Notes to Accounts of Reliance Chemotex Industries Ltd.

Mar 31, 2018

1 CORPORATE INFORMATION :

Reliance Chemotex Industries Limited (CIN No.L40102RJ1977PLC001994) is a public limited company domiciled and incorporated in India and its shares are publicly traded on the BSE, in India. The registered office of Reliance Chemotex Industries Limited is at Village Kanpur,Post Box No 73,Udaipur District,Rajasthan 313003. The Company is primarily engaged in the manufacturing and sale of Synthetic & blended Yarn.

A. Basis of Preparation of Financial Statements:

a. The financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) as prescribed under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) (Amendment) Rules, 2016 and relevant provisions of the Companies Act, 2013.

b. Historical cost convention

The financial statements have been prepared on a historical cost basis, except for the following:

1) certain financial assets and liabilities that are measured at fair value;

2) defined benefit plans - plan assets measured at fair value.

c. Use of estimates and judgments

The estimates and judgments used in the preparation of the financial statements are continuously evaluated by the Company and are based on historical experience and various other assumptions and factors (including expectations of future events) that the Company believes to be reasonable under the existing circumstances. Differences between actual results and estimates are recognised in the period in which the results are known/materialised.

The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date but provide additional evidence about conditions existing as at the reporting date.

d. Current non-current classification

All assets and liabilities have been classified as current or non-current as per the Company''s normal operating cycle (twelve months) and other criteria set out in the Schedule III to the Companies Act., 2013. e The financial statements of the Company are presented in Indian Rupee (INR), which is also the functional currency of the Company.

B. First Time Adoption of Ind AS:

These Financial Statements, for the year ended 31^st March 2018 have been prepared in accordance with Ind AS 101, "First Time Adoption of Ind AS", as these are the Company''s first Ind AS compliant financial statements.

For the periods upto and including the year ended 31^st March 2017, the company prepared its financial statements in accordance with the accounting standards notified under section 133 of Companies Act, 2013, read together with Paragraph 7 of the Companies (Accounts) Rules, 2014 (Indian GAAP).

Accordingly, the company has prepared its financial statement to comply with the Ind AS for the year ending 31^st March, 2018, together with the comparative figures as at and for the year ended 31^st March, 2017, as described in the summary of significant accounting policies. In preparing these financial statements, the company opening balance sheet was prepared as at 1^st April, 2016, the date of transition to Ind AS. 2017.

(b) Term/Right attached to Equity Shares:

The Company has issued only one class of shares referred to as equity share having a face value of Rs.10/- per share ranking paripassu. The holders of equity shares are entitled to one vote per share.

(a) Preference Shares have a face value of Rs 100/- Each, these shares are redembable at par on expiry of 20 years from their respective date of allotment.

(b) However the Company can redeem the Preference Shares before the date of maturity.

(ii) Term Loans from Banks (Secured)

a) Term Loans from IDBI Bank Limited

Term Loan of Rs. 1919.00 Lacs, outstanding of Rs. NIL (P.Y. 217.81 Lacs) including Rs. NIL (P.Y. Rs. 217.81 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21, is secured by way of joint first charge ranking paripassu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, subject to prior charges created in favour of Bankers for working capital facilities. The above loan of Rs. 1919.00 Lacs has also been guaranteed by the Managing Director and one other Director of the Company and are also secured by way of extension of pledge of 5,86,400 Equity Shares of the Company in the names of Directors and their relatives.

This loan is repaid in 96 monthly Instalments commencing from 01.04.2010 and last instalment is payable by 31.03.2018 and carry floating interest rate at base rate 4%.

b) Term Loan from State Bank of India

Term Loan of Rs. 1964.00 Lacs , outstanding Rs. NIL (P.Y. 60.50 Lacs) including Rs. NIL (P.Y. Rs. 60.50 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21, is secured by way of joint first charge ranking paripassu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, subject to prior charges created in favour of Bankers for working capital facilities. The above loans of Rs. 1964.00 Lacs have also been guaranteed by the Managing Director and one other Director of the Company and are also secured by way of extension of pledge of Preference Shares of the face value of Rs. 175.00 Lacs of the Company belonging to Directors and pledge of Preference Shares of the face value of Rs. 150.00 Lacs belonging to a Promoter Company.

This loan is repaid in 84 monthly Instalments commencing from July 2010 and the last instalment is payable by 30th June 2017 and carry floating interest rate at base rate 3.70%.

Term Loan of Rs. 1300.00 Lacs, Outstanding of Rs. 325.16 Lacs (P.Y. 534.30 Lacs) including Rs. 216.60 Lacs (P.Y. 209.14 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21, is secured by way of joint first charge ranking pari-passu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, subject to prior charges created in favour of Bankers for working capital facilities. The above loans of Rs.1300.00 lacs have also been guaranteed by the Managing Director and one other Director of the Company and are also secured by way of extension of pledge of Preference Shares of the face value of Rs. 175.00 Lacs of the Company belonging to Directors and pledge of Preference Shares of the face value of Rs. 150.00 Lacs belonging to a Promoter Company.

This loan is repayable in 72 monthly Instalments from Oct.2013 and last instalment is payable by September 2019 and carry floating interest rate at base rate 3%.

c) Corporate Loan of Rs. 1000.00 Lacs, Outstanding of Rs. 500.00 Lacs (P.Y. 739.06Lacs ) including Rs. 249.99 Lacs (P.Y. Rs. 239.06 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21,is secured by First Pari Passu charges on Entire Current Assets of the Company present and future. Collateral security by way of 1st paripassu charge on Entire Fixed Assets of the Company including Factory Building at Village : Kanpur, Udaipur. The above loans of Rs.1000.00 Lacs have also been guaranteed by the Managing Director and one other Director of the Company.

This loan is repayable in 48 monthly Instalments starting from April 2016 and last instalment is payable by March 2020 and carry floating interest rate at base rate 3.60%.

d) Term Loan from Export Import Bank of India

Term Loan of Rs.1300.00 Lacs , Outstanding Rs. 974.99 Lacs as on 31.03.18 (P.Y. 1187.23 Lacs ) which includes buyer credit of EURO NIL (Previous Year EURO 5,42,032) equivalent to Rs. NIL (Previous Year Rs. 380.46 Lacs ) availed from PNB Hongkong against LOU from EXIM Bank, including Rs. 216.66 Lacs (P.Y. Rs. 216.66 Lacs ) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 9, is secured by way of joint first charge ranking pari-passu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, Finished and semi finished products, other goods and uncalled capital, subject to prior charges created in favour of Bankers for working capital facilities. The above loans of Rs.1300.00 Lacs have also been guaranteed by Managing Director and one other Director of the Company.

This loan is repayable in 24 quarterly equal installments from November 2016 and last installment is payable by August 2022. The above term loan carry interest @LTMLR 2.60% p.a.

e) Term Loans (Vehicle Loans) from HDFC Bank Limited

i) Vehicle Loan from HDFC Bank Ltd. of Rs. 6.50 Lacs outstanding Rs. NIL as on 31.03.2018 (P.Y. 0.62 Lacs ) including Rs. NIL (P.Y. Rs. 0.62 Lacs ) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from July, 2014 along with interest @ 10.50% per annum and the last instalment is payable by June, 2017 .

ii) Vehicle Loan from HDFC Bank Ltd. of Rs. 6.50 Lacs outstanding Rs. NIL as on 31.03.2018 (P.Y. Rs. 1.22 Lacs ) including Rs. NIL (P.Y. Rs. 1.22 Lacs ) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from October, 2014 along with interest @ 10.50% per annum and the last instalment is payable by September, 2017 .

iii) Vehicle Loan from HDFC Bank Ltd. of Rs. 7.18 Lacs outstanding NIL as on 31.03.2018 (P.Y. Rs. 0.68 Lacs ) including Rs. NIL (P.Y. Rs. 0.68 Lacs ) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from July, 2014 along with interest @ 10.50% per annum and the last instalment is payable by June, 2017 .

iv) Vehicle Loan from HDFC Bank Ltd. of Rs. 6.00 Lacs outstanding Rs.3.54 Lacs as on 31.03.2018 (P.Y. 5.41 Lacs ) including Rs. 3.54 Lacs (P.Y. 5.41 Lacs ) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from December, 2016 along with interest @ 9.66% per annum and the last instalment is payable by November, 2019 .

v) Vehicle Loan from HDFC Bank Ltd. of Rs. 6.00 Lacs outstanding Rs.3.54 Lacs as on 31.03.2018 (P.Y. 5.41 Lacs ) including Rs.3.54 Lacs (P.Y. 5.41 Lacs) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from December, 2016 along with interest @ 9.66% per annum and the last instalment is payable by November, 2019 .

vi) Vehicle Loan from HDFC Bank Ltd. of Rs. 6.00 Lacs outstanding Rs.2.71 Lacs as on 31.03.2018 (P.Y. 4.65 Lacs ) including Rs.2.71 Lacs (P.Y. 1.94 Lacs) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from July, 2016 along with interest @ 9.75% per annum and the last instalment is payable by June 2019 .

f) Term Loans (Vehicle Loans) from ICICI Bank Limited

Vehicle Loan from ICICI Bank Ltd. of Rs. 18.50 Lacs outstanding Rs.14.73 Lacs as on 31.03.2018 (P.Y. NIL ) including Rs.5.99 Lacs (P.Y. NIL) shown under the head Other Current Liability for Current maturity of Long Term debts in Note 21 is secured by way of Hypothecation of respective car acquired out of the said loan. This Loan is repayable in 36 monthly instalment commencing from August, 2017 along with interest @ 8.25% per annum and the last instalment is payable by July 2020 .

(iii) Term Loan from Rajasthan State Industrial Development & Investment Corporation Limited (RIICO)

i) Term Loan of Rs.1000.00 Lacs , Outstanding Rs. 166.70 Lacs as on 31.03.18 (P.Y. 333.36 Lacs ) including Rs. 166.66 Lacs (P.Y. 166.66 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21, is secured by way of joint first charge ranking pari-passu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, Finished and semi finished products, other goods and uncalled capital, subject to prior charges created in favour of Bankers for working capital facilities. The above loans of Rs.1000.00 Lacs have also been guaranteed by Managing Director and one other Director of the Company.

This loan is repayable in 24 quarterly equal installments from May 2013 and last installment is payable by February 2019. The above term loan carry interest @11.00% p.a.

ii) Term Loan of Rs. 1250.00 Lacs , Outstanding Rs. 729.00 Lacs as on 31.03.18 (P.Y. 937.40 Lacs ) including Rs. 208.40 Lacs (P.Y. 208.40 Lacs) shown under the head Other Current Liabilities for Current Maturities of Long Term Debts in Note 21, is secured by way of joint first charge ranking pari-passu of all immovable properties (by way of deposit of Title Deeds of Lease Hold Land), both present and future and hypothecation charge over movable (save and except book debts) machinery, spares, tools and accessories, present and future, Finished and semi finished products, other goods and uncalled capital, subject to prior charges created in favour of Bankers for working capital facilities. The above loans of Rs. 1250.00 Lacs have also been guaranteed by Managing Director and one other Director of the Company. This loan is repayable in 24 quarterly equal installments from November 2015 and last installment is payable by August 2021. The above term loan carry interest @11.5% p.a.

(a) Borrowings of Rs. 3147.10 (P.Y. Rs 2123.81 ) from SBI, IDBI and ICICI Bank Ltd. for working capital are secured on pari passu basis by way of joint hypothecation first charge on entire inventories, trade receivables and other current assets present & future and secured by second pari passu charge on fixed assets of the Company. Such borrowings are also guaranteed by the Managing Director and one other Director of the Company.

The fair value of financial assets and liabilities are included at the amount at which instruments could be exchanged in a current transaction between the willing parties. The following methods and assumptions were used to estimate the fair value:

(A) The Company has opted to fair value its unquoted equity instruments at its Net Asset Value through Retained Earnings.

(B) The fair values of cash and cash equivalents, other bank balances, trade receivables, loans, other financial assets, short term borrowings, trade payables, and other financial liabilities approximates their carrying amounts largely due to the short-term maturities of these instruments. Company has adopted Effective Interest Rate Method (EIR) for fair valuation of long term borrowings.

Fair Value Hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

NOTE NO .2

Financial Risk Management Objectives and Policies: The Company''s activities are exposed to a variety of Financial Risks from its Operations. The key financial risks include Market risk, Credit risk and Liquidity risk.

(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 mainly three types of risk:, Foreign currency risk, Interest rate risk and other price risk such as Equity price risk and Commodity Price risk.

(b) Foreign Currency Risk: Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign exchange risk arising from foreign currency transactions of imports, exports and borrowing primarily with respect to USD and Euro. The Company''s exports are denominated generally in USD, providing a natural hedge to some extent against foreign currency payments on account of imports of raw materials and/or the payment of borrowings. The foreign currency transaction risk are managed through selective hedging programmes by way of forward contracts including for underlying transactions having firm commitments or highly probable forecast of crystalisation.The Company uses forward exchange contracts to hedge its exposure in foreign currency. The details of foreign currency exposures hedged by derivative instruments and those have not been hedged are as follows:

The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.

(d) Interest Rate Risk and Sensitivity:

The Company is having fixed rate long term borrowings which are not exposed to any risk of changes in market interest rates.

(e) Commodity price risk:

The Company is affected by the price volatility of certain commodities. Its operating activities require the purchase of raw material and therefore, require a continuous supply of certain raw materials. To mitigate the price risk, the company has an approved supplier base to get the best competitive prices for the commodities and to manage the cost without any compromise on quality.

(f) Equity price risk:

The Company''s exposure to equity instruments price risk arises from investments held by the company and classified in the balance sheet at fair value through OCI. Having regard to the nature of securities, intrinsic worth, intent and long term nature of securities held by the company, fluctuation in their prices are considered acceptable and do not warrant any management estimation.

(g) Credit Risk:

Credit risk is the risk that counter party might not honor 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).

Trade Receivables:

Customer credit risk is managed based on company''s established policy, procedures and controls. The company assesses the credit quality of the counter parties, taking into account their financial position, past experience and other factors.

Credit risk is reduced by receiving pre-payments and export letter of credit to the extent possible. The Company has a well defined sales policy to minimize its risk of credit defaults. Outstanding customer receivables are regularly monitored and assessed. The Company follows the simplified approach for recognition of impairment loss and the same, if any, is provided as per its respective customer''s credit risk as on the reporting date

(h) Deposits with Bank:

The deposits with banks constitute mostly the investment made by the company against bank guarantee and are generally not exposed to credit risk .

(i) Liquidity Risk:

Liquidity risk is the risk, where the company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The company''s approach is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due.

The table below summarises the maturity profile of company''s financial liabilities based on contractual undiscounted payments:

NOTE NO. 3 Capital Management:

The Company''s policy is to maintain an adequate capital base so as to maintain creditor and market confidence and to sustain future development. Capital includes issued capital, share premium and all other equity reserves attributable to equity holders.

The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. Net Debt is calculated as borrowings less cash and cash equivalents.

NOTE NO. 4

Exceptions and Exemptions applied for Transition to Ind AS

Ind AS 101 "First-time adoption of Indian Accounting Standards" (hereinafter referred to as Ind AS 101) allows first time adoptions certain mandatory exceptions and optional exemptions from the retrospective application of certain Ind AS, effective from 1^st April, 2016. In preparing these financial statements , the company has applied the below mentioned optional exemptions and mandatory exceptions.

(a) Optional Exemptions Availed:

Property Plant and Equipment, Intangible Assets and Investment Properties

As permitted in para D5-D8B of Ind AS 101, the company has opted to continue with the carrying values under previous GAAP for all the items of Property, Plant and Equipment and investment exept free hold land & lease hold land in which the company has opted to carry the fair value as deemed cost on transition date.

(b) Mandatory Exceptions:

(i) Estimates

Upon an assessment of the estimates made under Previous GAAP, the company has an opinion that there was no necessity to revise such estimates under Ind AS, except where revision in estimates was necessitated as required in Ind AS. The estimates used by the company to present the amounts in accordance with Ind AS reflect conditions existing as at 1^st April, 2016, the date of transition to Ind AS and as at 31^st March, 2017 and as at 31^st March, 2018.

(ii) Derecognition of Financial Assets and Financial Liabilities

The Company has opted to apply the derecognition requirements for financial assets and financial liabilities in accordance with Ind AS 109 prospectively for transactions occurring on or after the date of transition to Ind AS.

(iii) Classification and Measurement of Financial Assets

The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.

NOTE NO. 5

Standards Issued but not yet Effective:

IND AS 115- Revenue from Contract with Customer: On March 28, 2018 Ministry of Corporate Affairs ("MCA") has notified the Ind AS 115, Revenue from Contract with Customers. The core principal of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity''s contracts with customers.

The company will adopt the standard on April 1, 2018 by using the cumulative catch-up transition method and accordingly comparatives for the year ending or ended March 31, 2018 will not be retrospectively adjusted. The effect on adoption of IND AS 115 is expected to be insignificant.

NOTE NO. 6 Reconciliation:

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

(a) Effect of Ind AS adoption on the Balance Sheet as at 31^st March 2017 and 1^st April 2016:

1 Property Plant and Equipment

The Company has opted the option of fair value as deemed cost for freehold land and lease hold land as on the date of transition to IND AS i.e. as at 01-04-2016 . This has resulted in increase of Rs 4529.94 Lacs in the value of freehold and leasehold land with Corrosponding increase in Retained Earnings of Rs 4529.94 Lacs.

2 Non Current Investment :-

The company has treated fair value of Investment of Equity shares of Rs 167.47 Lacs and 0.01% Cumulative Preference Shares of Rs 148.56 Lacs as NIL in view of negative book value and has made provision for diminution in value of investment by debiting to retained earnings as at 01.04.2016

3 Employee Benefit Expenses:-

Under IND AS remeasurement i.e. Acturial Gain and losses and defined benefit obligation are recognised in the other comprehensive Income instead of Statement of Profit & Loss Thus employee benefit expenses are reduced by Rs. 5.79 Lacs and is recognised in OCI in year ended 31^st March 2017

4 Security Deposit:-

Interest free Security Deposit has been accounted for at amortised cost using market rate of interest. The difference between the amount of Deposit and the amortised cost as at 01-04-2016 amounting of Rs. 95.81 Lacs. has been debited to retained earnings.

5 Prior Period Expenses of Employee benefit expenses Rs 154.42 Lacs. have been debited to Retained Earnings as at 01-04-2016

6 Deferred Tax liabilities / Assets has also been recognised due to the Accounting treatment in respect of certain items as per IND AS

7 MAT entitlement credit being of the nature of Deferred Tax on transition to IND AS. MAT credit entitlement of Rs. 172.49 Lacs. as at 01.04.2016 has been regrouped under Deferred Tax Assets from Current Tax Assets (Net)

NOTE NO. 7

Accounts in respect of Current and Non-Current Liabilities, Trade Receivables , Other Current Assets, Loans and Advances and Deposits are subject to confirmations of respective parties.

NOTE NO. 8

The management has certified that the Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence, disclosures, if any, relating to total outstanding dues of Micro Enterprises and Small Enterprises and the Principal amount and Interest due thereon remaining unpaid and the amount of Interest paid/ payable as required under amended Schedule III of the Companies Act.2013 could not be compiled and disclosed. The Auditors have relied on the certificate of the management in this regard.

NOTE NO. 9

Revenue from operation upto 30^th June 2017 is inclusive of Excise Duty and thereafter it is net of Goods and Service Tax (GST).

NOTE NO. 10 Segment Information :

(a) The Company has only one reportable Primary Business Segment i.e Yarn. Hence, no seprate segment wise information of revenue, results and capital employed is given.

(b) The following table shows the distribution of Company''s Revenue from operations by geographical market, regardless of where the goods were produced :

(c) Sales to one Export Customer of the Company is Rs. 3292.10 Lacs (Previous Year Rs 5903.62 Lacs ) which is more than 10% of the Company''s total turnover.

NOTE NO. 11

The disclosures required as per the Indian Accounting Standards (Ind-AS 19 - Employee Benefits) notified under the Companies (Indian Accounting Standards) Rules, 2015 are as under :

Defined - Contribution Plans

The Company offers its employees defined contribution plan in the form of provident fund(PF), family pensions fund (FPF) and Employees State Insurance Scheme (ESI) which covers substantially all regular employees. Contribution are paid during the year into separate funds under certain fiduciary-type arrangements. Both the employees and the company pay pre determined contribution into the provident funds, family pension fund and the Employees State Insurance Scheme. The Contributions are normally based on a certain proportion of the employee''s salary. "

Defined - Benefit Plans

The Company offers its employees defined- benefit Plans in the form of a Gratuity Scheme. Benefits under the defined benefit plan is typically based either on years of service and the employee''s compensation (generally immediately before retirement). The Gratuity scheme covers substantially all regular employees. The Company contributes funds to Life Insurance Corporation of India, which is irrevocable. Commitments are actuarially determined at year end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains & Losses of changed actuarial assumptions are charged to the profit and loss account. The obligations for leave encashment is recognised in the same manner as gratuity.

Gratuity amount for the current year is higher as compared to the previous year mainly due to change in acturial assumption and discounting factor. The estimates of future salary increases, considered in actuarial Valuation, take account of inflation, seniority, promotion, and other relevant factors such as demand and supply in the employment market. The above information is as submitted and or obtained from Actuaries and relied upon by the Auditors.

NOTE NO. 12

Related Party Disclosures

(As certificed by the Management)

Disclosures in respect of Related Parties as defined in Indian Accounting Standard 24(Ind AS 24), with whom transactions were entered into at an arm''s length and in the ordinary course of business during the year are given below:

(i) Key Management Personnel and Relatives of Key Management Personnel

Mr. Ramadoss Srinivasan - Chairman Mr. Sanjiv Shroff (Managing Director)

Mr. Rahul Shroff (Whole-time Director Designated as Executive Director)

Mr. Ameya Shroff (Whole-time Director Designated as Executive Director)

Mr. N.G.Khaitan (Non Executive Director)

Mrs. Dipika Shroff (Non- Executive Director)

Mr. K.L Sonthalia ( Non Executive Director)

Mr. R N Sharma ( Non Executive Director)

Mr. Narayan Shroff ( Non Executive Director )

Mr. Amar Inder Singh Jassar (CFO)*

Mr. Kiran Firodiya (CFO)*

Mr. Vimal Tank (Company Secretary)

Relative of Key Managerial Person

Mr. Shankar Lal Shroff, Chairman Emeritus (Father of Mr. Sanjiv Shroff)

Mrs. Bimla Devi Shorff (Mother of Mr. Sanjiv Shroff)

Mrs. Kavisha Shroff (Wife of Mr. Rahul Shroff)

ii) Enterprises over which key Management Personnel and relative of such personnel is able to exercise significant influence or control

a) Indo Textiles & Fibres Limited

b) Spell Fashions Pvt.Ltd.

c) A.R.Fibtex Pvt. Ltd.

d) Khaitan & Co. LLP

e) A.R. Commercial Private Limited

f) A.S. Chemotex pvt. Ltd.

g) Sunrise Producers Pvt. Ltd.

h) Sunrise Cotton Industries Limited

i) Modern Fibotex India Limited

Note: #The remuneration to Key Managerial Personnel''s stated above does not include provision/payment towards incremental liability on account of gratuity and compensated absences since actuarial valuation is done for the Company as a whole. *Mr. Amar Inder Singh Jassar,CFO appointed on 02.12.2017 and Mr. Kiran Firodiya, was CFO till 14.09.2017

NOTE NO. 13

Previous Year figures have been regrouped / rearranged, wherever necessary.

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Mar 31, 2014

31st March, 2014 31st March, 2013 Rs. Rs.

1 Contingent Liabilities are not provided for in respect of i) Bonds executed in favour of Customs and Excise Authorities 1,00,00,000 1,04,00,000

ii) Unredeemed Bank Guarantees 1,55,00,000 1,55,00,000

iii) Unexpiredlettersofcredit 17,55,35,631 15,14,89,053

iv) Foreign Bills discounted with Banks 23,56,38,164 28,32,92,396

v) Claims not acknowledged as debts (Disputed by the Company and or appealed against);

a) Demand of Income Tax 1,62,59,210 7,20,58,480*

* Assessing officer''s order pending for giving appeals effect.

b) Demands by Excise department (including for Service Tax) 47,86,725 47,86,725

c) Demands of SalesTax. 31,240 31,240

d) Demands of workers 6,01,069 5,26,385

Except as stated above, there are no other pending cases and or claims against the Company, as certified by the management.

vi) Custom duty along with applicable amount of interest payable for non-fulfilment of export obligations of Rs. 1,21,28,62,000 within allowed time of eight years (upto 31-03-2020) for import of Capital goods under EPCG scheme 20,53,382 20,53,382

2 In the opinion of the Board of Directors, the Assets (other than Fixed Assets and non-current Investments), Trade Receivables, Loans, Advances and Deposits are approximately of the value stated, if realized in the ordinary course of business, unless otherwise stated. The provisions for liabilities except as stated above are adequate and not in excess of the amount reasonably necessary.

3 Company has been giving loans to other bodies corporate (this year as well as in previous years) in spite of borrowings from Banks and others. The Company has been advised by the Company''s Solicitors that the aforesaid activity does not come within the purview of Section 149(2A) of the Companies Act, 1956.

4 M/s V.S. Lignite Power Pvt. Ltd., from whom company is purchasing power, was raising bills up to 31.03.2012 part of which was disputed by the company, though being charged under the head Power and Fuel Account in Note 26. The dispute was referred to arbitration during the previous year and the arbitrators settled the dispute in favour of the company. Accordingly, a sum of Rs.1,26,83,136/-charged to Power and Fuel Account till 31.03.2012 but remaining unpaid had been written back and was included under the head Liability no longer required written back as per Note 21 of statement of profit and loss for the year ended 31.03.2013. Accordingly the company has also not provided for disputed amount of Rs.3,02,99,129/- (P.Y. Rs.2,05,71,494/-) (including Rs.97,27,635/- (P.Y. Rs.78,88,358/-) for the year for bills raised by M/S V.S. Lignite Power Pvt. Ltd. for the period from 04.07.2010 to 31.03.2014. M/S V.S. Lignite Power Pvt. Ltd. had filed an appeal in Session Court in earlier year and the Session Court had also decided the matter in favour of the Company. But the said company filed further appeal with Honorable Rajasthan High Court at Jaipur Bench and such case for Rs.3,02,99,129/- is still pending in Rajasthan High Court at Jaipur Bench. Liability, if any, arising on such appeal is intended to be provided as and when the case is decided.

5(i) (a) Accounts in respect of Current and Non-Current Liabilities, Trade Receivables, Other Current Assets, Loans and Advances and Deposits are subject to confirmations of respective parties.

(b) The management has considered the following amounts outstanding as on 31-03-2014 as good and fully recoverable.

Adjustments for non-recovery and or for short realisations, if any, the amount whereof is not presently ascertainable are intended to be made in accounts as and when such outstandings are realised.

ii) The management has certified that the Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence, disclosures, if any, relating to total outstanding dues of Micro Enterprises and Small Enterprises and the Principal amount and Interest due thereon remaining unpaid and the amount of Interest paid/ payable as required under amended Schedule VI of the Companies Act.1956 could not be compiled and disclosed.

The Auditors have relied on the certificate of the management in this regard.Copies of letters written to the suppliers seeking information regarding their status were also not available for Auditors verification.

iv) (a) Interest Expenses as per Note 25 forfinance cost includes interest of Rs. 17,64,476/- (P.Y. Rs. 17,18,977/-) relating to purchases of Raw Materials.

(b) As referred to under Note No.l(c) of Long Term Borrowings in Note 3, the company is still to seek approval from IDBI Bank Ltd.for payment of interest on Unsecured Loans. The company had provided interest this year as well as in earlier years on Unsecured Loans (including funds to be deployed as promoter''s contribution in the project up front and amount to be converted Rs.400 lacs into Equity Capital as per SEBI formula within 6 months from date of first disbursement (also refer note II in note 1). Interest so provided (amount not ascertained and stated) is included under the head " Interest Expense" in note 25 of" Finance Costs". The Company had been advised by the solicitors that no approval of IDBI Bank Ltd. is necessary for making only provisions for interest in accounts. But, the company has also made payments (amount not ascertained and stated) during this year and in previous year out of such provisions for Interest. However, the company has applied to IDBI Bank Ltd. for relaxation of certain terms and conditions as per sanction letter for Term Loans and one of the terms for which relaxation has been sought is regarding payments of interest on Unsecured Loans brought in to meet the terms and conditions prescribed by IDBI Bank Ltd. Payment of interest as aforesaid are subject to above refered relaxation by and or approval of IDBI Bank Ltd. in this regard. Such correspondence by the Company with IDBI Bank ltd. could not be made available for Auditors inspection and therefore they have relied on the Certificate of the management in this regard.

vii) Expenses as per Note 22 of ''Cost of materials consumed1 and Note 26 of "Other Expenses" includes :

(i) Octroi etc.in cases levied (amounts not separately ascertained and stated (P.Y. Same)

(ii) Service Tax on expenses in respect of which Cenvat credits have not been claimed/availed (amounts not separately ascertained and stated (P.Y. Same)

viii) Disclosure of Foreign Currency Exposure as on 31.03.2014 (P.Y. 31.03.2013)

a. Foreign Currency Exposure hedged and Forward booking outstanding as on 31.03.2014 (P.Y. 31.03.2013)

The particulars as stated above regarding hedged/not hedged currencies are as per certificate of the management and relied upon bytheAuditors.

ix) "Other Expenses11 as per Note ''26'' includes Rs. 6,16,565/-, (P.Y. Rs.4,59,300/-) cost of capital assets/equipments as under:

(a) Assets not exceeding cost of Rs.5000/- for each item Rs. 96,580/- (P.Y. Rs.l,50,660/-).Such accounting in respect of cost of capital assets/vastu equipments (not exceeding cost of Rs. 5000/-for each item) has not affected materially the results of the Company, as after capitalisation of such assets/ equiments, 100% depreciation is claimable thereon.

(b) Vastu equipments exceeding cost of Rs.5,000/- for each item, Rs. 5,19,985/- (P.Y. Rs. 3,08,640/-) considered being for uninterrupted working of the Factory.

x) Advances of Rs. 10,00,000/- as referred to under (c ) in Note 18 are for payments to SBI Life Insurance Company Ltd. towards Life Insurance Premium against SBI Life-Flexi Smart Plus Policies dated 31.03.2014 on Life of Sri Rahul Shroff and Sri AmeyaShroff,Whole Time Directors -Designated as Executive Directors, of the Company. Maturity amount alongwith bonus and other benefits, if any, will be received by the Company on the maturity of the Policies. The above Policies are endorsed and assigned with effect from 23.04.2014 in favour of Sri Rahul Shroff and Sri Ameya Shroff respectively, which will be effective in case of the death of the life assured or if company achieves yearly turnover growth of 30% for five years.Yearly premium of Rs. 500000/- in respect of each of the policies is payable by the Company upto 31-03-2019.

6 Related Party Disclosures

(A) List of Related Parties

(i) Enterprises over which Key Management Personnel/ Directors/ relatives have control or significant influence.

a) Modern Fibotex India Limited

b) lndoTextiles&Fibres Limited

c) Spell Fashions Pvt.Ltd.

d) A.R.Fibtex Pvt. Ltd.

e) Khaitan&Co.

f) Khaitan &Co. LLP

g) Khaitan&Co. AOP

h) A.R. Commercial Private Limited

i) A.S. Chemotexpvt. Ltd.

j) Sunrise Producers Pvt. Ltd.

K) Sunrise Cotton Industries Limited

(ii) Key Management Personnel and Relatives of Key Management Personnel

a) Mr. SanjivShroff (Managing Director)

b) Mr. R.N.Sharma (Wholetime Director)

c) Mr. Shanker Lai Shroff, Chairman (Fatherof Mr. SanjivShroff)

d) Mrs. Bimla Devi Shroff (Motherof Mr. SanjivShroff)

e) Mrs. Dipika Shroff (Wife of Mr. SanjivShroff)

f) Mr. Rahul Shroff (Wholetime Director Designated as Executive Director)

g) Mr. Ameya Shroff (Wholetime Director Designated as Executive Director)

h) Mr. N.G.Khaitan (Director) Partner in Solicitor Firms

7 The Company had entered into an agreement dated 22.02.07 (as amended by agreement dt. 01.07.2008) with M/s Marudhar Power Private Limited (Subsequently name changed to VS Lignite Power Private Limited), settng up a Group Captive Power Plant, at Bikaner in the State of Rajasthan, for supply of 8MW of Power also to the Company and in pursuance to such agreements, the Company had subscribed for 16,74,719 Class "A" Equity Shares of Rs.10/- each fully paid at a total value of Rs. 1,67,47,190/- and for 14,85,629 Class "A" 0.01% Cumulative Redeemable Preference Shares of Rs.l0/-each fully paid at a total value ofRs.1,48,56,290/- and the same have been classified as "Non-Current Investments" in Note "12" as "Trade Investements"

Further, the Company had agreed to create lien on the aforesaid Shares at appropriate time in favour of M/s VS Lignite Power Private Limited (Formerly known as Marudhar Power Private Limited), as per terms of the Charter Documents as security towards its obligation under the Power delivery Agreement dated 22.02.2007 and as amended by agreement dt. 01.07.2008 (also refer Note l(vi)(c) above)

8 Segment Reporting Policies

(a) Identification of Segments:

(i) Primary Segment - Business Segment -

The Company''s operation predominantly comprises of only one segment l.e. Manufacturing of Synthetic Blended Yarn. In view of the same, separate segmental information is not required to be given as per the requirements of Accounting Standard 17 - "Segment Reporting" issued by The Institute of Chartered Accountants of India.

(ii) Secondary Segment-Geographical Segment-

The analysis of geographical segment is based on the geographical location of the customers. Thegeogriphical segments considered for disclosure are as follows:

Sales within India include sales to customers located within India Sales outside India include sales to customers located outside India

(ii) Fixed Assets as per Geographical Locations

The entire activity pertaining to sales outside India is carried out from Fixed Assets in India and there are no Fixed Assets outside India.

9. The disclosures required as per the revised Accounting Standards (AS-15- Employee Benefits) notified under the Companies (Accounting Standards) Rules, 2006 are as under:

Defined - Contribution Plans : The Company offers its employees defined contribution plan in the form of provident fund(PF), family pensionsfund (FPF) and Employees Insurance Scheme (ESI). Provident Fund, Family Pension Fund Employees State Insurance Scheme cover substantially all regular employees. Contribution are paid during the year into separate funds under certain fiduciary- typearrangements. Both the employees and the company pay predetermined contribution into the provident funds, family pension fund and the Employees State Insurance Scheme. The Contributions are normally based on a certain proportion of the employee''s salary. Contribution to Defined Benefit Plan, recognized and charged off for the year are as under (excluding for on contracts payments)

Defined - Benefit Plans

The Company offers its employees defined- benefit Plans in the form of a Gratuity Scheme. Benefits under the defined benefit plan is typically based either on years of service and the employee''s compensation (generally immediately before retirement). The Gratuity scheme covers substantially all regular employees. The Company contributes funds to Life Insurance Corporation of India, which is irrevocable. Commitments are actuarially determined at year end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains & Losses of changed actuarial assumptions are charged to the profit and loss account. The obligations for leave encashment is recognised in the same manner as gratuity.

(A) These figures are pending reconciliation by the management with the relative figures as per "Employee Benefits Expense" in Note 24. The likely impact, after such reconciliation on the results for the year/ earlier years and on the year end Assets/ Liabilities, could not be ascertained and stated.

The acturial calculations used for estimated defined benefit commitments and expenses are based on the following assumptions, which, if changed, would affect the defined benefit commitment''s size, funding requirements.

The estimates of future salary increases, considered in actuarial Valuation, take acount of inflation, seniority, promotion, and other relevant factors such as demand and supply in the employment market. The above information is as submitted and or obtained from Actuariesand relied upon bytheAuditors.

The estimated contribution expected to be made by the Company for the year ending 31.03.2015 is not readily ascertainable and therefore could not be disclosed.

10 Previous Year, figures have been regrouped / rearranged, wherever necessary.

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Mar 31, 2013

1. Related Party Disclosures

(A) List of Related Parties

(i) Enterprises over which Key Management Personnel/Directors/Relatives have control or significant influence

a) Modern Fibotex India Limited

b) Indo Textiles & Fibres Limited

c) Spell Fashions Pvt. Limited

d) A. R. Fibtex Pvt. Limited

e) Khaitan & Co.

f) Khaitan & Co. LLP

g) Khaitan & Co. AOR

h) A. R. Commercial Pvt. Limited

i) A. S. Chemotex Pvt. Ltd.

j) Sunrise Producers Pvt. Ltd.

(ii) Key Management Personnel and Relatives of Key Management Personnel

a) Shri Sanjiv Shroff (Managing Director)

b) Shri R. N. Sharma (Wholetime Director)

c) Shri Shanker Lai Shroff (Father of Shri Sanjiv Shroff)

d) Smt. Bimla Devi Shroff (Mother of Shri Sanjiv Shroff)

e) Smt. Dipika Shroff (Wife of Shri Sanjiv Shroff)

f) Shri Rahul Shroff (Son of Shri Sanjiv Shroff)

g) Shri N. G. Khaitan, Partner of Solicitor''s Firm

Documents as sSy towSds £oStio under thePo Umtod)'' 3S P6r t6rmS °f tfle Charter by agreement dt. OlSoa Agreement dated 22.02.2007 and as amended

2. Segment Reporting Policies

(a) Identification of Segments

(i) Primary Segment - Business Segments

The Company''s operation predominantly comprises of only one segment i.e. Manufacturing of Synthetic Blended Yarn. In view of the same, separate segmental information is not required to be given as per the requirements of Accounting Standard 17 - "Segment Reporting" issued by The Institute of Chartered Accountants of India.

(ii) Secondary Segment - Geographical Segment

The analysis of geographical segment is based on the geographical location of the customers. The geographical segments considered for disclosure are as follows : Sales within India include sales to customers located within India Sales outside India include sales to customers located outside India.

Defined - Contribution Plans

Insurance Scheme cover substantially all regular employees. Contribution are paid during the year into separate funds under certain fiduciary-type arrangements. Both the employees and the Company pay predetermined contribution into the provident funds, family pension fund and the Employees State Insurance Scheme. The Contributions are normally based on a certain proportion of the employee''s salary.

---

Mar 31, 2012

31st March, 2012 31st March, 2011 Rs. Rs.

1. Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances of Rs. 89,64,428/-) (P.Y. Rs. 89,11,350/-) 8,33,11,700 7,88,13,150

2. Contingent Liabilities are not provided for in respect of

i) Bonds executed in favour of Customs and Excise Authorities 1,04,00,000 1,04,00,000

ii) Unredeemed Bank Guarantees 1,56,00,000 1,56,00,000

iii) Unexpired Letters of Credit 12,23,93,327 17,23,72,310

iv) Bills discounted with Banks 19,51,51,691 22,97,09,702

v) Claims not. acknowledged as debts (Disputed by the Company); a) Demands by Excise Department 47,86,725 47,86,725 {including for Service Tax)

b) Demands of Sales Tax 31,240 90,300

c) Demands of workers 6,53,495 4,04,122

vi) Obligation to Export towards Custom duty saved on Purchase of capital goods under Export Promotion Capital Goods Scheme (Refer Note 6{x)) 12,122.96 Lacs Nil

vii) Except as stated above, there are no other pending cases and or claims against the Company.

3. In the opinion of the Board Of Directors, the Current Assets, Loans, Advances and Deposits are approximately of the value stated, if realised in the ordinary course of business unless otherwise stated. The provisions for liabilities except as stated above are adequate and not in excess of the amount reasonably necessary.

4. i) Accounts in respect of Current Liabilities, Debtors, Other Current Assets, Advances and Deposits are subject to confirmation of respective parties.

ii) The Management has certified that the Company has not received any intimation from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act,. 2006 and hence, disclosures, if any, relating to total outstanding dues of Micro Enterprises and Small Enterprises and the Principal amount and Interest due thereon remaining unpaid and the amount of Interest paid/payable as required under amended Schedule VI of the Companies Act.1956 could not be compiled and disclosed. The Auditors have relied on the certificate of the Management in this regard. '

iv) Miscellaneous Expenses as per Note-27 includes Rs. 1,35,006/- (Previous year Rs. 30,223/-) paid for taxation • matters to a firm in Which any of the partners of the firm of Auditors are partners / proprietors.

v) a) Other Financial Charges as per Note 26 includes interest paid on Raw Material payments Rs. 50,77,491/-' (Previous Year Rs. 54,89,326/-).

b) As referred to under Note N6.1 of Long Term Borrowing, the Company would seek approval from IDB Bank Ltd. for payment of interest oh Unsecured Loans. The Company has provided interest this year as well as in earlier years on Unsecured Loans (including funds to be deployed as promoters contribution in the project upfront and amount to Be converted into Equity Capital as per SEBI formula within 6 months from date of first disbursment). Interest so provided (amount not ascertained and stated),is included under the head "Interest on Unsecured Loans" in schedule 26 of "Financial Cost". The Company has been advised by the solicitors that no approval of IDBI Bank Ltd. is necessary for making such provisions of interest in accounts. The Company has made certain payments during this year and in previous year out of such provisions for Interest The Company has applied to IDBI Bank Ltd: for relaxation of certain terms and conditions as per sanction letter for Term Loans and one of the terms for which relaxation has-been sought is regarding payments of interest on Unsecured Loans brought in to meet the terms and conditions prescribed by IDBI Bank Ltd.' Payment of interest as aforesaid are subject to above refered relaxation by and or approval of IDBI Bank Ltd. in this regard.

VIII a) Advances as per Note 19 includes lease rent etc. receivable Rs. Nil (PY. Rs, Nil) (net of T.D.S.) (Maximum amount due Rs. 30,000/-) (P.Y. Rs. 30,000/-) due from Spell Fashions Pvt, Ltd., a Company under the same Management and in which a Director is Director and or Member. b) Expenses as per Note 20 of Raw Materials Cost, Note 24 of "Other Expenses" includes :

(i) Octroi etc.in cases levied,amount not separately ascertained and stated (Previous year same). (ii) Service Tax On expenses in respect of which Cenvat credits have not been claimed/availed (amount not ascertained and stated) (also refer Notes 1(viii)(b) and 4(ix)(e)).

x) Additions to Plant and Machinery as per Note "9" includes Rs. 95,96,300/- (P.Y. Rs. Nil/-) for purchases under the Export Promotion Capital Goods Scheme of the Government of India: The Company is under an obligation to fulfill quantified exports to the extent of Eight times pf Custom Duty saved,of Rs. 19,82,748/- (P.Y. Rs. Nil/-) within a period of Eight years apart from annual average Export performance of Rs. 1,19,64,34,480/-.

xi) "Other Expenses" as per Note '24' includes Rs. 2,09,520/-, (P.Y. Rs. 3,02,450/-) cost of capital assets / equipments as under:

(a) Assets not exceeding cost of Rs. 5,000/-for each item Rs, 1,84,520/-(P.Y. Rs. 1,90,000/-) (b) Assets exceeding cost of Rs. 5,000/-for each item Rs. 25,000/-(P.Y. Rs.1,12,450/-).

The Company has considered the cost of above assets/equiments as revenue expenditure as having been made for uninterrupted working of the Factory. Such accounting in respect of cost of capital assets / equipments (not exceeding cost of Rs. 5,000/- for each item) has not affected materially the results of the Company, as after capitalisation of such assets/ equiments, 100% depreciation was to be claimed thereon. In respect of capital assets/equipments (Cost for each item exceeding Rs. 5,000/-), the results of the Company for the year have been affected to the extent of such cost of Rs. 25,000/- (P.Y. Rs. 1,12,450/- (Less allowable depreciation).

xii) The amounts as stated under item (a) above includes/ excludes premium/ discount on forward contracted rates amortised as expenses or income over the Life of the contracts, as referred to under note 1 (xiii)(c) above. The relative amount of premium/ discount has not been seperatly ascertained and stated.

xiii) In previous Year Payment of Interim Dividend of Rs. 29,80,507/- on 01.02.2011 on Preference Share as per Board Resolution dated 28.01.2011 not in accordance to the terms of the issue of such share nor the consent of the Equity Shareholders and permission of the Financial institutions were obtained in this regard. Such payment of Interim Dividend is not in accordance to the provision of the Companies Act, 1956. The Company is obtaining necessary legal opinion in this regard and do needful accordingly.

5. The Company had entered into agreement dated 22.02.2007 (as amended by agreement dt. 01.07 2008) with M/s Marudhar Power Private Limited (Subsequently name changed to M/s. VS Lignite Power Private Limited), setting up a Group Captive Power Plant, at Bikaner in the State of Rajasthan, for supply of 8MW of Power also to the Company and in pursuance to such agreements, the Company had subscribed for 7,70,371 Class "A" Equity Shares of Rs. 10/- each fully paid at a total value of Rs. 77.04 Lacs and for 14,85,629 Class "A" 0.01% Cumulative Redeemable Preference Shares of Rs. 10/- each fully paid at a total value of Rs. 148.56 Lacs and the same have been classified as "Non-Current: Investments" in Note,"12" as Trade Investements.

Further, the Company had agreed to create lien on the aforesaid Shares at appropriate time in favour of M/s. VS Lignite Power Private Limited (Formerly known as M/s. Marudhar Power Private Limited), as per terms of the Charter Documents as security towards its obligation under the Power delivery Agreement dated 22.02.2007 and as amended by agreement dt. 01.07.2008.i

6. Related Party Disclosures

(A) List of Related Parties

(i) Enterprises over which Key Management Personnel/Djrectors/Relatives have control or significant influence

a) Modern Fibotex India Limited

b) Indo Textiles &.Fibres Limited

c) Spell Fashions Pvt. Limited-

d) A. R. Fibtex Pvt. Limited

e) N. G. Khaitan & Co.

f) A, R. Commercial Pvt. Limited

(ii) Key Management Personnel and Relatives of Key Management Personnel

a) Shri Sanjiv Shroff (Vice Chairman & Managing Director)

b) Shri R. N; Sharma (Wholetime Director) .

c) Shri Shanker Lal Shroff (Father of Shri Sanjiv Shroff) .

d) Smt. Bimla. Devi Shroff (Mother of Shri. Sanjiv Shroff) ' ' e) Smt. Dipika Shroff (Wife of Shri Sanjiv Shroff)

f) Shri Rahul Shroff (Son of Shri Sanjiv Shroff)

g) Shri N. G. Khaitan, Partner of Solicitor's Firm .

7. Segment Reporting Policies

(a) Identification of Segments

(i) Primary Segment - Business Segments

The Company's operation predominantly comprises of only one segment i.e. Manufacturing of Synthetic Blended Yarn. In view of the same separate segmental information is not required to be given as per the requirements of Accounting Standard 17- "Segment Reporting" issued by The Institute of Chartered . Accountants of India.

(ii) Secondary Segment - Geographical Segment

The analysis of geographical segment is based on the geographical location of the customers. The geogriphical segments considered for disclosure are as follows :

Sales Within India include sales to customers located within India Sales outside India include sales to customers located outside India.

8. The disclosures required as per the revised Accounting Standard (AS-15- Employee Benefits) notified under the Companies (Accounting Standards) Rules, 2006 are as under:

Defined - Contribution Plans.

The Company offers its employees defined contribution plan in the form of Provident Fund (PF), Family Pensions Fund (FPF) and Employees Insurance Scheme (ESI). Provident. Fund, Family Pension Fund Employees State Insurance Scheme cover substantially all regular employees. Contribution are paid during the year into separate - funds under certain fiduciary-type,arrangements. Both the employees arid the Company pay predetermined contribution into the Provident Funds, Family Pension Fund and the Employees State insurance Scheme The Contributions are normally based on a certain proportion of the employee's salary.

Contribution to Defined Benefit Plan, recognized and charged off for the year are as under (excluding for on contracts payments) : *'

Defined - Benefit Plans

The Company offers its employees defined- benefit Plans in the form of a Gratuity Scheme. Benefits under the defined benefit plan is typically based either on years of service and the employee's compensation (generally immediately before retirement). The Gratuity scheme covers substantially all regular employees, the Company contributes funds to Life Insurance Corporation of India, which is irrevocable. Commitments are actuarially determined at year end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains & Losses of changed actuarial assumptions are charged to the profit and loss account. The obligations for leave encashment is recognised in the same manner as gratuity.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion,. and other relevant factors such as demand and; supply in the employment market. The above information is as submitted and or obtained from Actuaries and relied upon by the Auditors.

The contribution expected to be made by the Company for the year ending 31.03.2013 is not readily ascetainable and therefore not disclosed.

9. During the year end|d 31st March 2012 the Revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company for preparation and presentation of its financial statements. The adoption of Revised Schedule VI does not impact recognition and measurement principels followed for presentation of financial- statement. However it has significant Impact on presentation and diclosures, made in the financial statements.

The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year.

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Mar 31, 2011

1 Estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances of Rs. 89,11,350/- (Previous year Rs. 41,34,040/-)

31st March, 2011 31st March, 2010

Rs. Rs.

2 Contingent Liabilities are not provided for in respect of

i) Bonds executed in favour of Customs and Excise Authorities 1,04,00,000 1,04,00,000

ii) Unredeemed Bank guarantees 1,56,00,000 1,56,00,000

iii) Unexpired letters of credit 17,23,72,310 13,75,28,271

iv) Bills discounted with Banks 22,97,09,702 27,03,50,980

v) Claims not acknowledged as debts (Disputed by the Company);

a) Demands by Excise department

(including for Service Tax ) 47,86,725 47,86,725

b) Demands of Sales Tax. 90,300 90,300

c) Demands of workers 4,04,122 5,20,394

vi) Obligations to Export towards Custom duty saved on The obligations for 18,54,67,006 Purchases of capital goods under Export Promotion Rs.18,54,67,006 have Capital Goods Scheme (Refer Note 7(x)) been fulfilled during the year. There were no such obligations against imports during the year (as certified by the Management)

vii) Except as stated above, there are no other pending cases and or claims against the Company.

3 In the opinion of the Board of Directors, the Current Assets, Loans, Advances and Deposits are approximately of the value stated, if realised in the ordinary course of business unless otherwise stated. The provisions for liabilities except as stated above are adequate and not in excess of the amount reasonably necessary.

4 i) Accounts in respect of Current Liabilities, Debtors, Otiter "Current Assets, Advances and Deposits are subject to confirmation of respective parties.

ii) The Management has certified that the Company has not received any intirnation from suppliers regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence, disclosures, if any, relating to total outstanding dues of Micro Enterprises and Small Enterprises and the Principal amount and Interest due thereon remaining unpaid and the amount of Interest paid/ payable as required under amended Schedule VI of the Companies Act.1956 could not be compiled and disclosed. The Auditors have relied on the certificate of the Management in this regard.

iv) Miscellaneous Expenses as per Schedule 20 includes Rs. 30,223 /- (Previous year Rs.Nil A) paid for taxation matters to a firm in which any of the partners of the firm of Auditors are partners.

v) a) Other Financial Charges as per Schedule 22 includes interest paid on Raw Material payments Rs. 54,89,326/- (Previous Year Rs.29,12,149/-).

b) As referred to under Note No.1 in schedule "3" of Loan Funds, the Company would seek approval from IDBI Bank Ltd. for payment of interest on Unsecured Loans. The company has provided interest this year as well as in earlier years on Unsecured Loans (including funds to be deployed as promoter's contribution in the project upfront and amount to be converted into Equity Capital as per SEBI formula within 6 months from date of first disbursment). Interest so provided (amount not ascertained and stated) is included under the head " Interest on Unsecured Loans " in schedule 22 of "Financial Expenses ".The Company has been advised by the solicitors that no approval of IDBI Bank Ltd. is necessary for making such provisions of interest in accounts. The Company has made certain payments during this year and in previous year out of such provisions for Interest. The Company has applied to IDBI Bank Ltd. for relaxation of certain terms and conditions as per sanction letter for Term Loans and one of the terms for which relaxation has been sought is regarding payments of interest on Unsecured Loans brought in to meet the terms and conditions prescribed by IDBI Bank Ltd. Payment of interest as aforesaid are subject to above refered relaxation by and or approval of IDBI Bank Ltd. in this regard.

(b) No reimbursement is expected in the case of Contingent Liabilities and Liabilities shown respectively under note no. 3 and (a) above.

viii) (a) Advances as per Shedule 11 includes lease rent etc receivable Rs. Nil (P.Y. 2,569/-) (net of T.D.S.) (Maximum amount due Rs. 30,000/-) (RY. Rs. 30,000/-) due from Spell Fashions Pvt. Ltd., a Company under the same Management and in which a Director is Director and or Member.

(b) Expenses as per Schedule 17 of 'Raw Materials Cost', Schedule 19 of 'Manufacturing Cost' and Schedule 20 of 'Other Cost includes :

(i) Octroi etc.in cases levied,amount not seperately ascertained and stated (Previous year same).

(ii) Service Tax on expenses in respect of which Cenvat credits have not been claimed/availed (amount not ascertained and stated) (also refer Notes 1(viiii)(c) and 1(ix)(f)).

x) Additions to Plant and Machinery as per Shedule "4" includes Rs. Nil /- (P.Y. Rs. 47,65,954/-) for purchases under the Export Promotion Capital Goods Scheme of the Government of India. The Company is under an obligation to fulfill quantified exports to the extent of Eight times of Custom Duty saved i.e. Rs. Nil /- (P.Y.Rs.98,38,835/-) within a period of Eight years. The Balance Excise Duty of Rs. 13,40,325/- due since previous year as on 31.03.11 which is refundable in due course, paid by the Company on above purchases has been included under the head Advances in Schedule "11". Adjustments, for non-recovery and for short realisations, the amount where of is not presently ascetainable, is to be made as and when such refund is received.

xi) In view of certain court decisions and to fall strictly in line with relative Accounting Standards, the Company had in previous year reversed the capitalisation under the head "Plant & Machinary" in an earlier year in respect of payments of Rs. 1,54,08,480/- to Rajasthan Rajya Vidyut Prasaran Nigam Ltd. for Electric Installations (not owned by the Company) and so also depreciation provided thereon in such earlier year. Consequently such expenditure of Rs. 1,54,08,780/- had in previous year been charged to Profit & Loss account as per schedule '19' of" Manufacturing Cost" and had written back Depreciation of Rs.98,074/-. As a result of such change in method of accounting, the profits of the Company for the previous year were reduced by Rs. 1,53,10,406/- (net of write back of Depreciation) and so also the Fixed Assets of the company. The related laibilities for taxation for earlier years are also to be accordingly affected, the amounts whereof have not been ascertained and stated.

xii) "Manufactuing Cost " as per schedule'19' and 'Other Cost ' as per Schedule '20' includes Rs.3,02,450/-, (P.Y. Rs 11,88,375) cost of capital assets/ equipments as under:

(a) Assets not exceeding cost of Rs.5,000/- for each item Rs.1,90,000/- (P.Y. Rs.5,87,064/-).

(b) Assets exceeding cost of Rs.5,000/- for each item Rs.1,12,450/- (P.Y. Rs.6,21,175/-).

The Company has considered the cost of above assets/equiments as revenue expenditure as having been made for uninterrupted working of the Factory. Such accounting in respect of cost of capital assets/ equipments (not exceeding cost of Rs. 5,000/- for each item) has not affected materially the results of the Company, as after capitalisation of such assets/ equiments , 100% depreciation was to be claimed thereon. In respect of capital assets/ equipments (Cost for each item exceeding Rs. 5,000/-), the results of the Company for the year have been affected to the extent of such cost of Rs.1,12,450/- (P.Y. Rs.6,21,175/- (Less allowable depreciation).

xiii) (a) Turnover as per Profit & Loss Account and Schedule "14" of "Turnover" includes Net Foreign Exchange Gain of Rs 3,67,34,719 (P.Y. Rs 3,21,00,165) (net of loss of Rs 22,60,268 (P.Y. Rs 2,57,815) on account of forward cover etc. for Export sales. The bifurcation of total figure of Rs 4,13,41,971 (P.Y. Rs 2,82,01,752) of "Net Exchange Gain" for the purpose of including Rs 3,67,34,719 (P.Y. Rs 3,21,00,165)(net of loss of Rs 22,60,268 (P.Y. Rs 2,57,815) in Schedule "14" of Turnover as "Net Foreign Exchange Gain" on Account of forward cover etc. for Export Sales and showing the remaining debit amount of Rs 7,86,941 (P.Y. Rs 38,98,413) as "Exchange Loss" (net of gain of Rs NIL (P.Y. Rs 5,87,451) in Schedule 20 of "Other Cost" is only as per certificate of the Management and have been relied upon by the Auditors. The Company is of the view that the aforesaid presentation / groupings are not contrary to the Accounting Standard AS-11, as applicable and the provisions of Schedule VI (Part II) of the Companies Act 1956.

(b) The amounts as stated under item (a) above includes/ excludes premium/ discount on forward contracted rates amortised as expenses or income over the Life of the contracts, as referred to under note 1(xiii)(c) above. The relative amount of premium/ discount has not been seperatly ascertained and stated.

xiv) Payment of Interim Dividend of Rs. 39,80,507/- on 01.02.2011 on 4,79,500 - 10% Cumulative Redeemable Preference Shares of Rs. 10/- each as per Board Resolution dated 28.01.11 not in accordance to the terms of the issue of such shares nor the consent of the Equity Shareholders and permission of the Financial institutions were obtained in this regard. Such payment of Interim Dividend is not in accordance to the provision of the Companies Act, 1956. The Company is obtaining necessary legal opinion in this regard and do needful accordingly in current year.

9 "The Company had entered into agreement dated 22.02.07 (as amended by agreement dt. 01.07.2008) with M/s. Marudhar Power Private Limited (Subsequently name changed to M/s. VS Lignite Power Private Limited), setting up a Group Captive Power Plant, at Bikaner in the State of Rajasthan, for supply of 8MW of Power also to the Company and in pursuance to such agreements, the Company had subscribed for 7,70,371 Class ""A"" Equity Shares of Rs.10/- each fully paid at a total value of Rs.77.04 Lacs and for 14,85,629 Class ""A"" 0.01% Cumulative Redeemable Preference Shares of Rs.10/- each fully paid at a total value of Rs. 148.56 Lacs and the same have been classified as Long Term Investments in Schedule ""5"" as Trade Investements.

Further, the Company had agreed to create lien on the aforesaid Shares at appropriate time in favour of M/s. VS Lignite Power Private Limited (Formerly known as M/s. Marudhar Power Private Limited), as per terms of the Charter Documents as security towards its obligation under the Power delivery Agreement dated 22.02.2007 and as amended by agreement dt. 01.07.2008."

10. Related Party Disclosures

(A) List of Related Parties

(i) Enterprises over which Key Management Personnel/Directors/Relatives have control or significant influence

a) Modern Fibotex India Limited

b) Indo Textiles & Fibres Limited

c) Spell Fashions Pvt. Limited

d) A. R. Fibtex Pvt. Limited

(ii) Key Management Personnel and Relatives of Key Management Personnel

a) Shri Sanjiv Shroff (Vice Chairman & Managing Director)

b) Shri R. N. Sharma (Wholetime Director)

c) Shri Shanker Lai Shroff (Father of Shri Sanjiv Shroff)

d) Smt. Bimla Devi Shroff (Mother of Shri Sanjiv Shroff)

e) Smt. Dipika Shroff (Wife of Shri Sanjiv Shroff)

f) Shri Rahul Shroff (Son of Shri Sanjiv Shroff)

g) Shri N. G. Khaitan (Partner of Solicitors' Firm)

11 Segment Reporting Policies

(a) Identification of Segments:

(i) Primary Segment - Business Segment -

The Company's operation predominantly comprises of only one segment i.e. Manufacturing of Synthetic Blended Yarn. In view of the same, separate segmental information is not required to be given as per the requirements of Accounting Standard 17 - "Segment Reporting" issued by The Institute of Chartered Accountants of India.

(ii) Secondary Segment - Geographical Segment -

The analysis of geographical segment is based on the geographical location of the customers. The geogriphical segments considered for disclosure are as follows:

Sales within India include sales to customers located within India

Sales outside India include sales to customers located outside India

(ii) Fixed Assets as per Geographical Locations

The Company has common fixed assets for producing goods for domestic as well as overseas market. Hence segmentwise information for fixed assets/ additions to fixed assets cannot be furnished.

13. The disclosures required as per the revised Accounting Standards (AS-15- Employee Benefits) notified under the Companies (Accounting Standards) Rules, 2006 are as under: Defined - Contribution Plans

The Company offers its employees defined contribution plan in the form of Provident Fund (PF), Family Pensions Fund (FPF) and Employees Insurance Scheme (ESI). Provident Fund, Family Pension Fund Employees State Insurance Scheme cover substantially all regular employees. Contribution are paid during the year into separate funds under certain fiduciary- type arrangements. Both the employees and the Company pay predetermined contribution into the Provident Funds, Family Pension Fund and the Employees State Insurance Scheme. The Contributions are normally based on a certain proportion of the employee's salary.

Defined - Benefit Plans

The Company offers its employees defined- benefit plans in the form of a Gratuity Scheme. Benefits under the defined benefit plan is typically based either on years of service and the employee's compensation (generally immediately before retirement). The Gratuity scheme covers substantially all regular employees. The Company contributes funds to Life Insurance Corporation of India, which is irrevocable. Commitments are actuarially determined at year end. The actuarial valuation is done based on "Projected Unit Credit" method. Gains & Losses of changed actuarial assumptions are charged to the profit and loss account. The obligations for leave encashment is recognised in the same manner as gratuity.

5 Figures for the Previous year have been regrouped, re-arranged and re-cast wherever found necessary.

Signatures to Schedules 1 to 23