the profitability of the business and also working on increasing exports which has proven to be more beneficial.

The business of Packaging division was also significantly impacted by the decline in order position from the watch segment in domestic market. During the year the sales turnover of this division declined by 14%. In order to overcome the impact of high dependence on the watch segment for the business, the company accelerated its efforts for broad basing the market segments and utilized the resources for enhancing the market in export markets and the jewellery and accessories segments. The result of these efforts is encouraging and the company was in a position to increase the exports by more than 300%. The company has reduced the dependence on the watch segment and is confident that in the coming periods the business will witness healthy growth and return.

The Company''s Swiss subsidiary, Pylania SA in Switzerland was also impacted by the recession in the watch industry and its turnover declined by 22% over the previous year. The reduced turnover led to higher operational losses of CHF 0.69 million during the year. The company took the necessary steps for major reduction in the costs and operational expenses and has made alternate plans for healthy recovery and sustainable development in the Swiss markets for other watch products. Company facilities will be also utilized for alternate uses and the company is in the process of discussions with other watch players for further enhancing the business.

The operations of the Joint venture Company Satva Jewellery and Design Limited, the 50:50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland remained suspended during the year due to no orders. The company recorded a loss of Rs. 2.67 million during the year. The Company increased its paid-up capital by Rs. 5.21 million during the year and is in discussion with the JV partner for finding out the alternatives for restructuring / realigning the business of the company.

The watch retail and distribution business of the group, being managed through our subsidiary company Ethos Limited showed improved performance. The turnover of the Ethos Limited improved from Rs. 1246 million (billing of Rs. 1401 million) to Rs.1724 million (billing of Rs. 1944 million) registering a growth of nearly 39%.

The company continues to focus on increasing the turnover and profitability by enhancing the presence in the growing market and introducing new brands and improved performance. The company is poised for substantial growth in turnover and also improvement in financial parameters in the coming years.

During the year, the company initiated the efforts for setting up the e-commerce platform and systematic introduction and placement of the desired systems and processes. The project for e-commerce setup is moving in the right direction and the company will enhance the efforts and venture into full fledged e- commerce venture for one or more lifestyle brands.

CHANGES IN CAPITAL STRUCTURE

During the year under review, pursuant to the order of the High Court of Himachal Pradesh at Shimla for the amalgamation of Himachal Fine Blank Limited with the

Company, the un-issued Authorised Share Capital of Himachal Fine Blank Limited i.e. Rs. 48,00,000/- (Rupees Forty eight lacs only) has been merged with the Authorised Share Capital of the Company. Therefore, the Authorised Share Capital of the Company has increased from Rs. 12,00,00,000/- (Rupees Twelve crores only) consisting of 1,20,00,000 Equity Shares of Rs. 10 each to Rs. 12,48,00,000/- (Rupees Twelve crores and forty eight lacs only) consisting of 1,24,80,000 Equity Shares of Rs. 10 each. There has been no change in the Issued and Subscribed share capital of the Company.

DIVIDEND

Your Directors have recommended a dividend of 10% i.e. Rs. 1/-per share on equity shares of the Company for the financial year ended 31st March, 2013. The Dividend shall be paid after the approval of the shareholders at the ensuing Annual General Meeting.

The total outgo of the dividend to be paid to shareholders will be Rs 10.50 million (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company.

DIRECTORS

The tenure of the appointment of Mr. Dinesh Agrawal, Chief Operating Officer of the Company, ended on 31st March, 2013 and the Board has re-appointed him for a further period of 3 (three) years w.e.f. 1st April, 2013, subject to approval of shareholders in the General Meeting and subject to such other approvals of the Central Government, financial institutions or other statutory authorities, as maybe necessary.

Mr. Jagesh Khaitan and Mr. Anil Khanna, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standard AS-21 prescribed by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company are annexed to this Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors'' Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 31st March, 2013, the applicable accounting standards have been followed and that there has been no material departures;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2013 on a ''going concern'' basis.

LISTING OF SHARES

The Equity Shares of the Company are listed on the Bombay Stock Exchange Limited (BSE) and the Company has paid the Annual Listing Fees to BSE for the financial year 2012-13.

The Company has also applied for the Listing of its equity shares with the National Stock Exchange of India Limited (NSE) since it was complying with the requisite norms and its application is under consideration of the NSE.

SUBSIDIARIES

In accordance with the general circular no. 02/2011 dated February 8th, 2011, issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet and Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance sheet of the Company. A statement pursuant to section 212 of the Companies Act, 1956, relating to subsidiary companies is attached to the Accounts. The Company will make available the Annual Accounts of the subsidiary Companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

Details of major subsidiaries of the Company are covered in the Management Discussion and Analysis Report forming part of the Annual Report as AnnexureC.

AMALGAMATION OF HIMACHAL FINE BLANK LIMITED, SUBSIDIARY COMPANY WITH THE COMPANY

The Company had proposed a Scheme of Arrangement for the amalgamation of Himachal Fine Blank Limited, a wholly owned subsidiary company with the Company. The said scheme of arrangement was approved by the Hon''ble High Court of Himachal Pradesh at Shimla vide its Order dated 3rd January, 2013. The Appointed Date for the purpose of the Scheme of Arrangement was 1st April, 2011 and the Effective Date of the Scheme was 8th January, 2013.

Accordingly, Himachal Fine Blank Limited stands amalgamated with the Company as on date.

EMPLOYEE STOCK OPTION PLAN

The information relating to the "KDDL Employee Stock Option Plan -2011" required to be disclosed in terms of the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is enclosed as perAnnexure -Ato this report.

FIXED DEPOSITS

All the provisions of Sections 58A and 58AA of the Companies Act, 1956 have been complied with. Fixed Deposits from the public, shareholders and employees as on 31st March, 2013 stood at Rs. 107.77 million. There were unclaimed deposits amounting to Rs. 4.67 million pertaining to 38 depositors as on 31st March, 2013 and out of the above, 10 depositors having deposits aggregating to Rs. 1.64 million have subsequently claimed refund or renewed their deposits. If the unclaimed deposits are not claimed/renewed in future, it shall be deposited in. the Investor Education and Protection Fund in due course, as per the provisions of the Companies Act, 1956.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report as Annexure - C.

CORPORATE GOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Bombay Stock Exchange Limited during the year ended on 31st March, 2013 as per Report on Corporate Governance annexed as Annexure - D and a Certificate from the Auditors to this effect for the year ended on 31st March, 2013 is also enclosed with this report.

APPOINTMENT OF COST AUDITORS

Pursuant to the Cost Audit Order No.F.No.52/26/CAB- 2010 dated 06.11.2012 and on the recommendations of the Audit Committee, the Board of Directors of your Company have appointed M/s Khushwinder Kumar & Associates, Cost Accountants, Ludhiana, as the Cost Auditor to carry on the Cost Audit of the Packaging Division and Precision Stamping Unit of the Company for the year 2012-13.The due date for filing Cost Audit report for the year FY 12-13 is 27.09.2013 and this will be filed within due date. Cost Audit Report of the Financial year 2011-12 was filed on 16.01.2013 (Due date-28.02.2013)

AUDITORS

M/s Walker, Chandiok & Co., Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for such appointment within the meaning of section 226 of the Companies Act, 1956.

The Notes on Accounts referred to in the Auditors'' Report are self-explanatory and therefore do not call for any further comments.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205 C of the Companies Act, 1956, the relevant amounts which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

PARTICULARS OF EMPLOYEES

None of the employee has received salary of Rs. 60.00 lacs per annum or Rs. 5.00 lacs per month or more during the financial year 2012-13. Accordingly, no particulars of employees are to be given pursuant to the provisions of section 217(2A) of the Companies Act, 1956.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure - B forming an integral part of this Report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 32 of the Listing Agreement, the Cash Flow Statement for the year ended on 31 st March, 2013 is annexed hereto.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to withstand the impact of slowdown.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company''s endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

For and on behalf of the Board

Date: 29.05.2013 R.K. SABOO

Place : Chandigarh Chairman


Mar 31, 2012

The Directors have pleasure in presenting this 32nd Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2012.

OPERATIONS AND PROSPECTS

Financial Results

The summary of operating results for the year 2011-12 and appropriation of divisible profits is given below:

(Figures in Millions of Rupees)

Particulars 2011-12 2010-11

Gross Operating Income 1041.52 823.90

Profit before interest and 228.73 170.87 depreciation

Less : Interest 50.75 45.80

Depreciation 43.47 94.22 39.79 85.59

Profit before tax 134.51 85.28

Provision for Income Tax, 46.42 22.44

Deferred tax

Profit after tax 88.09 62.84

Profit/(Loss) brought forward 33.58 2.96 from previous year

Net Profit/(Loss) 121.67 65.80

Appropriated as under :

Proposed Dividend 27.11 22.25

Corporate Dividend Tax 4.40 3.69

Transfer to General Reserve 12.20 6.28

Surplus carried to Balance Sheet 76.71 33.58

Dividend for prior year 1.07

Tax on prior year dividend 0.18

PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved sales of Rs. 1042 Million against Rs. 824 Million in the previous year, thereby registering an increase of 26%. The Company earned a net profit of Rs.88 million against a net profit of Rs. 63 million in the previous year. The better performance was due to significant growth in the exports market, which is a key strategic focus area of company. The higher exports were enabled by the continuous and intensive efforts of the company to develop and service major global players. The higher revenues coupled with cost control measures initiated by the management, has helped the company in reporting higher profits during the year.

All the watch component manufacturing units reported improved revenues and profitability during the current year. The watch hands business continues its journey of significant increase in export sales owing to opening of several new client accounts and increased off-takes from existing customers. Company also set up a new facility at Bangalore for supply of high quality premium hands to Swiss customers. The company continued its journey of improving its market share by adding new feature hands in its basket of products and variants. Indexes/ appliqués are important and integral parts of the dials manufacturing. Company has set-up the index / appliqués manufacturing facility within the dials units for reducing dependence on outside sources. The dials manufacturing units capability is also being improved to cater to the higher segment of customers in overseas Swiss market.

The Precision Stamping Division, Eigen Engineering, has performed better than the last year by registering a growth of 25% in sales. This division is working on adding new customers and improving internal efficiencies to profit better from the growing demand for its products in the electrical, automobile, telecommunications, medical and aerospace industries.

The Company's Swiss subsidiary, Pylania, SA in Switzerland also improved its performance during the year and recorded a growth of 6% in its top line, with reduced operational losses. The prospects in the coming years are expected to be good as the company establishes its name for high quality and the "Swiss Made" label. The Company is getting encouraging enquiries from the reputed and premium segment customers in the Swiss market.

The operations of the Satva Jewellery and Design Ltd., the 50:50 Joint Venture of the Company with Pascal Vincent Vaucher, SA of Switzerland, remained suspended during the year due to no orders. This company reported a loss of Rs. 6.6 Million during the year. Company is in discussion with the JV partner for restructuring/re-aligning the business of the company.

The watch retail and distribution business of the group, being managed through our subsidiary company Ethos Limited (Formerly Kamla Retail Limited) also showed improved performance. The turnover of the Ethos Limited improved from Rs. 889 million (billing Rs 1003 million) to Rs 1246 million (billing Rs. 1401 million) registering a growth of 41%, of this nearly 29% came from "Same store" growth which is a vital indicator in retail pointing to market growth combined with operational excellence. The Company continues to focus on increasing the turnover by enhancing the presence in the growing market and introducing new brands and improved performance. The focus of retail business during the initial years is primarily on increasing market share and turnover. However, the company is getting reasonable EBIDTA earnings, considering the size and experience of the business segment. The Company is poised for substantial growth in turnover and also improvement in the financial performance in the coming years.

SETTING UP OF E-COMMERCE DIVISION

Due to the growing potential in the E-Commerce retail business and for exploring possible areas of business in the field of E-Commerce, the Company has established a new division based in Gurgaon, Haryana.

CHANGES IN CAPITAL STRUCTURE

The Company has allotted Equity Shares (on pari passu basis) pursuant to Conversion of equivalent number of Zero Coupon Convertible Warrants, as summarized below:-

Date of allotment No. of equity shares allotted on conversion of warrants

September 15, 2011 3,60,400

February 7, 2012 2,65,050

March 28, 2012 4,40,000

April 30, 2012 2,00,100

Total 12,65,550

The Company has filed listing applications with the Bombay Stock Exchange Limited (BSE) for the above said allotments upon conversion of warrants issued on preferential basis to promoters and others. The requisite approvals from BSE were obtained and the shares were credited to the respective depository accounts of the allottees.

DIVIDEND

Your Directors have recommended a dividend of 30% i.e. Rs 3/-(Three) per share on equity shares (last year 30% i.e. Rs 3/- per equity share) of the Company for the financial year ended March 31, 2012.The Dividend shall be paid after the approval of shareholders at the ensuing Annual General Meeting.

The total outgo of the dividend to be paid to shareholders will be Rs. 31.51 million (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company.

TRANSFER TO RESERVE

The Company proposes to transfer Rs. 12.20 million to the General Reserve out of the amount available for appropriation and an amount of Rs 76.71 million is proposed to be retained in the Profit and Loss account.

DIRECTORS

During the year under review, Mr. Mannil Venugopalan and Mr. Marc Bernhardt were appointed as Additional

Directors to strengthen the Board management of the Company. The Company has received notices in writing from members along with prescribed security deposits signifying their candidature for the office of the director of the Company.

Your directors are pleased to report that pursuant to application made to the Central Government for the re- appointment of Mr. Yashovardhan Saboo as Managing Director of the Company, the Central Government accorded its approval vide Letter no. SR No. B14576276/2/2011-CL-VII dated 19th October, 2011.

Dr. T. N. Kapoor and Mr. Chandra Mohan, Directors, retire by rotation and being eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standard AS-21 prescribed by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company are annexed to this Report.

DIRECTORS'RESPONSIBILITYSTATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 31st March, 2012, the applicable accounting standards have been followed and that there has been no material departures;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2012 on a 'going concern' basis.

LISTINGOFSHARES

The Equity shares of the Company are listed on the Bombay Stock Exchange Limited (BSE) and the Company has paid the Annual Listing fees to the Stock Exchange for the financial year 2011-12.

The Company has also applied for Listing of its equity shares with the National Stock Exchange of India Limited (NSE) since it was complying with the requisite norms and its application is under consideration of the NSE.

During the period under report, the Company has filed listing applications with the BSE for 10,65,450 equity shares of the Company upon conversion of equal number of Zero Coupon Convertible Warrants issued on preferential basis to the promoters and others and the same has since been obtained.

SUBSIDIARIES

In accordance with the general circular no. 02/2011 dated February 8th, 2011, issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet and Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance sheet of the Company. A statement pursuant to section 212 of the Companies Act, 1956, relating to subsidiary companies is attached to the Accounts. The Company will make available the annual Accounts of the subsidiary Companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

Details of major subsidiaries of the Company are covered in the Management Discussion and Analysis Report forming part of the Annual Report.

AMALGAMATION OF HIMACHAL FINE BLANK LIMITED, SUBSIDIARY COMPANY WITH THE COMPANY

The Company filed a writ petition with the Hon'ble High Court of Himachal Pradesh at Shimla for Amalgamationof its subsidiary company i.e. Himachal Fine Blank Limited. The Hon'ble Court passed the Order dated 20th March, 2012 for the convening of the meetings of Shareholders, Secured Creditors and Unsecured Creditors on 12th May, 2012. The Court Convened meetings were duly held on the scheduled date and the High Court took note of the outcome of the meetings on its record. Thereafter, second motion petition was filed with the Hon'ble Court and the Court fixed the date of hearing of the petition on 5th July, 2012. On the said date, the Hon'ble Court ordered the publication of public notices, asked for the reports of Official Liquidator, Shimla, and Regional Director, Company Law Board, New Delhi and fixed the next date of hearing being 28th August, 2012 for approval of the Scheme of Amalgamation.

EMPLOYEES TOCK OPTION PLAN

During the year under review, your Company has implemented 'KDDL Employee Stock Option Plan 2011 (KDDL ESOP 2011)' to motivate and ensure participation of the employee in the long term growth plan of the Company.

The Compensation Committee of the Board of Directors, at its meeting held on 1st November, 2011, granted 1,00,500 (One lac and five hundred only) options to the selected employees under ESOP2011.

The Company had filed an application for the 'In- principle' approval for the listing of new shares under "KDDL Employee Stock Option Plan – 2011" dated 27th January, 2012 with the Bombay Stock Exchange Limited, Mumbai. The Bombay Stock Exchange Limited was pleased to accord its approval via Letter no. DCS/AMAL/BS/ESOP-IP/077/2011-12 dated 11th May, 2012.

The information required to be disclosed in terms of the provisions of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 is enclosed as per Annexure A to this report.

FIXEDDEPOSITS

All provisions of Sections 58A and 58AA of the Companies Act, 1956 have been complied with. The unclaimed deposit due for payment at the close of the financial year is Rs. 1.86 million. The aggregate amount of fixed deposits as on31st March, 2012isRs. 87.87 million.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report.

CORPORATEGOVERNANCE

The Company has complied with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Bombay Stock Exchange Limited during the year ended on 31st March, 2012 as per Report on Corporate Governance annexed and a Certificate from the Auditors to this effect for the year ending on 31st March, 2012 is also enclosed with this report.

APPOINTMENTOFCOSTAUDITORS

In order to comply with Cost Audit Order No. 52/26/CAB-2010 dated 30th June, 2011 and 24th January, 2012 and on the recommendations of the Audit Committee, M/s Khushwinder Kumar & Associates, Cost Accountants, Ludhiana, were appointed as the Cost Auditor to carry on the Cost Audit of Packaging Division of the Company for the year 2011-12.

AUDITORS

M/s Walker, Chandiok & Co., Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 224(1B) of the Companies Act, 1956 and that they are not disqualified for such appointment within the meaning of section 226of the Companies Act,1956.

The Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTIONFUND

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the relevant amounts which remained unpaid or unclaimed for a period of seven years, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205Cof the said Act.

PARTICULARSOFEMPLOYEES

The information required under section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees)Amendment Rules, 2011 is attached here with as Annexure-B.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGSANDOUTGO

The information required under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure –C forming an integral part of this Report.

CASHFLOWANALYSIS

In conformity with the provisions of clause 32 of the Listing Agreement, the Cash Flow Statement for the year endingon31.03.2012isannexed hereto.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to cross new mile stones.

TRADERELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company's endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

for and on behalf of the Board

Date : 03.08.2012 R.K. SABOO

Place : Chandigarh Chairman


Mar 31, 2011

THE MEMBERS

The Directors have pleasure in presenting this 31st Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March 2011.

OPERATIONS AND PROSPECTS Financial Results

The summary of operating results for the year 2010-11 and appropriation of divisible profits is given below:

(Figures in Millions of Rupees)

Particulars 2010-11 2009-10

Gross Operating Income 803.7 546.6

Profit before interest and 170.3 30.7

depreciation

Less: Interest 45.2 39.3

Depreciation 39.8 85.0 38.9 78.2

Profit before tax 85.3 (47.5)

Provision for Income Tax, 22.4 (13.7)

Deferred tax

Profit after tax 62.9 (33.8)

Profit/(Loss) brought forward 2.9 36.7

from previous year

Net Profit/(Loss) 65.8 2.9

Appropriated as under:

Proposed Dividend 22.2 -

Corporate Dividend Tax 3.7 -

Transfer to General Reserve 6.3 -

Surplus carried to Balance Sheet 33.6 2.9

Total 65.8 2.9

PERFORMANCE AND PROJECTIONS

The financial year saw a handsome bounce-back from the previous year which had been severely impacted due to the global economic slowdown of 2009. During the year under review, the Company achieved sales of Rs. 804 Million against Rs. 547 million in the previous year, thereby registering an increase of 47%. The Company earned a net profit of Rs.63 million against a net loss of Rs. 34 million in the previous year. The better performance was due to multiple reasons mainly the several recovery measures initiated by the management, which was further helped by the improved market conditions.

All the watch component manufacturing units reported improved revenues and profitability during the current year. The watch hands business saw an especially encouraging increase in export sales owing to opening of several new client accounts. The Company expects and visualizes growth of market in the coming year also and continuation of the satisfactory performance.

The Precision Stamping Division, Eigen Engineering, has performed better than the last year by registering a growth of 22% in sales. This division is further working on improving the performance by working on internal efficiencies and serving new customers in the growing demand for its products in the electrical, automobile, telecommunications, medical and aerospace industries.

The Company's Swiss subsidiary, Pylania, SA in Switzerland also improved its performance during the year and recorded a growth of 112% in its top line. Although the Company is still not profitable, however the loss was lower by 32% as compared to the previous year. The prospects in the coming years are expected to be good as the Company establishes its name for high quality and the "Swiss Made" label.

Satva Jewellery and Design Ltd., the 50:50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland, specializing in jewel setting on watch cases and dials, made a loss of Rs. 3.7 millions against a loss of Rs.10 Millions in the previous year. The sales improved by 96% during the year.

The watch retail and distribution business of the group, managed mainly through our subsidiary company Kamla Retail Limited also showed improved performance. During the last financial year, Kamla Retail Limited and Mahen Boutiques Limited were merged. The aggregate turnover of the retail and distribution companies improved from Rs.600 millions to Rs 890 millions registering a growth of 48%. Company expects the rate of growth and improvement in the financial performance to continue in the coming years as the Company plans to open new stores in line with the growth in demand of luxury and premium brand watches.

DIVIDEND

In view of the improved results, your Directors are pleased to recommend for approval of the shareholders a dividend of 30% i.e. Rs 3/- per share on equity shares of the Company in respect of the financial year 2010-11.The Dividend shall be paid after the approval of shareholders at the ensuing Annual General Meeting.

The total outgo of the dividend to be paid to shareholders will be Rs 25.9 millions (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company's policy to pay sustainable dividend linked to long term growth objectives of the Company.

TRANSFER TO RESERVE

The Company proposes to transfer Rs 6.3 millions to the General Reserve out of the amount available for appropriations and an amount of Rs. 33.6 millions is proposed to be retained in the Profit and Loss Account.

DIRECTORS

The tenure of Mr. R K Saboo, Chairman of the Company ended on 30th November, 2010, and the Board has re-appointed him for a further period of three years w.e.f. 1st December, 2010. Also, the terms of Mr. Yashovardhan Saboo as Chief Executive Officer ended on 31st March, 2011, and the Board has re- appointed him for a period of three years, respectively, w.e.f. 1st April, 2011, subject to approval of shareholders in the General Meeting and subject to such other approvals of Central Government, financial institutions or other statutory authorities, as may be necessary.

Mr. Anil Khanna and Mr.Jagesh Khaitan retire by rotation, and being eligible, offer themselves for re-appointment.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standard AS-21-Consolidated Financial Statements read with Accounting Standard-23 - Accounting for Investment in Associates issued by the Institute of Chartered Accountants of India, your Directors have pleasure in attaching the Consolidated financial statements, which forms part of the Annual Report.

DIRECTORS'RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 31st March, 2011, the applicable accounting standards have been followed and that there has been no material departures;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2011 on a 'going concern' basis.

LISTING OF SHARES

The Equity Shares of the Company are listed on the Bombay Stock Exchange Limited and the Company has paid the annual listing fees to the Stock Exchange for the financial year 2010- 11.

During the period under report, the Company had filed listing application with the Bombay Stock Exchange Limited for 421950 equity shares of the Company upon conversion of equal number of Zero Coupon Convertible Warrants issued on preferential basis to the promoters and others and the same has since been obtained.

SUBSIDIARIES

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet and Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. The Company will make available the Annual Accounts of the Subsidiary Companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

Details of major subsidiaries of the Company are covered in the Management Discussion and Analysis Report forming part of the Annual Report.

FIXED DEPOSITS

All provisions of Sections 58Aand 58AAof the Companies Act, 1956 have been complied with. The unclaimed deposit due for payment at the close of the financial year is Rs. 0.65 Millions.

The aggregate amount of fixed deposits as on 31st March, 2011 is Rs. 87.13 millions

INTERNAL CONTROL SYSTEM

The Company has a proper and adequate system of internal control. An extensive programme of internal audits and management reviews supplement the process of internal control. Properly documented policies, guidelines and procedures are laid down for this purpose.

The Company has an Audit Committee comprising of majority of Independent, non Executive and professionally qualified Directors, who interact with the statutory auditors and internal auditors in dealing with matters within its terms of reference. During the year under review, the Committee met six times.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report.

CORPORATE GOVERNANCE

The Company has been practicing the principles of good Corporate Governance over years. The Board of Directors supports the broad principles of Corporate Governance. In addition to the basic governance issues, the Board lays strong emphasis on transparency, accountability and integrity.

The Company has complied with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchange during the year ended on 31.03.2011 as per Report on Corporate Governance annexed and a Certificate from the Auditors to this effect for the year ending on 31.03.2011 is also enclosed to this report.

AUDITORS

M/s Walker, Chandiok & Co., Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for such appointment within the meaning of section 226 of the Companies Act, 1956.

The Notes on Accounts referred to in the Auditors' Report are self-explanatory and therefore do not call for any further comments.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends and interest on fixed deposits which remained unpaid or unclaimed for a period of seven years, if any, have been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORBTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

The information required under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is given in the Annexure and forms an integral part of this Report.

PARTICULARS OF EMPLOYEES

Pursuant to the amendment in the Companies (Particulars of Employees) Rules, 2011 vide notification No. GSR 289(E) dated 31.03.2011 issued by the Ministry of Corporate Affairs, no employee of the Company was in receipt of Rupees Sixty Lacs per annum or Rupees Five Lacs per month during the year under review. Accordingly, no particulars of employees are given pursuant to the provisions of Section 217(2A) of the Companies Act, 1956.

CASH FLOW ANALYSIS

In conformity with the provisions of clause 32 of the Listing Agreement, the Cash Flow Statement for the year ending on 31.03.2011 is annexed hereto.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co- operation, have enabled the Company to cross new milestones.

TRADE RELATIONS

The Board desires to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company's endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities, for their continued support and patronage.

for and on behalf of the Board

Date : 28.07.2011 R.K. SABOO

Place: Chandigarh Chairman


Mar 31, 2010

The Directors present the 30th Annual Report of the Company for the financial year 2009-10.

OPERATIONS AND PROSPECTS

Financial Results

The summary of operating results for the year 2009-10 and appropriation of divisible profits is given below :

(Figures in Millions of Rupees)

Particulars 2009-10 2008-09

Gross Operating Income 546.6 720.0

Profit before interest and 30.6 84.4 depreciation

Less: Interest 39.2 36.0

Depreciation 38.8 78.0 42.0 78.0

Profit before tax (47.5) 6.4

Provision for Income Tax, (13.7) 4.1

Deferred tax and FBT _____ _____

Profit after tax (33.8) 2.3

Profit/(Loss) brought forward 36.7 34.3

from previous year _____ _____

Net Profit/(Loss) 2.9 36.6

Appropriated as under:

Proposed Dividend - -

Corporate Dividend tax - -

Transfer to General Reserve - -

Surplus carried to Balance Sheet 2.9 36.6

PERFORMANCE AND PROJECTIONS

The year saw a decline in sales in both the Domestic and Export Markets. During the financial year under review, the Company sales were Rs. 547 million against Rs. 720 million in the previous year, thereby registering a decrease of 24%. The performance in terms of net profit was substantially below expectations mainly because of decline in watch dial sales, caused by a severe crisis in the international watch market, following the global economic meltdown. Most international watch hands reported sharp fall in sales and purchases, combined with inevitable inventory corrections caused supplier orders to decline by as much as 75% in some key accounts. The market conditions stabilized after January, 2010 and performance has revived handsomely after April this year.

The Precision Stamping Division performed better than the last year by registering a growth of 36% in sales. This division is further expected to show good performance during the current financial year tapping into the growing demand for its products in the electrical, automobile, telecommunications, medical and aerospace industries.

The Hands Unit had a very marginal decrease of (2%) in

sales in the current year but in the coming year there would be tremendous growth on account of the high off take in Europe. It is expected that there would be a growth of 25%. The Companys Swiss subsidiary, Pylania, SA in Switzerland was not able to perform well in its second full year of production due to the global meltdown which adversely affected its sales, resulting in a loss. The prospects in the coming years have improved.

Satva Jewellery and Design Ltd., the 50.50 Joint Venture with Pascal Vincent Vaucher, SA of Switzerland, specializing in jewel setting on watch cases and dials, made a loss of (Rs. 9.86 million) against a profit of Rs. 1.3 million in the previous year. The sales declined by 43%. This drop in the year was due to the sharp recession in Europe and a shift away from expensive jewellery watches. The company is now looking at the Europe and Hong Kong as the main thrust areas in the coming year. The recovery from global recession is likely to be gradual and is expected that the performance of the company will start to recover only towards the end of the current financial year.

The retail and distribution business of the group, managed through our subsidiary companies Kamla Retail Limited, Mahen Boutiques Limited and Mahen Distribution Limited continued to grow during the year, registering an aggregate increase in turnover of 49%, from Rs. 47.7 crores to Rs. 71 crores. It is expected that this rate of growth will continue in the current year and the future too. DIVIDEND

In the absence of adequate profits, your Directors regret not to recommend any dividend for year ended 31st March, 2010.

MEMBERS OF THE BOARD/MANAGEMENT COMMITTEE

The tenure of Mr. R K Saboo, Chairman of the Company ended on 30th November, 2009, and the Board has re- appointed him for a further period of one year w.e.f 1st December, 2009. Also, the tenure of Mr. Yashovardhan Saboo as Chief Executive Officer and Mr. Dinesh Agrawal as Chief Operating Officer (WCG) ended on 31st March, 2010, and the Board has re-appointed them foir a period of one year & three years, respectively, w.e.f. 1st April, 2010, subject to approval of shareholders in the; General Meeting and subject to such other approvals of financial institutions or other statutory authorities, as may be necessary.

During the period under review, Mr. Rabendra Singh Mathoda was appointed as an Additional Director and has since resigned for personal reasons.

During the year, Mr. C.S Liao and Mr. S.K. Mandelia have resigned from the Board of Directors of the Company during the year due to personal reasons.

Mr. Chandra Mohan and Dr. T N Kapoor retire by rotation, and being eligible, offer themselves for re-appointment.

CONSOLIDATED ACCOUNTS

In accordance with the requirements of Accounting Standard AS-21 prescribed by the Institute of Chartered Accountants of India, the Consolidated Accounts of the Company and its subsidiaries are annexed to this Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217(2AA) of the Companies Act, 1956, with respect to Directors Responsibility Statement, it is hereby confirmed:

(i) That in the preparation of the accounts for the financial year ended 31 st March, 2010, the applicable accounting standards have been followed alongwith proper explanation relating to material departures, as mentioned in the Notes on Accounts;

(ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for the year under review;

(iii) That the Directors have taken proper and sufficient care in the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2010 on a going concern1 basis.

LISTING OF SHARES

The equity shares of the Company are listed on the Bombay Stock Exchange Limited and the Company has paid the annual listing fees to the Stock Exchange for the financial year 2009-10.

SUBSIDIARIES

PylaniaSA

As required under section 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the Reports of the Board of Directors and Auditors thereon of M/s Pylania SA are annexed.

Himachal Fine Blank Limited

As required under section 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the Reports of the

Board of Directors and Auditors thereon of M/s Himachal Fine Blank Limited are annexed.

Kamla Retail Limited

As required under section 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the Reports of the Board of Directors and Auditors thereon of M/s Kamla Retail Limited are annexed.

Mahen Boutiques Limited

As required under section 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the Reports of the Board of Directors and Auditors thereon of M/s Mahen Boutiques Limited are annexed.

Mahen Distribution Limited

The Company has formed a wholly owned subsidiary, M/s Mahen Distribution Limited, during the year. The subsidiary has been formed with the objective of carrying on the business of distribution of watches and other luxury products.

As required under section 212 of the Companies Act, 1956, the audited statements of accounts, alongwith the Reports of the Board of Directors and Auditors thereon of M/s Mahen Distribution Limited are annexed.

FIXED DEPOSITS

All provisions of Sections 58A and 58AA of the Companies Act, 1956 have been complied with. The unclaimed deposit due for payment at the close of the financial year is Rs. 19,37,000. The aggregate amount of fixed deposits as on 31st March, 2010 is Rs. 7,54,55,000.

INTERNAL CONTROL SYSTEM

The Company has a proper and adequate system of internal control. An extensive programme of internal audits and management reviews supplement the process of internal control. Properly documented policies, guidelines and procedures are laid down for this purpose.

The Company has an Audit Committee comprising of majority of Independent, Non Executive and professionally qualified Directors, who interact with the statutory auditors and internal auditors in dealing with matters within its terms of reference. During the year under review, the Committee met five times.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Clause 49 of the Listing Agreement is annexed to this report.

CORPORATE GOVERNANCE

The Company has been practicing the principles of good Corporate Governance over years. The Board of Directors

supports the broad principles of Corporate Governance. In addition to the basic governance issues, the Board lays strong emphasis on transparency, accountability and integrity.

The Company has been in compliance with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchange and a Certificate from the Auditors to this effect is enclosed as a part of the Corporate Governance Report.

However, there was one instance in which the gap between two board meetings was delayed beyond four months by four days due to the pre-occupation of Directors.

In terms of sub-clause (v) of Clause 49 of the Listing Agreement, Chief Executive Officer and Chief Financial Officer have confirmed the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee in terms of the said Clause.

DEPOSITORY SYSTEM

As members are aware, your Companys shares are tradable compulsorily in electronic form and the Company has established connectivity with both the depositories, i.e., National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). In view of the numerous advantages offered by the Depository System, members are requested to avail the facility of dematerialization of the Companys shares on either of the Depositories as aforesaid.

AUDITORS

M/s Walker, Chandiok & Co., Chartered Accountants, Statutory Auditors of the Company, retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received the letter from them to the effect that their appointment, if made, would be within the prescribed limits under section 224(1 -B) of the Companies Act, 1956.

The Notes on Accounts referred to in the Auditors Report are self-explanatory and therefore do not call for any further comments.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends and interest on fixed deposits which remained unpaid or unclaimed for a period of seven years, if any, have been transferred by the

Company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C of the said Act.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORBTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

The information required under section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 relating to "Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo" is annexed and forms an integral part of this Report.

PARTICULARS OF EMPLOYEES

Particulars of employees as required under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended is annexed and forms an integral part of this Report.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co- operation, have enabled the Company to cross new milestones.

TRADE RELATIONS

The Board desires to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Companys endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGEMENT

Your Directors take this opportunity to thank all investors, clients, vendors, banks, regulatory and government authorities, fortheircontinued support.

for and on behalf of the Board

Date: 30.08.2010 R.K. SABOO

Place: Chandigarh Chairman

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