Accounting Policies of Loyal Textiles Mills Ltd. Company

Mar 31, 2018

1 Significant Accounting Policies:

Statement of Compliance:

These financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 (‘the Act’) (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.

Basis for Preparation and Presentation:

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.

For all periods up to and including the year ended 31 March 2017, the Company prepared its financial statements in accordance with accounting standards notifed under section 133 of Companies Act, 2013, read with paragraph 7 of the Companies (Accounts) Rule, 2014 (Indian GAAP). These financial statements for the year ended 31 March 2018 are the first the Company has prepared in accordance with Ind AS. Note no. 3 explains the manner in which the Company has adopted Ind AS.

The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have been measured at fair value: -

Derivative financial instruments -

Certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments) The accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

(a) Inventories:

Inventories are valued at cost or net realizable value, whichever is lower. The cost in respect of the various items of inventory is computed as under:

- Raw materials, stores & Spares are valued at weighted average basis. The cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition.

- Stock-in-process is valued at Cost and Finished goods are Valued at Cost and Net Realisable value as Applicable - Cost includes applicable production overheads.

- Traded goods are valued at lower of Cost and Net Realizable Value (as on 31-03-2018 traded goods stock is NIL).

The stock of saleable waste is valued at net Realisable value.

Net Realisable Value (NRV) is the estimated selling price in the ordinary course of business less estimated cost of completion and estimated selling expenses necessary to make the sale.

Obsolete/non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

(b) Cash flow statement:

The cash flow statement is prepared in accordance with the Indian Accounting Standard (Ind AS) - 7 “Statement of Cash flows” using the indirect method for operating activities, whereby net profit before tax is adjusted for the effects of transactions of noncash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

(c) Use of Estimates and Judgements:

The preparation of the financial statements in conformity with Ind AS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made. Differences between actual results and estimates are recognised in the period in which the results are known/ materialised, and if material, their effects are disclosed in the Notes to the Financial Statements.

(d) Revenue Recognition:

Revenue is recognized at the fair value of the consideration received or receivable. The company recognizes revenue when the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the entity.

Sales are recognized when goods are despatched and are recorded excluding Value added tax, Sales Tax, Goods and Service Tax and recoveries as applicable. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

Service / Process Charge is accounted on completed service contract method. Revenue from the sale of services is recognised on the basis of the stage of completion, right to receive the amount is clearly established and there is no uncertainty about its realisation. When the contract outcome cannot be measured reliably, revenue is recognised only to the extent that the expenses incurred are eligible to be recovered.

Interest income from financial asset is recognized when it is probable that the economic benefit will flow to the company and the amount of income can be measured reliably. Interest income is accrued on time basis by reference to principal outstanding using the effective interest rate method (EIR).

Dividend income on investments is recognized when the right to receive the payment is established and when no significant uncertainty as to the measurability or collectability exists.

Rental income from operating lease on investment properties is recognized on a straight-line basis over the term of the relevant lease, if the escalation is not a compensation for increase in cost inflation index.

Incentives receivable from Government is accounted on certainty of receipt.

Insurance claims are recognized on the basis of claims admitted / expected to be admitted and when there is no signifi cant uncertainty exists with regard to the amount to be recovered and it is reasonable to expect ultimate collection.

Duty draw back claims and other export benefits are accounted on completion of exports, on complying with the rules of the scheme governing it based on eligibility and expected amount on realization.

(e) Property, Plant And Equipment:

i) Land including lease-hold land is stated at cost except for a portion revalued. Other Fixed Assets including leased out assets are stated at cost less accumulated depreciation and impairment loss, if any. The cost includes borrowing cost and in respect of imported machinery the cost includes the value portion of customs duty credit availed as granted by the government under export incentive schemes. Exchange fluctuations are considered to cost up to commencement. Assets under erection/construction are stated at value incurred.

On transition to Ind AS, the Company has elected to consider carrying amount of all items of property, plant and equipments measured as per Indian GAAP as recognized in the f nancial statements as at the date of transition, as deemed cost at the date of transition. Deemed cost is the differential between the cost of the asset less the depreciation at the given date. The company has recognized the deemed cost by this method on April 2016.

ii) Depreciation on Property, Plant and Equipment is provided over their useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013 on Straight Line method basis.

iii) Depreciation in respect of additions/sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

iv) The estimated useful lives, residual values and the depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

v) The increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery, wherever applicable, beyond the date of commissioning is taken to Statement of Profit and Loss. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

(f) Intangible Assets:

Intangible assets are stated at cost less accumulated amount of amortization. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. The estimated useful life of an identifable intangible asset is based on a number of factors including the effects of obsolescence, etc. The amortization method and useful lives are reviewed periodically at end of each financial year.

(g) Foreign Currency Transactions:

i) Functional and Presentation currency:

Items included in the financial statements of the company are measured using the currency of the primary economic environment in which these entities operate, (i.e., the “functional currency”). The functional currency of the company is Indian rupee. These financial statements are presented in Indian rupee.

ii) Transaction and balances:

The foreign currency transactions are recorded, on initial recognition in the functional currency, by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. The foreign currency monetary items are translated using the closing rate at the end of each reporting period. Non-monetary items that are measured in terms of historical cost in a foreign currency shall be translated using the exchange rate at the date of the transaction. Exchange differences arising on translation/ settlement are recognized as income or expense in the period in which they arise.

The Company enters into forward exchange contract to hedge its risk associated with Foreign currency fluctuations. The premium or discount arising at the inception of a forward exchange contract is amortized as expense or income over the life of the contract. In case of monetary items which are covered by forward exchange contract, the difference between the year end rate and rate on the date of the contract is recognized as exchange difference. Any profi t or loss arising on cancellation of a forward exchange contract is recognized as income or expense for that year.

(h) Financial Instruments:

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i) Initial Recognition and measurement:

On initial recognition, all the financial assets and liabilities are recognized at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability other than financial asset or financial liability that are measured at fair value through profit or loss. Transaction costs of financial assets and liabilities carried at fair value through the Profit and Loss are immediately recognized in the Statement of Prof t and Loss.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Company commits to purchase or sell the asset.

ii) Subsequent measurement

a. Non-derivative financial instruments :

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

(ii) Financial assets at fair value through other comprehensive income (FVTOCI): A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

(iii) Financial assets at fair value through profit or loss (FVTPL): A financial asset is measured at fair value through profit and loss unless it is measured at amortized cost or at fair value through other comprehensive income.

(iv) Investments in subsidiaries, joint ventures and associates: The Company has adopted to measure investments in subsidiaries, joint ventures and associates at cost in accordance with Ind AS 27 and carrying amount as per previous GAAP at the date of transition has been considered as deemed cost in accordance with Ind AS 101.

(v) Financial liabilities: The financial liabilities are subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.

b. Derivative financial instruments:

The Company holds derivative financial instruments such as foreign exchange forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. Although the Company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, is categorized as a financial asset or financial liability, at fair value through profit or loss. Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of profit and loss when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets / liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.

c. Derecognition of financial instruments:

A financial asset is derecognized when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability is derecognized when the obligation specified in the contract is discharged or cancelled or expired.

d. Fair value measurement of financial instruments:

The fair value of financial instruments is determined using the valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Based on the three level fair value hierarchy, the methods used to determine the fair value of financial assets and liabilities include quoted market price, discounted cash flow analysis and valuation certified by the external valuer. In case of financial instruments where the carrying amount approximates fair value due to the short maturity of those instruments, carrying amount is considered as fair value.

(i) Employee Benefits:

i) Short term benefits: The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment. Long term compensated absences are provided for based on actuarial valuation.

ii) Post-employment benefits:

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Statement of Profit and Loss of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year. Remeasurement comprising actuarial gains and losses, the effect of changes to the asset ceiling if applicable and the return on plan assets (excluding net interest), is reflected immediately in the balance sheet with the charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and is not reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.

iii) Other long term benefits: Deferred employee benefits / deferred compensation and termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement Scheme are charged to the Statement of Prof t and Loss in the year incurred. Actuarial gains / losses are immediately taken to the Statement of Profit and Loss and are not deferred.

(j) Borrowing Costs:

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of the asset. Other borrowing costs are recognized as an expense in the period in which they are incurred.

(k) Segment Reporting:

Operating segments are those components of the business whose operating results are regularly reviewed by the chief operating decision making body in the company to make decisions for performance assessment and resource allocation. The reporting of segment information is the same as provided to the management for the purpose of the performance assessment and resource allocation to the segments.

The operating segments are the segments for which separate financial information is available. The Accounting policies adopted for segment reporting are in line with the accounting policy of the company.

The Company has identified two reportable operating segments viz., manufacturing and trading activities.

Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segments.

Pricing for Inter Segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.

Revenue, expenses, assets and liabilities which relate to the company as a whole and are not allocable to segment on reasonable basis are reported under unallocated revenue / expenses / assets / liabilities.

(l) Leases:

The determination of whether an arrangement is (or contains) a lease is based on the substance of the arrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfillment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

For arrangements entered into prior to April 1, 2016, the Company has determined whether the arrangement contain lease on the basis of facts and circumstances existing on the date of transition.

A lease that transfers substantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease. All other leases are operating leases.

Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit and loss, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general policy on the borrowing costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.

(m) Earnings Per Share:

The basic earnings per share are computed by dividing the net profit for the period attributable to equity shareholders by the weighted average number of equity shares outstanding during the period.

Diluted EPS is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic EPS and also weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for bonus shares, as appropriate

(n) Income Taxes:

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Company operates and generates taxable income.

Current income tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Current tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future tax liability, is recognised as an asset viz. MAT Credit Entitlement, to the extent there is convincing evidence that the Company will pay normal tax in the future and it is highly probable that future economic benefits associated with it will flow to the Company during the specified period and that can be measured reliably.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences.

Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Where there is deferred tax assets arising from carry forward of unused tax losses and unused tax created, they are recognised to the extent of deferred tax liability.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss (either in other comprehensive income or in equity). Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly in equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(o) Impairment of Assets:

(i) Financial assets

The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in statement of profit or loss.

(ii) Non-financial assets:

The Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

(p) Provisions, Contingent Liabilities, and Contingent Assets:

Provisions:

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are discounted, if the effect of the time value of money is material, using pre-tax rates that reflects the risks specific to the liability. When discounting is used, an increase in the provisions due to the passage of time is recognised as finance cost. These provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Necessary provision for doubtful debts, claims, etc., are made, if realisation of money is doubtful in the judgement of the management.

Contingent Liabilities:

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the company or a present obligation that is not recognized because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognized because it cannot be measured reliably. Contingent liabilities are disclosed separately.

Show cause notices issued by various Government authorities are considered for evaluation of contingent liabilities only when converted into demand.

Contingent Assets:

Where an inflow of economic benefits is probable, the Company discloses a brief description of the nature of the contingent assets at the end of the reporting period, and, where practicable, an estimate of their financial effect.

Contingent assets are disclosed but not recognised in the financial statements.

(q) Cash and Cash Equivalents:

The Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with a maturity period of three months or less from the balance sheet date, highly liquid investments that are readily convertible into cash, which are subject to an insignif cant risk of changes in value.

(r) Government Grants:

The government grants are recognized only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in the statement of prof t and loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.

(s) Investment Property:

Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes).

Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are measured in accordance with Ind AS 16 - Property, plant and equipments requirements for cost model. The cost includes the cost of replacing parts and borrowing costs for long-term construction projects if the recognition criteria are met. When signifi cant parts of the investment property are required to be replaced at intervals, the Company depreciates them separately based on their specific useful lives. All other repair and maintenance costs are recognised in the statement of profit and loss as incurred.

Company depreciates investment property as per the useful life prescribed in Schedule II of the Companies Act, 2013.

Though the Company measures investment property using the cost-based measurement, the fair value of investment property is disclosed in the notes. Fair values are determined based on an annual evaluation applying a valuation model. External valuers are involved, wherever necessary with the approval of Company''s board of directors. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of profit and loss in the period in which the property is derecognised.

(t) Intangible Assets:

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives which are generally in accordance with those specified in Schedule II to Companies Act, 2013.

3. Explanation of Transition to Ind AS First time adoption of Ind AS

This financial statement is the first financial statement that has been prepared in accordance with Indian Accounting Standards (Ind AS) together with the comparative period data as at and for the year ended 31st March 2017, as described in the summary of significant accounting policies. The transition to Ind AS has been carried out in accordance with Ind AS 101 —‘First time adoption of Indian Accounting Standards’ with 1st April 2016 as the transition date. This note explains the exemptions availed by the company on fi rst time adoption of Ind AS and the principal adjustments made by the Company in restating its Indian GAAP financial statements as at 1st April 2016 and financial statements as at and for the year ended 31st March 2017 in accordance with Ind AS 101.

Exemptions applied

Ind AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Company has, accordingly, applied following exemptions:

a) The Company has elected to consider carrying amount of all items of property, plant and equipments measured as per Indian GAAP as recognized in the financial statements as at the date of transition, as deemed cost at the date of transition. The effect of consequential changes arising on the application of other Ind AS has been adjusted to the deemed cost of Property, Plant & Equipment.

b) The Company has adopted to measure investments in subsidiaries, joint ventures and associates at cost in accordance with Ind AS 27 and therefore has measured such investments in its separate opening Ind AS balance sheet at carrying amount as per Indian GAAP at the date of transition in accordance with Ind AS 101.

c) The Company has availed the exemption of fair value measurement of financial assets or liabilities at initial recognition and accordingly will apply fair value measurement of financial assets or liabilities at initial recognition prospectively to transactions entered into on or after 1st April 2016.

d) The estimates at 1st April 2016 and at 31st March, 2017 are consistent with those made for the same dates in accordance with Indian GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items under Indian GAAP did not require estimation:

- Fair values of Financial Assets & Financial Liabilities

- Impairment of financial assets based on expected credit loss modal

- Discount rates

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions as at 1st April, 2016 and 31st March, 2017.

Notes to the reconciliation of equity as at 1st April 2016 and 31st March 2017 and Total comprehensive income for the year ended 31^st March 2017

1. Leasehold Land: Under Indian GAAP, land on lease was not covered under ‘Leases’ and therefore it was shown as Tangible assets. Under Ind AS, land on lease is considered as operating lease. Therefore, the net block of leasehold land obtained from SIPCOT Cuddalore (as on 31st March,2017 Rs.161.89 lakhs, as on 1st April, 2016 Rs. 163.56 lakhs) has been reclassified as Other Non - Current Assets (as on 31st March,2017 Rs.160.22 lakhs, as on 1st April, 2016 Rs.161.89 lakhs) and Other Current Assets (as on 31st March,2017 Rs.1.67 lakhs, as on 1st April, 2016 Rs.1.67 lakhs) as “Prepayments of Leasehold Land”. Further, the amortization of leasehold payment for the year ended 31st March,2017 amounting to Rs.1.67 lakhs has been reclassified from Depreciation & Amortization expenses to “Other Expenses”. However, the same does not have any impact on total equity as at 31^st March, 2017.

2. Fair Value of Investments: Under Indian GAAP, investments in equity instruments, mutual funds and debt securities were classified as long term investments or current investments based on the intended holding period and realisability. Long term investments were carried at cost less provision for other than temporary diminution in the value of investments. Current investments were carried at lower of cost and fair value. Ind AS requires such investments to be measured at fair value except investments in subsidiaries, associates and joint venture for which exemption has been availed. Fair value changes with respect to investments in equity instruments designated as at FVOCI have been recognised in FVOCI - Equity Instruments as at the date of transition and subsequently in the Other Comprehensive Income for the year ended March 31, 2017. This increased other reserves by Rs.19.83 lakhs as at March 31, 2017 (decreased other reserves by Rs.13.75 lakhs as at April 1, 2016).

3. Proposed Dividend: Under Indian GAAP, proposed dividend (including Dividend Distribution Tax) is recognized as a liability in the period to which it relates, irrespective of when it is declared. Under Ind AS, proposed dividend is recognized as a liability in the period in which it is declared by the company (usually when approved by shareholders in a general meeting) or paid. In the case of the Company, the declaration of dividend occurs after period end. Therefore, the liability for the year ended 31st March 2016 recorded as proposed dividend as on 1st April, 2016 along with dividend distribution tax amounting to Rs.579.69 Lakhs has been de-recognised with a corresponding adjustment in the retained earnings.

4. Defined Benefit Obligation: Under Ind AS, remeasurements i.e. actuarial gains and losses are to be recognized in ‘Other comprehensive income’ and are not to be reclassified to profit and loss in a subsequent period. Under the Indian GAAP, these remeasurements were forming part of the prof t or loss. Therefore, actuarial gain/ loss amounting to Rs.223.51 Lakhs for the financial year 2016-17 has been recognized in OCI (net of tax Rs.77.35 Lakhs) which was earlier recognised as Employee benef ts expense. However, the same has no impact on the total equity as at 31st March, 2017.

5. Bill discounted against debtors: Under Indian GAAP, bills discounted against debtors were shown as contingent liability. However, the same falls under the category of ‘Financial instruments’ under Ind AS. Therefore, the bills discounted amounting to Rs.8228.15 Lakhs and Rs.8585.63 Lakhs as on 31st March 2017 and 1st April 2016 respectively have been shown under ‘Short term borrowings’ with a corresponding adjustment / Disclosure in ‘Trade receivables’. However, the same has no impact on the total equity as at 31st March, 2017 and 1st April, 2016.

6. Deferred tax: Under Indian GAAP, deferred tax was recognized for the temporary timing differences which focus on differences between taxable profits and accounting prof ts for the period. Ind AS requires entities to account for deferred taxes using the Balance Sheet approach, which focuses on temporary differences between the carrying amount of an Asset or Liability in the Balance Sheet and its tax base. Further, the application of Ind AS has resulted in recognition of deferred tax on certain temporary differences which was not required under Indian GAAP. Accordingly, deferred tax adjustments have been recognised in correlation to the underlying transactions in retained earnings/OCI in accordance with Ind AS. This has resulted decrease in retained earnings of Rs.77.35 Lakhs as at 31st March 2017.

7. Statement of cash flows: The transition from Indian GAAP to Ind AS has not had a material impact on statement of cash flows.

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Mar 31, 2015

A) BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with accounting standards as prescribed under section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts ) Rules, 2014, the provisions of Companies Act, 2013 to the extent notified and guidelines issued by Securities and Exchange Board of India ( SEBI). The disclosure and other requirements under the Micro, Small and Medium Enterprises Development Act, 2006 have been considered.

B) USE OF ESTIMATES

The preparation of financial statements requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and the reported amount of income and expenses during the year.

C) REVENUE RECOGNITION

i) Sales are recognised when goods are despatched and are recorded excluding Sales Tax and recoveries. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

ii) Rental Income / Interest income / Service / Process Charge is accounted on accrual basis.

iii) Dividend income on investments and claims are accounted for, when the right to receive the payment is established.

Dividends from foreign company is accounted on receipt.

D) DUTY DRAW BACK CLAIMS

i) Duty draw back claims and other export benefits are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance.

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Focus market / product licences for which no obligation is attached, is recognised under income approach method.

E) EXPENDITURE

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of Inputs are accounted net of duty concessions availed.

F) FIXED ASSETS AND DEPRECIATION

i) Land including lease is stated at cost except for a portion revalued. Other Fixed Assets including leased out assets are stated at cost less depreciation. The cost includes borrowing cost and in respect of imported machinery the cost includes the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets. Assets under erection / construction are stated at value incurred.

ii) Depreciation on Tangible Assets is provided over their useful lives as prescribed under Part C of Schedule II of the Companies Act, 2013 on Straight Line method basis except the following which have been provided on written down value basis:- 1. All the assets in Garment Division

2. All the assets except Plant and Machinery in Loyal Division

3. Furniture and Fittings, Vehicles in Shri Vishala Textile Mills Division

4. Building in Wind Mill Division

iii) Depreciation in respect of additions / sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

iv) The increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss Statement. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

G) FOREIGN CURRENCY TRANSACTIONS

i) Foreign Currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognised over the period of the contract.

ii) Foreign Exchange assets and liabilities are converted at the year end exchange rates. However non-monetary assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the Profit and Loss Statement.

H) EMPLOYEE BENEFITS

i) Short term benefits :

The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability.

Short term compensated absences are provided for based on internal assessment.

Long term compensated absences are provided for based on actuarial valuation.

ii) Post employment benefits :

Provident fund and other funds, being defend contribution schemes, the contributions are charged to the Profit and Loss Statement of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defend benefit plan, the defend benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

iii) Other long term benefits :

Deferred employee benefits / deferred compensation and termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement Scheme are charged to the Profit and Loss Statement in the year incurred. Actuarial gains / losses are immediately taken to the Profit and Loss Statement and are not deferred.

I) INVENTORIES

a) Inventories are valued at lower of cost or net realisable value, cost being ascertained on the following basis:

i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods - Cost includes applicable production overheads.

iii) Traded goods - at lower of Cost and Net Realisable Value.

b) Obsolete / non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

J) INVESTMENTS

Investments being long term are valued at Cost. Provision for permanent diminution in value is made, when considered necessary.

K) TAXES ON INCOME

Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognised for all timing differences, subject to the consideration of prudence.

L) CASH FLOW STATEMENT

Cash flow is reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M) IMPAIRMENT OF FIXED ASSETS

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the company's fixed assets including leased out assets. Impairment loss is recognised as and when required.

N) EARNINGS PER SHARE:

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O) PROVISIONS AND CONTINGENT LIABILITIES

The company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P) SEGMENT REPORTING SEGMENT INFORMATION

a) The company has identified five reportable business segments as primary segments viz : yarn, yarn for trading, cloth, cloth trading and garments.

b) The secondary segment information is identified on the basis of geographical segments viz. Europe, Asia, U.S.A. and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting .

i) Revenue and Expenses have been identified to a segment on the actual basis / on turnover basis of the segment.

ii) Pricing for Inter Segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.

iii) Operating assets and liabilities represent assets / liabilities in respective segments.

Q) LEASES

i) The determination of whether an agreement is, or contains, a lease is based on the substance of agreement at the date of inception.

ii) Operating leases - assets leased out under operating leases are capitalised. Lease rental income is recognised on an accrual basis.

iii) In respect of operating lease, the depreciation is recognised in the Profit and Loss Statement.

iv) Initial direct costs, if any, incurred specifically to earn revenue from operating lease, is recognised as expense in the Profit and Loss Statement.

R) RESEARCH AND DEVELOPMENT COSTS

Revenue expenditure pertaining to research is charged to the Profit and Loss Statement. Development costs of products are charged to the Profit and Loss Statement unless a product's technological feasibility has been established, in which case such expenditure is capitalised.

S) BORROWING COSTS

Borrowing costs attributable to the acquisition, construction or production of qualifying assets are added to the cost of those assets, up the date when the assets are ready for their intended use. All other borrowing costs are recognised in the Profit and Loss Statement in the period in which they are incurred.

---

Mar 31, 2014

A) The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with the applicable accounting standards specified in Companies (Accounting Standard) Rule 2006, the provisions of Companies Act 1956. The disclosure and other requirements under the Micro, Small and Medium Enterprises Development Act, 2006 have been considered.

B) Revenue recognition:

(i) Sales are recognised when goods are despatched and are recorded excluding Sales Tax and recoveries. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

(ii) Rental Income / Interest income / Service / Process Charge is accounted on accrual basis.

(iii) Dividend income on investments/claims are accounted for, when the right to receive the payment is established. Dividends from foreign company is accounted on receipt.

C) Duty Draw Back claims:

i) Duty draw back claims, other Export benefits are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance.

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Focus market / product licences for which no obligation is attached, is recognised under income approach method.

D) Expenditure:

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of inputs are accounted net of duty concessions availed.

E) Use of estimates:

The preparation of financial statement requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statement and the reported amount of income and expenses during the year.

F) Fixed Assets and Depreciation:

i) Land including lease is stated at cost except for a portion revalued. Other Fixed Assets are stated at cost less depreciation. The cost include borrowing cost and in respect of imported machinery the cost include the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets. Assets under erection/construction are stated at value incurred.

ii) Depreciation in respect of all assets at Loyal division excepting Plant and Machinery (On SLM basis) has been provided on written down value basis at the rates specified in Schedule XIV to the Companis Act 1956.

iii) Depreciation in respect of all assets at Valli Division, Processing Division and Plant and Machinery of Loyal division (except as stated specifically elsewhere), SCTM division has been provided at the rates specified in Schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation in respect of all assets at Garment division has been provided on written down value basis at the rates specified in Schedule XIV. Rate of depreciation is determined on certain assets as per the internal assessment on the useful life of such assets.

iv) Depreciation in respect of all assets (except Furniture & Vehicles, which has been provided on WDV basis) at Shri Vishala Textile Mills division has been provided on SLM basis at the rates specified in Schedule XIV of the Companies Act, 1956.

v Depreciation in respect of additions/sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

vi) The increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss account. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

G. Foreign Currency Transactions:

i) Foreign Currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognised over the period of the contract.

ii) Foreign Exchange assets and liabilities are converted at the year end exchange rates. However non monetary assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the profit and loss statement.

H. Retirement benefits:

a) Short term benefits:

The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability.

Short term compensated absences are provided for based on internal assessment.

Long term compensated absences are provided for based on actuarial valuation.

b) Post employment benefits:

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Profit and Loss Account of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

c) Other long term benefits:

Deferred employee benefits/deferred compensation and Termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement scheme are charged to the Profit and Loss Account in the year incurred. Actuarial gains/losses are immediately taken to the Profit and Loss account and are not deferred.

I) Valuation of Inventories:

a) Inventories are valued at lower of cost or net realisable value, cost being ascertained on the following basis:

i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods - cost includes applicable production overheads.

iii) Traded goods - at lower of Cost or net realisable value.

b) Obsolete/non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

J. Investments:

Investments being long term are valued at Cost. Provision for permanent diminution in value is made, when considered necessary.

K. Taxes on Income :

Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognised for all timing differences, subject to the consideration of prudence.

L. Cash Flow Statement:

Cashflow is reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M. Impairment of Fixed Assets:

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the Company''s fixed assets. Impairment loss is recognised as and when required.

N. Earnings per share:

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O. Provisions and contingent liabilities:

The company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P. SEGMENT REPORTING:

SEGMENT INFORMATION:

a) The company has identified four reportable business segments as primary segments viz : yarn, yarn for trading, cloth and garments.

b) The secondary segment information are identified on the basis of geographical segments viz. Europe, Asia, U.S.A and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting.

i) Revenue and Expenses have been identified to a segment on the actual basis / on turnover basis of the segment.

ii) Pricing for Inter segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.

iii) Operating assets and liabilities represent assets / liabilities in respective segments.

Q. Accounting for Leases :

a) The determination of whether an agreement is , or contains , a lease is based on the substance of agreement at the date of inception.

b) Operating leases - assets leased out under operating leases are capitalised, Lease rental income is recognised on an accrual basis.

c) In respect of operating lease, the depreciation is recognised in the Profit and Loss Statement.

d) Initial direct costs, if any, incurred specifically to earn revenue from operating lease, is recognised as expenses in the Profit and Loss Statement.

---

Mar 31, 2013

A) The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with the applicable accounting standards specified in Companies (Accounting Standard) Rule 2006, the provisions of Companies Act 1956. The disclosure and other requirements under the Micro, Small and Medium Enterprises Development Act, 2006 have been considered.

B) Revenue recognition:

ii) Sales are recognised when goods are despatched and are recorded excluding Sales Tax and recoveries. There i s no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

(ii) Rental Income / Interest income / Service / Process Charge is accounted on accrual basis.

(iii) Dividend income on investments/claims are accounted for, when the right to receive the payment is established. Dividends from foreign company is accounted on receipt.

C) Duty Draw Back claims:

ii) Duty draw back claims, other Export benefits are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance.

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Target plus licences for which no obligation is attached, is recognised under income approach method.

D) Expenditure:

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of inputs are accounted net of duty concessions availed.

E) Use of estimates:

The preparation of financial statement requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statement and the reported amount of income and expenses during the year.

F) Fixed Assets and Depreciation:

i)Land including lease is stated at cost except for a portion revalued. Other Fixed Assets are stated at cost less depreciation. The cost include borrowing cost and in respect of imported machinery the cost include the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets. Assets under erection/construction are stated at value incurred.

ii) Depreciation in respect of all assets at Loyal division excepting Plant and Machinery (On SLM basis) has been provided on written down value basis at the rates specified in Schedule XIV to the Companis Act 1956.

iii) Depreciation in respect of all assets at Valli Division, Processing Division and Plant and Machinery of Loyal division (except as stated specifically elsewhere), SCTM division has been provided at the rates specified in Schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation in respect of all assets at Garment division has been provided on written down value basis at the rates specified in Schedule XIV. Rate of depreciation is determind on certain assets as per the internal assessment on the useful life of such assets.

iiv) Depreciation in respect of all assets (except Furniture & Vehicles, which has been provided on WDV basis) at Shri Vishala Textile Mills division has been provided on SLM basis at the rates specified in Schedule XIV of the Companies Act, 1956.

v) Depreciation in respect of additions/sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

vi) The increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss account. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

G. Foreign Currency Transactions:

ii) Foreign Currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognised over the period of the contract.

ii) Foreign Exchange assets and liabilities are converted at the year end exchange rates. However non-monetary assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the profit and loss account.

H. Retirement benefits:

a) Short term benefits:

The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment. Long term compensated absences are provided for based on actuarial valuation.

b) Post employment benefits:

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Profit and Loss Account of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

c) Other long term benefits:

Deferred employee benefits/deferred compensation and Termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement scheme are charged to the Profit and Loss Account in the year incurred. Actuarial gains/lossess are immediately taken to the Profit and Loss account and are not deferred.

I) Valuation of Inventories:

a) Inventories are valued at lower of cost or net realisable value, cost being ascertained on the following basis: I i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods - cost includes applicable production overheads. iii) Traded goods - at lower of Cost or net realisable value.

b) Obsolete/non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

J. Investments being long term are valued at Cost. Provision for permanent dimunition in value is made, when considered necessary.

K. Taxes on Income - Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognised for all timing differences, subject to the consideration of prudence.

L. Cash Flow Statement:

Cashflow is reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M. Impairment of Fixed Assets:

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the company''s fixed assets. Impairment loss is recognised as and when required.

N. Earnings per share:

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O. Provisions and contingent liabilities:

The company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P. SEGMENT REPORTING:

SEGMENT INFORMATION:

a) The company has identified four reportable business segments as primary segments viz : yarn, yarn for trading, cloth and garments.

b) The secondary segment information are identified on the basis of geographical segments viz. Europe, Asia, U.S.A and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting.

I i) Revenue and Expenses have been identified to a segment on the basis actual / on turnover basis of the segment. ii) Pricing for Inter segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value. iii) Operating assets and liabilities represent assets / liabilities in respective segments.

---

Mar 31, 2012

A) The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with the applicable accounting standards specified in Companies (Accounting Standard) Rule 2006, the provisions of Companies Act 1956. The disclosure and other requirements under the Micro, Small and Medium Enterprises Development Act, 2006 have been considered.

B) Revenue recognition:

i) Sales are recognized when goods are dispatched and are recorded excluding Sales Tax and recoveries. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

ii) Rental Income / Interest income / Service / Process Charge is accounted on accrual basis.

iii) Dividend income on investments / claims are accounted for, when the right to receive the payment is established.

C) Duty Draw Back claims:

i) Duty draw back claims are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance.

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Target plus licences for which no obligation is attached, is recognised under income approach method.

D) Expenditure:

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of Inputs are accounted net of duty concessions availed.

E) Use of estimates:

The preparation of financial statement requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statement and the reported amount of income and expenses during the year.

F) Fixed Assets and Depreciation :

i) Land including lease is stated at cost except for a portion revalued. Other Fixed Assets are stated at cost less depreciation. The cost include borrowing cost and in respect of imported machinery the cost include the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets .Assets under erection / construction are stated at value incurred.

ii) Depreciation in respect of all assets at Loyal division excepting Plant and Machinery(On SLM basis) has been provided on written Down value basis at the rates specified in Schedule XIV to the Companies Act 1956.

iii) Depreciation in respect of all assets at Valli Division, Processing Division and Plant and Machinery of Loyal division (except as stated specifically elsewhere), SCTM division has been provided at the rates specified in schedule XIV to the Companies Act, 1956 on Straight line basis. Depreciation in respect of all assets at Garment division has been provided on written down value basis at the rates specified in schedule XIV. Rate of depreciation is determined on certain assets as per the internal assessment on the useful life of such assets.

iv) Depreciation in respect of all assets (except Furniture & Vehicles, which has been provided on WDV basis) at Shri Vishala Textile Mills division has been provided on SLM basis at the rates specified in Schedule XIV of the Companies Act, 1956.

v) Depreciation in respect of additions / sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

vi) Consequent to the amendment to schedule VI as per notification No. G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss account. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realizable values.

G. Foreign Currency Transactions :

i) Foreign currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognized over the period of the contract.

ii) Foreign Exchange assets and liabilities are converted at the year end exchange rates. However non-monitory assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the profit and loss account.

H. Retirement benefits:

a) Short term benefits :

The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment.

Long term compensated absences are provided for based on actuarial valuation.

b) Post employment benefits :

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Profit and Loss Account of the year when the contributions, for the covered employees, to the respective government administered funds are due. Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

c) Other long term benefits :

Deferred employee benefits/deferred compensation and Termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement scheme are charged to the Profit and Loss Account in the year incurred. Actuarial gains/losses are immediately taken to the Profit and Loss account and are not deferred.

I. Valuation of inventories :

a) Inventories are valued at lower of cost or net realizable value, cost being ascertained on the following basis:

i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods-Cost includes applicable production overheads.

iii) Traded goods - Cost at present location and condition.

b) Obsolete / non-moving Inventories are provided for to the extent of requirement and are stated at net realizable value.

J. Investments being long term are valued at Cost. Provision for permanent diminution in value is made, when considered necessary.

K. Taxes on Income - Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognized for all timing differences, subject to the consideration of prudence.

L. Cash Flow Statement :

Cash flow is reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M. Impairment of Fixed Assets :

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the company's fixed assets. Impairment loss is recognized as and when required.

N. Earnings per share :

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O. Provisions and contingent liabilities :

The Company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P. SEGMENT REPORTING :

SEGMENT INFORMATION :

a) The company has identified three reportable business segments as primary segments viz: yarn, cloth and garments.

b) The secondary segment information are identified on the basis of geographical segments viz. Europe, Asia,U.S.A and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting.

i) Revenue and Expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Expenses incurred on behalf of other segments are not directly identifiable to each reportable segment have been allocated to each segment on the basis of associated revenues of each segment.

ii) Pricing for Inter segment transfers has been made, considering the normal internal business reporting system of the company at estimated realizable value.

iii) Operating assets and liabilities represent assets / liabilities in respective segments.

---

Mar 31, 2011

A) The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with the applicable accounting standard specified in Companies (Accounting Standard) Rule 2006, the provisions of Companies Act 1956. The disclosure and other requirements under the Micro, Small and Medium Enterprises Development Act, 2006 have been considered.

B) Revenue recognition:

i) Sales are recognised when goods are despatched and are recorded excluding Sales Tax and recoveries. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

ii) Rental Income / Interest income is accounted on accrual basis.

iii) Dividend income on investments / claims are accounted for, when the right to receive the payment is established.

C) Expenditure:

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of Inputs are accounted net of duty concessions availed.

D) Duty Draw Back claims:

i) Duty draw back claims are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Target plus licences for which no obligation is attached, is recognised under income approach method.

E) Use of estimates:

The preparation of financial statement requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statement and the reported amount of income and expenses during the year.

F) Fixed Assets and Depreciation :

i) Land including lease is stated at cost except for a portion revalued. Other Fixed Assets are stated at cost less depreciation.The cost include borrowing cost and in respect of imported machinery, the cost include the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets .Assets under erection / construction are stated at value incurred.

ii) Depreciation in respect of all assets at Loyal division excepting Plant and Machinery has been provided on Written Down value basis at the rates specified in schedule XIV to the Companies Act 1956.

iii) Depreciation in respect of all assets at Valli Division, Processing Division and Plant and Machinery of Loyal division (except as stated specifically elsewhere) SCTM division has been provided at the rates specified in schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation in respect of all assets at Garment division has been provided on written down value basis at the rates specified in schedule XIV. Rate of depreciation is determined on certain assets as per the internal assessment on the useful life of such assets.

iv) Depreciation in respect of additions / sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

v) Consequent to the amendment to schedule VI as per notification No. G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss account. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

G. Foreign Currency Transactions :

i) Foreign currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognised over the period of the contract.

ii) Foreign exchange assets and liabilities are converted at the year end exchange rates. However non-monetory assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the profit and loss account.

H. Retirement benefits:

a) Short term benefits

The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment. Long term compensated absences are provided for based on actuarial valuation.

b) Post employment benefits

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Profit and Loss Account of the year when the contributions, for the covered employees, to the respective government administered funds are due.

Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

c) Other long term benefits

Deferred employee benefits/deferred compensation and termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement scheme are charged to the Profit and Loss account in the year incurred. Actuarial gains/losses are immediately taken to the Profit and Loss account and are not deferred.

I. Valuation of inventories

a) Inventories are valued at lower of cost or net realisable value, cost being ascertained on the following basis.

i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods cost includes applicable production overheads.

iii) Traded goods - Cost at present location and condition.

b) Obsolete / non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

J. Investment being long term are valued at Cost. Provision for permanent dimunition in value is made, when considered necessary.

K. Taxes on Income - Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognised for all timing differences, subject to the consideration of prudence.

L. Cash Flow Statement

i) Cashflow are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accurals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M. Impairment of Fixed Assets :

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the company's fixed assets. Impairment loss is recognised as and when required.

N. Earnings per share :

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O. Provisions and contingent liabilities :

The Company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P. SEGMENT REPORTING:

SEGMENT INFORMATION :

a) The company has identified three reportable business segments as primary segments viz:yarn, cloth and garments.

b) The secondary segment information are identified on the basis of geographical segments viz. Europe, Asia and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting.

i) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Expenses incurred on behalf of other segments and not directly identifiable to each reportable segment have been allocated to each segment on the basis of associated revenues of each segment.

ii) Pricing for Inter segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.

iii) Operating assets and liabilities represent assets / liabilities in respective segments.

Q. ACCOUNTING FOR AMALGAMATION :

The company has, in the matter of accounting for amalgamation, adopted pooling of interest method for recording assets, liabilities and reserves of the transfer or company at their exisiting carrying value as recommended by the companies Accounting Standard Rules, 2006 (AS 14)

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Mar 31, 2010

A) The accounts have been prepared to comply with, in all material aspects, the generally accepted accounting principles, under the historical cost convention, on accrual basis and in line with the applicable accounting standard specified in Companies (Accounting Standard) Rule 2006, the provisions of Companies Act 1956. The disclosure and other requirements under the Micro Small and Medium Enterprises Development Act, 2006 have been considered.

B) Revenue recognition:

i) Sales are recognised when goods are despatched and are recorded excluding Sales Tax and recoveries. There is no Excise Duty collection on sales as the Company has opted out of the duty payment scheme.

ii) Rental Income / Interest income is accounted on accrual basis.

iii) Dividend income on investments / claims are accounted for, when the right to receive the payment is established.

C) Expenditure:

Expenses are accounted for on accrual basis and provision is made for all losses and known liabilities. Cost of Inputs are accounted net of duty concessions availed.

D) Duty Draw Back claims:

i) Duty draw back claims are accounted on completion of exports, on complying with the rules of the scheme governing it. No obligation is attached to this assistance

ii) Sale of import entitlements are accounted on completion of transfer.

iii) Duty portion of capital goods availed against Target plus licences for which no obligation is attached, is recognised under income approach method.

E) Use of estimates:

The preparation of financial statement requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statement and the reported amount of income and expenses during the year.

F) Fixed Assets and Depreciation :

i) Land including lease is stated at cost except for a portion revalued. Other Fixed Assets are stated at cost less depreciation.The cost include borrowing cost and in respect of imported machinery, the cost include the value portion of customs duty credit availed as granted by the government under export incentive schemes. The Capital subsidy from government is accounted when the right to receive is established and is deducted from the gross value of the respective assets and shown in the fixed assets schedule. Assets under erection are stated at value incurred.

ii) Depreciation in respect of all assets at Loyal division excepting Plant and Machinery has been provided on Written Down value basis at the rates specified in schedule XIV to the Companies Act 1956.

iii) Depreciation in respect of all assets at Valli Division, Processing Division and Plant and Machinery of Loyal division (except as stated specifically elsewhere) has been provided at the rates specified in schedule XIV to the Companies Act, 1956 on straight line basis. Depreciation in respect of all assets at Garment division has been provided on written down value basis at the rates specified in schedule XIV. Rate of depreciation is determined on

iv) Depreciation in respect of additions / sales has been provided pro-rata from the date of commissioning or till the date of sale as rounded off to the nearest month.

v) Consequent to the amendment to schedule VI as per notification No. G.S.R. 226(E) Dated 31.03.2009 the increase / decrease in long term liability due to fluctuation in foreign currency in respect of imported Plant and Machinery beyond the date of commissioning is taken to Profit and Loss account. Depreciation has been provided from the date of commissioning. The assets identified as obsolete and held for disposal are stated at their estimated net realisable values.

G. Foreign Currency Transactions :

i) Foreign currency transactions are recorded at the negotiated rates prevailing on the dates of transactions. Exchange difference on Foreign Currency Transactions covered by specific forward contracts are recognised over the period of the contract.

ii) Foreign exchange assets and liabilities are converted at the year end exchange rates. However non-monetory assets ie., investments are stated at the rate prevailing on the date of transaction.

iii) Exchange differences arising on foreign currency transactions are included in the profit and loss account.

H. Retirement benefits:

a) Short term benefits The gross amounts are recognized as expense and to the extent unpaid it is recognized as liability. Short term compensated absences are provided for based on internal assessment. Long term compensated absences are provided for based on actuarial valuation

b) Post employment benefits

Provident fund and other funds, being defined contribution schemes, the contributions are charged to the Profit and Loss Account of the year when the contributions, for the covered employees, to the respective government administered funds are due.

Gratuity, being a defined benefit plan, the defined benefit obligations are provided for on the basis of an actuarial valuation made at the end of each financial year.

c) Other long term benefits

Deferred employee benefits/deferred compensation and termination benefits are recognized as an expense as and when incurred. Payments made under the Voluntary Retirement scheme are charged to the Profit and Loss account in the year incurred. Actuarial gains/losses are immediately taken to the Profit and Loss account and are not deferred.

I. Valuation of inventories

a) Inventories are valued at lower of cost or net realisable value, cost being ascertained on the following basis.

i) Stores and spares, raw-materials on weighted average basis.

ii) Stock-in-process, Finished goods cost includes applicable production overheads.

iii) Traded goods - Cost at present location and condition.

b) Obsolete / non-moving Inventories are provided for to the extent of requirement and are stated at net realisable value.

J. Investment being long term are valued at Cost. Provision for permanent dimunition in value is made, when considered necessary.

K. Taxes on Income - Current Tax is determined on the basis of taxable income for the year. Deferred tax is recognised for all timing differences, subject to the consideration of prudence.

L. Cash Flow Statement

i) Cashflow are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accurals of past or future operating cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

M. Impairment of Fixed Assets :

Consideration is given at each Balance Sheet date to determine whether there is any impairment of the carrying amount of the companys fixed assets. Impairment loss is recognised as and when required.

N. Earnings per share :

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect on any extra ordinary items. The number of shares used in computing basic and diluted equity shares is the weighted average number of shares outstanding during the year.

O. Provisions and contingent liabilities :

The Company creates a provision when there is a present obligation as a result of an event that requires an outflow of resources and a reliable estimate can be made of the amount. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not require an outflow of resources.

P. SEGMENT REPORTING:

SEGMENT INFORMATION :

a) The company has identified three reportable business segments as primary segments viz:yarn, cloth and garments.

b) The secondary segment information are identified on the basis of geographical segments viz. Europe, Asia and Others.

c) The Accounting policies adopted for segment reporting are in line with the accounting policy of the company with the following additional policies for segment reporting.

i) Revenue and expenses have been identified to a segment on the basis of relationship to operating activities of the segment. Expenses incurred on behalf of other segments and not directly identifiable to each reportable segment have been allocated to each segment on the basis of associated revenues of each segment.

ii) Pricing for Inter segment transfers has been made, considering the normal internal business reporting system of the company at estimated realisable value.

iii) Operating assets and liabilities represent assets / liabilities in respective segments.