Notes to Accounts of Suryalakshmi Cotton Mills Ltd.

Mar 31, 2018

CORPORATE INFORMATION

Suryalakshmi Cotton Mills Limited (the ‘company’) is a public limited company domiciled and incorporated in India under the Companies Act, 1956. The registered office of the company is located at 6th Floor, Surya Towers, 105 S P Road, Secunderabad, Telangana - 500003.

The company was formed in 1962 as a yarn manufacturing company. It has evolved today as integrated denim & branded Garments manufacturing textile Company. The company also has a captive thermal power plant.

a. Terms/ rights attached to equity shares

(i) The company has only one class of equity shares having a face value of RS.10 per share.

(ii) Each holder of equity share is entitled to one vote per share.

(iii) The dividends recommended by the Board of Directors if any, are subject to the approval of the shareholders in the ensuing Annual General Meeting.

(iv)In the event of liquidation of the Company, the equity share holders are entitled to receive the remaining assets of the Company after distribution of all preferential claims, in proportion to the number of shares held.

A. All the installments falling due within 12 months from the date of Balance Sheet have been classified as current maturities, the aggregate amounts are shown under ‘Other Current Liabilities’.

B. 1. The term loans referred at (a)(i) to (a)(ii) and (b)(i) to (b)(iv) above are secured by mortgage of (present & future) movable and immovable properties of the company on first charge pari passu & on the current assets of the company on second charge pari passu with existing term lenders and guaranteed by two directors of the company in their personal capacities.

2 The term loans referred at (a)(iii) to (a)(vi) and (c) above are secured by mortgage of (present & future) movable and immovable properties of the company on first charge pari passu & on the current assets of the company on second charge pari passu with existing term lenders and guaranteed by three directors of the company in their personal capacities. The term loan referred at (b) (viii) above are also secured with exclusive collateral security of Non-Agricultural property owned by M/s. Jayman Dealers Pvt. Ltd.

3. The loan referred at (b)(v) above is secured by pari-passu first charge by way of hypothecation of entire current assets (existing & future) of the company along with existing working capital credit lenders & guaranteed by three directors of the company in their personal capacities.

C. Vehicle loans are secured by hypothecation of the respective vehicles and guaranteed by one of the directors of the company.

D. Terms of Repayment:

a. Secured:

(i) Workcapital loans from (a) to (g) are secured by hypothecation of stocks of raw materials, yarn, fabric, stock-in-process, stores and spares and book debts and by a second mortgage over the (present and future) movable & immovable properties of the company on pari-passu basis and further guaranteed by three Directors of the Company in their personal capacities.

(ii) Commodity funding Purchase Bill discounting from Axis Bank is secured by pledge of stock of raw material, in the warehouse and further guaranteed by three Directors of the company in their personal capacities

b. Unsecured:

Loan from Directors and Inter corporate deposits are repayable on demand.

(x) In the Summary Suit filed by the Company, against Rajvir Industries Ltd. the Company has initiated the execution proceedings to recover the balance outstanding in the books of the Company (RS.236.93 lakhs) together with the interest as decreed by the City Civil Court, Secunderabad.

(xi) Three cases have been filed against the Company for amounts totaling to RS.1348 Lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

(xii) Rajvir Industries Ltd. had filed an application before the Hon’ble High court of Andhra Pradesh for modification of the Order of the High Court in the scheme of arrangement for transfer of the liability of RS.1000 Lakhs to the company. The application has been dismissed with costs by the High Court and the applicant has preferred an appeal before the High Court which is pending.

(xiii) An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover RS.3807 Lakhs including interest and penalties. Apart from this a penalty of RS.25 Lakhs each on CMD and MD and RS.5 Lakhs on some other Directors of the company has been imposed. The High Court of Andhra Pradesh has granted an interim stay of the dismissal of the appeal by the Company. The Company in compliance with the orders of the High Court has paid RS.500 Lakhs to DGFT, Hyderabad. (The Company has already paid RS.500 Lakhs to DRI in the same matter). A show cause notice on the same issue was issued by DRI and the Commissioner of Customs & Central Excise has confirmed the demand in the Show Cause Notice. The Company’s appeal is pending before CESTAT, Mumbai. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

1.1. Upfront lease amount of RS.3,56,75,740/- and RS.2,42,35,600/- paid to Maharastra Industrial Development Corporation (MIDC) towards factory land lease of Amravati Unit -1 (Spinning Unit) and Amravati Unit -2 (Weaving Unit) respectively, is amortized over the lease period of 95 years.

1.2. The Dividend Distribution tax on the preference dividend payable on 5% Non Cumulative Redeemable Preference shares amounting to RS.10 lacs and on 10% Cumulative redeemable Preference shares amounting to RS.50 lacs will be RS.12.21 lacs.

1.3. There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company’s Insurance claim is processed and settled partly. The Company received an amount of RS.2609 lakhs from the Insurance Company including salvage.The part claim of RS.490 lakhs which is still to be settled by the Insurance Company is shown under Claims receivable. The Company’s complaint in this matter is pending before National Consumer Disputes Redressal Commission (NCDRC), New Delhi.

1.4. Disclosures in accordance with Companies (India Accounting Standards) Rules, 2015 notified by the Central Government:

1.4.1. Capital Management

The company’s capital management is intended to create value for shareholders by facilitating the meeting of long-term and short-term goals of the company.

The company determines the amount of capital required on the basis of annual operating plans and long-term product and other strategic investment plans. The funding requirements are met through equity and other long-term/short term borrowings.

The company’s policy is aimed at combination of short term and long-term borrowings. The company monitors the capital structure on the basis of total debt to equity ratio and maturity profile of the overall debt portfolio of the company.

F. Sensitivity Analysis

The financial results are sensitive to the actuarial assumptions. The changes to the Defined Benefit Obligations for increase/ decrease of 1% from assumed salary escalation, withdrawal and discount rates are given below:

E. Sensitivity Analysis

The financial results are sensitive to the actuarial assumptions. The changes to the Defined Benefit Obligations for increase/ decrease of 1% from assumed salary escalation, Attrition and discountrates are given below

1.5.1. Financial Instruments

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into level 1 to level 3 as described below.

Level 1 - Quoted prices in an active market:

This level of hierarchy includes financial assets that are measured by reference to quoted prices (unadjusted) in active markets for identical assets or liabilities. This category consists of mutual fund investments.

Level 2 - Valuation techniques with observable inputs:

This level of hierarchy includes financial assets and liabilities, measured using 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 - Valuation techniques with significant unobservable inputs:

This level of hierarchy includes financial assets and liabilities measured using inputs that are not based on observable market data (unobservable inputs). Fair values are determined in whole or in part, using a valuation model based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data.

1.5.2. Financial Risk Management Objectives and Policies

The company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include interest rate risk, foreign currency risk, market risk, credit risk and liquidity risk. The company has a risk management policy which not only covers the foreign exchange risks, but also other risks associated with the financial assets and liabilities such as interest rate risks and credit risks. The risk management framework aims to:

1. Create a stable business planning environment by reducing the impact of currency and interest rate fluctuations on the company’s business plan.

2. Achieve greater predictability to earnings by determining the financial value of the expected earnings in advance.

The following sections provide the details regarding the Company’s exposure to the financial risks associated with financial instruments held in the ordinary course of business and the objectives policies and processes for the management of these risks.

(i) Market Risk:

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise three types of risk, currency rate risk, interest rate risk and other price risks such as equity risk. Financial instruments affected by market risk include investments in equity shares.

a. Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of the Company and the Company’s financial instruments will fluctuate because of changes in market interest rates. Since the Company has only fixed interest-bearing debts, exposure to interest rate risk is minimal.

b. Foreign Currency Risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when transactions are denominated in foreign currencies.

The Company has transactional currency exposures arising from goods supplied or received that are denominated in a currency other than the functional currency. The foreign currencies in which these transactions are denominated are mainly in US Dollars ($). The Company’s trade receivable and trade payable balances at the end of the reporting period have similar exposures.

The following table demonstrates the sensitivity in the USD to the Indian Rupee with all other variables held constant. The impact on the company’s profit before tax due to changes in the fair value of monetary assets and liabilities is given below:

c. Other price risk

Other price risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk) whether those changes are caused by factors specific to the individual financial instrument or its issuer or by factors affecting all similar financial instruments traded in the market.

The Company is exposed to price risk arising mainly from investments in Equity shares recognized at FVTPL.

Sensitivity analysis of 1% change in price of security as on reporting date.

(ii) Credit Risk:

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The credit risk arises from its operation activity primarily from trade receivable and from its financial activity. Customer credit risk is controlled by analysis of credit limit and credit worthiness of the customer on a continuous basis to whom the credit has been granted.

Long outstanding receivable from customer are regularly monitored. The maximum exposure to credit risk at the reporting date is the carrying value of trade and other receivable.

(iii) Liquidity Risk:

The risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset.

The company ensures that it has sufficient cash on demand to meet expected operational demands including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments:

(c) Information about major customers

Revenue from transactions with a single customer exceed 10% or more of entity revenues in case of 1 customer in Denim (Fabric) Division and 2 customers in Garments Division.

1.5.3. Dues to Micro, Small and Medium Enterprises

On the basis of details furnished by the suppliers, there are no amounts to be reported as dues to micro, small and medium enterprises as required under section 22 of the Micro, Small and Medium Enterprises Development Act, 2006 (‘‘MSMED Act’).

1.5.4. Previous Year’s figures have been reclassified, wherever necessary so as to conform with those of Current Year.

1.5.5. FIRST TIME ADOPTION OF IND AS

For all periods, up to and including the year ended 31st March 2017 the company has prepared its financial statements in accordance with generally accepted accounting principles and accounting standards notified under section 133 of the Companies Act 2013 read together with Rule 7 of the Companies (Accounts) Rules 2014 (“Previous GAAP”).

These financial statements for the year ended 31st March 2018 are the company’s first annual Ind AS complied financial statements.

The company has prepared financial statements which comply with Ind AS applicable for period beginning on or after 01st April 2016 (transition date) as described in the accounting policies. This note explains the principal adjustment made by the company in restating its Balance Sheets as at 01st April 2016 & 31st March 2017 and Statement of Profit & Loss for the year ended 31st March 2017.

A. Optional Exemptions from retrospective application

Ind AS 101 permits first-time adopters certain exemptions from retrospective application of certain requirements under Ind AS. The Company has elected to apply the following optional exemptions from retrospective application:

(i) Business Combinations:

Ind AS 101 provides the option to apply Ind AS 103 - Business Combinations prospectively from the transition date or from a specific date prior to the transition date. This provides relief from full retrospective application that would require restatement of all business combinations prior to the transition date. The Company elected to apply Ind AS 103 prospectively to business combinations occurring after its transition date. Hence, Business combinations occurring prior to the transition date have not been restated.

(ii) Deemed cost for property, plant & equipment and Intangible asset:

The Company has elected to continue with the Previous GAAP carrying value for all its property, plant and equipment and intangible assets and use that as deemed cost on the date of transition to Ind AS.

B. Mandatory Exceptions from retrospective application

The Company has applied the following exceptions to the retrospective application of Ind AS as mandatorily required under Ind AS 101:

(i) Estimates:

On assessment of the estimates made under the Previous GAAP financial statements, the Company has concluded that there is no necessity to revise the estimates under Ind AS, as there is no objective evidence of an error in those estimates. However, estimates that were required under Ind AS but not required under Previous GAAP are made by the Company for the relevant reporting dates reflecting conditions existing as at that date.

(ii) Classification and measurement of financial assets:

The classification of financial assets to be measured at amortized cost or fair value through Profit and loss or fair value through other comprehensive income is made on the basis of the facts and circumstances that existed on the date of transition to Ind AS.

(iii) Government loans:

The requirements of Ind AS 20 - Accounting for Government Grants and Disclosure of Government Assistance and Ind AS 109 - Financial Instruments in respect of interest free loans from government authorities is opted to be applied prospectively to government loans existing at the date of transition to Ind AS. Consequently, the carrying amount of such interest free loans as per the financial statements of the Company prepared under Previous GAAP is continued as carrying amount in the opening Ind AS Balance Sheet.

C. Transition to Ind AS - Reconciliations

The following reconciliations provide the explanations and quantification of the differences arising from the transition from Previous GAAP to Ind AS in accordance with Ind AS 101:

I. Reconciliation of Equity as at 1st April 2016

II. A. Reconciliation of Equity as at 31st March 2017

B. Reconciliation of Statement of Profit and Loss for the year ended 31st March 2017

III. Adjustments to Statement of Cash Flows for the year ended 31st March 2017

Previous GAAP figures have been reclassified/regrouped wherever necessary to conform with financial statements prepared under Ind AS.

Notes to reconciliation of financial statements as previously reported under Previous GAAP to Ind AS

Notes to Reconciliation of Financial Statements as previously reported under previous GAAP to Ind AS

(i) Due to Ind AS Adjustments

1. Lease hold land:

Under Previous GAAP leasehold lands were recognized as assets under PPE. As per Ind AS 17, the company has treated leasehold lands as operating leases and premium paid is considered as pre-paid lease rentals. Thereafter, amortization of prepaid lease rentals is charged to Profit and loss.

2. Borrowing cost (Upfront fees):

Under the previous GAAP the transactions costs relating to origination of term loans raised specifically for acquisition of items of Property, Plant & Equipment were capitalized.

Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the proceeds of borrowings on initial recognition. These costs are treated as part of the interest expense by applying the effective interest method.

Hence upfront fees capitalized under Previous GAAP is reversed and reduced from term loan (financial liability). Interest (calculated using effective interest method) upto date of addition is capitalized and after the date of addition, it is charged to Profit and loss account as part of finance cost.

3. Fair valuation of financial liability (sales tax deferment):

Under previous GAAP, the sales tax deferral incentive, which is sales tax collected and repayable after a fixed tenure was recognized at cost. Under Ind AS, sales tax deferment is a financial liability classified as subsequently measured at amortized cost. Hence it is to be measured at fair value and the difference between transaction value and fair value is to be recognized as Government grant. The Company has availed mandatory exception under Ind AS 101 and accordingly, there is no change in accounting treatment on the amount carried forward on the date of transition.

After transition date, the difference between transaction value and fair value has been recognized as Government grant in Balance Sheet. The Government grant has been recognized in the Statement of Profit and Loss on a straight-line basis over the period of grant and unwinding of interest on fair value of sales tax deferment liability has been recognized as finance cost.

4. Preference Shares:

Under Previous GAAP, Preference share capital is treated as part of Share Capital and dividend on redeemable preference shares were adjusted to Reserves when the dividend is declared and paid.

As per Ind AS, cumulative redeemable preference shares meet the definition of financial liability. Hence it is reclassified as financial liability (borrowings) classified as subsequently measured at amortised cost. Consequently, it is to be measured at fair value and the difference between transaction value and fair value is to be credited to Other Equity. Interest (Dividend) is to be charged to the statement of Profit and Loss using Effective Interest Rate (EIR).

5. Excise duty:

Under the previous GAAP, revenue from sale of products was presented net of excise duty. Excise duty is collected by the company on its own account and hence as per Ind AS, revenue from sale of goods is presented inclusive of excise duty. There is no impact on the total equity and profit.

6. Remeasurement of Defined Benefit Plans:

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss.

Under the previous GAAP, these remeasurements were forming part of the Statement of Profit and Loss for the year. There is no impact on the total equity.

7. Revaluation Reserve:

On adoption of Ind AS, the company has elected to continue the previous GAAP carrying values of Property, Plant & Equipment and use those amounts as deemed cost. Hence, Revaluation Reserve created under previous GAAP is reversed and reduced from carrying amount of Property, Plant & Equipment.

8. Unsecured Loans from Directors

As per Ind AS, Unsecured Loan from Directors meet the definition of financial liability. Hence it is reclassified as financial liability (borrowings) classified as subsequently measured at amortised cost. Consequently, it is to be measured at fair value and the difference between transaction value and fair value is to be credited to Other Equity. Interest (Dividend) is to be charged to the statement of Profit and Loss using Effective Interest Rate (EIR).

9. Deferred Tax:

Deferred tax is created on all the temporary differences arising on adjustments arising on adoption of Ind AS.

10. Investments in Equity Shares

Under Previous GAAP, Investment in Equity shares are treated as current investments and shown at lower of cost and fair value.

As per Ind AS, Investments in Equity Instruments are carried at fair value (through Other Comprehensive Income) and resultant fair value changes are recognized in Other Comprehensive Income.

(ii) Due to Errors made under Previous GAAP

11. Preliminary, Product Development and Trial Run Expenditure

As per Previous GAAP, Preliminary and Product Development expenses are to be charged off to the statement of Profit and loss in the year in which they were incurred and trial run expenditure is to be capitalized along with cost of the item of Property, plant and equipment. Erroneously, these were treated amortised to the statement of Profit and loss and unamortised portion is shown under other Non-Current assets. On adoption of Ind AS, the error is rectified.

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Mar 31, 2016

Note 1. Significant Accounting Policies: 1 Accounting Convention

The financial statements are prepared under historical cost convention and on accrual basis in accordance with the generally accepted accounting principles.

2 Fixed Assets

Fixed Assets are stated at cost net of depreciation provided

The Company''s Insurance claim is processed and settled partly. The Company received an amount of RS,2,609 Lakhs from the Insurance Company including salvage. The part claim of RS,490 Lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

3 On 4th July, 2015, there was a major fire accident in Sizing Machine in Weaving department of denim division at Ramtek, Nagapur district, Maharashtra state, in which one of the Sizing Machines & its accessories, etc., was damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. Due to this damage, there was production loss also. New sizing machine was purchased, installed and decommissioned on 23.02.2016. The Company has already filed its claim for reinstatement of assets damaged and also for loss of profit under Business Interruption (Fire) Policy.

4 During the financial year, the Company has successfully commissioned its state of art of Spinning unit of 25,344 spindles at Amravati District of Maharashtra on 25th September, 2015.

5 During the financial year 2014-15, the Company had revised the Useful life of its fixed assets to comply with the useful life as mentioned under Schedule II of the Companies Act, 2013.

6 Previous year''s figures : Figures for the previous year have been regrouped wherever necessary to correspond with the current year''s figures.

7 Except when otherwise stated, the figures are presented in Rupees Lakhs.

in the statements. Cost of acquisition of Fixed Assets is inclusive of all direct and indirect expenditure up to the date of commercial use.

Depreciation is provided in accordance with the Useful Life prescribed under Schedule II of the Companies Act, 2013

8 Inventories

Raw material and Stores & Spares are valued at cost on weighted average basis. Stock-in-process and Finished Goods are valued at lower of cost or net realizable value.

The Excise Duty payable on finished / Saleable goods is accounted for on clearance of goods from the factory premises, wherever applicable.

9 Investments

Investments are stated at cost and diminution / increase in the value, which is permanent in nature, is provided for.

10 Contingent Liabilities and Provisions

All Contingent liabilities are indicated by way of a note and will be paid / provided on crystallization.

6 Retirement Benefits

Provident Fund contribution is charged to the Profit and Loss Account as and when the contributions are due In respect of Gratuity, the Company has covered the gratuity liability by obtaining the group gratuity policy. The premium charged by Life Insurance Corporation of India is paid as stipulated and charged to Profit and Loss Account. The Company has also made required Gratuity & Leave encashment liability provision as per Actuarial valuation.

7 Foreign Exchange Transactions

a) Export Sales are initially accounted at the exchange rate prevailing on the date of documentation/invoicing and the same is adjusted with the difference in the rate of exchange arising on actual receipt of proceeds in foreign exchange.

b) Earnings in foreign currency other than export sales are accounted for at the rate of conversion on the date of realization.

c) Imports of material / capital equipment are accounted at the rates at which the actual payments are made.

d) Assets and liabilities arising out of foreign exchange transactions are translated at the rates of exchange ruling on the date of Balance Sheet and are suitably adjusted to the appropriate Revenue/Capital account.

8 Impairment of Assets

An asset is treated as impaired when the carrying cost of asset exceeds its recoverable value. An impairment loss is charged to Profit and Loss Account in the year in which an asset is identified as impaired. The impairment loss recognized in prior accounting periods, is reversed if there has been a change in the estimate of recoverable amount.

9 Leasehold Land

Leasehold Land is treated as an asset for the period of its Lease as per the Lease Agreement entered, and the amount of lease will be amortized as depreciation on straight line basis and charged to Profit & Loss account over the lease term.

10 Sales

Sales represents the amount receivable for goods sold including excise duty and sales Tax thereon. Incentives on export sales are recognized as income on accrual basis.

11 Provision for Taxation

Provision for Taxation for the year is based on Tax liability computed in accordance with relevant Tax rates and Tax laws as at the Balance Sheet date. Provision for deferred Tax is made for all timing differences arising between Taxable income and accounting income at rates that have been enacted or substantively enacted as at the Balance Sheet date. Deferred Tax assets / MAT Credit are recognized only if there is a reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying value at each Balance Sheet date.

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Mar 31, 2015

1.(a) During the financial year, the Authorised Capital of the Company has been reclassified consisting of 3,00,00,000 Equity Shares of Rs. 10/- each, 672,000 - 10% Cumulative Redeemable Preference Shares of Rs. 100 each and 2,00,000 - 5% Non Cumulative Preference Shares of Rs. 100 each, as approved by the members in the Annual General Meeting held on 4th August, 2014.

(b) During the current financial year, the Company has issued and allotted 2,150,000 fully paid up Equity shares of Rs. 10/- each at a Share premium of Rs. 65/- per Equity Share.

(c) During the current financial year, the Company has issued 500,000 - 10% Cumulative Redeemable Preference Shares of Rs. 100 each as issued, subscribed and paid up, to part finance Company's Spinning Project at Amravathi, near Nagpur, Maharashtra. The same will be redeemed on 18th August, 2026.

(d) 8,032,267/- Equity shares of Rs. 10 each are allotted as fully paid up by way of Bonus shares by capitalisation of reserves.

(e) During the previous financial year, the Company has issued 200,000 - 5% Non Cumulative Redeemable Preference Shares of Rs. 100 each as issued, subscribed and paid up, as per the Schme of Amalgamation, to the preference shareholders of erstwhile Suryakiran International Ltd. The same will be redeemed on 21st December, 2021.

# Persuant to Scheme of Amalgamation, the excess of Equity Share Capital Rs. 445.78 Lakhs, & Security Premium account Rs. 434.58 Lakhs, totaling to Rs. 880.36 Lakhs, of erstwhile Suryakiran International Ltd. over Investment by the Company amounting to Rs. 666.01 Lakhs in SKIL, i.e., Rs. 214.35 Lakhs is considered as Amalgamation / Capital Reserve during the previous financial year.

Note :

1. The Loans referred at I (a) to (i), (k) and (n) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis & second pari passu charge on the current assets of the Company with existing term lenders and guaranteed by two Directors of the Company in their personal capacities.

2. The Loans referred at (l) to (m) and (II)(a) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis & second pari passu charge on the current assets of the Company with existing term lenders and guaranteed by three Directors of the Company in their personal capacities.

3. The Loan referred at I (j) above is secured by mortgage of present and future movable and immovable properties of the Garment division of the Company and guaranteed by two Directors of the Company.

4. The Loan referred at I (o) above is secured by pari-passu first charge by way of hypothecation of entire current assets (existing & future) of the Company along with existing Working Capital credit lenders & guaranteed by three Directors of the Company in their personal capacities.

The Sales tax deferment liability amounting to Rs. 114.15 Lakhs shown under unsecured loans above, is due for repayment as under.

All Working Capital loans are secured by hypothecation of stocks of raw materials, yarn, fabric, stock-in-process, stores and spares and book debts and by a second mortgage over the (present and future) movable & immovable properties of the Company on pari-passu basis and further guaranteed by three Directors of the Company in their personal capacities.

Note 2

Notes forming part of Balance Sheet as at 31st March, 2015 and Statement of Profit and Loss for the year ended on that date.

(Figures in Rs. Lakhs)

Particulars As at As at 31st March 31st March

1 Contingent Liabilities not provided for

a) Contracts to be executed 7255.54 4450.65 on capital accounts.

b) Against Foreign & Inland 673.38 0.00 Letters of Credit

c) Against Bank Gaurantees 1627.34 1595.04

d) Against Bills discounted 515.75 1298.42

e) Demand against Reversal 32.89 32.89 of Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No. 30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

f) Disputed demand from sales tax 28.82 28.82 department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad.

g) Disputed demand from Central 11.43 11.43 Excise department on clearance of unbranded garments without payment of duty. Cenvat on exempted garments reversed and paid. The company has filed appeal before CESTAT, Bangalore

h) Disputed demand from Customs 61.49 61.49 department towards differential custom duty on garments exported. The Case is pending for hearing with Hon'ble High Court of Judicature of Andhra Pradesh at Hyderabad.

i) Disputed demand from DCIT, Range : 3.93 3.93 3(2), Hyderabad towards Income tax on disallowance of expenditure on account of Customs duty paid for previous year, during the Assessment Year 2008-09. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

j) Disallowance of Unpaid Leave 10.85 10.85 encashment provision in assessment proceedings for the Assessment Year 2011-12 by Addl. CIT, Range 3, Hyderabad. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

k) Disputed demand from DCIT, Range : 65.27 - 3(2), Hyderabad towards disallowance of Credit towards Surcharge and Education Cess as Minimum Alternate Tax credit. The case is pending in appeal before the Commissioner of Income Tax (Appeals-IV), Hyderabad

3 The legal proceedings against M/s.Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the company of Rs. 236.93 Lakhs (Previous year Rs. 236.93 Lakhs) are pending.

4 Three cases have been filed against the Company for amounts totaling to Rs. 1,348 Lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 (i) Rajvir Industries Ltd., has filed an application before the Hon,ble High court of Andhra Pradesh for modification of the

Order of the High Court in the scheme of arrangement for transfer of the liability of Rs. 1,000 Lakhs to the company. The application has been dismissed with costs by the High Court and the applicant has preferred an appeal before the High Court which is pending.

(ii) Rajvir Industries Limited (RIL) had also filed criminal complaint against the Company, certain Directors, Sr. Executives and the Auditor of the company in the above matter which however was quashed by the Hon'ble High Court of A.P RIL has preferred a special leave petition before the Hon'ble Supreme Court which is pending.

6 An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs. 3,807 Lakhs including interest and penalties. Apart from this a penalty of Rs. 25 Lakhs each on CMD and MD and Rs. 5 Lakhs on some other Directors of the company has been imposed. The High Court of Andhra Pradesh has granted an interim stay of the dismissal of the appeal by the Company. The Company in compliance with the orders of the High Court has paid Rs. 500 Lakhs to DGFT, Hyderabad. (The Company has already paid Rs. 500 Lakhs to DRI in the same matter). A show cause notice on the same issue was issued by DRI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

7 The Company carried out a revaluation of its assets, i.e., Land, Buildings and Plant & Machinery in its Denim Division at Ramtek and Spinning Division at Amanagallu, by an approved valuer. Revaluation of Power Plant assets was not done, as it was relatively new Plant. The written up value of the assets on revaluation amounting to Rs. 174.58 Crores was added to the cost of the assets / Gross Block as on 31st March, 2014. The depreciation of Rs. 84.84 Crores for the previous financial year 2013- 14 and Rs. 12.89 crores for the financial year 2014-15, totalling to Rs. 97.73 crores on written up value of Gross Block has been added to depreciation, and the net increase in depreciated value Rs. 76.85 crores (Previous year Rs. 89.74 Crores), is considered as revaluation reserve and the same will be written off as per the depreication method followed by the company.

8 Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity.

Employee Benefits : Actuarial valuation of Leave encashment

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Leave encashment.

9 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

10 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the raw material which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

11 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount of Rs. 2609 Lakhs from the Insurance Company including salvage. The part claim of 490 Lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

12 During the financial year, the Company has revised the Useful life of its fixed assets to comply with the useful life as mentioned under Schedule II of the Companies Act, 2013 and in view of the transitional provisions, the Company has adjusted Rs. 366.77 lacs with the opening balances of retained earnings, i.e., surplus in the statement of profit and loss. Had the Company continued to follow the earlier useful life under the Companies Act,1956, the depreciation expense for the year to date would have been higher by Rs. 200.49 lacs and Profit before tax & the Net Block of Fixed Assets for the year to date would have been lower by Rs. 200.49 lacs.

13 Previous Year's Figures : Figures for the previous year have been regrouped wherever necessary to correspond with the current year's figures.

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Mar 31, 2013

1. The legal proceedings againt M/s.rajvir Industries ltd., for the recovery of the balance outstanding in the books of the company of Rs.236.93 lakhs (Previous year Rs.236.93 lakhs) are pending.

2. Three cases have been filed against the Company for amounts totaling to Rs.1348 lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

3. rajvir Industries ltd., has filed an application before the hon,ble high court of andhra Pradesh for modification of the Order of the high Court in the scheme of arrangement for transfer of the liability of Rs.1000 lakhs to the company. The application has been dismissed with costs by the high Court and the applicant has preferred an appeal before the high Court which is pending.

4. an order has been received from the office of dGFT hyderabad for alleged violation of Target plus scheme to recover Rs.3807 lakhs including interest and penalties. apart from this a penalty of Rs.25 lakhs each on CMd and Md and Rs.5 lakhs on some other directors of the company has been imposed. The high Court of andhra Pradesh has granted an interim stay of the dismissal of the appeal by the Company. The Company in compliance with the orders of the high Court has paid Rs.500 lakhs to dGFT, hyderabad. (The Company has already paid Rs.500 lakhs to drI in the same matter). a show cause notice on the same issue was issued by drI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

5 Employee Benefits : Gratuity

Consequent to the adoption of accounting Standard on Employees Benefits (aS-15) (revised 2005) issued by the Institute of Chartered accountants of India, the following disclosures have been made as required by the Standard for actuarial valuation of Gratuity

6. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

7. Vide notification no.30/09.07.2004 of the Central Excise department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under notification no.29/09.07.2004) of Central Excise department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. accordingly in case of denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

8. There was a major fire accident in spinning department of denim division at ramtek, nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company''s Insurance claim is processed and settled partly. The Company received an amount of Rs.2609 lakhs from the Insurance Company including salvage.The part claim of Rs.490 lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

9. The company has given corporate guarantee to SBI on behalf of its subsidary M/s Surya kiran International limited, for 21.31 crores.

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Mar 31, 2012

Note:

1. The Loans referred at (a) to (f), (h) to (i) above are secured by mortgage of (present & future) movable and immovable properties of the Company on first charge pari passu basis and guaranteed by two Directors of the Company in their personal capacities.

2. The Loan referred at (j) above is secured by mortgage of the fixed assets created by virtue of the said term loan for the present movable and immovable properties of the Company on first charge pari passu basis.

3. The Loan referred to in (g) above is secured by hypothecation of specified plant and machinery as per the scheme and guaranteed by two Directors of the Company.

4. The Loan referred to in (i)-(k) & (ii)-(a) are secured by pari passu first charge on the entire fixed assets (movable & immovable, present & future) of the Company & second pari passu charge on the current assets of the Company with existing term lenders, guaranteed by two Directors of the Company.

5. The Loan referred to in (i)-(l) is secured by pari passu first charge on the entire fixed assets (present & future) of the Company & second pari passu charge on the current assets of the Company with existing term lenders, guaranteed by two Directors of the Company.

As at As at 31.03.2012 31.03.2011

NOTES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2012 AND STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED ON THAT DATE.

1. Contingent Liabilities not provided for

a) Contracts to be executed on capital accounts. 5557.80 11532.39

b) Against Foreign & Inland Letters of Credit 257.05 96.44

c) Against Bank Guarantees 763.37 129.67

d) Against Bills discounted 2308.17 4489.84

e) Demand from Central Excise Department in connection with the clearance of 78.50 78.50 the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Company's favour. However the department has preferred an appeal against the Commissioner's order.

f) Demand against Reversal of Excise duty on Finished goods and Cenvat 32.89 32.89 Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

g) Disputed demand from sales tax department on Input tax credit, 58.74 58.74 Appeal remanded by Appellate Dy. Commissioner (CT). Pending for verification & orders with Dy./Asst. Commissioner (CT), Begumpet Division, Hyderabad

h) Disputed demand from sales tax department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad. 28.82 28.82

2. The legal proceedings againt M/s.Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the compnay of Rs. 236.93 lakhs (Previous year Rs. 236.93 lakhs) are pending.

3. Claim against the company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the company claiming export incentives allegedly due to them amounting to Rs. 295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissible and is taking adequate steps to resist the claim.

4. Three cases have been filed against the Company for amounts totaling to Rs. 1348 lakhs in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in the absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5. Rajvir Industries Ltd., has filed an application before the Hon,ble High court of Andhra Pradesh for modification of the Order of the High Court in the scheme of arrangement for transfer of the liability of Rs. 1000 lakhs to the company. The application has been dismissed with costs by the High Court and the applicant has preferred an appeal before the High Court which is pending.

6. An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs. 3807 lakhs including interest and penalties. Apart from this a penalty of Rs. 25 lakhs each on CMD and MD and Rs. 5 lakhs on some other Directors of the company has been imposed. The High Court of Andhra Pradesh has granted an interim stay on the dismissal of the appeal by the Company. The Company in compliance with the orders of the High Court has paid Rs. 500 lakhs to DGFT, Hyderabad. (The Company has already paid Rs. 500 lakhs to DRI in the same matter). A show cause notice on the same issue was issued by DRI. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself.

7. Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity

Employee Benefits : Actuarial valuation of Leave encashment

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Leave encashment.

8. Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs. 100/- each on 28th October, 2002 to IDBI and IFCI. Out of which the company has redeemed Rs. 271.60 Lakhs on 31.07.2011 to IFCI & the balance of Rs. 400 Lakhs to be redeemed to IDBI before May,2012.

9. In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

10. Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of polyster / viscose / blended yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster / viscose / blended yarn meant for export, and cleared the material for export on payment of duty.

11. There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount of Rs. 2609 lakhs from the Insurance Company including salvage.The part claim of Rs. 490 lakhs which is still to be settled by the Insurance Company is shown under Claims receivable.

12. The company has given corporate guarantee to its subsidary M/s SuryaKiran International Limited, to the extent of Rs. 500 Lakhs.

13. Consequent to the Notification under the Companies Act, 1956, the financial statements for the year ended 31st March,2012 are prepared under Revised Schedule VI accordingly. The Previous year's figures also have been reclassified to conform to this year's classification.

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Mar 31, 2011

(Amount in Rs.) As at As at 31.03.2011 31.03.2010

1 Contingent Liabilities not provided for

a) Contracts to be executed on 1,153,239,045 130,279,355 capital accounts.

b) Against Foreign & Inland 9,643,815 4,533,043 Letters of Credit

c) Against Bank Gaurantees 12,966,600 466,940

d) Against Bills discounted 448,984,388 191,313,664

e) Demand from the Central Excise Department under Textiles and Textile Articles Act (TTA), disputed – 28,534,563 by the Company pending in appeals with the Commissioner, Customs and Central Excise, Nagpur, not provided for.

f) Demand from Central Excise 7,850,277 7,850,277 Department in connection with the clearance of the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Company's favour. However the department has preferred an appeal against the Commissioner's order.

g) Demand against Reversal of 3,288,688 3,288,688 Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Company's appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal against the above Order with CESTAT

h) Disputed demand from sales 5,874,266 5,874,266 tax department on Input tax credit,Appeal remanded by Appellate Dy. Commissioner (CT). Pending for verification & orders with Dy./Asst.Commissioner (CT), Begumpet Division, Hyderabad

i) Disputed demand from sales tax 2,881,750 2,163,938 department on subjecting the turnover of unit at Maharashtra to tax along with the turnover of Andhra Pradesh and set off. The company has filed appeal before STAT(A.P),Hyderabad against the revised demand issued by the DC(CT), Begumpet Division, Hyderabad.

j) Interest charged U/s.234B of – 11,866,089 the Income Tax Act,1961 - Interest waiver Petition filed before Hon'ble Chief Commissioner of Income Tax-I, Hyderabad

2 The legal proceedings against M/s Rajvir Industries Ltd., for the recovery of the balance outstanding in the books of the company of Rs.2,36,92,934/- (Previous Year Rs.2,36,92,934/-) are pending.

3 Claim against the company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the company claiming export incentives allegedly due to them amounting to Rs.295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissable and is taking adequate steps to resist the claim.

4 Three cases have been filed against the Company for amounts totaling to Rs. 13.48 crores in respect of three cheques allegedly issued by the company. These claims are being resisted on the plea that these cheques have been misused and in absence of any legally enforceable debt or liability the company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 An order has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme (TPS) and to recover Rs.38.07 crores including interest and penalties. Apart from this a penalty of Rs.25 lakhs each on CMD and MD and Rs.5 lakhs on some other directors of the company has been imposed. A show cause notice on the same issue for Rs. 10.59 crores was issued by DRI The company has been advised that no liability is likely to arise under the notice as the allegations are unfounded and the company is taking adequate steps to defend itself. However, the Company has paid Rs.5 crores to DRI in this connection.

6 Information about Business Segments

Other Disclosures

Allocation of Corporate Office expenses to segment is at cost.

All Profit / (Losses) on inter segment transfers are eliminated at Company's level.

Types of Product and Services in each Business Segment.

Business Segment Type of Product

a) Spinning Cotton Yarn, Combed Yarn and P V Yarn

b) Denim Denim Fabric

c) Power Project & Others Power

7 Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs.100/- each on 28th October, 2002 to IDBI and IFCI and the same will be redeemed to IDBI in March, 2012 (Rs.400 lacs) and to IFCI in July, 2011 (Rs.271.60 Lacs)

8 The amount of CRPS of 671.60 lakhs payable on redemption to IDBI and IFCI as stated in note No.27 is treated as deferred revenueRs. expenditure, to be written off over the term of the CRPS.

10 During the year 2005-06 the Company has incurred an amount of Rs.12,523,000/- being the expenditure incurred for raising equity. The same will be amortised over a period of 5 Years from the date of commencement of operations, i.e. from the financial year 2006-07.

11 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

12 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the raw material which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

13 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Company's Insurance claim is processed and settled partly. The Company received an amount ofRs.26.09 crores from the Insurance Company including salvage.The part claim of Rs.4.90 crores which is still to be settled by the Insurance Company is shown under Claims receivable

14 The company has given corporate guarantee to its subsidiary M/s Surya Kiran International Limited, to the extent of Rs.5 crores.

15 Previous year's figures have been regrouped where ever necessary. Paise have been rounded off to the nearest rupee. Previous year Figures are shown in brackets.

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Mar 31, 2010

(Amount in Rupees)

As at As at

31.03.2010 31.03.2009

1 Contingent Liabilities not provided for

a) Contracts to be executed on capital accounts. 130,279,355 122,509,299

b) Against Foreign & Inland Letter of Credits 4,533,043 34,087,616

c) Against Bank Gaurantees 466,940 466,940

d) Against Bills discounted 191,313,664 155,380,313

e) Demand from the Central Excise Department under Textiles and Textile Articles Act (TTA), disputed by the Company pending in appeals with the

Commissioner, Customs and Central Excise, Nagpur, not provided for. 28,534,563 28,534,563

f) Demand from Central Excise Department in connection with the clearance of the goods disputed by the Company and allowed by the Commissioner Appeals, Nagpur in Companys favour. However the department has

preferred an appeal against the Commissioners order. 7,850,277 7,850,277

g) Demand against Reversal of Excise duty on Finished goods and Cenvat Credit involved in the stock of inputs while opting for the Central Excise Notification No.30/2004. Companys appeal was allowed by Appellate Commissioner of Customs & Central Excise, Nagpur. However, the Central Excise Department has filed an appeal

against the above Order with CESTAT 3,288,688 -

h) Disputed demand from sales tax department on Input tax credit, Appeal remanded by 5,874,266 5,874,266

Appellate Dy. Commissioner (CT). Pending for verification & orders with

Dy./Asst. Commissioner (CT), Begumpet Division, Hyderabad

I) Disputed demand from sales tax department on subjecting the turnover of uni 12,163,938 2,163,938 at Maharashtra to tax along with the turnover of Andhra Pradesh and set off.The appleal filed before STAT(A.P) by the Company was partly allowed and the balance was remanded for verification by the department.

j) Interest charged U/s.234B of the Income Tax Act,1961 - Interest waiver Petition filed before Honble Chief Commissioner of Income Tax-I, Hyderabad 11,866,089 -



2 The legal proceedings against M/s Rajvir Industries Ltd., for the recovery of the balance oustanding in the books of the Company of Rs. 2,36,92,934/- (Previous Year Rs. 2,36,92,934/-) are pending.

3 Claim against the Company not acknowledged as debts :

M/s Rajvir Industries Limited has filed a suit against the Company claiming export incentives allegedly due to them amounting to Rs. 295.70 Lakhs relating to export performance of erstwhile Mahabubnagar Unit of the periods prior to demerger. The Company has been advised that the claim is not admissable and is taking adequate steps to resist the claim.

4 Three cases have been filed against the Company for amounts totalling to Rs.13.48 crores in respect of three cheques allegdly issued by the Company. These claims are being resisted on the plea that these cheques have been misused and in absence of any legally enforceable debt or liability the Company has been advised that the complaints are not maintainable and no liability is likely to arise.

5 Rajvir Industries Ltd has filed a compliant against the Company and its officers in connection with the transfer of liability of Rs. 10 crores in the scheme of arrangement. The Company has been advised that the complaint is not maintainable in law and is taking adequate steps to defend its position.

6 Rajvir Industries Ltd., has filed an application before the Honble High Court of Andhra Pradesh for modification of the Order of the Honble High Court of Andhra Pradesh in the scheme of arrangement for transfer of the liability of Rs.10 crores to the Company. The application is pending before the Honble High Court of Andhra Pradesh. The Company has been advised that the complaint is not maintainable in law and is taking adequate steps to defend its position.

7 A show cause notice has been received from the office of DGFT Hyderabad for alleged violation of Target plus scheme to recover Rs.17.29 crores and levy other penalties. The Company has been advised that no liability is likely to arise under the notice as the allegations are unfounded, and the Company is taking adequate steps to defend itself.

8 Employee Benefits : Gratuity

Consequent to the adoption of Accounting Standard on Employees Benefits (AS-15) (Revised 2005) issued by the Institute of Chartered Accountants of India, the following disclosures have been made as required by the Standard for Actuarial valuation of Gratuity.

9 Pursuant to Scheme of restructuring package of Term Loans the Company has alloted 0.1% Cumulative Redeemable Preference Shares of Rs. 100/- each on 28th October, 2002 to IDBI and IFCI and the same will be redeemed to IDBI in March, 2012 (Rs. 400 lacs) and to IFCI in July, 2011 (Rs. 271.60 Lacs).

10 The amount of CRPS of Rs. 671.60 lacs payable on redemption to IDBI and IFCI as stated in note No.30 is treated as deferred revenue expenditure, to be written off over the term of the CRPS.

11 During the year 2005-06 the Company has incurred an amount of Rs. 1,25,23,000/- being the expenditure incurred for raising equity.The same is being amortised over a period of 5 Years from the date of commencement of operations, i.e. from the financial year.

12 In the opinion of the Board, the current assets and loans & advances have a value on realisation in the ordinary course of business atleast equal to the amount at which they are stated.

13 Vide Notification No.30/09.07.2004 of the Central Excise Department we can opt for zero rate of duty by not taking Cenvat credit on Inputs and vide Tariff rate (Previous year under Notification No.29/09.07.2004) of Central Excise Department option can be exercised for payment of duty on Final products by taking credit on inputs and capital items. Accordingly in case of Denim Fabric and Cotton yarn the Company has opted for Zero rate of duty and not availed Cenvat credit on the purchase of inputs and capital items, where as in case of Polyster yarn we have taken cenvat credit on part of the rawmaterial which are used for production of polyster yarn meant for export, and cleared the material for export on payment of duty.

14 There was a major fire accident in spinning department of denim division at Ramtek, Nagapur district, Maharashtra state during January, 2008, in which the Building, Plant & Machinery, Electrical Installations and stocks were totally damaged. The factory was fully insured under reinstatement policy for fixed assets and under declaration policy for stocks. The Companys Insurance claim is processed and settled partly. The Company received an amount of Rs. 26.09 crores from the Insurance Company including salvage.The part claim of Rs. 4.90 crores which is still to be settled by the Insurance Company is shown under Claims receivable and the amount of loss of Rs. 2.45 crores which is not expected to be received, has been written off under Claims written off under the head Other expenses (Ref. Schedule 19 of the Annual Accounts).

15 Previous years figures have been regrouped wherever necessary. Paise have been rounded off to the nearest rupee. Previous year Figures are shown in brackets.