Notes to Accounts of Pradip Overseas Ltd.

Mar 31, 2015

1.1 The company has made provision in the accounts for gratuity based on actuarial valuation. The particulars under the AS 15 (Revised) furnished below are those which are relevant and available to the company for this year.

2. In the opinion of the management and to the best of their knowledge and belief, the value under the head of current and non-current assets (other than fixed assets and non-current investments) are approximately of the value stated, if realised in ordinary course of business, except unless stated otherwise. The provision for all known liabilities is adequate and not in excess of amount considered reasonably necessary.

3. SEGMENT REPORTING

The company's business activity falls within a single business segment viz. 'Textile' and is managed organisationally as a single unit. However, it has customers in India as well as outside India and thus segment reporting based on the geographical location of its customers is as follows :

* Segment Assets from outside India represents receivables from export sales (net of advances in relation to exports). In view of the interwoven / intermix business operations and manufacturing facility, other information is not ascertainable.

4. RELATED PARTY DISCLOSURES

As per the Accounting Standard 18, disclosure of transactions with related parties (as identified by the management), as defined in the Accounting Standard are given below:

I. Names of Ralated Parties & Description of Relationship

(A) Subsidiaries of Company : Pradip Home Fashions, INC (USA)

(B) Key Managerial Personnel :

Shri Pradip J. Karia, Managing Director

Shri Chetan Karia, Whole Time Director

Shri Vishal R. Karia, Whole Time Director & CFO

Shri Amit H. Thakkar, President

Shri Anil Agarwal, Vice President (Production)

Shri A. N. Saboo, Vice President (HRD & Admin.)

Shri Anand Shiplkar, Vice President (Technical)

Shri Kaushik Kapadia, Company Secretary & Compliance Officer

(C) Enterprises over which (B) above have significant influence:

M/s Pradip Exports Pradip Intigrated Textile Park Pvt. Ltd.

Pradip Enterprises Limited Pradip Energy Limited

M/s Anu Impex

5. The company had made an application before the Hon'ble Settlement Commission, Mumbai u/s 245C of the Income Tax Act, 1961, for A.Y. 2006-07 to 2012-13. During the year, the application was heard and disposed off vide order u/s 245 D(4) dated 07.11.2014 in favour of the Company. The effects of the order have been given in the current year' financial statements.

6. Pradip Overseas Ltd. had formed a company, "Pradip Home Fashion Inc." (USA), on 31-01-2011 by subscribing all 100 Equity Shares of US$ 0.01 in the said Company and making it as a wholly owned Subsidiary Company. The subsidiary company has not commenced any business activities. As per clause 32 of the Listing Agreement, the company is required to mandatorily publish Consolidated Financial Statements (CFS) in its Annual Report in addition to the individual financial statements. The Company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the stock exchange. The Accounting Standard 21 related to "Consolidated Financial Statement" states that it applies to material items and if there are no material transactions, the accounts of the subsidiary may not be consolidated. Accordingly, since no transaction has been carried out by the subsidiary company, except issue of share capital, the consolidated accounts have not been prepared.

Section 129(3) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 requires that a company having one or more subsidiaries (including associate company) will, in addition to separate financial statements, prepare CFS. But as per the fourth proviso to Rule 6 of the Companies (Accounts) Rules, 2014 (as amended), "nothing in Rule 6 shall apply in respect of consolidation of financial statement by a company having subsidiary or subsidiaries incorporated outside India only for the financial year commencing on or after 1st April, 2014". Since the company has subsidiaries (including associate company) incorporated outside India, it is also not required to prepare CFS as per the Companies Act, 2013 read with the relevant Rules.

7. Previous year's figure have been regrouped / reclassified, wherever necessary to confirm to this year's classification / disclosure. Further the figures have been rounded off to the nearest rupee.

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Mar 31, 2014

1. BASIS OF CONSOLIDATION:

The consolidation financial statements of the company together with its wholly owned subsidiary Pradip Home Fashion Inc. USA have been prepared under historical cost convention, on accrual basis, to comply, in all material respect, with the mandatory accounting standards as specified in the Companies (Accounting Standard) Rules, 2006 (as amended).

Investment in subsidiary has been accounted in accordance with accounting principles as defined in Accounting Standard 21 "Consolidated Financial Statements" as specified in the Companies (Accounting Standard) Rules,2006 (as amended).

The following are the details of the company''s wholly owned subsidiary:

1.1 Increase in Authorised Share Capital

During the year, company has increased the authorised share capital by Rs. 40 Cr. (Rupees Forty Crores only) comprising of 40,00,000 (Forty Lacs) Preference Shares of Rs. 100 each vide resolution dated 25.01.2014.

(b) Rights, Preferences and Restrictions Attached to each class of shares

The Company has only one class of Equity Shares having a par value of Rs. 10/- per share and each holder of the Equity Shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no preferential amounts exist currently. The distribution will be in proportion to the number of shares held by the shareholders.

The Company has increased authorised share capital as mentioned in note 1.1 above which includes Preference Shares. Each holder of Preference Shares is entitled to one vote per share only on resolutions placed before the company which directly affects the right attached to the Preference Shares. In the event of Liquidation of the Company, the holders of Preference Shares shall have priority over Equity Shares in the payment of dividend and repayment of capital.

As per records of the company, including its register of shareholders/members and other declarations received from the shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownership of shares.

2.1 Conversion of Capital Asset into Stock-in-trade

In the current year, company has converted a fixed asset (consisting of land) into stock-in-trade at the then fair market value. The surplus (market price less original cost) arising on such conversion was credited to Capital Reserve.

3.1 Corporate Debt Restructuring :

The Company had gone for restructuring of its debt in F.Y. 2011-12. But on account of various factors, inter-alia, unavailability of ETP facility, fluctuation in cotton prices, high receivables and high debtors level, continued global recession etc., the company''s operations have been severely affected and the company was not able to meet the scheduled debt service obligations. Hence the company decided to approach the Corporate Debt Restructuring (CDR) Cell for restructuring of the existing loans.

At the request of the company and in consideration of the company''s commitment to improve its operations, the lenders agreed to refer the company''s proposal to Corporate Debt Restructuring Forum for the efficient restructuring of its corporate debt (hereinafter referred to as the "CDR"). Pursuant thereto, the CDR Empowered group at their meeting held on December 11, 2013 has approved a restructuring package in terms of which the existing loans of the lenders to the company are to be restructured on the terms and conditions set out in Letter of Approval (LOA) dated December 16,2013, as amended / modified from time to time. The cut-off date (''COD'') for the CDR proposal is January 1, 2013. The Master Restructuring Agreement (''MRA'') has been executed between the borrower and the CDR lenders, by virtue of which the restructured facilities are governed by the provisions specified in the MRA having COD of January 1, 2013.

3.1.1 The Key Features of the CDR Proposal are as follows:

- Setting up the ETP (Effluent Treatment Plant) facility so that the company can operate at higher capacity utilisation.

- To monetize the land parcel at Bhamsara and the sale proceeds (estimated at Rs. 1,036.39 Cr.) from the monetization shall be utilised for repayment of dues to the lenders.

- The existing term facilities of Rs. 544.09 Cr. (including existing term loan, WCTL and FITL) shall stand restructured, merged and converted into Restructured Term Loans. The Rate of Interest (ROI) on Restructured Term Loans shall be linked to the Base Rate of the respective lenders, which is presently in the range of 10.50% - 10.70% p.a. with reset due at the end of the 3rd year from COD.

- The company to avail a new term loan aggregating to Rs. 29.92 Cr. for setting up ETP facility under the approved CDR package. No FITL (Funded Interest Term Loan) on new term loan is proposed hence the company shall pay interest on the new term loan as and when due. The ROI on new term loan shall be linked to the Base Rate of the respective lenders, which is presently in the range of 11 - 11.20% p.a. with reset due at the end of 3rd year from COD.

- There shall be a moratorium of 24 months from COD for repayment of installments of Restructured Term Loans and New Term loans.

- A new term loan of Rs. 12.50 Cr. from SCB is proposed and the same shall be repaid over a period of 7 years as per the schedule mentioned below.

- The irregular portion of Working Capital facilities as on COD amounting to Rs. 212.12 Cr., after payment of interest overdues and bank charges, shall be converted to WCTL (Working Capital Term Loan). The ROI on WCTL shall be linked to the Base Rate of the respective lenders, which is presently in the range of 10.50 - 10.70% p.a. with reset due at the end of 3rd year from COD.

- The balance portion of working capital facilities of Rs. 359.78 Cr. shall stand reconstituted into need based working capital limits. Need based working capital limits / facilities shall be provided within the drawing power of the company. The ROI on these working capital limits shall be linked to the Base Rate of the respective Lenders, which is presently in the range of 10.50 - 10.70% p.a. with reset due annually. These working capital facilities shall be repayable on demand.

- The interest on Restructured Term Loans, Working Capital Term Loan and Working Capital Facilities accrued/to be accrued for a period of 24 months from the COD i.e. from 1st January 2013 till 31st December 2014 shall stand converted into Funded Interest Term Loan (FITL) aggregating to Rs. 234.31 Cr. The ROI on FITL shall be linked to the Base Rate of the respective lenders, which is presently in the range of 10.50 - 10.70% p.a. with reset due at the end of 2rd year from COD.

- All the above term facilities (except working capital facilities repayable on demand) are to be repaid in 28 structured quarterly installments commencing from quarter ending March 2015 and the last installment will be payable in quarter ending December 2021.

- Waiver of all penal charges / penal interest / cumulative interest after COD.

- Permitting holding-on operation till implementation of the CDR package.

- Right to recompense to CDR lenders for the relief and sacrifice extended, subject to the provisions of the CDR guidelines and MRA.

- Minimum promoters''s contribution shall be 25% of the lenders sacrifice. The promoters shall make contribution of Rs. 42.06 Cr. (being 25.65%) in the company in lieu of bank sacrifice, out of which Rs. 33.65 Cr. (20.52%) shall be brought upfront including conversion of unsecured loans brought post COD by the directors into equity / preference shares. The balance Rs. 8.41 Cr. (5.13%) shall be brought over next 12 months.

- The promoters shall pledge their entire shareholding in favour of the lenders in demat form with voting rights. Further, if any fresh equity shares are issued to the promoters, they shall also be pledged in favour of the lenders.

- The promoters shall furnish unconditional and irrevocable personal guarantee along with the corporate guarantee from Pradip Enterprises Ltd. and M/s. Pradip Exports (limited to the value of property offered).

Details of Securities offered by the Company:

(A) Charge on Immovable Properties of the Company : Term loans and working capital facilities from banks are secured by way of first charge by mortgage of all immovable properties of the company, both present and future, ranking pari passu interse.

(B) Charge on Current Assets of the Company : Working Capital facilities, WCTL and FITL on Working Capital facilities are secured by way of hypothecation by first charge over current assets of the company, both present and future, ranking pari passu interse and Restructured working capital facilities, New Term Loan and FITL on Restructured Term Loan from Banks are secured by hypothecation of second charge over the current assets of the company, both present and future, ranking pari passu interse.

(C) Charge on Movable P&M of the Company : Restructured Working Capital facilities, FITL on Restructured Term Loans and New Term loans from Banks are secured by way of hypothecation by first charge over the movable Plant and Machinery of the Company, both present and future, ranking pari passu interse and working capital facilities, WCTL and FITL on working capital facilities from banks are secured by way of Hypothecation by second charge over the movable Plant and Machinery of the Company, both present and future, ranking pari passu interse.

(D) Charge on Movable P&M for ETP of the Company : New Term Loans from Banks are secured by hypothecation by first charge over the movable Plant and Machinery for ETP, both present and future, ranking pari passu interse and Restructured working capital facilities, FITL and WCTL

3.1.2 The company and the CDR lenders have executed a MRA during the year. The MRA as well as the provisions of the Master Circular on Corporate Debt Restructuring issued by the Reserve Bank of India, give a right to the CDR lenders to get recompense of their waivers and sacrifices made as part of the CDR proposal. The recompense payable by the company is contingent on various factors including improved performance of the company and many other conditions, the outcome of which currently is materially uncertain and hence the proportionate amount payable as recompense has been treated as contingent liability. The aggregate present value of the outstanding sacrifice made / to be made by CDR Lenders as per first restructuring and CDR is approximately Rs. 440.08 Cr.

3.1.3 Going Concern :

CDR Empowered group has approved a restructuring package in terms of which the existing loans of the lenders to the company are to be restructured. Post approval, the company is confident of successful implementation of the CDR package. The company is also taking various steps to reduce costs and improve efficiencies to make its operations profitable. The company has prepared the financial statements on going concern basis and therefore no adjustments have been made to the carrying values or classification of assets and liabilities.

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of the information collected by the management. This has been relied upon by the auditors.

8.1 Preference share application money pending allotment

As per CDR package, the company has received share application money for issue of 38,98,000 Non - Convertible Preference Shares of Rs. 100 each. The Preference shares are pending allotment as on March 31, 2014.

8.2 Other Payables include the statutory dues and advance from customers.

13.1 The closing stock in trade consisting of Land, situated at Village Bhamasara, has been valued at fair market value on date of conversion i.e. 31st March, 2014.

22.1 The company has made provision in the accounts for gratuity based on acturial valuation. The particulars under the AS 15 (Revised) furnished below are those which are relevant and available to the company for this year.

* The details of experience adjustments arising on account of plan assets and liabilities as required by paragraph 120(n)(ii) of AS 15 (Revised) on Employee Benefits are not available in the valuation report and hence, are not furnished.

Principal actuarial assumptions at the balance sheet date (expressed as weighted averages)

The estimates of future salary increase considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in employment market. Current and non current classification is done based on actuarial valuation certificate.

26. In the opinion of the management and to the best of their knowledge and belief, the value under the head of current and non-current assets (other than fixed assets and non-current investments) are approximately of the value stated, if realised in ordinary course of business, except unless stated otherwise. The provision for all known liabilities is adequate and not in excess of amount considered reasonably necessary.

27. SEGMENT REPORTING

As the Company''s business activity falls within a single segment viz. ''Textile'' and the sales substantially being in the domestic market, the disclosure requirements of the Accounting Standard - 17 "Segment Reporting" as specified by the Companies (Accounting Standard) Rules, 2006 are not applicable. However it does not have any impact on the true and fair view of the state of affairs in case of Balance Sheet and the Statement of Profit and Loss.

28. RELATED PARTY DISCLOSURES

As per the Accounting Standard 18, disclosure of transactions with related parties (as identified by the management), as defined in the Accounting Standard are given below:

I. Names of Ralated Parties & Description of Relationship

(A) Subsidiaries of Company : Pradip Home Fashions, INC (USA)

(B) Key Managerial Personnel :

Shri Pradip J. Karia, Chairman cum Managing Director

Shri Chetan Karia, Whole Time Director

Shri Vishal R. Karia, Whole Time Director

Shri Amit H. Thakkar, President

Shri Anil Agarwal, Vice President (Production)

Shri A. N. Saboo, Vice President (HRD & Admin.)

Shri Anand Shiplkar, Vice President (Technical)

Shri Kaushik Kapadia, Company Secretary & Compliance Officer

(C) Enterprises over which (B) above have significant influence:

M/s Pradip Exports Pradip Intigrated Textile Park Pvt. Ltd.

Pradip Enterprises Limited Pradip Energy Limited M/s Anu Impex

33. The company has made an application before the Hon ble Settlement Commission, Mumbai u/s 245C of the Income Tax Act, 1961, for A.Y. 2006-07 to 2012-13. The application for Settlement has been admitted u/s 245 D(1) by the Hon''ble Settlement Commission vide order dated May 6, 2013. The Company has paid taxes (incl interest) of Rs. 82,45,000. The proceedings are pending before the Hon''ble Settlement Commission. The ultimate liability, if any, is dependent on the outcome of the proceedings and will be quantified only on the completion of the same.

34. Pradip Overseas Ltd. had formed a company named "Pradip Home Fashions Inc.", USA on 31-01-2011 by subscribing all 100 Equity Shares of US$ 0.01 in the said Company and making it as a wholly owned Subsidiary Company. The subsidiary company has not commenced any business activities. As per clause 32 of the Listing Agreement, the company is required to mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The Company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the stock exchange. The Accounting Standard 21 related to "Consolidated Financial Statement" states that it applies to material items and if there are no material transactions, the accounts of the subsidiary may not be consolidated. Accordingly, since no other transaction has been carried out by the subsidiary company, except issue of share capital, the consolidated accounts have not been prepared.

35. Previous year''s figure have been regrouped / reclassified, wherever necessary to confirm to this year''s classification / disclosure. Further the figures have been rounded off to the nearest rupee.

(1) Name of Company : Pradip Home Fashions INC. USA

(2) Financial year of subsidiary ended : 31st March, 2014.

(3) Holding Company''s interest :

(i) No. of equity shares : 100 equity shares of US$ 0.01 each.

(ii) Extent of holding : 100%

(4) The net aggregate of Profit / (Loss) of the Subsidiary Company in so far as it concerns the members of the Holding Company.

(a) Not dealt with in the accounts of the Company for the year ended 31st March 2014 :

(1) For the Subsidiary''s financial year ended 31st March 2014. Nil

(2) For the previous financial years of the Subsidiary. Nil

(b) Dealt with in the accounts of the Company for the year ended 31st March 2014

(1) For the Subsidiary''s financial year ended 31st March 2014. Nil

(2) For the previous financial years of the Subsidiary. Nil

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Mar 31, 2013

1. In the opinion of the management and to the best of their knowledge and belief, the value under the head of current and non-current assets (other than fixed assets and non-current investments) are approximately of the value stated, if realised in ordinary course of business, except unless stated otherwise. The provision for all known liabilities is adequate and not in excess of amount considered reasonably necessary.

2. SEGMENT REPORTING

As the Company''s business activity falls within a single segment viz. ''Textile'' and the sales substantially being in the domestic market, the disclosure requirements of the Accounting Standard - 17 "Segment Reporting" as specified by the Companies (Accounting Standard) Rules, 2006 are not applicable. However it does not have any impact on the true and fair view of the state of affairs in case of Balance Sheet and Profit and Loss account.

3. RELATED PARTY DISCLOSURES

As per the Accounting Standard 18, disclosure of transactions with related parties (as identified by the management), as defined in the Accounting Standard are given below:

I. Names of Ralated Parties & Description of Relationship

(A) Subsidiaries of Company : Pradip Home Fashions, INC (USA)

(B) Key Managerial Personnel :

Shri Pradip J. Karia, Chairman cum Managing Director

Shri Chetan Karia, Whole Time Director

Shri Vishal R. Karia, Whole Time Director

Shri Amit H. Thakkar, President

Shri Anil Agarwal, Vice President (Production)

Shri A. N. Saboo, Vice President (HRD & Admin.)

Shri Anand Shiplkar, Vice President (Technical)

Shri Kamal Garg, Vice President (Marketing)

Shri Kaushik Kapadia, Company Secretary & Compliance Officer

(C) Enterprises over which (B) above have significant influence:

M/s Pradip Exports Pradip Intigrated Textile Park Pvt. Ltd.

Pradip Enterprises Limited Pradip Energy Limited

M/s Anu Impex

4. The company has made an application before the Hon''ble Settlement Commission, Mumbai u/s 245C of the Income Tax Act, 1961, for A.Y. 2006-07 to 2012-13. The application for Settlement has been admitted u/s 245 D(1) by the Hon''ble Settlement Commission vide order dated May 6, 2013. The Company has paid taxes (incl interest) of Rs. 82,45,000. The proceedings are pending before the Hon''ble Settlement Commission. The ultimate liability, if any, is dependent on the outcome of the proceedings and will be quantified only on the completion of the same.

5. Pradip Overseas Ltd. had formed a company named "Pradip Home Fashions Inc.", USA on 31-01-2011 by subscribing all 100 Equity Shares of US$ 0.01 in the said Company and making it as a wholly owned Subsidiary Company. The subsidiary company has not commenced any business activities. As per clause 32 of the Listing Agreement, the company is required to mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The Company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the stock exchange. The Company has accordingly got the consolidated FInancial Statement audited by the Statotory Auditor of the Company and will file the same with the stock exchange. The Accounting Standard 21 related to "Consolidated Financial Statement" states that it applies to material items and if there are no material transactions, the accounts of the subsidiary may not be consolidated. Accordingly, since no other transaction has been carried out by the subsidiary company, except issue of share capital, the Consolidated accounts have not been printed in this Annual Accounts.

6. Previous year''s figure have been regrouped / reclassified, wherever necessary to confirm to this year''s classification / disclosure. Further the figures have been rounded off to the nearest rupee. The amounts have been reclassified as per Revised Schedule VI and the line items which are either not applicable or were NIL for both the years are omitted in presentation.

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Mar 31, 2012

(a) Rights, Preferences and Restrictions Attached to each class of shares

The Company has only one class of Equity Shares having a par value of Rs. 10/- per share and each holder of the Equity Shares is entitled to one vote per share.

In the event of liquidation of the Company, the holders of the equity shares will be entitled to receive any of the remaining assets of the company, after distribution of all preferential amounts. However, no preferential amounts exist currently. The distribution will be in proportion to the number of shares held by the shareholders.

1.1 Debt Restructuring :

During the year, several external factors such as high volatility in the cotton prices (main raw material), meltdown in overseas financial markets, RBI monetary policy, etc. impacted the company''s ability to repay its debts in a timely manner. This led to severe liquidity challenges arising out of mismatch of loan maturities vis-a-vis the cash flows to the company which impacted the timely payment of its loans and interest. As a result of this, the company filed an application with SBI (lead banker of the loan consortium) to recast its debt obligations. A letter of approval was issued by SBI Industrial Finance Branch on March 27,2012. The significant highlights of the package are as under:

i) Effective date for restructuring : 29.02.2012

ii) Under the scheme, debts are restructured as :

(a) Working Capital facilities comprising of cash credit, packing credit, Letter of Credits, Purchase Bill Discounting and Guarantees of Rs. 534 Cr.

(b) Conversion of overdrawn working capital facilities and short term loans amounting to Rs. 403.26 Cr. to Working Capital Term Loan (WCTL). WCTL carries interest rate of 12.50% p.a.

(c) Interest on WCTL for the first 9 months (March 2012 to November 2012) shall be converted into Funded Interest Term Loan (FITL) carrying interest at 12.50% p.a. Repayment of FITL shall start from April, 2013 as per schedule below.

(d) The Company has offered additional security for securing restructured debt.

Securities Offered :

Term Loans from banks are secured by a first mortgage of all the Company''s immovable properties, both present and future ranking pari passu interse and the first charge by way of hypothecation of all Company''s movables subject to prior charges created in favour of Company''s bankers on inventories, book debts and other movables for securing the borrowings for working capital requirement along with personal guarantee of the Whole-time Director.

1.2 Going Concern :

During the year, the company underwent various challenges in form of high volatility in the prices of its raw materials, increase in interest rates etc. All these led to drop in revenues and profit therefrom in the last two quarters of this financial year. As explained earlier, the Company undertook to restructuring of its debts. Post the debts restructuring, the company is confident of successful implementation of the restructuring package. Therefore it has prepared the financial statements on a going concern basis.

1.3 The details of term loans which are not forming part of the restructuring proposal (as per note 3.1) are as under:

(a) Term loans amounting to Rs.6.57 Cr. (from SBI, Canara Bank and IOB) which were outstanding as on March 31,2012 are due for payment in the year 2012-13. The Interest rate for the same is 14% p.a.

(b) Out of a term loan of Rs.47 Cr. from Allahabad Bank (Interest @12.50% p.a.) which was outstanding as on March 31,2012, installment of Rs.3.96 Cr. is due for payment in the year 2012-13. The loan is secured against mortgage of parcels of land of the company.

(c) In December 2011, the company had gone for restructuring of its overdrawn working capital limits ofW.4 Cr. with Allahabad Bank. The restructuring had resulted in creation of WCTL of Rs.9.4 Cr. and FITL of Rs.7.5 Cr. which are due for. payment in 2012-13.

2. INITIAL PUBLIC OFFER (IPO)

Company has passed special resolution through postal ballots by the members on 15th November,2010 that the proceeds of the Initial Public Offer (IPO ) of 1,06,00,049 equity shares of Rs. 10/- each of the company allotted at a price of Rs. 110/- per share, meant for margin money requirement for the working capital for the new unit of the company, to be established in the special economic zone (SEZ), for Rs. 9995.00 Lacs, for the working capital requirement for the existing unit of the company tilt the aforesaid new unit commence its commercial activities thus allow the company to vary the object of the issue as stated in the prospectus dated 19th March,2010 for the IPO of the company.

3. In the opinion of the management and to the best of their knowledge and belief, the value under the head of current and non-current assets (other than fixed assets and non-current investments) are approximately of the value stated, if realised in ordinary course of business, except unless stated otherwise. The provision for all known liabilities is adequate and not in excess of amount considered reasonably necessary.

4. SEGMENT REPORTING

As the Company''s business activity falls within a single segment viz. Textile'' and the sales substantially being in the domestic market, the disclosure requirements of the Accounting Standard - 17 "Segment Reporting" as prescribed by the Companies (Accounting Standard) Rules, 2006 are not applicable. However it does not have any impact on the true and fair view of the state of affairs in case of Balance Sheet and Profit and Loss account.

5. RELATED PARTY DISCLOSURES

As per the Accounting Standard 18, disclosure of transactions with related parties (as identified by the management), as defined in the Accounting Standard are given below:

I. Names of Ralated Parties & Description of Relationship

(A) Subsidiaries of Company : Pradip Home Fashions, INC (USA)

(B) Associates with whom transactions done during the year :Elegant Home Fashion INC

(C) Key Managerial Personnel:

Shri Pradip J. Karia, Chairman cum Managing Director

Shri Chetan Karia, Whole Time Director

Shri Vishal R. Karia, Whole Time Director

Shri Amit H. Thakkar, President

Shri Anil Agarwal, Vice President (Production)

Shri A. N. Saboo, Vice President (HRD & Admin.)

Shri Anand Shiplkar, Vice President (Technical)

Shri Kamal Garg, Vice President (Marketing)

Shri Kaushik Kapadia, Company Secretary & Compliance Officer

(D) Enterprises over which (C) above have significant influence:

Pradip Exports Pradip Intigrated Textile Park Pvt. Ltd.

Pradip Enterprises Limited Pradip Energy Limited

6. Pradip Overseas Ltd. had formed a company named "Pradip Home Fashions Inc.", USA on 31-01-2011 by subscribing all 100 Equity Shares of US$ 0.01 in the said Company and making it as a wholly owned Subsidiary Company. The subsidiary company has not commenced any business activities. As per clause 32 of the Listing Agreement, the company is required to mandatorily publish Consolidated Financial Statements in its Annual Report in addition to the individual financial statements. The Company will have to get its Consolidated Financial Statements audited by the statutory auditors of the company and file the same with the stock exchange. The Company has accordingly got the consolidated Financial Statement audited by the Statotory Auditor of the Company and will file the same with the stock exchange. The Accounting Standard 21 related to "Consolidated Financial Statement" states that it applies to material items and if there are no material transactions, the accounts of the subsidiary may not be consolidated. Accordingly, since no other transaction has been carried out by the subsidiary company, except issue of share capital, the Consolidated accounts have not been printed in this Annual Accounts.

7. The Revised Schedule VI has become effective from 1st April,2011 for the preparation of financial statement. This has significantly impacted the disclosure and presentation made in the financial statements. Previous year''s figure have been regrouped / reclassified, wherever necessary to confirm to this year''s classification / disclosure. Further the figures have been rounded off to the nearest rupee.

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Mar 31, 2011

01. Contingent Liabilities :

a. Export obligation of Rs. 26.38 Lacs (Previous Year Rs. 24.07 Lacs) is pending against advance License.

b. Bank Guarantee of Rs. 15.00 Lacs (Previous Year Rs. 17.41 Lacs)

02. Provident Fund has been deducted and paid inclusive of Employer's contribution to respective Authority and as per the requirements of the Employees Provident Fund and Miscellaneous Provisions Act.

03. Intangible Assets :

Cost relating to computer software and trade mark which are acquired and capitalized and amortized on a straight line basis over it useful of 5 years.

Prior period Adjustment, Extraordinary & Exceptional items are changes in Accounting policies :

Prior period and Extra ordinary items & changes in Accounting policies having material impact on the financial factors of the company are declared.

Exceptional items includes :

Loss on Grey Stock worth Rs. 2352.88 lacs due to fire for which insurance claimed has been passed for Rs. 1147.17 lacs.

04. Insurance claim :

Due to fire company's property and stock worth extensively damaged. Company logged claim with National Insurance Co. Ltd. for Rs. 2352.88 Lacs. Insurance company has passed claim of Rs. 1147.17 Lacs . The insurance company disallowed claim worth Rs. 1205.71 lacs, which was charged to Profit & Loss Account for the year ended on 31st March, 2011.

05. The total liability for Gratuity payable in accordance with the payment of Gratuity Act, 1972 and as per Accounting Standard 15 (revised) as on 31-03-2011 as per certificate of an independent actuary is Rs. 34.33 Lacs (Previous Year Rs. 26.44 Lacs)

06. SECURED LOANS :

Term Loans are secured by way of first charge created by an Equitable Mortgage of specified Land, Building, and Hypothecation of Plant, Machinery and by way of second charge created by Hypothecation of movable assets. It is further secured by collateral securities of offices, shop and residence premises and personal Guarantee of the Promoter Directors and relative of promoter Director of the Company.

Short Term Loans are secured by way of an Equitable Mortgage on free hold industrial land property situated at survey No. 170, 173, and 164 at village Bhamasara.

Vehicle Loans are secured by Hypothecation of the respective Vehicles.

Working Capital Loans are secured by way of first charge created by Hypothecation of Stock and Book Debts, and second charge on specified fixed assets like Land, Building, Plant & Machinery, and other moveable assets of the Company. It is further secured by collateral securities of offices, shop and residence premises and personal Guarantee of the Promoter Directors and relative of Promoter Director of the Company.

07. Related Party Disclosure (As identified by the Management)

A) Names of Related Parties and the Nature of Relationship.

Sr. no. Name Relationship

01. Pradip Enterprise Limited Associate Company

02. Anu Impex Partnership Firm in which Directors are Partner

03. Pradip Exports Partnership Firm in which Directors are Partner

04. Key Management Personnel

Shri Pradipkumar J. Karia Chairman cum Managing Director

Shri Chetan J. Karia Whole Time Director

Shri Vishal R. Karia Whole Time Director

Shri Amit H. Thakkar President

Shri Anil Agarwal Vice President (Production)

Shri A. N. Saboo Vice President (HRD & Admin.)

Shri Anand Shiplkar Vice President (Technical)

Shri Kamal Garg Vice President (Marketing)

Shri Kaushik Kapadia Company Secretary & Compliance Officer

05 Subsidiary Company Pradip Home Fashion Inc , USA

08. Segment Reporting

(a) Primary Segment:

The company, considering its high level of international operation and sent internal financial reporting based on geographical location of customers, has identified geographical segment as primary segment. The geographic segment consists of :

a) Domestic ( Sales to customers located in India)

b) International ( sales to Customers located outside India)

Revenue directly attributable to segments is reported based on items that are individually identifiable to that segment. The company believes that is is not practical to allocate segment expenses, segment result, fixed assets used in the company's business or liabilities contracted since the resources / services / assets are used interchangeably within the segments. Accordingly, no disclosure relating to same is made.

(b) Secondary Segment: Business Segment

The company is operating into a single business i.e. Textile and as such all business activities revolve around this segment. Hence, there is no separate secondary segment to be reported considering the requirement of AS 17 on "Segment Reporting".

9. Basis of Consolidation:

The consolidation financial statements of the company together with its wholly owned subsidiary Pradip Home Fashion Inc. USA have been prepared under historical cost convention, on accrual basis, to comply, in all material respect, with the mandatory accounting standards issued by the institute of Chartered Accountants of India.

Investment in subsidiary has been accounted in accordance with accounting principles as defined in Accounting Standard 21 "Consolidated Financial Statements" issued by the institute of Chartered Accountants of India.

10. In the opinion of the Board, Carrying value of all Current Assets, loans & advances and other receivables is not less than their realizable value in the ordinary course of business.

11. Due to Micro, Small and Medium Enterprises ( MSMEs)

Amount payable to Micro, Small and Medium Enterprises ( MSMEs) as defined under the Micro Small and Medium Enterprises Development Act 2006, as on 31.03.2011 is Rs. 98.68 Lacs (Previous Year Rs. 189.97 Lacs).

The Names of Micro, Small and Medium Enterprises ( MSMEs) to whom amount is outstanding for more than 30 days are:

Ashi Dye Chem, Abhisekh Chemicals, Abhisekh Dye chem., Aeon Chemicals, Ambe Dye Chem Pvt. Ltd. Amit Polycrom Pvt. Ltd., Anushree Industries, Ashok Dye Chem., Bajaj Colur-Chem, Bhagwati Dye and Chem. Ind., Electron Colourchem Pvt. Ltd., Jitendra Dye Chem., Kali Dye Chem. Pvt. Ltd., Radha Krishna Pigment Pvt. Ltd., Saaras Industries, Shah Meta Chem. Ind.

12. Managerial Remuneration

The Company has been advised that the computation of Net Profit for the purpose of Directors' remuneration under Section 349 of the Companies Act, 1956 need not be enumerated since no commission has been paid to the Directors. Fixed monthly remuneration has been paid to the Directors as per Schedule XIII to the Companies Act, 1956.

13. Accounting of Government Grants

Government grants are recognized where it is reasonably certain that the ultimate collection will be made. During the year the Company has accounted for Revenue Grants by adding to the Income in case of Export Incentives and reducing the Bank interest on Term Loans (Financial Expenses) in case of interest subsidy of Rs. 54.29 Lacs (Previous year Rs. 75.35 Lacs) under TUF Scheme.

14. Hedging Contracts:

The Company uses forward exchange contracts to hedge its foreign exchange exposure in accordance with its forex policy. As on 31st March, 2011, the company had Five and Fourteen outstanding forward exchange contract to purchase foreign currency aggregating to USD 65 lacs and Euro 25.64 lacs respectively.

15. Statement of Utilization of Proceeds from Initial Public Offer (IPO)

Company has passed special resolution through postal ballots by the members on 15th November,2010 that the proceeds of the Initial Public Offer ( IPO ) of 1,06,00,049 equity shares of Rs. 10/- each of the company allotted at a price of Rs. 110/- per share, meant for margin money requirement for the working capital for the new unit of the company, to be established in the special economic zone (SEZ), for Rs. 9995.00 Lacs, for the working capital requirement for the existing unit of the company till the aforesaid new unit commence its commercial activities thus allow the company to vary the object of the issue as stated in the prospectus dated 19th March,2010 for the IPO of the company.

16. Interim Financial Reporting:

The quarterly financial reports are published in accordance with the requirement of listing agreement with the stock exchange.

17. Some of the Debit / Credit balances are subject to reconciliation /confirmation in certain cases. However in the opinion of the Board of Director all assets including Sundry Debtors, Loan and Advances and Deposits would be in ordinary course of business, realized at least value stated.

18. The figures for the previous year have been reworked, regrouped, rearranged and reclassified wherever necessary. Amount and other disclosures for the preceding year are included as an integral part of the current year financial statements and are to read in relation to the amounts and other disclosures relating to the current year.

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Mar 31, 2009

01. In view of the change in the Accounting policy for writing off of Preliminary Expenses as mentioned above, the balance amount of expenditure incurred in connection with incorporation of the Company and Expenditure incurred for increase in Authorised Share Capital Rs. 14,34,223 are written off during this year and the Profit has been decreased by same amount.

02. For the current year on review as required by the Accounting Standard 28 "Impairment of Fixed Asset", the management is of the opinion that no impairment or reversal of loss is required.

03. Contingent Liabilities :

a. The Company has purchased Capital Assets under EPCG License against which the Company has an export obligation. Contingent Liabilities, to the extent of duty saved, subject to fulfillment of export obligation in future is Rs. 33,38,013 (Previous Year Rs. 33,38,013)

b. Export obligation of Rs. 22,33,890 (Previous Year Rs. 5,37,302) is pending against advance License.

c. Bank Guarantee of Rs. 42,41,300 (Previous Year Rs. 82,80,515)

d. Letter of Credit of Rs. Nil (Previous Year Rs. 67,01,229) opened by the company with the Banks.

e. Estimated amount of Contract remaining to be executed on Capital Account (net of advances) Rs. NIL ( Previous Year Rs. 2,02,77,164 )

04. Some of the debit / Credit balancies are subject to reconciliation/ confirmation in certain cases. However, in the opinion of the Board of directors all assets including sundry debtors, Loan and Advancies and deposit would be in ordinary course of business, released at list value stated.

05. Provident Fund has been deducted and paid inclusive of Employers contribution to respective Authority and as per the requirements of the Employees Provident Fund and Miscellaneous Provisions Act.

06. The total liability for Gratuity payable in accordance with the Payment of Gratuity Act, 1972 and as per Accounting Standard 15 (revised) as on 31-03-2009 as per certificate of an independent actuary is Rs. 19,61,410/-.

07. Intangible Assets consisting of Computer Software and Trade Mark written off over the period of Four years.

08. Credit and Debit balances under a particular category are netted off, while certain mutually discharging related debit and credit balances have also been netted off .

09. Deferred Tax :

Break - up of Deferred Tax Assets and Liabilities into major components of the respective balances are as under.

No amount in respect of the related parties have been written off / back are provided for during the year.

Related party relationship have been identified by the management and relied upon by the auditor.

10. Segment Reporting

Since the Company has only one Segment i.e. Textile Process Business, there is no separate reportable segment as required in AS 17 issued by the Institute of Chartered Accountants of India.

11. Due to Micro, Small and Medium Enterprises ( MSMEs)

Amount payable to Micro, Small and Medium Enterprises ( MSMEs) as defined under the Micro Small and Medium Enterprises Development Act 2006, as on 31.03.2009 is Rs 1,28,10,903/- ( Previous Year Rs. 25,82,135/-).

The Names of Micro, Small and Medium Enterprises ( MSMEs) to whom amount is outstanding for more than 30 days are:

Ashi Dye Chem, Abhisekh Chemicals, Abhisekh Dye chem., Aeon Chemicals, Ambe Dye Chem Pvt. Ltd., Amit Polycrom Pvt. Ltd., Anand Solt, Anushree Industries, Ashok Dye Chem., Bajaj Colur-Chem, Bhagwati Dye and Chem. Ind., Electron Colourchem Pvt. Ltd., Jitendra Dye Chem., Kali Dye Chem. Pvt. Ltd., Radha Krishna Pigment Pvt. Ltd., Saaras Industries, Shah Meta Chem. Ind.

12. Accounting of Government Grants

Government grants are recognized where it is reasonably certain that the ultimate collection will be made. During the period the Company has accounted for Revenue Grants by adding to the Income in case of Export Incentives and reducing the Bank interest on Term Loans (Financial Expenses) in case of interest subsidy of Rs. 95,79,368 (Previous year Rs. 1,04,37,559) under TUF Scheme.

During the year, company has accounted for TUF subsidy of Rs. 2,22,41,082 in the books of accounts. TUF subsidy being capital Grants relating to specific plant and machinery are reduced from gross value of the respective plant and machinery. The excess depreciation claimed on specific plant and machinery on which the amount of TUF subsidy accrued in earlier years of Rs. 55,75,083 has been written back for the year.

13. Bonus Issue of Shares

During the year, the company has issued bonus shares in the ratio of 1 ; 1 i. e. one share for every one equity shares of Rs. 10/- each fully paid up as approved in Annual General meeting held on 18-08-2008. The company has utilized Share Premium amounting to Rs. 8,41,50,000.00 and accumulated profit of Rs. 6,46,83,850.00 for issuance of Bonus Share.

14. Hedging Contracts :

The Company uses forward exchange contracts to hedge its foreign exchange exposure in accordance with its forex policy. As on 31st March,2009, the company had 24 outstanding forward exchange contracts to purchase foreign currency aggregating to US Dollars 1,40,00,000 and Euro 58,00,000.

15. The figures for the previous year have been regrouped and rearranged wherever necessary.