Notes to Accounts of Nahar Industrial Enterprises Ltd.

Mar 31, 2018

1. Background

Nahar Industrial Enterprises Limited (the “Company”) incorporated in 1983 is engaged in the business of Textiles and Sugar in India. The company is a public company domiciled in India under the provision of companies Act, 1956. Its shares are listed in recognized stock exchange BSE/NSE of India. The registered office of the company is located in Focal Point, Ludhiana.

Note: 1.1 Critical estimates and judgements

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company’s accounting policies.

This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

Critical estimates and judgements

The areas involving critical estimates or judgements are:

- Estimation of current tax expense and payable - Note 30

- Estimation of defined benefit obligation - Note 40

- Recognition of deferred tax assets for carried forward tax losses - Note 15

Estimates and judgements are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on Company and that are believed to be reasonable under the circumstances.

* Figures of term loan stated in para 13a .1(I) includes current maturities of Long term debt shown separately in notes no. 17c and exclude Rs. 27.50 lacs transaction cost amortised over the period of Term loan.

Term Loan from IDBI Bank Limited, State Bank of India, Allahabad Bank, Punjab & Sind Bank, Canara Bank, Dena Bank and Corporation Bank are secured by hypothecation as pari-passu first charge on whole of the immovable properties of the Company situated at Village Jalalpur, Chandigarh Ambala Road, Lalru, Distt. Mohali, Industrial Focal Point, Phase-VIII, Village Mundian,Distt. Ludhiana, Village Jaladiwal, Near Raikot, Distt. Ludhiana (Punjab), Village Udaipur / Khljuriwas, Bhiwadi, Distt. Alwar (Rajasthan), Focal Point Phase IV Ludhiana (Punjab) and Village Salana Jeon Singh Wala, Tehsil Amloh, Distt. Fatehgarh Sahib (Punjab) Including the Company''s movable Plant and Machinery, Machinery Spares and other moveables both present and future and subject to the charge or charges created or to be created by the Company in favour of its Bankers on its movables and also personally guaranteed by some of the Directors of the Company.

ii) Loans and advances from the related parties will be paid after three years.

* Figures of term loan stated in para 13a .1(I) includes current maturities of Long term debt shown separately in notes no. 17c and exclude Rs. 33.69 lacs transaction cost amortised over the period of Term loan.

Term Loan from IDBI Bank Limited, State Bank of Patiala, State Bank of Hyderabad, Allahabad Bank, Punjab National Bank, Punjab & Sind Bank, Dena Bank and Corporation Bank are secured by hypothecation as pari-passu first charge on whole of the immovable properties of the Company situated at Village Jalalpur, Chandigarh Ambala Road, Lalru, Distt. Mohali, Industrial Focal Point, Phase-VIII, Village Mundian,Distt. Ludhiana, Village Jaladiwal, Near Raikot, Distt. Ludhiana (Punjab), Village Udaipur / Khljuriwas, Bhiwadi, Distt. Alwar (Rajasthan), Focal Point Phase IV Ludhiana (Punjab) and Village Salana Jeon Singh Wala, Tehsil Amloh, Distt. Fatehgarh Sahib (Punjab) Including the Company''s movable Plant and Machinery, Machinery Spares and other moveables both present and future and subject to the charge or charges created or to be created by the Company in favour of its Bankers on its movables and also personally guaranteed by some of the Directors of the Company.

ii) Loans and advances from the related parties will be paid after three years.

1.2 Working Capital Borrowings are secured by hypothecation of stock of Raw Materials, work-in-Progress, Finished Goods, Stores and Book Debts and further secured by 2nd charge on fixed Assets of the Company and also personally guaranteed by some of the Directors of the Company.

2) CONTINGENT LIABILITIES NOT PROVIDED FOR :

a) Letter of Credits in favour of suppliers and others Rs.7,602.85 Lacs (Previous Year Rs.864 Lacs)

b) Bank Guarantees in favour of suppliers and others Rs.1,532.79 Lacs (Previous Year Rs.2,218.26 Lacs)

c) Sales tax demands against which the company has preferred appeals Rs.57.74 Lacs .(Previous Year Rs.67.17 Lacs)

d) Income tax demands against which the company has preferred appeals Rs.1,339.89 Lacs. (Previous Year Rs.1,368.89 Lacs).

e) The Central Excise Authorities have issued show cause notices to the Company for Rs.571.84 Lacs on various matters under the Central Excise Rules (Previous Year Rs.640.83 Lacs ) .The Company has filed suitable reply with the concerned authorities.

f) The Company has executed bonds / legal undertakings for an aggregate amount of Rs.426.73 Lacs (Previous Year Rs.3,124.90 Lacs). In favour of the President of India for fulfilment of its obligation under the rules made Central Excise Act, 1944 and Customs Act, 1962.

g) Claims of Rs.3,680.22 Lacs. (Previous Year Rs.3,602.98 Lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

h) Employees’ state Insurance Corporation has raised demand of Rs.124.62 Lacs.(Previous Year Nil) The Company deposited Rs.94.64 Lacs against the said demand. The Company has filed Civil Suit before the Civil Judge (Sr. Div.), ESI Court, Ludhiana.

3. Capital Commitment

Estimated amount of contracts in capital account (net of advances/LC issued) remaining to be executed and not provided for Rs.5,911.33 Lacs (Previous Year Rs.908.89 Lacs).

4. The Company has undertaken export obligations of Rs.40,671.89 Lacs (Previous Year Rs.50,005.74 ) to export goods against the issuance of Import Licenses / Advance Licenses for the Import of Capital Goods and Raw Materials. Out of this, export obligations of Rs.39,092.20 Lacs (Previous Year Rs.48,426.05 Lacs) have been fulfilled up to 31 March, 2018.

5. In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

6. Export/domestic bills discounted under Letter of Credit outstanding as on 31.03.2018 for Rs.3,196.84 Lacs (Previous Year Rs.3,531.48 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

7) Significant accounting judgements, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Judgements

In the process of applying the Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the financial statements:

Operating lease commitments - Company as lessee

The Company has taken ceratin land on long term lease basis. The Company has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the property and the fair value of the asset, that it does not have all the significant risks and rewards of ownership of these properties and accounts for the contracts as operating leases.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Defined benefit plans (gratuity benefits)

The cost of the defined benefit gratuity plan and other post-employment benefits and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate for plans operated in India, the management considers the interest rates of government bonds in currencies consistent with the currencies of the post-employment benefit obligation.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at interval in response to demographic changes. Future salary increases and gratuity increases are based on expected future inflation rates.

Impairment of non-financial assets

Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Company is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

8) Post Retirement Benefits Plan (Ind AS 19)

Defined Benefit Plan

The Company provides for gratuity for employees in India as per the Payment of Gratuity Act, 1972. Employees who are in continuous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied for the number of years of service. For the funded plan the Company makes contributions to recognized funds in India.

These assumptions were developed by management with the assistance of independent actuarial appraisers. Discount factors are determined close to each year-end by reference to government bonds of relevant economic markets and that have terms to maturity approximating to the terms of the related obligation. Other assumptions are based on management’s historical experience.

Expected Future cash flow

The expected future cash flow in respect of gratuity as at 31st March, 2018 were as follows

Expected contribution

The expected future employer contributions for defined benefit plan as at 31st March, 2018 (for the year ended 31st March, 2019 i.e. Rs.977.71 Lacs)

Level 1 : Level 1 hierarchy includes financial instruments measured using quoted prices. This includes listed equity instruments. The fair value of all equity instruments which are traded in the stock exchanges is valued using the closing price as at the reporting period.

Level 2 : The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2.

Level 3 : If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, contingent consideration and indemnification asset included in level 3.

The carrying amounts of trade receivables, other financial assets, trade payables and cash and cash equivalents are considered to be the same as their fair values, due to short term nature. The fair values for loans, security deposits and investments in preference shares were calculated based on cash flows discounted using a current lending rate. They are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk. The fair values of non-current borrowings are based on discounted cash flows using a current borrowings rate . They are classified as level 3 fair values in the fair value hierarchy due to the use of unobservable inputs, including own credit risk. For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

9) Financial risk management objectives and policies

The Company''s financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company''s operations and to support its operations. The Company''s financial assets include investments, loans, trade and other receivables, cash & cash equivalents and other bank balances that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The company''s senior management oversees the management of these risks. The company''s senior management is supported by a financial risk committee that advises on financial risks and the appropriate financial risk governance framework for the Company. This financial risk committee provides assurance to the Company''s senior management that the Company''s financial risk activities are governed by appropriate policies and procedure and that financial risks are identified, measured and managed in accordance with the Company''s policies and risk objectives. The Board of Directors reviews and agrees policies for managing each risk, which are summarised as below:

(A) Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risks. Financial instruments affected by market risk include loans and borrowings, deposits and payables/receivables in foreign currencies.

a) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company''s exposure to the risk of changes in market interest rates relates primarily to the Company''s long term debt obligations with floating interest rates. The Company is carrying its borrowings primarily at variable rate. The Company expects the variable rate to decline, accordingly the Company is currently carrying its loans at variable interest rates.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. With all other variable held constant, the Company''s profit before tax is affected through the impact on floating rate borrowings, as follows:

b) Foreign currency risks

Foreign currency risk is the risk that the fair value of future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company’s exposure in foreign currency is in Trade payables denominated in foreign currency. The Company is not restricting its exposure of risk in change in exchange rates.

Foreign currency sensitivity

The following table demonstrate the sensitivity to a reasonably possible change in foreign currency exchange rates. The impact on the Company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

(B) Credit risk

Credit risk is the risk that counter party will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including loans to related parties, deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

Credit risk management

The Company assesses and manages credit risk based on internal credit rating system. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets.

(i) Low credit risk on reporting date

(ii) Moderate credit risk

(iii) High credit risk

Cash & cash equivalents and bank deposits

Credit risk related to cash and cash equivalents and bank deposits is managed by only accepting highly rated banks and diversifying bank deposits and accounts in different banks across the country.

Trade receivables

Credit risk related to trade receivables are mitigated by taking Credit insurance for domestic sales/letter of credit for export sales, which results in low credit risk. The Company closely monitors the credit-worthiness of the debtors through internal systems that are configured to define credit limits of customers, thereby, limiting the credit risk to pre-calculated amounts.

Other financial assets measured at amortised cost

Other financial assets measured at amortized cost includes loans and advances to employees, security deposits and others. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously.

10. Capital Management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the Company. The primary objective of the Company’s capital management is to maximise the shareholder value. The Company manages its capital structure and makes adjustments in light of changes in economic conditions and the requirements of the financial covenants. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt , interest bearing loans and borrowings, trade payables, less cash and cash equivalents.

The Company for its CSR obligation joined hands with other group companies and agreed to do CSR obligation through a SPV, a recognized charitable organization , M/s. Oswal Foundation. The said organization had done various activities under CSR. Last year the project of Eye care which was under consideration could not be taken up and discarded. Now the said society is considering a new healthcare project. The company would contribute its CSR obligation as and when it is finalized. In the meantime amount of CSR obligation Rs.68.52 lacs has been set apart towards Corporate social responsibility reserve and Rs.54.89 as CSR liability.

11. Reconciliation of changes in liabilities arising from the financing activities including both changes arising from the cash flows and non-cash changes as per the requirement of the Ind AS-7 "Statement of Cash Flows" .

12. Previous year figures have been regrouped/recasted/rearranged/reclassified wherever considered necessary to make them comparable.

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Mar 31, 2016

1) CONTINGENT LIABILITIES NOT PROVIDED FOR :

a) Estimated amount of contracts remaining to be executed on capital account (net of advances/ Letter of credit issued) Rs.1,076.15 Lacs (Previous year Rs.5,398.67 Lacs).

b) Letter of Credits in favour of suppliers and others Rs. 2,408.62 Lacs (Previous year Rs. 694.98 Lacs).

c) Bank Guarantees in favour of suppliers and others Rs. 1,803.22 Lacs (Previous year Rs. 1,159.11 Lacs).

d) Sales tax demands against which the company has preferred appeals Rs. 67.17 Lacs (Previous year Rs. 67.17 Lacs).

e) Income tax demands against which the company has preferred appeals Rs. 1,175.84 Lacs (Previous year Rs. 646.83 Lacs).

f) The Central Excise Authorities have issued show cause notices to the Company for Rs. 603.16 Lacs on various matters under the Central Excise Rules (Previous year Rs. 819.44 Lacs). The Company has filed suitable replies with the concerned authorities.

g) The Company has executed bonds / legal undertakings for an aggregate amount of Rs. 3,124.90 Lacs (Previous year Rs. 8,681.30 Lacs) in favour of the President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962.

h) Claims of Rs. 3,525.40 Lacs (Previous year Rs. 3,525.40 Lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

2) The Company has undertaken export obligations of Rs. 49,246.31 Lacs (Previous year Rs. 67,461.51 Lacs) to export goods against the issuance of Import Licenses / Advance Licenses for the Import of Capital Goods and Raw Materials. Out of this, export obligations of Rs. 47,666.62 Lacs (Previous year Rs. 65,881.82 Lacs) have been fulfilled up to 31^st March, 2016.

3) Advances include Rs. 27.76 Lacs (Previous year Rs. 27.76 Lacs) paid to the machinery supplier that are under dispute. The matter is pending in the Delhi High Court.

4) In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

5) Export/domestic bills discounted during the year under Letter of Credit outstanding as on 31.03.2016 for Rs. 4,474.56 Lacs (Previous year Rs. 5,723.35 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

6) The Company was diversifying its business by installing a distillery unit at Village Salana Jeon Singh Wala, Tehsil Amloh, District Fatehgarh Sahib. However because of strategic reason, the Company has abandoned this project.

7) Segment Information as required by Accounting Standard 17 “Segment Reporting” issued by the ICAI and compiled on the basis of the financial statements is as under :-

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Mar 31, 2015

1) CONTINGENT LIABILITIES NOT PROVIDED FOR :

a) Estimated amount of contracts remaining to be executed on capital account (net of advances/ Letter of credit issued) Rs.5,398.67 Lacs (Previous year Rs.1,010.03 Lacs).

b) Letter of Credits in favour of suppliers and others Rs. 694.98 Lacs (Previous year Rs. 868.81 Lacs).

c) Bank Guarantees in favour of suppliers and others Rs. 1,159.11 Lacs (Previous year Rs. 916.08 Lacs).

d) Sales tax demands against which the company has preferred appeals Rs. 67.17 Lacs (Previous year Rs. 67.17 Lacs).

e) Income tax demands against which the company has preferred appeals Rs. 646.83 Lacs (Previous year Rs. Nil Lacs).

f) The Central Excise Authorities have issued show cause notices to the Company for Rs. 819.44 Lacs on various matters under the Central Excise Rules (Previous year Rs. 809.52 Lacs). The Company has filed suitable replies with the concerned authorities.

g) The Company has executed bonds / legal undertakings for an aggregate amount of Rs. 8,681.30 Lacs (Previous year Rs. 8,161.57 Lacs) in favour of the President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962.

h) Claims of Rs. 3,525.40 Lacs (Previous year Rs. 486.49 Lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

2) The Company has undertaken export obligations of Rs. 67,461.51 Lacs (Previous year Rs. 52,048.08 Lacs) to export goods against the issuance of Import Licenses / Advance Licenses for the Import of Capital Goods and Raw Materials. Out of this, export obligations of Rs. 65,881.82 Lacs (Previous year Rs. 50,468.39 Lacs) have been fulfilled up to 31st March, 2015.

3) Advances include Rs. 27.76 Lacs (Previous year Rs. 27.76 Lacs) paid to the machinery supplier that are under dispute. The matter is pending in the Delhi High Court.

4) In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

5) Export/domestic bills discounted during the year under Letter of Credit outstanding as on 31.03.2015 for Rs. 5,723.35 Lacs (Previous year Rs. 6,597.01 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

6) In accordance with the section 135 of the Companies Act, 2013 the company is covered by the provision of the said section-"Corporate Social Responsibility (CSR)"

a) The amount required to be spent- Rs.40.56 Lacs

b) The amount Spent - Nil However the company jointly with other group companies have joined hands under one umbrella, namely Oswal Foundation to carry out CSR activities in future.

7) Consequent to the enactment of the Companies Act, 2013 and its applicability for accounting periods commencing from 1st April, 2014, the Company has recalculated the remaining useful life of fixed assets in accordance with the provisions of Schedule-II of the Act. In case of Fixed Assets which have already completed their useful life in terms of Schedule-II of the Act, the carrying value (net of residual value) of such assets as at 1st April, 2014 amounting to Rs. 3,348.44 Lacs (net of deferred tax ) has been adjusted to the Retained Earnings and in case of other fixed assets the carrying value (net of residual value) is being depreciated over the re-calculated remaining useful life.

8) The Company is setting up a distillery unit with a capacity of 200 KLPD and 5 MW co-generation power plant at Village Salana Jeon Singh Wala , Tehsil Amloh , District Fatehgarh Sahib in the State of Punjab. After obtaining all necessary approvals for setting up the unit, orders for purchase of plant and machinery was placed and civil construction has also started. Unfortunately, farmers of the nearby area have filed an appeal in the National Green Tribunal (NGT), Delhi challenging Environmental Clearance and the central ground water approval regarding extraction of water through bore wells. The Tribunal heard the arguments from both the sides and the order was reserved on 19.3.2015 and the same is pending till date. In the meantime Company has incurred Rs. 16.61 crore as capital expenditure in the project.

9) Related Party Disclosures as required by Accounting Standard 18 issued by the ICAI are as under: - (a) Disclosure of Related Parties and relationship between the parties.

1 Associates J.L.Growth Fund Limited

Vardhman Investment Limited

Atam Vallabh Financers Limited

Cotton County Retail Limited

2 Key Management Personnel Sh. Kamal Oswal Vice Chairman-cum-Managing Director

Sh. Bharat Bhushan Gupta Chief Financial Officer

Sh. Mukesh Sood Company Secretary

3 Relatives of Key Management Personnel Sh. Jawahar Lal Oswal

Sh. Dinesh Oswal

Mrs. Abhilash Oswal

Mrs. Manisha Oswal

Mrs. Ritu Oswal

Mrs. Ruchika Oswal

Mrs. Monika Oswal

Mr. Rishab Oswal

Mr. Abhinav Oswal

4 Enterprises in which Key Management Personnel and relative of such personnel is able to exercise significant influence or control

Oswal Woollen Mills Ltd.

Nahar Spinning Mills Ltd.

Nahar Capital and Financial Services Ltd.

Nahar Industrial Infrastructure Corporation Ltd.

Monte Carlo Fashions Ltd.

Nahar Poly Films Ltd.

Kovlam Investment & Trading Co. Ltd.

Nagdevi Trading & Investment Co. Ltd.

Sankheshwar Holding Co. Ltd.

Vanaik Investors Ltd.

Vinayak Spinning Mills Ltd.

Crown Star Ltd.

Hug Foods Pvt. Ltd.

Abhilash Growth Fund Pvt. Ltd.

Nahar Growth Fund Pvt. Ltd.

Neha Credit & Investment Pvt. Ltd.

Nahar Financial and Investment Ltd.*

Retailerkart E-Venture Pvt. Ltd.*

Simran & Shanaya Co. Ltd.*

Sidhanth & Mannat Co. Ltd.*

Palam Motels Ltd.*

Monika Growth Fund Pvt. Ltd.*

Ruchika Growth Fund Pvt. Ltd.*

Girnar Investment Ltd.*

10) The previous year figures have been reclassified to confirm to this year's classification.

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Mar 31, 2013

1) CONTINGENT LIABILITIES NOT PROVIDED FOR :

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs.3,498.34 Lacs (Previous year Rs.3,645.75 Lacs).

b) Letter of Credits in favour of suppliers and others Rs.4,852.15 Lacs (Previous year Rs.3,505.94 Lacs).

c) Bank Guarantees in favour of suppliers and others Rs.335.57 Lacs (Previous Year Rs.128.98 Lacs)

d) Corporate guarantee given on behalf of others Rs. Nil Lacs (Previous year Rs.1,195 Lacs)

e) Sales tax demands against which the company has preferred appeals Rs.120.46 Lacs (Previous year Rs.120.46 Lacs).

f) Income tax demands against which the company has preferred appeals Rs.552.00 Lacs (Previous year Rs.Nil Lacs).

g) The Central Excise Authorities have issued show cause notices to the Company for Rs.749.29 Lacs on various matters under the Central Excise Rules (Previous Year Rs.850.68 Lacs). The Company has filed suitable replies with the concerned authorities.

h) Punjab State Power Corporation Ltd. has raised a net demand of Rs.121.78 Lacs (Previous Year Rs.121.78 Lacs) on account of paralleling operation charges for the captive power generation by the Company. The Company has protested the demand in the Hon''ble Courts. i) The Company has executed bonds / legal undertakings for an aggregate amount of Rs.6,900.39 Lacs (Previous year Rs.6,041.87 Lacs) in favour of The President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962. j) Claims of Rs.437.35 lacs (Previous Year Rs.368.06 lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities. k) On the basis of liability under disputed derivative contracts the banks have created interest demand of Rs.135.03 lacs so far on account of non payment. Since the derivative contracts are subjudice and disputed, thus the interest liability is contingent and has not been provided for.

2) The Company has undertaken export obligations of Rs.38,251.63 Lacs (Previous year Rs.26,130.59 Lacs) to export goods against the issuance of Import Licenses / Advance Licenses for the Import of Capital Goods and Raw Materials. Out of this, export obligations of Rs.36,671.95 Lacs (Previous year Rs.23,046.27 Lacs) have been fulfilled up to 31st March, 2013.

3) Advances include Rs.27.76 Lacs (Previous Year Rs.27.76 Lacs) paid to the machinery suppliers that are under dispute. The matter is pending in the Delhi High Court.

4) In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

5) Export/domestic bills discounted during the year under Letter of Credit outstanding as on 31.03.2013 for Rs.6,896.92 Lacs (Previous year Rs.2,952.57 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

6) The previous year figures have been reclassified to confirm to this year''s classification.

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Mar 31, 2012

A. Terms/rights attached to equity shares:

The company has only one class of Equity Shares having Face value of Rs. 10/-each. Each holder of equity share is entitled to only one vote per share.

1.1 Term loan from ICICI Bank Limited, IDBI Bank Limited, Canara Bank, State Bank of Patiala, Indian Overseas Bank, Allahabad Bank, Punjab National Bank, Axis Bank , State Bank Of Mysore, Punjab & Sind Bank , Corporation Bank and Government of India, Ministry of Consumer Affairs are secured by hypothecation as pari-passu first charge on whole of the immovable properties of the Company situated at Village Jalalpur, Chandigarh Ambala Road, Lalru, Distt. Mohali, Industrial Focal Point, Phase VIII, Village Mundian, Distt. Ludhiana, Village Jalaldiwal, Near Raikot, Distt. Ludhiana (Punjab), Village Udaipur/ Khijuriwas, Bhiwadi, Distt. Alwar (Rajasthan), Focal Point Phase IV Ludhiana (Punjab) and Village Salana Jeon Singh Wala, Tehsil Amloh, Distt. Fatehgarh Sahib (Punab) including the Company's movable Plant and Machinery, Machinery Spares and other moveables both present and future and subject to the charge or charges created or to be created by the Company in favour of its Bankers on its movables and also personally guaranteed by some of the Directors of the Company.

2.1 Working Capital Borrowings are secured by hypothecation of stock of Raw Materials, Work-in-Progress, Finished Goods, Stores and Book Debts and further secured by 2nd charge on Fixed Assets of the Company and also personally guaranteed by some of the Directors of the Company.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotions and other relevant factors such as supply and demand in the employment market. Discount rate is based on market yields prevailing on government bond as at 31 March 2012 for the estimated term of defined benefit obligation.

3) CONTINGENT LIABILITIES NOT PROVIDED FOR :

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 3,645.75 Lacs (Previous year Rs. 14,036.28 Lacs).

b) Letter of Credits in favour of suppliers and others Rs. 3,505.94 Lacs (Previous year Rs. 8,032.67 Lacs).

c) Bank Guarantees in favour of suppliers and others Rs. 128.98 Lacs (Previous Year Rs. 113.34 Lacs).

d) Corporate guarantee given on behalf of others Rs. 1,195 lacs (Previous year Rs. 8,500lacs).

e) Sales tax demands against which the company has preferred appeals Rs. 120.46 Lacs (Previous year Rs. 120.46 Lacs).

f) The Central Excise Authorities have issued show cause notices to the Company forRs. 850.68 Lacs on various matters under the Central Excise Rules (Previous Year Rs. 618.81 Lacs). The Company has filed suitable replies with the concerned authorities.

g) Punjab State Power Corporation Ltd. has raised a net demand of Rs. 121.78 Lacs (Previous Year Rs. 158.66 Lacs) on account of paralleling operation charges for the captive power generation by the Company. The Company has protested the demand in the Hon'ble Courts.

h) The Company has executed bonds / legal undertakings for an aggregate amount of Rs. 6,041.87 Lacs (Previous yearRs. 6,293.03 Lacs) in favour of The President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962.

i) Claims of Rs. 368.06 lacs (Previous YearRs. 349.67 lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

j) Contingent liablities were provided in respect of Foreign Exchange Contracts which were under dispute in the courts, The net contingent liability at the end of year 2011-12 come to Rs. 1,609.04 lacs.

Since the liability arising out of the derivative contracts are sub judice before the Civil Courts and has been considered by the company as Contingent liability, thus the interest of Rs. 135.03 lacs computed by the banks on the disputed amount is not acknowledged and accordingly not provided for as status quo order is already in force.

4) The Company has undertaken export obligations of Rs. 26,130.59 Lacs (Previous year Rs. 19,929.98 Lacs) to export goods against the issuance of Import Licenses / Advance Licenses for the Import of Capital Goods and Raw Materials. Out of this, export obligations of Rs. 23,046.27 Lacs (Previous year Rs. 18,798.44 Lacs) have been fulfilled up to 31st March, 2012.

5) Advances include Rs. 27.76 Lacs (Previous YearRs. 27.76 Lacs) paid to the machinery suppliers that are under dispute. The matter is pending in the Delhi High Court.

6) In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

7) Export/domestic bills discounted during the year under Letter of Credit outstanding as on 31.03.2012 forRs. 2,952.57 Lacs (Previous yearRs. 2,211.88 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

Associates*

Nahar Spinning Mills Limited , Nahar Poly Films Limited, Nahar Capital and Financial Services Limited, Oswal Woolen Mills Limited, Atam Vallabh Financers Limited, J.L.Growth Fund Limited, Vardhman Investments Limited, Abhilash Growth Fund Pvt. Limited, Kovlam Investment Trading Co. Limited, Ludhiana Holding Limited, Nagdevi Trading Investment Co. Limited, Nahar Growth Fund Pvt. Limited, Neha Credit Investment Pvt. Limited, Sankheshwar Holding Co. Limited, Vanaik Investor Limited, Vinayak Spinning Mills Limited, Nahar Industrial Infrastructure Corporation Limited, Cotton County Retail Limited, Crown Star Limited, Nahar Financial and Investment Limited, Monte Carlo Fashions Limited.

Key Management Personnel

Sh. Jawahar Lal Oswal, Sh. Kamal Oswal and Sh. Dinesh Oswal

Relatives of Key management Personnel

Mrs. Abhilash Oswal, Mrs. Manisha Oswal, Mrs. Ritu Oswal and Mr. Rishab Oswal

* Associates include enterprises in which Key Management Personnel or their relatives have significant Influence, it also includes enterprises with which no transaction has taken place during the peroid.

8) The financial statements for the year ended 31st March, 2012 have been prepared as per Revised Schedule-VI to the Companies Act, 1956. Accordingly the previous year figures have been reclassified to confirm to this year's classification.

---

Mar 31, 2011

1) CONTINGENT LIABILITIES NOT PROVIDED FOR:

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs. 14,036.28 Lacs (Previous year Rs. 1,570.14 Lacs).

b) Letter of Credits in favour of suppliers and others Rs. 8,032.67 Lacs (Previous year Rs. 2,074.50 Lacs).

c) Bank Guarantees in favour of suppliers and others Rs. 113.34 Lacs (Previous Year Rs. 267.69 Lacs).

d) Corporate guarantee given on behalf of others Rs. 8,500 lacs (Previous year Rs. 8,500 lacs).

e) Sales tax demands against which the company has preferred appeals Rs. 120.46 Lacs (Previous year Rs. 120.46 Lacs).

f) The Central Excise Authorities have issued show cause notices to the Company for Rs. 618.81 Lacs on various matters under the Central Excise Rules (Previous Year Rs. 2,129.06 Lacs). The Company has filed suitable replies with the concerned authorities.

g) Punjab State Electricity Board has raised a net demand of Rs. 158.66 Lacs (Previous Year Rs. 158.66 Lacs) on account of paralleling operation charges for the captive power generation by the Company. The Company has protested the demand in the Hon'ble Courts.

h) The Company has executed bonds / legal undertakings for an aggregate amount of Rs. 6,293.03 Lacs (Previous year Rs. 3,166.52 Lacs) in favour of the President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962.

i) Claims of Rs. 349.67 lacs (Previous Year Rs. 372.56 lacs) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

j) Foreign Exchange contracts which were under dispute in the Courts, for which contingent liablities were provided, have been partly settled during the year. The net contingent liability at the end of year 2010-11 come to Rs. 1,609.04 lacs.

Since the liability arising out of the derivative contracts are sub judice before the Civil Courts and has been considered by the company as Contingent liability, thus the interest of Rs. 135.03 lacs computed by the banks on the disputed amount is not acknowledged and accordingly not provided for as status quo order is already in force.

2) The Company has undertaken export obligations of Rs. 19,929.98 Lacs (Previous year Rs. 17,793.98 Lacs) to export goods against the issuance of Import Licenses for the Import of Capital Goods. Out of this, export obligations of Rs.18,798.44 Lacs (Previous year Rs. 17,397.65 Lacs) have been fulfilled up to 31st March, 2011.

3) The outstanding liability towards Zero Coupon Foreign Currency Convertible Bonds (FCCBs), which were due for redemption on its maturity date i.e. 16th February, 2011 have been redemed in full alongwith redemption premium for the entire peroid.

FCCB's peroidic cost reserve of Rs. 1,272.91 Lacs Created upto 31st March, 2010 has been transferred to the Profit/ Loss Account in the year ended results.

4) Market value of quoted investments is Rs. 3,742.92 Lacs (Previous Year Rs. 3,242.39 Lacs). Aggregate value of quoted investments is Rs. 5,057.66 Lacs (Previous Year Rs. 5,091.24 Lacs) and unquoted investment is Rs. 9,028.34 Lacs (Previous Year Rs. 9,025.53 Lacs).

5) Advances include Rs. 27.76 Lacs (Previous Year Rs. 27.76 Lacs) paid to the machinery suppliers that are under dispute. The matter is pending in the Delhi High Court.

6) The balances of Sundry debtors and Sundry creditors are subject to confirmation.

7) In the opinion of the Board of Directors, the Current Assets and Loans and Advances have a value on realization in the ordinary course of business at least equal to the value at which they are stated in the foregoing Balance Sheet, unless stated otherwise.

During the financial year 2007-08 the company had paid managerial remuneration of Rs. 464.78 lacs as approved by the shareholders in their meeting held on 29.09.2007. The company moved an application with the Central Government for approval which was denied. Accordingly, the amount of excess remuneration of Rs.358.75 lacs was considered as advance salary in the year of payment and was adjusted in the subsequent years remuneration. Out of this, Rs.145.49 lacs was adjusted in 2009-10 and Rs. 213.26 lacs was adjusted in 2010-11. After adjustment, the remuneration of Rs. 14.13 lacs is paid/payable to the Vice Chairman Cum-Managing Director.

Associates*

Nahar Spinning Mills Limited , Nahar Poly Films Limited, Nahar Capital and Financial Services Limited, Oswal Woolen Mills Limited, Atam Vallabh Financers Limited, J.L.Growth Fund Limited, Vardhman Investments Limited, Abhilash Growth Fund Pvt. Limited, Kovlam Investment Trading Co. Limited, Ludhiana Holding Limited, Nagdevi Trading Investment Co. Limited, Nahar Growth Fund Pvt. Limited, Neha Credit Investment Pvt. Limited, Sankheshwar Holding Co. Limited, Vanaik Investor Limited, Vinayak Spinning Mills Limited, Nahar Industrial Infrastructure Corporation Limited, Cotton County Retail Limited, Crown Star Limited, Nahar Financial and Investment Ltd.

Key Management Personnel

Sh. Jawahar Lal Oswal, Sh. Kamal Oswal and Sh. Dinesh Oswal

Relatives of Key management Personnel

Mrs. Abhilash Oswal, Mrs. Manisha Oswal, Mrs. Ritu Oswal and Ms Neha Oswal

* Associates include enterprises in which Key Management Personnel or their relatives have significant Influence, it also includes enterprises with which no transaction has taken place during the peroid.

8) Export/domestic bills discounted during the year under Letter of Credit outstanding as on 31.03.2011 for Rs. 2,211.88 Lacs (Previous year Rs. 1,639.16 Lacs) have been reduced from Bank Borrowings and correspondingly from Sundry Debtors.

9) Previous year's figures have been regrouped / rearranged wherever considered necessary in order to make them comparable with the current year's figures.

10) Annexure I to XX form integral part of the Balance Sheet and Profit and Loss Account and have been duly authenticated as such.

11 Additional informations as required under paragraph 3 and 4 of Part-II of Schedule VI of the Companies Act, 1956 are as follows :

1 Production excludes 517 MTs. material reprocessed (Previous year 115 MTs.) and excludes 3,368 MTs. for captive consumption (Previous year 3,288 MTs.). Sales Includes interunit transfer of 20,761 MTs. amounting to Rs. 4,016,618 thousands (Previous Year 19,820 MTs. amounting to Rs. 2,592,957 thousands).

2 Production excludes 633,385 Mtrs. reprocessed (Previous year 361,806 Mtrs.) It also excludes 27,161,755 Mtrs. for captive consumption (Previous Year 21,554,951 Mtrs.). Sales includes interunit transfer of 16,513,629 Mtrs amounting to Rs. 1,204,728 thousands (Previous Year 16,485,423 Mtrs. amounting to Rs. 960,693 thousands).

3 Production excludes 1,632,437 Mtrs. material reprocessed (Previous year 1,403,659 Mtrs.) and include 159,935 Mtrs. on Job work basis (Previous year 940,559). Sales Includes interunit transfer of 871,110 Mtrs. amounting to Rs. 76,541 thousands (Previous year 2,177,726 Mtrs. amounting to Rs. 183,216 thousands).

4 Sale Includes interunit transfer of 1,625 MTs. amounting to Rs.124,551 thousands (Previous year 76 MTs. amounting to Rs. 4,507 thousands).

5 Production excludes 4,720 Qtls. of Brown sugar reprocessed (Previous Year 3,950 Qtls.).

6 Production includes 815,387 Qtls. for captive consumption (Previous Year 467,755 Qtls.). Sale include interunit transfer of 65,995 Qtls. amounting to Rs. 13,199 thousands (Previous year 13,870 Qtls. amounting to Rs. 3,814 thousand).

7 Other sales includes interunit transfer of Rs. 923,046 thousands (Previous year Rs. 804,440 thousands).

(1) Excludes interunit transfer of 4,288 MTs. (Previous Year 3,394 MTs.) amounting to Rs. 270,512 thousands (Previous Year Rs. 143,499 thousands).

(2) Excludes interunit transfer of 18,836 MTs. (Previous Year 17,908 MTs.) amounting to Rs. 3,703,192 thousands (Previous Year Rs. 2,339,650 thousands).

(3) Excludes interunit transfer of 17,050,430 Mtrs. amounting to Rs. 1,260,377 thousands (Previous Year excludes interunit transfer of 18,356,313 Mtrs. amounting to Rs. 1,127,748 thousands).

(4) Includes 4,478.30 Qtls. amounting to Rs. 930 thousands of Sugar Cane Cultivated at Company's own R & D Farms (Previous Year 3,514.90 Qtls. amounting to Rs. 752 thousands).

(5) Excludes interunit transfer of 154 MTs. amounting to Rs. 2,315 thousands (Previous Year nil MTs. amounting to Rs. nil thousands).