30th annual general meeting · shri ashok kumar agarwal, shri kailash kumar agarwal and shri raj...

REGISTERED / CORPORATE OFFICE AND WORKS:Regd. Office : 15th K.M. Stone, Delhi Road, V.P.O. Mayar,& HISAR - 125 044 (Haryana). Ph. (01662) 261425-26-27, 261483,Works Fax no. (01662) 261417, E-mail : [email protected]

New Delhi Office : 1E/12, Jhandewalan Extention, Sewak Bhawan, New Delhi - 110055Ph. (011) 23524439/41, 23636663/64, 41540471Fax no. (011) 23541076, (011) 23610076E-mail : [email protected]

Kolkatta Office : 405, Manglam Building, 24 Hament Basu Sarani, Kolkatta - 700 001Ph. (033) 22316763, 22135501Fax no.(033)22135502, E-mail : [email protected]

Ahmedabad Office : 85, Hira Bhai Market, Ahmedabad - 380022Ph. (079) 25467482, Fax no. (079) 25467459

Mumbai Office : Shah & Nahar (Worli) Industrial Estate, Unit No. 506,5th Floor, Dr. E.Moses Road, Worli, Mumbai - 400018Ph. (022) 24950532/38, Fax no.(022)24946474,E-mail : [email protected]

30th ANNUAL GENERAL MEETINGDay : THURS DAY

Date : 29th SEPTEMBER, 2011Time : 4:00 P.M.

Venue : 15th K.M. Stone, Delhi Road, V.P.O. Mayar,HISAR - 125 044 (Haryana)

C O N T E N T SNotice…………………………………………………………02

Directors' Report…………………………………………06

Report on Corporate Governance ………………………12

Auditors' Report …………………………………………24

Balance Sheet………………………………………………28

Profit & Loss Account……………………………………29

Schedule & Notes to Accounts …………………………30

Cash Flow Statement ……………………………………44

Proxy Form …………………………………………………45

Request for E-mail Address.........................................47

H.P. Cotton Texti le Mil ls LimitedH.P. Cotton Texti le Mil ls LimitedH.P. Cotton Texti le Mil ls LimitedH.P. Cotton Texti le Mil ls LimitedH.P. Cotton Texti le Mil ls Limited

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BOARD OF DIRECTORS :

Shri Ashok Kumar Agarwal, Deputy Managing Director

Shri Kailash Kumar Agarwal, Deputy Managing Director

Shri Raj Kumar Agarwal, Additional Director (w.e.f.01.07.2011)

Shri Parshotam Das Agarwal, Director

Shri Bibhuti Charan Talukdar, Director

Shri Anil Agarwalla, Director

Shri Mohan Lal Jain, Director

BANKERS :

State Bank of Patiala

Oriental Bank of Commerce

IDBI Bank Limited

AUDITORS OF THE COMPANY

M/s. A.K. Associates, Chartered Accountants, New Delhi

REGISTRAR & SHARE TRANSFER AGENT:

M/S. Alankit Assignments Ltd.

2E/ 21, Alankit House, Jhandewalan Extension,

New Delhi – 110 055

Tel. No. : (011) 23541234-42541234

Fax No. : (011) 23552001

Website: www.alankit.com


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NOTICE:

Notice is hereby given that the Thirtieth Annual General Meeting of the Members of H.P.Cotton Textile MillsLimited will be held on Thursday, the 29th day of September, 2011 at 4:00 p.m. at the Registered Office of theCompany at 15th K.M.Stone, Delhi Road, V.P.O. Mayar, Hisar-125044 (Haryana) to transact the following business:

ORDINARY BUSINESS

1. To receive, consider and adopt Audited Balance Sheet of the Company as at 31st March 2011 and the Profit

and Loss Account for the financial year ended on that date along with the report of the Directors and

Auditors thereon.

2. To appoint a Director in place of Sh. Parshotam Das Agarwal who retires by rotation and being eligible,

offers himself for re-appointment.

3. To appoint a Director in place of Sh. Anil Agarwalla who retires by rotation and being eligible, offers

himself for re-appointment.

4. To appoint Auditors and to fix their remuneration.

SPECIAL BUSINESS

5. To consider and if thought fit, to pass with or without modification(s) the following resolution as

Ordinary Resolution:-

Appointment of Shri Raj Kumar Agarwal as a Director of the Company

“RESOLVED THAT Shri Raj Kumar Agarwal who was appointed by the Board of directors as an additional

director of the Company with effect from 1st July, 2011 and who holds office upto the date of the

forthcoming Annual General Meeting of the Company in terms of Section 260 of the Companies Act, 1956

(“the Act”) be and is hereby appointed a Director of the Company and who shall be liable to retire by

rotation.”

6. To consider and if thought fit, to pass with or without modification(s) the following resolution as

Special Resolution:-

Appointment of Shri Raj Kumar Agarwal as a Whole Time Director of the Company

“Resolved that pursuant to the provisions of Sections 198, 269, 309, 310 and 314 read with Schedule XIII

and other applicable provisions, if any, of the Companies Act, 1956 (including any statutory modification

or re-enactment thereof for the time being in force) and such other approvals/consents/sanctions/

permissions as may be necessary and pursuant to the recommendation of the Remuneration Committee

of the Board, the approval of the members be and is hereby accorded for the appointment Shri Raj Kumar

Agarwal as Whole Time Director of the Company for a period of 5 years w.e.f. 1st July, 2011 on the

following terms: -

1) Salary Basic : Rs. 40500 - 2500 - 50500 per month.

2) HRA : HRA 25% of Basic salary

3) Medical : Re-imbursement of medical expenses for self and family upto a limit

of 5% of Basic salary per annum.

4) LTA : Re-imbursement of Leave Travel Concession expenses for self and family

upto a limit of 5% of Basic salary per annum.

5) Bonus : As per company rule.

6) Encashment of unavailed leave at the time of retirement / cessation of service shall not be included

in the computation of the ceiling on remuneration


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Resolve Further that Shri Raj Kumar Agarwal will hold the office as Whole Time Director and he shall be

subject to the same provisions as to resignation, removal and vacation of office as the other directors and

if he ceases to hold office of director for any cause he shall ipsofacto and immediately cease to be the

Whole Time Director.

RESOLVED FURTHER THAT the Board of Directors of the company be and is hereby authorized, to do

all such acts, deeds and things as may be required in order to comply with the provisions of the Companies

Act 1956 and to give effect to the above resolution.”

7. To consider and if thought fit, to pass, with or without modification, the following Resolution as Special

Resolution:

“RESOLVED that pursuant to section 314 (1B) read with Director's Relative (Office or Place of Profit)

Rules, 2003 [as amended from time to time] and other applicable provisions, if any, and subject to such

other requisite approvals, if any, approval of the members be and is hereby accorded to the revision in

the terms and conditions of appointment including remuneration payable to Shri Ravindrra Agarwaal,

President (Commercial) of the Company, For a period of 5 years with effect from July 1, 2011, as specified

herein below:

1) Salary Basic : Rs. 37500 – 2500 - 47500 per month.

2) HRA : HRA 25% of Basic salary

3) Medical : Re-imbursement of medical expenses for self and family upto a limit

of 5% of Basic salary per annum.

4) LTA : Re-imbursement of Leave Travel Concession expenses for self and family

upto a limit of 5% of Basic salary per annum.

5) P.F. : As per Law.


7) Gratuity : As per Law

RESOLVED FURTHER THAT the Board of Directors of the company be and is hereby authorized, to do

all such acts, deeds and things as may be required in order to comply with the provisions of the Companies

Act 1956 and to give effect to the above resolution.”

8. To consider and if thought fit, to pass, with or without modification, the following Resolution as Special

Resolution:

"RESOLVED that pursuant to section 314 (1B) read with Director's Relative (Office or Place of Profit)

Rules, 2003 [as amended from time to time] and other applicable provisions, if any, and subject to such

other requisite approvals, if any, approval of the members be and is hereby accorded to the revision in

the terms and conditions of appointment including remuneration payable to Shri Kashmiri Lal Agarwal,

Advisor (Commercial & Technical) of the Company for a period of three years, with effect from August

1, 2011, on the following remuneration:

Salary : Rs 75000 (consolidated) Per Month

RESOLVED FURTHER THAT the Board of Directors of the company be and is hereby authorized, to do all

such acts, deeds and things as may be required in order to comply with the provisions of the Companies

Act 1956 and to give effect to the above resolution."

EXPLANATORY STATEMENT PURSUANT TO SECTION 173 OF THE COMPANIES ACT 1956

Item No. 5 & 6

Shri Raj Kumar Agarwal was appointed as an Additional Director of the Company at the meeting of the


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Board of Directors held on 29th June, 2011 w.e.f. 1st July, 2011. Shri Raj Kumar Agarwal aged about 58years is a B.Com. Prior to such appointment Shri Raj Kumar Agarwal was an employee of the Companyand had been working in the capacity as President Export. He is attached with the Export Business for lastten years and therefore his induction on the Board would be beneficial to the company.

Further Shri Raj Kumar Agarwal appointed as Whole Time Director for a period for the five years w.e.f. 01stJuly, 2011on the following remuneration terms:

1) Salary Basic : Rs. 40500 - 2500 - 50500 per month.2) HRA : HRA 25% of Basic salary

3) Medical : Re-imbursement of medical expenses for self and family upto a limitof 5% of Basic salary per annum.

4) LTA : Re-imbursement of Leave Travel Concession expenses for self and familyupto a limit of 5% of Basic salary per annum.


6) Encashment of unavailed leave at the time of retirement / cessation of service shall not be included

in the computation of the ceiling on remuneration

The Board of directors recommends both the resolutions for your approval.Shri Raj Kumar Agarwal is interested in this resolution as it relates to his appointment as Director of theCompany and payment of remuneration to him., Shri Ashok Kumar Agarwal & Shri Kailash Kumar Agarwalare interested in this resolution as relatives of Shri Raj Kumar Agarwal. No other Director of the Company is inany way concerned or interested in the proposed resolution.

The above information be considered as a relevant abstract, as required under Section 302 of the Companies, Act1956.

Item No. 7

The remuneration payable to Shri Ravindrra Agarwaal, was approved by the shareholders at the 25th AGM heldon 16th September, 2006. The revision in the existing terms and conditions between the Company and ShriRavindrra Agarwaal as contained as per the statement. The Board of Directors, thereafter, in their meeting heldon 5th May, 2011, decided to recommend for his re-appointment for a period of 5 years w.e.f. 1st July, 2011 andto revised terms and conditions of service of Shri Ravindrra Agarwaal as set out in the resolution.

Shri Ashok Kumar Agarwal, Shri Kailash Kumar Agarwal and Shri Raj Kumar Agarwal are interested in thisresolution as relatives of Shri Ravindrra Agarwaal. No other Director of the Company is in any way concernedor interested in the proposed resolution.

Item No. 8

The remuneration payable to Shri Kashmiri Lal Agarwal, was approved by the shareholders at the 27th AGMheld on 20th September, 2008. The revision in the existing terms and conditions between the Company and ShriKashmiri Lal Agarwal as contained as per the statement. The Board of Directors, thereafter, in their meetingheld on 29th July, 2011, decided to recommend for his reappointment for a period of three years w.e.f. 1stAugust, 2011 and to revised terms and conditions of service of Shri Kashmiri Lal Agarwal as set out in theresolution.Shri Ashok Kumar Agarwal, Shri Kailash Kumar Agarwal and Shri Raj Kumar Agarwal are interested in thisresolution as relatives of Shri Kashmiri Lal Agarwal. No other Director of the Company is in any way concernedor interested in the proposed resolution

For and on Behalf of the Board of Directors

Ashok Kumar Agarwal Kailash Kumar AgarwalDeputy Managing Director Deputy Managing Director

Place: New DelhiDate: 29.07.2011


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Name of the Director Shri Parshotam DasAgarwalDIN NO. 00063017Date of Birth 09.10.1946Date of Appointment 09.08.2004Expertise in specific functional Area 40 years experience in Textile & Paper industry.Qualification B.Com., L.L.B., M.B.A.Director ship in other limited Companies NilMembership of the Committee Audit Committee, Remuneration committee, Investors

Grievances Committee, Share Transfer Committee of theCompany

Number of share held NilName of the Director Shri Anil AgarwallaDIN NO. 00046615Date of Birth 01.01.1964Date of Appointment 29.07.1999Expertise in specific functional Area Practicing Advocate at Supreme Court of India,

New Delhi having more than 20 years experience.Qualification L.L.B.Director ship in other limited Companies M/s Promain Ltd.Membership of the Committee Audit Committee, Remuneration committee, Investors

Grievances Committee, Share Transfer Committee ofthe Company

Number of share held NILName of the Director Shri Raj Kumar AgarwalDIN NO. 02950710Date of Birth 04.10.1952Date of Appointment 01.07.2011Expertise in specific functional Area 25 Years in Textile Industry.Qualification B.ComDirector ship in other limited Companies NilMembership of the Committee NILNumber of share held 6786

DETAILS OF DIRECTORS SEEKING APPOINTMENT/ REAPPOINTMENT AT THE ANNUALGENERAL MEETING (PURSUANT TO CLAUSE 49 OF THE LISTING AGREEMENT)

NOTES

� A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and voteinstead of himself and such proxy need not be a member of the Company.

� The Company must receive instrument of Proxies in order to be effective not less than 48 hours before themeeting.

� Members/ proxies should bring the enclosed attendance slip duly filed in, for attending the meetingalong with the Annual Report.

� The Register of members and the Share transfer Books of the Company shall remain closed from 14thSept., 2011 to 21st Sept., 2011 both days inclusive.

� Nomination facility--- Members holding Shares in physical form may obtain the nomination forms fromthe Company’s Registrar and Share Transfer Agent. Members holding shares in electronic form mayobtain the nomination forms from their respective depository participants.

� A member desirous of getting any information in respect of the contents of the Annual Reports is requiredto forward their queries to the Company at least ten days prior to the Meeting so that, if the Chairman sopermits, the required information can be made available at the meeting.

� Members are requested to notify change in address, if any immediately to Co.’s registrars M/s AlankitAssignments Ltd., 2E/21, Alankit House, Jhandewalan Extension, New Delhi – 110 055..

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DIRECTORS REPORT

ToThe Share HoldersH.P.Cotton Textile Mills Ltd.,

Your Directors have pleasure in presenting the Thirtieth Annual Report together with the Audited Statementsof Accounts of the Company for the year ended 31st March 2011.

FINANCIAL HIGHLIGHTSThe financial results of the Company for the year under review are compared below with the previous year’sresults for your consideration.

(Rupees in Lacs)

Particulars Year ended Year ended 31st March, 2011 31st March, 2010

Sales and other Income 7383.59 5953.00

Profit/(Loss) before financial charges and depreciation 414.49 390.09

Financial charges (232.04) (223.66)

Profit /(Loss) before depreciation 182.45 166.43

Depreciation (146.12) (159.60)

Profit before tax 36.33 6.83

Prior year Adjustment 8.43 10.41

Less: Provision for Tax

-Current Tax (8.30) (2.55)

-Deferred Tax (14.29) (12.08)

Profit after Tax 22.17 2.61

Provision for Deferred Tax Written Back 4.77 --

Surplus as per last year 2.77 0.16

Surplus carried forward to next year 29.71 2.77

DIVIDEND

To conserve the resources for working capital and capital expenditure the Directors do not recommend anydividend for the financial year under review.

OPERATIONAL PERFORMANCE :

Your directors regret to inform you that “On 14th September, 2010” violent mob attacked the Company’spremises and set on fire the Raw Material Godown, Cotton Waste (Scrap) Godown, Store, Factory and part ofoffice premises. The mob also damaged the office premises, furniture & fixtures, office equipment, computer,vehicles, some machines and also looted cash. However the Company’s properties being insured, claim for suchloss has been lodged with the insurance company.In addition to captioned mishappening, during the yearunder review the prices of cotton and other inputs were on rising trend and labour of requisite quantity andquality was also not available. Despite all these your directors are glad to announce that company has earnedcash profit of Rs. 182.45 lacs and net profit of Rs. 22.17 lacs after tax. Packed production for the year was 2480 MT.


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as compared to 2491 MT. in last year. The Export of the Company for the year was Rs.4258.10 lacs showing anincrease of 49.86 % over the last year. Your directors would like to inform you even though the overall economyhas started showing a sign of recovery but textile sector is still struggling. The high cotton prices along withother input cost continue to pose pressures on the company bottom line. Your management is trying hard tomeet the prevailing challenges by focusing its efforts on further reduction of cost and by improving operationalefficiencies so as to remain globally competitive.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

a) Industry Structure & Development:

The Textile industries faces a particularly acute challenge as the price of its raw material, viz. cotton, hasincreased by more than 100 percent in just the last one year. The industry has not been able to take theadvantage of investments made in recent years because of lack of demand particularly in the exportmarket, The prices realizable are not remunerative. The importing countries are still not fully out of thedemand recession and the adverse rupee dollar parity does not encourage exports. Allowing export ofcotton has created an acute shortage of this commodity. This factor coupled with increased cost to anunprecedented level and partial restrictions on the export of yarn up to March, 2011 have added to theproblem of the industry. Unless export policies get stabilized on a sound footing, it will be difficult forthe industry to improve substantially in the near future.

b) Opportunities and Threats:

In view of rising income levels and resultant higher demand, the industry has an opportunity for thegrowth which has to be fully exploited in both domestic and export markets. Once the global demandrecession is over, opportunities for exports should increase and to take full advantage, improvement inquality will have to be given priority. As the textile up gradation fund has been restarted by theGovernment, it would definitely provide support to the industry to gain fully from the opportunity forexpansion and sustained and profitable growth.

In view of the rising input costs including those of raw materials, it will be difficult to compete and thosecountries, where manufacturing costs can be controlled with support of their Governments, would bebetter placed.

c) Risks and Concerns:

The regular availability of cotton at reasonable prices particularly in view of increasing global demandfor cotton may prove an obstacle in continuing uninterrupted manufacturing operations. Coupled withthis, the availability of skilled labour in states where the textile industry is located has become difficult.The strength of migrating textile workers from different States has reduced resulting in this acute shortage,which is a matter of concern. Moreover, the increased incentives being provided by our competitors likeChina, Pakistan, Bangladesh, Vietnam etc. are enabling the manufacturers in those countries to get aheadof us in the various export markets.

d) Outlook:

In spite of the current stressful outlined above, the demand for cotton textiles in the long run shouldremain strong in India and abroad. Our continued efforts to maintain quality, variety in product mix andscouting for new and better markets should promote growth and we hope to achieve a better performancein the near future.


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QUALITY MANAGEMENT SYSTEM

The company continues to lay emphasis on excellence in quality and services and is committed to total customersatisfaction. The high quality of the company products is reflected in the company ability to export its productin quality conscious European markets. The company continues to be on a mission to provide customer withproducts that can match with international standards and will surpass their expectations.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACIES

The Company has adequate Internal Control systems in all areas of operations commensurating with the size ofthe operation. Your Company has an adequate and effective internal control system to ensure that assets andinterests of the Company are safeguarded and reliability of accounting data and accuracy are ensured withproper checks and balances.

The internal control system is improved and modified continuously to meet the changes in business conditions,statutory and accounting requirements. The Audit Committee of the Board of Directors, Statutory Auditors andthe business heads are periodically appraised of the internal audit findings and the corrective actions taken. TheAudit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal controlssystems and suggests improvements for strengthening them.

HUMAN RESOURCES AND SAFETY OF WORKERS

During the year under review, there were no strikes, lockout or any other Industrial disputes. The Industrialrelationship was cordial during the year. Your Directors would like to record their appreciation of the efficientand loyal service rendered by the Company’s employees.

REMUNERATION OF EMPLOYEES

Since no employee was in receipt of remuneration equal to or exceeding Rs.60 lacs per annum, if employed forthe full year or exceeding Rs. 5 lacs per month if employed for part of the year, hence statement showingparticulars of the employees as required under Section 217(2A) of the Companies Act 1956 read with theCompanies (Particulars of employees) Rules, 1975 as amended, has not been given.

ENVIRONMENT AND POLLUTION CONTROL

The Company is conscious of the importance of environmentally clean and safe operations. The company’spolicy requires the conduct of all operations in such manner so as to ensure safety of all concerned complianceof statutory and industrial requirements for environment protection and conservation of natural resources tothe extent possible.

DIRECTORS

Sh. Raj Kumar Agarwal was appointed as additional director of the Company w.e.f. 1.07.2011 and holds officeupto the date of the ensuing Annual General Meeting. The Company has received notice from a memberproposing the candidature of Shri Raj Kumar Agarwal.

Shri Parshotam Das Agarwal and Shri Anil Agarwalla Directors are liable to retire by rotation and beingeligible, offer themselves for re-appointment.The information on the particulars of Directors seekingappointment and re- appointment as stipulated under Clause 49 of Listing Agreements with the Stock Exchanges,are provided in the notes to Notice forming part of the Annual Report.

AUDITORS AND AUDIT REPORT

The retiring Statutory Auditors M/s A.K.Associates, Chartered Accountants, hold office until the conclusion ofthe ensuring Annual General Meeting. The Company has received a certificate from them that their


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re-appointment, if made, would be with in the prescribed limits under section 224(1B) of the Companies Act,1956, and that they are not disqualified for such re-appointment with in the meaning of section 226 of the saidAct or any other Act rules or regulations applicable for such re-appointment.

The Auditor’s Report on the accounts is self explanatory

COST AUDITORS

Pursuant to directives of the Central Government under the provisions of Section 233B of the Companies Act,1956 the Company has appointed M/s R.J. Goel & Co., Cost Accountants with approval of Central Governmentto conduct the cost audit of the products manufactured by the Company for the period under review.

Application for appointment of M/s HMVN & Associates, Cost Accountants as Cost Auditors for conducting thecost audit for the financial year ending 31st March, 2012 has been made to the Central Government.

CORPORATE GOVERNANCE

Company has complied with the requirements of Corporate Governance through constitution and reconstitutionof various committees and has taken adequate steps to ensure that all mandatory provisions of CorporateGovernance as provided in the Listing Agreement with the Stock Exchanges are duly complied with. A separatereport on Corporate Governance along with the Auditors Certificate on compliance with the CorporateGovernance as stipulated in Clause 49 forms part of this Annual Report.

INVESTOR SERVICES

The Company has appointed M/s Alankit Assignments Limited, New Delhi as Registrar and Share TransferAgent (RTA). It may be informed that no complaint/ query from any of the shareholder is pending to beresolved by the Company or the RTA.

LISTING OF SHARES

Company’s shares are listed on Delhi Stock Exchange & Bombay Stock Exchange. During the year under reviewthe company has delisted its equity shares from the Stock Exchange of Jaipur.

FIXED DEPOSITS

The Company has not accepted / renewed any deposits from the public / members during the year underreview.

CASH FLOW

Inconformity with the provisions of clause 32 of the Listing Agreement the Cash Flow Statement for the yearended 31.03.2011 is annexed hereto.

PUBLICATION OF FINANCIAL RESULTS

In conformity with the provisions of clause 41 of the Listing Agreement the Company has published unauditedfinancial results for the quarter ended 30th June, 2010; 30th Sept., 2010; 31st December, 2010 and audited financialresult for the quarter/ year ended on 31st March, 2011. The summarized result published in Business Standard,Delhi & Dainik Bhaskar (Hindi), Hisar.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGAE EARNINGS /OUT GO

The information required under Section 217(l)e) of the Companies Act, 1956, read with the Companies (Disclosureof Particulars in the report of the Board of Directors) Rules, 1988 is annexed hereto as annexure A and forms part


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of this report.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956 and on the basis of compliance certificatesreceived from the concerned executives of the respective departments of the Company and subject to disclosuresin the annual accounts, as also on the basis of the discussion held with the Statutory Auditors of the Companyfrom time to time, we state:

1. That in the preparation of the annual accounts , the applicable accounting standards have been followedand proper explanations provided relating to material departures, if any;

2. That the Directors have selected appropriate accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profit of the Company for that period;

3. That the Directors have taken proper and sufficient care to the best of their knowledge and ability for themaintenance of adequate accounting records in accordance with the provisions of the Companies Act1956 for safeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities, if any,

4. That the Directors have prepared the annual accounts on a going concern basis.

APPRECIATION

The Board of Directors of the company wished to place on record their thanks and appreciation to all workers,staff members and executives for their contribution to the operations of the company. The Directors are thankfulto the Bankers, Financial Institutions for their continued support to the company. The Directors also place onrecord their sincere thanks to the shareholders for their continued support,

co-operation and confidence in the Management of the Company.

For and on behalf of the Board

Ashok Kumar Agarwal Kailash Kumar AgarwalDeputy Managing Director Deputy Managing Director

Place: New DelhiDate : 29th July, 2011


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ANNEXURE –A TO THE DIRECTORS’ REPORTF O R M - A

PARTICULARS UNIT 2010-11 2009-10

A POWER AND FUEL CONSUMPTION1. Purchases from DHVVNL

Units 000’ KWH 12728 13096Rate RS/UNIT 5.27 4.46Total amount RS. LACS 670.78 583.75

2. OWN GENERATIONUnits generated 000' KWH 1435 1163Average rate RS/UNIT 9.99 8.89Total amount RS. LACS 143.38 103.4

B. FUELa) STEAM GENERATION

Quantity of petcock consumed TONNES 2587.34 2208.64Average cost of petcock RS.PER TON 9694.40 6734Total cost of petcock RS.LACS 250.83 148.72

b) LIQUEFIED PETROLEUM GASLPG consumed 000’KG 31 26Average cost RS.PER KG 53.78 44.91Total cost RS.LACS 16.61 11.68

C. CONSUMPTION PER KILOGRAM OF PRODUCTa) ELECTRICITY

I) Upto Ring frame KWH/KG 2.51 2.88Ii) Mills as a whole KWH/KG 5.71 5.72Total power consumed 000’UNIT 14163 14259

b) STEAM KG/KG 4.36 4.12

F O R M - BB. TECHNOLOGY ABSORPTION

RESEARCHAND DEVELOPMENT(R&D)I) SPECIFIC AREA IN WHICH THE COMPANY CARRIES OUT R & D

1. Developed new products and product mix2. Reduction in waste generation in the process3. Reuse of waste recycled water4. Steam, power and Water conservation5. Improvement in production process resulting in quality Improvement

II) BENEFIT DERIVED AS A RESULT OF ABOVE R & D1. New range of Milange were produced2. Reduced generation in waste3. Reutilization of water4. Reduction in cost of color and chemical used

III) FUTURE PLAN OF ACTIONResearch and Development activities will be continued to attain objectives of cost reduction, energy conservation,efficient inventory management, waste utilization, value addition, environmental improvement and efficientmanagement of water.

IV) Common equipment and facilities are used for operational as well as R & D activities. No separate account ismaintained and as such expenditure on R & D is not separately ascertainable.

V) FOREIGN EXCHANGE EARNING AND OUT GOForeign Exchange earned Rs.425810429 Previous Year Rs.284134724Foreign Exchange Used Rs. 6555630 Previous year Rs. 4912378

Equivalent production standard is not practicable sinceall the different counts/range of products has variousqualities, colors and process involved

In case of production of different qualities/specifications, consumption details may begiven for equivalent production.

Reasons for variation Consumption of electricity and coal varies dependingupon range/counts and Quality produced.


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REPORT ON CORPORATE GOVERNANCE

THE COMPANY’S PHILOSOPHY ON CORPORATE GOVERNANCE: The Company’s philosophy on CorporateGovernance envisages commitment to ensure customer satisfaction through better services and redressal ofgrievances if any, of all its share holders consistent with fairness to all the stakeholders and with due concernfor social responsibility.

In compliance with the requirement under clause 49 of the Listing Agreement, all the Board Members haveaffirmed their compliance of Code of Conduct adopted by the Company for the year-ended 31.03.2011 and adeclaration to this effect duly signed by the Dy. Managing Director(s) form part of this report.

1. Board of Directors

a) Composition of Board: - The Board of Directors comprised six members consisting of two ExecutiveDirectors and four Non-executive Directors as at 31.03.2011. The company is having more than 50% of theBoard’s strength as Independent Directors as required under the listing agreement. The Non-executiveDirectors are eminent professionals having experience in business, industry, Finance and Law.

# including H. P. Cotton Textile Mills Limited.

@Board Committees for this purpose includes Audit Committee and Shareholder Grievance Committeeonly.

No Director is a member of more than 10 committees or Chairman of more than 5 committees across all thecompanies in which he is a Director.

No Director is related to any other Director on the Board in terms of the provisions of the Companies Act,1956, except for Shri Ashok Kumar Agarwal and Shri Kailash Kumar Agarwal who are from the promoters’family and are related to each other.

All the director who is on various Committees is within the permissible limits of the Listing Agreement.The Directors have intimated to the Company from time to time about their membership in the variouscommittees in other Companies.

b) Directors’ Attendance at Board Meetings: During the financial year 2010-11, the Board of Directors met5 times on the following dates:

Name of theDirector

Category ofDirectors

Attendanceat lastAGM

Shareholdingin the

Company

Directorshipheld #

No of Committees@Member

shipsheld

Chairman

Sh Ashok Kumar Agarwal Promoter/ P 75896 3 NIL NIL(Dy. Managing Director) Executive (1.99%)

Sh Kailash Kumar Agarwal Promoter/ P 85320 5 NIL NIL(Dy. Managing Director) Executive (2.24%)

Sh Bibhuti Charan Non- Executive / L 00 4 1 5Talukdar Independent

Sh Parshotam Das Non- Executive / P 00 1 1 1Agarwal Independent

Sh Anil Agarwalla Non- Executive / L 00 2 NIL 2Independent

Sh. Mohan Lal Jain Non- Executive / P 00 3 NIL 1Independent


13

P = Present, L = Leave granted,

c) Committees of the Directors

i) Audit Committee: Audit Committee is consisting of four Directors, all being Non-Executive andIndependent Director viz. Sh. Parshotam Das Agarwal (Chairman), Sh. Bibhuti Charan Talukdar, Sh. AnilAgarwalla and Shri Mohan Lal Jain. Sh. Ashok Kumar Agarwal (Dy. Managing Director), Sh. KailashKumar Agarwal (Dy. Managing Director), The Statutory Auditor, Internal Auditor, Cost Auditor andFinancial advisor are the permanent invitees to attend the Audit Committee Meeting for consultation andto respond to the queries raised at the Committee Meeting.

The role and terms of reference of Audit Committee are as contained in the Section 292A of the CompaniesAct, 1956 and also as contained in the clause 49 of the Listing Agreement. The main objective of the AuditCommittee interallia includes monitoring and providing effective supervision on the financial transactionsand reporting process and the disclosure of its financial information(s) to ensure that these statement(s) arepresented/ published timely, is accurate, sufficient and are true and fair. It also works as whistle blower tothe Board of Directors.

Sh Parshotam Das Agarwal, Chairman of the Audit Committee attended the last Annual General Meetingheld on September 21, 2010, at the Registered Office of the Company at 15 K.M. Stone, Delhi Road, VillageMayar, Hisar – 125044 (Haryana).

During the year 2010-11 the Audit Committee met 4 times on 31.05.2010; 12.08.2010; 11.11.2010 &12.02.2011.The attendance record of Audit Committee members is given below:

ii) Remuneration Committee: At present the Remuneration Committee consists of three members viz.,Sh Bibhuti Charan Talukdar (Chairman), Sh Parshotam Das Agarwal and Sh Anil Agarwalla, all are non-executive and Independent Directors. The terms of reference of Remuneration Committee include thedetermination of remuneration packages of the Executive Directors including remuneration policy andpension rights.

* Sh. Mohan Lal Jain has been appointed member in Audit Committee on 12.08.10 meeting.


14

iii) Share transfer Committee: At present the Share Transfer Committee consists of four members viz., ShParshotam Das Agarwal (Chairman), Sh Bibhuti Charan Talukdar, Sh Anil Agarwalla, Sh. Kailash KumarAgarwal. There were no share transfers pending for registration for more than 30 days as at 31st March2011.During the year meetings of the committee were held on 31.05.2010, 12.08.2010 & 12.02.2011. Attendances ofthe members at these meetings were as follows:-

During the year 2010-11 the Remuneration Committee met 1 time on 12.02.2011. The attendance record ofremuneration Committee members is given below:

The Committee acts in close liaison with its Share Transfer Agent and Registrar M/s. Alankit AssignmentsLtd. Company has received certificate from its Share Transfer Agent and Registrar that complaints, if any,received from the shareholders have been suitably redressed and the company regularly follows with theRegistrars for redressal of all complaint in time as per statutory requirements.

During the year ended 31 March 2011, no complaints/queries were received and as at 31st March 2011 therewere no complaints / queries pending for reply.

d) Remuneration of Directors:

i) The Company pays remuneration to its Deputy Managing Directors as approved by the RemunerationCommittee, Board of Directors and Members of the Company in General Meeting. Detail of the remunerationgiven to them is given below:

iv) The Shareholder/Investors’ Grievance Committee: The Shareholder/Investors’ Grievances committeespecifically looks into the redressal of the Shareholders and Investors complaints and expetidious sharetransfer process. The Shareholder/Investors’ Grievance Committee consists of three members viz. Sh.Bibhuti Charan Talukdar (Chairman), Sh Parshotam Das Agarwal and Sh Anil Agarwalla.

During the year meetings of the committee were held on 31.05.2010, 12.08.2010 & 12.02.2011. Attendance ofthe members at these meetings were as follows:-


15

** Since the employee wise breakup of the liability on account of Gratuity and accumulated leave encashmentbased on actuarial valuation is not available, the related amount has not been shown.

ii) Non-executive Directors are not paid any remuneration except sitting fees of Rs. 5000/- & Rs. 2000/- forattending the meetings of the Board and Audit Committee respectively and Rs. 500 as out of pocket expenses.The detail of sitting fees paid is as follow:

The sitting fees paid to the non-executive directors is within the statutory limits under the Companies Act1956 for payment of sitting fees without the approval of the Central Government.

e) Retiring Directors: According to Article 110 of the Articles of Association of the Company, two Directorsfor the time being are liable to retire by rotation, Accordingly Sh Parshotam Das Agarwal and Sh. AnilAgarwalla Directors are liable to retire by rotation in the ensuing Annual General Meeting and beingeligible offer themselves for re-appointment.

2. Management Discussions and Analysis Report

The Management Discussion and Analysis Report have been included in this Annual Report and includediscussion on the matters specified in Clause 49 of the Listing Agreement.

3. Disclosures:

a) The Company does not have any Subsidiary Company.

b) All and individual transactions with the related parties were in the ordinary course of business and wereon arm's length basis. Since such transaction(s) were not having potential Conflict with the interest of theCompany at large and therefore was not required to be placed before the Audit Committee. Related partytransactions have been audited by the Statutory Auditors of the Company.

c) There were no material financial and commercial transactions by Senior Management as defined in Clause49 of the listing agreement where they have personal interest that may have a potential conflict with theinterest of the Company at large requiring disclosure by them to the Board of Directors of the Company.

d) All mandatory Accounting Standards have been followed in preparation of the financial statements.

e) The Company has not raised any money through public issue, right issue, preferential issue etc. in 2010-11and in the previous financial year and hence provisions relating to above in Clause 49 of the listingagreement are not applicable.

f) The Company has continued to comply with the requirements of the Stock Exchanges, SEBI and otherStatutory Authorities on all matters related to capital markets during the last three years. Stock Exchanges,SEBI or any other statutory authorities have not imposed any penalty or strictures related to capital marketactivities on the Company during the last three Financial years.

g) The Company has two whole time promoter directors designated as Dy. Managing Director(s) whose


16

appointment and remuneration has been fixed by the Board in terms of resolution passed by the Members.

h) The Company has adopted a code of conduct for prohibition of Insider Trading pursuant to the requirementsof SEBI (Prohibition of Insider Trading) Regulation, 1992 as amended. This code is applicable to all theDirectors and such designated employees who are expected to have access to unpublished price sensitiveinformation relating to the Company.

i) The Company has not adopted any Whistle Blower policy. However, no personnel have been denied accessto the Audit Committee.

j) The Company has complied all the mandatory requirements and has constituted a Remuneration Committeefrom the non -mandatory requirements.

4) Annual General Meetings: i) The last three Annual General Meetings were held at the Registered Office ofthe company as per the details given below:

ii) Postal Ballot: No resolution was put to postal ballot during the year ended 31st March 2011.

iii) Compliance made by the Company: Compliance certificate for Corporate Governance from Auditorsof the Company is submitted elsewhere in this report.

5.) GENERAL SHAREHOLDER INFORMATION

i) Annual General Meeting

a. Date & Time : 29th September, 2011 at 4 p.m.

b. Venue : At Registered Office of the Company

15 K.M. Stone, Delhi Road,

VPO Mayar, Hisar - 125044 (Haryana)

ii) Financial Calendar: The Last financial year of the Company was of twelve months from April, 2010 toMarch, 2011.The tentative financial calendar of the Company for the year 2011-12 shall be as follow:

iii) Date of Book Closure:

The Register of members and the Share transfer Books of the Company shall remain closed from 14th Sept.,2011 to 21st Sept., 2011 both days inclusive.

iv) Listing of Equity Shares on Stock Exchanges at :

Bombay Stock Exchange Limited The Delhi Stock ExchangePhiroze Jeejeebhoy Towers, Association Ltd., DSE House,Dalal Street 3/1, Asaf Ali Road,Mumbai - 400 001 New Delhi - 110 002


17

The Company is regularly paying the Listing fee to Mumbai Stock Exchange (BSE) and Delhi Stock Exchange(DSE). The fee for the current year 2011-12 has been paid.

v) Stock Code :

The scrip code of the Company at BSE is 502873.

vi) Market Price data and comparison with broad based indices

Monthly high and low prices of equity shares of H. P. Cotton Textile Mill Limited at the Stock Exchange,Mumbai (BSE) are as follow.

Source: bseindia.com/archives

vii) Share Transfer Agent, Plant Location & Address for Correspondence:

viii) Distribution Schedule & Shareholding Pattern:

The Distribution Schedule & Shareholding Pattern of the Company as on 31.03.2011 is as follows:

Range No. of Shares Shareholders SharesNumber %Age Number %Age

Up to 5000 1951 95.97 579048 15.205001 to 10000 28 1.38 197516 5.1810001 to 20000 26 1.28 351880 9.2420001 to 30000 5 0.25 113689 2.9830001 to 50000 5 0.24 205282 5.3950000 to 100000 8 0.39 664200 17.43100001 to Above 10 0.49 1698385 44.58Total 2033 100 3810000 100.00


18

* Promoters have declared that they have not pledged nor have created any lien on any of the shares held by them.

ix) Dematerialization and Transfer of shares :

Dematerialization and Transfer of shares are being done by M/s Alankit Assignments Limited, Registrar &Share Transfer Agents of the Company.

The equity shares of the company are under rolling settlement and are compulsory traded and settled onlyin the dematerialized form. A total of 2733520 (71.75%) shares of the company have been dematerialized ason March 31, 2011. There is no case in process/ pending for transfer as well as dematerialization of shares.

x) The Central Government in exercise of the powers conferred under section 642and section 383A of theCompanies Act 1956 has amended the Companies (Appointment and Qualifications of Secretary) Rules,1988 vide notification NO.G.S.R.11 (e) dated 05.01.2009 and accordingly the Companies having paid upCapital of Less than Rs. 500 lacs need not to appoint any Company secretary. Accordingly the Company hasdecided not to appoint Company Secretary as an economy measure.

xi) Shri Ashok Kumar Agarwal has been designated as Compliance Officer Under Clause 47 of the ListingAgreement. Any Investor/Shareholder of the company can contact him on the matters related with thecompany at 15th K M Stone, Delhi Road, VPO Mayar, Hisar - 125044, Phone: 91-1662-261425-27, Fax: 91-1662-261417 and E-mail: [email protected]

xii) The quarterly, half yearly and annual results are generally published in 'Business Standard' (English) andthe 'Dainik Bhaskar' (Hindi). As per the requirements of the Listing Agreement, the company is alsoproviding regular information to the Stock Exchange.

Declaration under Clause 49 (1) (D)(ii) of Listing Agreement

We, Ashok Kumar Agarwal & Kailash Kumar Agarwal, Deputy Managing Directors of the Company, herebydeclare that all members of the Board of Directors have affirmed compliance with the code of Conduct for theyear-ended 31.03.2011.

Ashok Kumar Agarwal Kailsh Kumar AgarwalDeputy Managing Director Deputy Managing Director

Place: New DelhiDated : 29th July, 2011

Category No of Holders No. of shares held % Age

Promoters 53 2379700* 62.46Mutual fund 1 600 0.02Financial Institution 2 2450 0.06FII 1 50 0.00NRI 5 217 0.01Body Corporate 59 115449 3.03Individuals 1912 1311534 34.42 Total 2033 3810000 100.00


19

COMPLIANCE CERTIFICATE

CIN No. : L18101HR1981PLC012274Nominal Capital : Rs.4,25,00,000.00

To

The MembersM/S. H.P.COTTON TEXTILE MILLS LIMITED15 K.M. STONE, DELHI ROADVPO MAYAR, HISAR (HARYANA)

I have examined the registers, records, books and papers of M/S. H.P.COTTON TEXTILE MILLS LIMITED requiredto be maintained under the Companies Act. 1956 (the Act) and rules made there under and also the provisionscontained in the Memorandum and Articles of Association of the company for the Financial Year ended on 31stMarch, 2011. In my Opinion and to the best of my information and according to the examination carried out byme and the explanation furnished to me by the company, its officers and agents, I certify that in respect of theaforesaid financial year:

1. The Company has kept and maintained all the registers as stated in annexure 'A' to this certificate, as perthe provision of act and rules made there under and all the entries therein have been duly recorded.

2. The company duly filed the forms as stated in Annexure 'B' to this certificate with the Registrar of Companieswithin time prescribed under the Act and rules made there under.

3. The Company being a public limited company and has minimum prescribed paid up capital.

4. The Board of Directors duly met 5 (Five) times on 10.05.2010, 31.05.2010, 12.08.2010, 11.11.2010 & 12.02.2011in respect of which meeting, proper notices were given and the proceedings were properly recorded andsigned in the Minutes Books maintained for the purpose.

5. The Company has closed its Register of Members from 14th September 2010 to 20th September 2010 andnecessary compliance of sec. 154 of the act has been made.

6. The Annual General Meeting for the financial year ended on 31st March, 2010 was held on 21.09.2010 aftergiving due notice to the members of the company and resolutions passed there at were duly recorded in theMinutes Book maintained for the purpose.

7. No Extra-Ordinary General Meeting of the members of the company was held during the financial year.

8. The Company has not advanced any loans to its directors and /or persons or firms or companies referredin the sec.295 of the Act.

9. The Company has duly complied with the provisions of sec. 297 of the act in respect of contract specified insection 297 of the Act.

10. The Company has made necessary entries in the register maintained under section 301 of the Act.

11. The Company has obtained necessary approvals from the Board of Directors, members pursuant to section314 of the Act.

12. The Company has not issued any duplicate share certificates during the financial year.

13.

I. The company has delivered all the certificates on lodgment thereof for transfer in accordance with theprovisions of the Act.

II. The company has not deposited any amount in a separate Bank account as no dividend was declaredduring the year.

III. The company was not required to post warrants to any member of the company as no dividend wasdeclared during the year.


20

IV. There was nothing pending as unpaid dividend money, application money due for refund, matureddebentures and the interest accrued thereon and therefore the nothing is required to be transferred toInvestor Education and Protection Fund.

V. The company has duly complied with the requirement of section 217 of the act.

14. During the year no change in the constitution of the Board of Directors in the Company.

15. The company has not appointed any Managing Director/ Whole Time Director or Manager during the year.

16. The company has not appointed any sole-selling agents during the financial year.

17. The company was not required to obtain any approvals of Central Government, Company Law Board,Regional Director, Registrar and / or such other authorities as may be prescribed under the variousprovisions of the act and rules made there under.

18. The Directors has disclosed their interest in other firms/ companies to the Board of Directors pursuant tothe provisions of the act and rules made there under

19. The company has not issued any shares/ debentures/ other securities during the financial year.

20. The company has not bought back shares during the financial year.

21. There was no redemption of preference shares/ debentures/ other securities during the financial year.

22. There were no transactions necessitating the Company to keep in abeyance rights to dividend, right sharesand bonus shares pending registration and transfer of shares.

23. The company has not invited /accepted any deposits including any unsecured loan falling within themeaning of Sec. 58A of the Companies Act, 1956 during the financial year.

24. The amount borrowed by company from Financial Institutions, Banks & Others during the financial yearended 31.03.2011 is within the borrowing limit of the company.

25. The company has not made any loans or given guarantees or provided securities to other bodies corporateduring the financial year and consequently no entries have been made in the register kept for the purpose.

26. The Company has not altered the provisions of the Memorandum with respect to Situation of the Company'sregistered office from one state to another during the year under scrutiny.

27. The company has not altered the provisions of the Memorandum with respect to the objects of the companyduring the year under scrutiny.

28. The company has not altered the provisions of the Memorandum with respect to the name of the companyduring the year under scrutiny.

29. The company has not altered the provisions of the memorandum with respect to share capital of thecompany during the financial year.

30. The company has not altered its Articles of Association during the financial year.

31. As per information & explanations provided to me there was no prosecution initiated against or showcause notice received by the company and no fines or penalties or any other punishment was imposed onthe company during the financial year, for the offence under the act.

32. As per information & explanations provided to me the company has not received any money as securityfrom its employees during the financial year.

33. The company has deposited both employees and employer's contribution to Provident Fund with prescribedauthorities pursuant to Sec.418 of the Act.

Place: Hisar Signature :Date: 11.07.2011 Company Secretary : Anju Jain

C.P. No. : 2728


21

Annexure-A

1. Register of Members u/s 150 of the Act

2. Minutes Book of Board Meetings

3. Minutes Book of Annual General Meetings u/s 193

4. Books of Accounts u/s 209 of the Act.

5. Register of Director/ Managing Director/ Manager & Secretaries u/s 303

6. Register of Director's Shareholdings u/s 307

7. Register of Share Application money & allotment

8. Register of Share transfer u/s 108

9. Register of particulars of contracts in which directors are interested u/s 301

10. Register of Mortgages & Charges u/s 143

Annexure-B

Forms and returns as filed by the company with the Registrar of companies during the financial year endingon 31st March, 2011 :


22

CERTIFICATE UNDER CLAUSE 49(V) OF LISTING AGREEMENT

We, Ashok Kumar Agarwal and Kailash Kumar Agarwal, Dy. Managing Director(s) of H.P. Cotton Textile MillsLimited, certify that:

1. We have reviewed the financial statements and the cash flow statement for the year ended 31st March 2011and that to the best of our knowledge and belief:

a) These statements do not contain any materially untrue statement or omit any material fact or containstatements that might be misleading;

b) These statements together present a true and fair view of the company's affairs and are in compliancewith existing accounting standards, applicable laws and regulations;

2. There are, to the best of our knowledge and belief, no transactions entered into by the company during theyear are fraudulent, illegal or violative of the company's code of conduct;

3. We accept responsibility for establishing and maintaining internal controls and that we have evaluated theeffectiveness of the internal control systems of the company and we have disclosed to the Auditors and theAudit Committee, deficiencies in the design or operation of internal controls, if any, of which we are awareand the steps we have taken or propose to take to rectify these deficiencies;

4. We have indicated to the Auditors and the Audit Committee

a) Significant changes in internal controls during the year;

b) Significant changes in accounting policies during the year, if any, and that the same have been disclosedin the notes to the financial statements; and

c) Instances of significant fraud of which we have become aware and involvement therein, if any, of themanagement or other employees who have a significant role in the company's internal controlssystem.

5. We further declare that all Board members and senior managerial personnel have affirmed compliancewith the code of conduct for the financial year ended 31st March 2011.

Place: New Delhi Ashok Kumar Agarwal Kailash Kumar AgarwalDate: 29th June 2011 Dy.Managing Director and Dy.Managing Director and CFO

Compliance Officer

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 217(2AA) of the Companies Act, 1956 and on the basis of compliance certificatesreceived from the Dy.Managing Director(s) of the Company and subject to disclosures in the annual accounts, asalso on the basis of the discussion held with the statutory Auditors of the Company from time to time, we state:

1. That in the preparation of the annual accounts, the applicable accounting standards have been followed andproper explanations are provided relating to material departures, if any;

2. That the Directors have selected appropriate accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profits and loss of the Company for thatperiod;

3. That the Directors have taken proper and sufficient care to the best of their knowledge and ability for themaintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities,if any,

4. That the Directors have prepared the annual accounts on a going concern basis.

P.D.Agarwal Ashok Kumar Agarwal Kailash Kumar AgarwalChairman, Audit Committee Deputy Managing Director Deputy Managing Director

Place: New DelhiDated : 29th June,.2011


23

Auditors' Certificate on Corporate Governance as per Clause 49 of the Listing Agreement.

ToThe MembersH P Cotton Textile Mills LimitedHisar

We have examined the compliance of the conditions of Corporate Governance by H. P. Cotton Textile MillsLimited for the year ended 31st March 2011 as stipulated in clause 49 of the listing Agreement of the saidcompany with Stock Exchanges in India.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examinationwas limited to a review of the procedures and implementation thereof, adopted by the Company, for ensuringthe compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of theopinion on the financial statements of the company.

In our opinion and to the best of our information and explanations given to us, we may certify that the companyhas complied with the conditions of Corporate Governance as stipulated in the above-mentioned ListingAgreement.

We state that based on the report given by the Registrar (RTA) of the Company as on 31st March 2011 there wasno investor grievance matter against the Company remaining un attended / pending for more than 30 days.

We further state that such compliance is neither an assurance as to the future viability of the Company nor theefficiency or effectiveness with which the management has conducted the affairs of the Company.

For A. K. ASSOCIATES,Chartered Accountants

(CA A. K. GUPTA)F.C A.

Membership No.16533PLACE: New Delhi Firm Registration No. 000596NDATE : 29th July 2011


24

AUDITORS REPORT

The Members of H P COTTON TEXTILE MILLS LIMITED1. We have audited the attached Balance Sheet of H P COTTON TEXTILE MILLS LIMITED, as at 31st March

2011, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexedthereto. These financial statements are the responsibility of the Company's management. Our responsibilityis to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India ThoseStandards require that we plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includes examining, on test basis evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

3. As required by the Companies (Auditor's Report) Order, 2003 issued by the Central Government of Indiain terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure astatement on the matters specified in paragraphs 4 and 5 of the said Order.

4. As explained in Note 2; Schedule 18 to the Balance Sheet " On 14th September, 2010 " violent mob attacked theCompany's premises and set on fire the Raw Material Godown, Cotton Waste (Scrap) Godown, Store, Factory and partof office premises. The mob also damaged the office premises, furniture & fixtures, office equipment, computer, vehicles,some machines and also looted cash. The Company's properties being insured, claim for such loss has been lodged withthe insurance company.Pending the settlement of insurance claim the cost of raw materials, stock in process, cotton waste (scrap) and storeburnt/ damaged due to fire, cost of repairs; incurred upto 31st March, 2011, in case of fixed assets party damaged, valueof fixed assets fully damaged and cash looted aggregating to Rs. 339.93 lakh has been debited to Claims Recoverable;Schedule 8 to the Balance Sheet.Adjustment; if any, arising upon settlement of insurance claim will be made in accounts as and when insurance claimis settled.

5. Further to our comments in the Annexure referred to above, we report that:(i) We have obtained all the information and explanations, which to the best of our knowledge and belief

were necessary for the purposes of our audit.(ii) In our opinion, proper books of account as required by law have been kept by the company so far, as

appears from our examination of those books.(iii) The Balance Sheet, Profit and Loss Account and Cash Flow Statements dealt with by this report are in

agreement with the books of account.(iv) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this

report comply with the accounting standards referred to in sub-section (3C) of section 211 of theCompanies Act, 1956.

(v) On the basis of written representations received from the directors, as on 31st March, 2011 and takenon record by the Board of Directors, we report that none of the directors is disqualified as on 31stMarch, 2011 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274of the Companies Act, 1956

(vi) Subject to the foregoing, in our opinion and to the best of our information and according to theexplanations given to us, the said accounts give the information required by the Companies Act, 1956in the matter so required and give a true and fair view in conformity with the accounting principlesgenerally accepted in India(i) In the case of the Balance Sheet, of the State of Affairs of the Company as at 31st March 2011.(ii) In the case of the Profit and Loss Account, of the Profit of the Company for the year ended on that

date, and(iii) In the case of the Cash Flow Statement, of the Cash Flows of the Company for the year ended on

that date.


(CA A. K. GUPTA)F.C A., M. No.16533

PLACE: New Delhi Firm Registration No. 000596N DATE : 29/06/2011


25

A K ASSOCIATESChartered Accountants

Re: H P COTTON TEXTILE MILLS LIMITED

Annexure to the Auditors' Report referred to in paragraph 3 of our report of even date.

As required by the Companies (Auditors' Report) Order, 2003 and according to the information and explanationsgiven to us and on the basis of such checks as we considered appropriate, we state that in our opinion:-

(i) (a) The Company has maintained proper records showing full particulars including quantitative detailsand situation of fixed assets.

(b) The fixed assets have been physically verified by the management at the year end. No materialdiscrepancies were noticed on such verification.

(c) During the year, the company has not disposed off a major part of the plant and machinery.Accordingly the provisions of clause 4(i) ( c ) of the Companies (Auditor's Report) Order 2003 arenot applicable.

(ii) (a) The inventories except lying with third parties and in transit have been physically verified duringthe year by the management at reasonable intervals. In our opinion, the frequency of verificationis reasonable.

(b) The procedures of physical verification of inventories followed by the management are reasonableand adequate in relation to the size of the company and the nature of its business.

(c) The company is maintaining proper records of inventory. The discrepancies noticed on verificationbetween the physical stocks and the book records were not material.

(iii) (a) The company has taken loan from four other companies covered in the register maintained undersection 301 of the Companies Act, 1956. The maximum amount involved during the year wasRs.34.22 lakh and the year-end balance of loans taken from such parties was Rs. 34.22 lakh.

(b) In our opinion, the rate of interest and other terms and conditions on which loans have been takenfrom the companies listed in the register maintained under section 301 of the Companies Act, 1956are not, prima facie prejudicial to the interest of the company.

(c) The company is regular in repaying the principal amounts as stipulated and has also been regularin the payment of interest as stipulated.

(d) The company has not granted any loan to companies, firms or other parties as listed in the registermaintained under section 301 of the Companies Act, 1956. Accordingly provisions of clause 4(iii)(a) to (d) of the Companies (Auditors' Report) order 2003 are not applicable to the company.

(iv) In our opinion and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the company and the nature of its business with regardto purchases of inventory, fixed assets and with regards to the sale of goods. During the course of ouraudit, we have not observed any continuing failure to correct major weaknesses in the internal control.

(v) (a) According to the information and explanations given to us, we are of the opinion that thetransactions that need to be entered into the register maintained under section 301 of the CompaniesAct, 1956 have been duly entered.

(b) In our opinion and according to the information and explanations given to us, no transactions wasmade in pursuance of contracts or arrangements entered in the register maintained under section301 of the Companies Act, 1956 and exceeding the value of rupees five lakh in respect of each party


26

during the year,

(vi) The company has not accepted deposits from the public. Accordingly provisions of clause 4(vi) of theCompanies (Auditors' Report) order 2003 are not applicable to the company.

(vii) In our opinion, the company has an internal audit system commensurate with the size and nature of itsbusiness.

(viii) (viii) We have broadly reviewed the books of account relating to materials, labour and other items ofcost maintained by the company pursuant to the Rules made by the Central Government for themaintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinionthat prima facie the prescribed accounts and records have been made and maintained.

(ix) (a) Undisputed statutory dues including provident fund, investor education protection fund, employeesstate insurance, income tax, sales tax, wealth, custom duty, excise duty, cess and other materialstatutory dues applicable to the company have generally been deposited in time with the statutoryauthorities.

(b) According to the information and explanation given to us, there are no disputed statutory duespayable by the company in respect of sales tax, income tax, wealth, custom duty, excise duty, cessand other material statutory dues

(x) The company does not have accumulated losses. The company has not incurred cash losses during thefinancial year covered by our audit and during the immediately preceding financial year.

(xi) According to the information and explanations given to us, during the year the company has not defaultedin repayment of dues to financial institutions and/ or banks.

(xii) Keeping in view the business carried on by the company at present the provisions of clause 4 (xii) of theCompanies (Auditors' Report) order 2003 are not applicable to the company.

(xiii) Keeping in view the business carried on by the company at present the provisions of clause 4 (xiii) (a) to(d) of the Companies (Auditors' Report) order 2003 are not applicable to the company.

(xiv) In our opinion, the company is not dealing in or trading in shares, securities, debentures and otherinvestments. Accordingly, the provisions of clause 4(xiv) of the Companies (Auditor's Report) Order,2003 are not applicable to the company.

(xv) The company has not given guarantees for loans taken by others from banks or financial institutions.Accordingly, the provisions of clause 4(xv) of the Companies (Auditor's Report) Order, 2003 are notapplicable to the company.

(xvi) The term loans were applied for the purpose for which the loans were obtained.

(xvii) According to the information and explanations given to us and on an overall examination of the BalanceSheet of the company, we report that the company has not used funds raised on short term basis for longterm investment and vice versa.

(xviii) During the year under audit the company has not made preferential allotment of shares to parties andcompanies covered in the register maintained under section 301 of the Act. Accordingly, the provisionsof clause 4(xviii) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xix) During the year under audit the company has not issued debentures. Accordingly, the provisions ofclause 4(xix) of the Companies (Auditor's Report) Order, 2003 are not applicable to the company.

(xx) During the year under audit the Company has not raised funds by way of public issue. Accordingly, theprovisions of clause 4(xx) of the Companies (Auditor's Report) Order, 2003 are not applicable to thecompany


27

(xxi) According to the information and explanations given to us, no fraud on or by the company has beennoticed or reported during the course of our audit.


(CA A. K. GUPTA)F.C A.

M. No.16533PLACE: New Delhi Firm Registration No. 000596NDATE : 29/06/2011


28

BALANCE SHEET AS AT 31ST MARCH, 2011SCHEDULE AS AT 31ST AS AT 31ST

MARCH, 2011 MARCH, 2010RUPEES RUPEES

SOURCES OF FUNDSSHAREHOLDERS FUNDSShare Capital 1 38,100,000 38,100,000Reserves and Surplus 2 64,452,055 61,757,481

102,552,055 99,857,481LOAN FUNDS 3Secured 165,637,316 171,029,760Unsecured 12,051,566 177,688,882 14,639,718Deferred Tax (NET) 9,944,450 8,993,124

290,185,387 294,520,083

APPLICATION OF FUNDSFIXED ASSETS 4Gross Block 408,225,321 406,610,297Less: Depreciation 292,525,658 280,566,021Net Block 115,699,663 126,044,276Capital Work in Progress 271,392 1,871,667

CURRENT ASSETS,LOANS AND ADVANCESInventories 5 143,964,929 158,771,304Sundry Debtors 6 59,007,693 53,887,920Cash and Bank Balances 7 11,560,323 10,349,363Loans and Advances 8 67,346,605 27,948,040

281,879,550 250,956,627LESS: CURRENT LIABILITIES AND PROVISIONSCurrent Liabilities 9 89,560,064 69,089,388Provisions 10 18,105,154 107,665,218 15,263,099Net Current Assets 174,214,332 166,604,140

290,185,387 294,520,083NOTES 18

As per our report of even date attachedfor A.K. ASSOCIATESChartered Accountants

(CA A. K. GUPTA) A. K. AGARWAL K.K. AGARWALF.C A. DY. MANAGING DY. MANAGINGM. No.16533 DIRECTOR DIRECTORFirm Registration No.000596NPLACE : New Delhi P. D. AGARWAL B.C. TALUKDARDATE : 29th July, 2011 CHAIRMAN M.L. JAIN

AUDIT COMMITTEE DIRECTORS


29

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDEDSCHEDULE YEAR ENDED YEAR ENDED

31ST MARCH 31ST MARCH 2011 2010

RUPEES RUPEESINCOME :Sales 11 736,653,180 593,593,698Other Income 12 1,693,938 1,706,933Profit on Sale of Fixed Assets 12,162 0

738,359,280 595,300,631

EXPENDITURE :Raw Material Consumed 13 366,644,311 249,731,056Manufacturing & Other Expenses 14 376,047,636 306,976,971Loss on Sale of Fixed Assets 0 20,215

742,691,947 556,728,242Less/Add : ( Decrease)/Increase in inventory 15 (45,782,086) (436,975)

696,909,861 556,291,267Profit before Financial Chargesand Depreciation 41,449,419 39,009,364Less: Financial Charges 16 23,204,446 22,366,302 Depreciation 14,612,034 37,816,480 15,959,913Profit before Tax 3,632,939 683,149Add: Prior Year Adjustments 17 842,754 1,040,585

4,475,693 1,723,734Less: Provision for Income Tax 829,793 255,130 Deferred Tax 1,429,100 1,207,417Add: Provision for Deferred Tax Written Back 477,774 0Profit after Tax & Prior Year Adjustments 2,694,574 261,187Add: Surplus as per last year 276,921 15,734Surplus carried to Balance Sheet 2,971,495 276,921

Earning per Share 0.71 0.07(Note 11; Schedule 18)

NOTES 18

As per our report of even date attachedfor A.K. ASSOCIATESChartered Accountants

(CA A. K. GUPTA) A. K. AGARWAL K.K. AGARWALF.C A. DY. MANAGING DY. MANAGINGM. No.16533 DIRECTOR DIRECTORFirm Registration No.000596NPLACE : New Delhi P. D. AGARWAL B.C. TALUKDARDATE : 29th June, 2011 CHAIRMAN M.L. JAIN

AUDIT COMMITTEE DIRECTORS


30

SCHEDULES TO THE BALANCE SHEETAS AT 31ST AS AT 31ST


SCHEDULE - 1SHARE CAPITALAuthorised42,50,000 Equity Shares of Rs.10/- each 42,500,000 42,500,000

Issued38,10,000 Equity Shares of Rs.10/ each 38,100,000 38,100,000

Subscribed and Paid Up38,10,000 Equity Shares of Rs.10/ each fully paid up in cash 38,100,000 38,100,000

38,100,000 38,100,000

SCHEDULE - 2RESERVES AND SURPLUSCapital Reserves- Central Investment Subsidy 1,500,000 1,500,000- State Subsidy 1,510,000 1,510,000- Share Premium 18,000 18,000- Surplus on Issue of forfeited Shares 11,250 11,250

A 3,039,250 3,039,250Revenue Reserves- General Reserve(As per Last Year) 58,441,310 58,441,310Profit and Loss Account 2,971,495 276,921

B 61,412,805 58,718,231

A + B 64,452,055 61,757,481


31



SCHEDULE - 3LOAN FUNDSSECUREDTerm Loan from Industrial Development Bank of India 34,550,000 37,850,000Vehicle Term Loans- ICICI Bank Limited 0 39,590- HDFC Bank Limited 810,421 1,216,054- Kotak Mahindra Prime Limited 1,127,010 1,937,431 1,800,300

Cash Credits :State Bank of Patiala * 44,243,178 45,616,962Oriental Bank of Commerce 15,291,829 29,290,167LC PayableState Bank of Patiala 40,420,650 35,121,607Oriental Bank of Commerce 29,194,228 129,149,885 20,095,080

165,637,316 171,029,760

UNSECUREDFrom Bodies Corporate 3,421,838 3,421,838Trade Deposits (Free of Interest)Rs.47,505/-(Previous Year Rs.58,605/-) 1,129,728 1,217,880Long Term Deposit from Cotton Agent 7,500,000 10,000,000

12,051,566 14,639,718

NOTES :1. 1. The Term Loans from Industrial Development Bank of India (IDBI) are secured by the first charge by way

of equitable mortgage by deposit of title deeds in respect of Land situated at V.P.O. Mayar, Distt. Hisar(Haryana) and by hypothecation of all the movables (save and except book debts) including movablemachinery & spares, tools and accessories both present and future, subject to the prior charges on moveableassets in favour of Banks for working capital borrowings.

2. Cash Credits and other working capital facilities from Banks viz. State Bank of Patiala and Oriental Bank ofCommerce are secured by hypothecation and charge by way of a first charge ranking pari-passu without anypreference or priority to one over the other on the stock of Raw Materials, Goods in Process, Loose Yarn,Finished Goods , Stores & Spares and Book Debts (both present and future) and second charge on fixed assetsof the Company.

3. The Term Loans from IDBI are guaranteed by Sh. K. L, Agarwal and Sh. A.K. Agarwal, Promoter/Directorsof the Company in their personal capacity.

4. Cash Credits from State Bank of Patiala & Oriental Bank of Commerce are guaranteed by Sh. K. L. Agarwal,Sh. A.K. Agarwal and Sh. K.K. Agarwal, Promoter/Directors of the Company in their personal capacity.

5. Term Loan from IDBI due within a year Rs.75 Lakhs (Previous Year Rs.13 Lakhs).6. Term Loan from HDFC Bank Ltd. due within a year Rs.4.63 Lakhs (Previous Year Rs.4.06 Lakhs )7. Term Loan from Kotak Mahindra Prime Ltd. due within a year Rs.7.35 Lakhs (Previous Year Rs.6.73 Lakhs)


32

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33



SCHEDULE - 5INVENTORIES(As taken, valued and certified by the management)Stores and Spares 18,496,397 16,623,175Raw Material- Cotton 12,327,554 72,820,575- Polyster Staple Fibre 1,074,888 3,043,550Finished Goods * 58,485,464 19,112,573Loose Yarn 41,506,588 38,047,876Stock in Process 9,325,580 6,500,217Cotton Scrap 2,748,458 2,623,338

143,964,929 158,771,304* Includes Finished Goods in Transit Rs. Nil (Previous Year Rs.1502236/-)

SCHEDULE - 6SUNDRY DEBTORSOutstanding for a period more than Six MonthsSecured 5,000 5,355Unsecured 7,245,925 11,878,464Other DebtsSecured 36,803,315 28,700,920Unsecured 14,953,453 13,303,181

59,007,693 53,887,920


34



SCHEDULE - 7CASH AND BANK BALANCESCash in hand 1,018,278 873,022With Scheduled Banks :- In Current Accounts 874,838 1,402,367- In Margin Money against L C 9,434,207 7,064,412Post Office Saving

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