kg fabriks limited · 5. to consider and if thought fit, to pass with or without modification s,...

BOARD OF DIRECTORS ChairmanMr KG Baalakrishnan

Managing DirectorsMr B SriramuluMr B Srihari

DirectorsMr A VelusamyMr Duraipandian KumaravelMr R Rajesh

AUDITOR Mr C A VenkatesanChartered AccountantCoimbatore

LEGAL ADVISORS M/s Ramani & ShankarAdvocatesCoimbatore

BANKERS Canara BankOriental Bank of CommerceState Bank of PatialaIndian Overseas BankState Bank of India

REGISTERED OFFICE & FACTORY Plot No. FF-1SIPCOT Industrial Growth CentrePerundurai - 638 052Ph : 0422 - 3019291-7Fax : 0422 -3019110Mobile : 73737 13936E-mail : [email protected] : www.kgfabriks.comCIN : U65999TZ1994PLC005630

CORPORATE OFFICE Sri Kannapiran Mills PremisesSowripalayamCoimbatore - 641 028Ph : 0422 - 3019111Fax : 0422 - 3019110

KG Fabriks Limited

KG Fabriks LimitedCIN : U65999TZ1994PLC005630

Registered Office : Plot No. FF - 1, SIPCOT IGC, Perundurai - 638 052Ph: 0422 - 3019291 Fax: 0422 - 3019110 Email:[email protected], www.kgfabriks.com

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NOTICE is hereby given that the 20th Annual General Meeting of the Members of the Company willbe held Registered Office of the Company at Plot No FF-1, SIPCOT Industrial Growth Centre,Perundurai 638 152, Erode District on Wednesday, the 10th September 2014 at 4.00 pm totransact the following business.

ORDINARY BUSINESS1. To receive, consider and adopt the Audited Profit and Loss Account for the year ended March

31, 2014 and Balance Sheet as on that date and the Reports of the Directors and Auditorsthereon.

2. To consider and, if thought fit, to pass, with or without modification, the following resolutionrelating to the appointment of the Auditors of the Company

“RESOLVED THAT Mr C A Venkatesan, Chartered Accountant, the retiring Auditors of the Company,be and are hereby re-appointed as Auditors of the Company, from the conclusion of this meetinguntil the conclusion of the next Annual General Meeting on such remuneration as shall be fixedby the Board of Directors of the Company.

SPECIAL BUSINESS

3 To consider and if thought fit, to pass with or without modification/s, the followingresolution as an Ordinary Resolution:“RESOLVED that pursuant to the provisions of Sections 149, 150, 152 and any other applicableprovisions of the Companies Act, 2013 and the Rules made there under read with ScheduleIV to the Companies Act, 2013, Mr Duraipandian Kumaravel (DIN 00004827), Director of theCompany who retires by rotation at the Annual General Meeting and in respect of whom theCompany has received a notice in writing from a member proposing his candidature for theoffice of Director, be and is hereby appointed as an Independent Director of the Company tohold office for five consecutive years for a term up to 31st March, 2019.”

4. To consider and if thought fit, to pass with or without modification(s), the followingresolution as an Ordinary Resolution:“RESOLVED that pursuant to the provisions of Sections 149, 150, 152 and any other applicableprovisions of the Companies Act, 2013 and the Rules made there under read with ScheduleIV to the Companies Act, 2013, Mr. R Rajesh (DIN 02449223), Director of the Company whois liable to retirement by rotation and in respect of whom the Company has received a noticein writing from a member proposing his candidature for the office of Director, be and is herebyappointed as an Independent Director of the Company to hold office for five consecutive yearsfor a term up to 31st March, 2019.”

NOTICE OF ANNUAL GENERAL MEETING

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5. To consider and if thought fit, to pass with or without modification s, the followingresolution as an Ordinary Resolution:“RESOLVED THAT pursuant to Section 148 of the Companies Act, 2013 and Companies (Auditand Auditors) Rules, 2014, the remuneration of Rs 65000 (Rupees sixty five thousand only)plus applicable service tax to Mr M Nagarajan, the Cost Accountant, for the conduct of costaudit of the Company for the year 2014-15, be and is hereby ratified”.

6. To consider and, if thought fit, to pass with or without modification, the followingresolution as a Special Resolution:“RESOLVED THAT consent of the Company be and is hereby accorded under Section180 (1) (c) and other applicable provisions of the Companies Act, 2013 to the Board of Directorsof the Company to borrow any sum or sums of money from time to time as may in the opinionof the Board of Directors be required to be borrowed by the Company, notwithstanding that themonies to be borrowed together with the monies already borrowed by the Company, apart fromtemporary loans obtained from the Company’s Bankers in the ordinary course of business, willexceed the aggregate paid up capital of the Company and its free reserves, that is to say,reserves not set apart for any specific purpose, provided however, the total monies borrowedand outstanding at any time, for the principal amounts of the loans borrowed, apart fromtemporary loans obtained from the Company’s Bankers in the ordinary course of business,shall not exceed the sum of Rs.300 Crores (Rupees three hundred crores only)”.

7. To consider and, if thought fit, to pass with or without modification, the followingresolution as a Special Resolution:“RESOLVED THAT the consent of the Company be and is hereby accorded in terms of Section180(1)(a) and other applicable provisions, if any, of the Companies Act, 2013 to the Board ofDirectors of the Company to create, mortgage and/or charge and/or to hypothecate in additionto the mortgages/hypothecations/charges created/to be created by the Company up to the limitas per resolution under Section 180(1)(c), in such form and manner and with such ranking andat such time and on such terms as the Board of Directors may determine on all or any of themovable and/or immovable properties of the Company wheresoever situate, both present andfuture, and/or the whole or substantially the whole of the undertaking or the undertakings ofthe Company in favour of the Financial Institutions/ Banks/ Trusts/ Mutual Funds or any otherInstitutions/ Companies/ Authorities for securing the loans/finance sanctioned or to be sanctionedto the Company or for securing the securities or any other debt instruments etc issued or tobe issued together with interest, remuneration of the trustees and/ or any other Institutions/Companies/ Authorities, premium (if any) on redemption and all other costs, charges andexpenses payable by the Company in terms of the trust deed and / or any other agreements/documents, etc to be finalised and executed between the Company and the agents andtrustees and/or any other Institutions or Authorities and containing such specific terms andconditions and covenants in respect of enforcement of security as may be stipulated in thatbehalf and agreed to between the Board and the agents and trustees and /or any otherInstitutions or Authorities”.

By order of the BoardCoimbatore KG Baalakrishnan26.05.2014 Chairman

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NOTES:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attendand vote instead of himself. The proxy need not be a member of the Company. Proxy form,in order to be effective, must be received by the Company not less than 48 hours before themeeting.

2. Register of Members and the Share Transfer Book of the Company will remain closed from 1st

September 2014 to 10th September 2014 (Both days inclusive).

3. Members are requested to notify any change in their address to Company’s Registered Officeimmediately.

4. As per the green initiative taken by the Ministry of Corporate Affairs, the shareholders areadvised to register their e-mail address with the Company to enable service of documents suchas Notice, Annual Report etc., in electronic form.

5. Explanatory statement pursuant to Section 102 of the Companies Act, 2013 in respect ofSpecial Business is enclosed.

EXPLANATORY STATEMENT AS REQUIRED UNDER SECTION102(1) OF THE COMPANIES ACT, 2013

Item No. 3

Mr Duraipandian Kumaravel is a Non-Executive Independent Director of the Company. He joinedthe Board of Directors of the Company in 2005. Mr Duraipandian Kumaravel is a member of theNomination and Remuneration Committee and the Audit Committee of the Board of Directors of theCompany.

Mr. Duraipandian Kumaravel, aged 61 years, is a Graduate in Arts with experience in business andtrade for more than 35 years. He is currently engaged in printing and publishing industry. He isthe President of Coimbatore Master Printers Association, Tamil Nadu Master Printers Federationand Honorary General Secretary of All India Federation of Master Printers, New Delhi which is theapex body for the printing industry.

Mr Duraipandian Kumaravel retires by rotation at the ensuing Annual General Meeting under theerstwhile applicable provisions of Companies Act, 1956. In terms of Section 149 and any otherapplicable provisions of the Companies Act, 2013, he is proposed to be appointed as an IndependentDirector for five consecutive years for a term up to 31st March, 2019. A notice has been receivedfrom a member proposing Mr Duraipandian Kumaravel as a candidate for the office of Director ofthe Company.

In the opinion of the Board, Mr Duraipandian Kumaravel fulfils the conditions specified in theCompanies Act, 2013 and rules made there under for his appointment as an Independent Directorof the Company and is independent of the management. Copy of the draft letter for appointmentof Mr Duraipandian Kumaravel as an Independent Director setting out the terms and conditionswould be available for inspection without any fee by the members at the Registered Office of theCompany during normal business hours on any working day.

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The Board considers that his continued association would be of immense benefit to the Companyand it is desirable to continue to avail services of Mr Duraipandian Kumaravel as an IndependentDirector. Accordingly, the Board recommends the resolution in relation to appointment of MrDuraipandian Kumaravel as an Independent Director, for the approval by the shareholders of theCompany.

Except Mr Duraipandian Kumaravel, being an appointee, none of the Directors and Key ManagerialPersonnel of the Company is concerned or interested, financial or otherwise, in the resolution setout at Item No. 3.

Item No. 4

Mr R Rajesh is a Non-Executive Independent Director of the Company. He joined the Board ofDirectors of the Company in 2009. Mr R Rajesh is member of the Nomination and RemunerationCommittee and a member of the Audit Committee of the Board of Directors of the Company.

Mr. R Rajesh, M.Sc., M. Phil, PGDBA, MBA., Ph.D is aged 43 years and is currently the GeneralManager of RND Softech Private Limited which is engaged in medical, business and legal transcriptionservices for clients based in US and Europe. He is also the Director of RND Wind Energy PrivateLimited. His period of office is liable to determination by retirement of Directors by rotation underthe erstwhile provisions of Companies Act, 1956. In terms of Section 149 and any other applicableprovisions of the Companies Act, 2013, Mr R Rajesh being eligible and offering himself for appointment,is proposed to be appointed as an Independent Director for five consecutive years for a term upto 31st March, 2019. A notice has been received from a member proposing Mr R Rajesh as acandidate for the office of Director of the Company.

In the opinion of the Board, Mr R Rajesh fulfils the conditions specified in the Companies Act, 2013and rules made there under for his appointment as an Independent Director of the Company andis independent of the management. Copy of the draft letter for appointment of Mr R Rajesh as anIndependent Director setting out the terms and conditions would be available for inspection withoutany fee by the members at the Registered Office of the Company during normal business hourson any working day.

The Board considers that his continued association would be of immense benefit to the Companyand it is desirable to continue to avail services of Mr R Rajesh as an Independent Director.Accordingly, the Board recommends the resolution in relation to appointment of Mr R Rajesh asan Independent Director, for the approval by the shareholders of the Company.

Except Mr R Rajesh, being an appointee, none of the Directors and Key Managerial Personnel ofthe Company is concerned or interested, financial or otherwise, in the resolution set out at ItemNo. 4.

Item No. 5

At the Board Meeting held on the 26th May 2014, after considering the recommendation of the AuditCommittee, the Directors have appointed Mr M Nagarajan, Cost Accountant, as the Cost Auditorof the Company for the year 2014-15 on a remuneration of Rs.65000. Pursuant to the provisionsof Section 148 read with the Companies (Audit and Auditors) Rules, 2014, the aforesaid remunerationapproved by the Board of Directors is required to be ratified by the Shareholders.

The Ordinary Resolution appearing in the Notice is sought to be passed for this purpose.

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None of the Directors and the Key Managerial Personnel of the Company is interested or concerned,financial or otherwise, in the passing of the Resolution.

Item No. 6

As per Section 180(1)(c) of the Companies Act, 2013 the Board of Directors of the Company shallexercise the following powers only with the consent of the Company by a special resolution, viz.,to borrow money, where money to be borrowed, together with the money already borrowed by theCompany will exceed aggregate of its paid-up share capital and free reserves, apart from temporaryloans obtained from the Company’s bankers in the ordinary course of business, for which purposethe necessary resolution is brought before you for approval.

Shareholders at the Annual General Meeting held on 23rd December 2005 had passed ordinaryresolution under Section 293(1)(d) of the Companies Act, 1956 for borrowing up to the limit ofRs 300 crores. The present requirement of Law being that there has to be a special resolution,the appropriate resolution is proposed.

None of the Directors and Key Managerial Personnel of the Company is concerned or interestedin the resolution.

Item No. 7

As a security for the loans sanctioned/to be sanctioned by Financial Institutions/banks/otherCorporate Bodies, the Company would be required to give mortgage and/or charge all the movableand immovable properties of the Company both present and future.

As per the provisions of Section 180(1) (a) of the Companies Act, 2013, the Board of Directors ofthe Company cannot except with the consent of the Company in the general meeting create chargeor mortgage or hypothecate any of the assets of the Company for securing the loan/financesanctioned/to be sanctioned by the Financial Institutions/Banks and/or for securing securities suchas debentures, etc as also any other debt instruments issued/to be issued from time to time bythe Company.

Shareholders at the Annual General Meeting held on 23rd December 2005 had passed ordinaryresolution under Section 293(1)(a) of the Companies Act, 1956 to create, mortgage and/or chargeand/or hypothecate in addition to the mortgages/ hypothecations / charges created by the Companyin such form and manner and with such ranking and at such time and on such terms as the Boardof Directors may determine on all or any of the movable and/or immovable properties of theCompany. The present requirement of Law being that there has to be special resolution, theappropriate resolution is proposed.

It is proposed to obtain the approval of the shareholders under section 180(1)(a) of the CompaniesAct, 2013 to enable the Board of Directors to create charges on the assets of the Company upto such ceiling for borrowings as may be fixed by the shareholders under Section 180(1)(c). YourDirectors recommend the resolution for your approval.

None of the Directors and Key Managerial Personnel of the Company is in any way concerned orinterested in the resolution.

By order of the BoardCoimbatore KG BAALAKRISHNAN26.05.2014 Chairman

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REPORT OF THE DIRECTORS TO THE SHAREHOLDERSYour Directors are pleased to present the Twentieth Annual Report together with the auditedaccounts of the Company for the year ended March 31, 2014.

Year ended Year ended31.03.2014 31.03.2013

Total Revenue 15112.54 13034.26Gross Profit 661.89 1831.33Interest 974.99 922.85Profit Before Depreciation (313.10) 908.48Depreciation 349.56 344.20Net Profit Before Tax (662.66) 564.29

PERFORMANCE

Company produced 95.90 lakh meters for the year as against 104.96 lakhs during previous yeardue to change in market trend. Sales for the year were 100.73 lakh meters as against 94.47 lakhmeters for previous year. Exports increased to 6.73 lakh meters for the year as against 4.12 lakhmeters for the previous year. Sales realisation also increased during the year.

Sales for the year were of Rs 15081 lakhs as against sales of Rs 13010 lakhs for the previousyear. Exports for the year were Rs 1180 lakhs as against Rs 670 lakhs for the previous year.Profitability was affected due to increase in the cost of main inputs viz., cotton and yarn besidesother input costs. Company is taking steps to improve profitability by changes in product mix.

OUTLOOK

The outlook for the industry continues to be bright as denim is being increasingly worn by menand women and now that it has become a fashionable wear for use by all generations. Theconcerns are volatility in prices of raw materials, chemicals, changes in fashion trends, governmentpolicies, interest and exchange rate volatility. Company added 12 more Toyota looms during theyear to produce Lycra denim and to reduce dependence on outsourcing of looms. Company is alsoin the process of adding further finishing equipments to produce value added products aimed atincreasing sales and profitability of operations.

DIRECTOR

Section 149 of the Companies Act, 2013 provides for the appointment of Independent Directors onnon rotational basis. Accordingly Mr. Duraipandian Kumaravel, Independent Director of the Companywho is retiring by rotation at the ensuing Annual General Meeting is now being reappointed on nor-rotational basis for a period of 5 years till 31st March 2019. Further Mr. R Rajesh, IndependentDirector who is liable to retire by rotation is now being reappointed on non rotational basis for aperiod of 5 years till 31st March 2019.

(1 in Lakhs)

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AUDIT COMMITTEE

The Audit Committee of the Company comprises of the following Directors1. Mr B Srihari Managing Director2. Mr A Velusamy Non Executive Director3. Mr Duraipandian Kumaravel Non Executive Independent Director4. Mr R Rajesh Non Executive Independent Director

AUDITORS

The Auditor Mr C A Venkatesan, Chartered Accountant, retires at the conclusion of the ensuingAnnual General Meeting and is eligible for reappointment.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors confirm that

(a) that all applicable accounting standards have been followed in the preparation of annualaccounts and there are no material departure

(b) that such accounting policies have been selected and applied consistently and suchjudgments and estimates made are reasonable and prudent so as to give a true and fairview of the state of affairs of the company as at 31st March 2014 and of the Profit or Lossof the Company for the year ended on that date

(c) that proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of thecompany for the year ended on that date

(d) that the annual accounts have been prepared on a going concern basis

CONSERVATION OF ENERGY, TECHNOLOGY ABSORBPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO

The particulars as prescribed under Section 271(1)(e) of the Companies Act, 1956, read withCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 are given inAnnexure which forms part of the Directors’ Report.

ADDITIONAL DISCLOSURES

The Company does not have any employee drawing the remuneration referred in Section 271(2A)of the Companies Act, 1956.

PERSONNEL

The Directors wish to place on record their appreciation for the co-operation extended by allsections of the employees.

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ACKNOWLEDGEMENT

Your Directors express their sincere appreciation for the support and co-operation extended to theCompany by the bankers, customers, suppliers, employees and other stake holders for theirunstinted support and encouragement. Your Directors are also thankful to all the esteemedshareholders for their continued patronage. Your Directors look forward to the long term future withconfidence.

Our humble prayers to Lord Venkateswara, Then Thirumalai Sri Venkatachalapathy, Lord Muruga,Goddess Sri Saradambal for the continued prosperity of the Company

By order of the Board

Coimbatore KG BAALAKRISHNAN26.05.2014 Chairman

ANNEXURE TO DIRECTORS REPROTPARTICULARS PURSUANT TO THE COMPANIES (DISCLOSURE OF PARTICULARS

IN THE REPORT OF BOARD OF DIRECTORS) RULES 1988A. Conservation of Energy

Improved Internal lighting Energy conservation motors Energy monitoring system Shifting of TFH close to the Stentering machine

FORM AFORM FOR DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGYA. Power and Fuel Consumption 31.3.2014 31.3.2013

Electricitya. PurchasedUnits in lakhs 103.57 102.74Total Amount in Lakhs of Rs 639.62 655.65Rate per unit in Rs 6.18 6.38b. Own GenerationThrough Diesel GeneratorUnits in lakhs 2.53 1.23Units per Litre of fuel oil 3.42 3.39Cost per Unit for Diesel only in Rs 15.64 11.26

B. Consumption/Unit of Production (Power & Fuel)Electricity Units/meter of fabric 1.11 0.99

PARTICULARS PURSUANT TO THE COMPANIES (DISCLOSURE OF PARTICULARSIN THE REPORT OF BOARD OF DIRECTORS) RULES 1988

FORM BA. Research & Development (R&D)

Specific areas in which R & D is carried out are: Development of production processes to meet specific customer specifications Development of new products and new applications for the same Evaluation and development of new sources for various raw materials New process technique for fuel and energy conservation Reduction in water consumption

B. Technology AbsorptionIndigenous technology alone is used. Company is making continuous efforts for further improvingtechnology to economize on consumption of dyes and chemicals, utilities, improving productivityand product quality.

C. Foreign Exchange Earnings and Outgo Rs lakhs2013-14 2012-13

Earnings 1180.05 670.26Outgo 964.74 468.42 By order of the Board

Coimbatore KG Baalakrishnan26.05.2014 Chairman

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AUDITORS‘ REPORT

ToThe Members of KG Fabriks Limited

Report on the Financial Statements:We have audited the accompanying financial statements of KG Fabriks Limited (‘the Company‘)which comprise the Balance Sheet as at 31 March 2014, the Statement of Profit and Loss for theyear ending on that date and a summary of significant accounting policies and other explanatoryinformation.

Management‘s Responsibility for the Financial Statements:Management is responsible for the preparation of these financial statements that give a true andfair view of the financial position, financial performance of the Company in accordance with theAccounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956(“the Act”). This responsibility includes the design, implementation and maintenance of internalcontrol relevant to the preparation and presentation of the financial statements that give a true andfair view and are free from material misstatement, whether due to fraud or error.

Auditor‘s Responsibility:Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with the Standards on Auditing issued by the Institute ofChartered Accountants of India. Those Standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor‘s judgment, includingthe assessment of the risks of material misstatement of the financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant tothe Company‘s preparation and fair presentation of the financial statements in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accounting estimatesmade by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

Opinion:

In our opinion and to the best of our information and according to the explanations given to us,the financial statements give the information required by the Act in the manner so required and givea true and fair view in conformity with the accounting principles generally accepted in India:

(i) In the case of the Balance Sheet, of the state of affairs of the Company as at31 March 2014;

(ii) In the case of the Statement of Profit and Loss, of the loss for the year ended on thatdate; and

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Report on Other Legal and Regulatory Requirements:

1. As required by the Companies (Auditor‘s Report) Order, 2003 (“the Order”), as amended,issued by the Central Government of India in terms of sub-section (4A) of section 227 of theAct, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 ofthe Order.

2. As required by section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which to the best of our knowledgeand belief were necessary for the purpose of our audit;

b. In our opinion proper books of account as required by law have been kept by the Companyso far as appears from our examination of those books;

c. The Balance Sheet and the Statement of Profit and Loss dealt with by this Report are inagreement with the books of account;

d. In our opinion, the Balance Sheet and the Statement of Profit and Loss comply with theAccounting Standards referred to in subsection (3C) of section 211 of the Companies Act,1956; and

e. In accordance with the information and explanations given to us, we report that none ofthe directors is disqualified as on 31st March 2014 from being appointed as a director interms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;

CA.VENKATESANPlace: Coimbatore Membership No.19753Date : 26.05.2014 Chartered Accountant

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ANNEXURE REFERRED TO IN PARAGRAPH [3] OF OUR REPORT OF EVEN DATEi) a) The Company has maintained proper records showing full particulars, including

quantitative details and situation of fixed assets.b) According to the information and explanations given to us, the fixed assets have been

physically verified by the management at reasonable intervals and no serious discrepanciesbetween the book records and physical inventory have been noticed.

c) There were no disposal of substantial part of fixed assets during the year and hencethe going concern of the Company is not affected.

ii) a) Physical verification of Inventory has been conducted at reasonable intervals by theManagement. In respect of inventory lying with third parties, these have been substantiallyconfirmed by them. In our opinion, the frequency of verification is reasonable.

b) The procedures of physical verification of inventory followed by the management arereasonable and adequate in relation to the size of the company and the nature of itsbusiness.

c) The company has maintained proper records of inventory and discrepancies noticed onphysical verification of inventories as compared to book records were not material andhave been appropriately dealt with.

iii) During the year, the company have not granted or taken any loans, secured or unsecuredto/from companies, firms, or other parties covered in the register maintained u/s 301 of theAct

iv) a) In our opinion and according to the explanation and information given to us there areadequate internal control procedures commensurate with the size of the Company andthe nature of the business for the purchase of inventory and fixed assets and for the saleof goods.

b) During the course of our Audit no major weakness was noticed in the internal controls/procedures.

v) a) The transactions made in pursuance of contracts or arrangements, that need to beentered into the register maintained under section 301 of the Companies Act, 1956 havebeen recorded in the register maintained for the purpose.

b) According to the information and explanations given to us, the transactions of purchaseand sale of goods and materials made in pursuance of contracts or arrangementsentered in the register maintained u/s 301 of the Act aggregating during the year to Rs.5 lakhs or more in respect of each party have been made at prices which are reasonablehaving regard to the prevailing market prices for such goods and materials or the pricesat which the transactions for similar goods have been made with other parties.

vi) During the year the company has not accepted any deposits from the public and hence theprovisions of section 58A and 58AA of the Companies Act, 1956 and the Companies[Acceptances of Deposit Rules 1975] and other relevant provisions of the Companies Act,1956 are not applicable.

vii) In our opinion, the Company’s present internal audit system is commensurate with its sizeand nature of business.

viii) We have broadly reviewed the books of accounts maintained by the Company pursuant tothe order made by the Central Government for the maintenance of cost records under section209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed

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accounts and records have been made and maintained. We have not, however, made adetailed examination of the records with a view to determine whether they are accurate orcomplete.

ix) According to the information and explanations given to us and records examined by us, thecompany is regular in depositing undisputed statutory dues including Provident Fund, InvestorEducation and Protection Fund, Employees’ State Insurance, Income-tax, Sales-tax, Wealthtax. Service tax, Customs duty, Excise duty, Cess and any other statutory dues with theappropriate authorities to the extent applicable

x) The Company has incurred cash loss of Rs.313.10 lakhs during the financial year coveredby our audit. In arriving at the accumulated losses and net worth, we have taken intoconsideration the qualifications which are quantifiable in the audit reports of the years towhich these losses pertain.

xi) In our opinion and according to the information and explanation given to us the company hasnot defaulted in repayment of dues, as per the related agreements/arrangements, to anyfinancial institution or banks.

xii) During the year, the Company has not granted loans and advances on the basis of securityby way of pledge of shares, debentures and other securities.

xiii) In our opinion the company is not a chit fund or a nidhi/mutual benefit fund/ society.Therefore, clause (xiii) of the Companies (Auditors Report) Amendment Order 2004 is notapplicable to the Company.

xiv) In our opinion and according to the information and explanations given to us, proper recordshave been maintained by the company in respect of dealing in securities and other investmentsand timely entries have been made therein in respect of transactions and contracts. Thesecurities and other investments have been held by the Company in its own name.

xv) In our opinion and according to the information and explanation given to us, the company,during the year has not given any guarantee for loans taken by others from banks or financialInstitutions.

xvi) According to the information and explanations given to us, in our opinion, we report that termloans availed during the year under review were utilized for the purposes they have beenobtained.

xvii) According to the information and explanations given to us and on an overall examination ofthe Balance sheet of the company, we report that no funds raised on short time basis havebeen used for long term investment.

xviii) The Company has not issued any share capital during the financial year.xix) The company has not issued any debentures during the financial year.xx) The company has not raised any money through a public issue during the year.xxi) Based upon the audit procedures performed and information and explanations given to us,

we report that no fraud on or by the Company has been noticed or reported during the courseof our audit.

C A VenkatesanPlace: Coimbatore M.No. 19753Date : 26.05.2014 Chartered Accountant

BALANCE SHEET AS AT MARCH 31, 2014

PARTICULARS NOTE No 31.03.2014 31.03.2013

EQUITY AND LIABILITIESSHAREHOLDER’S FUNDS

Share Capital 1 22 11.01 22 11.01Reserves and Surplus 2 8 69.54 13 73.64

NON-CURRENT LIABILITIESLong Term Borrowings 3 35 13.27 36 56.95

Deferred Tax Liabilities (Net) 4 -- 1 45.89 Other Long - Term Liabilities 5 1 01.00 1 32.50

Long - Term Provisions 6 33.09 28.87CURRENT LIABILITIES

Short Term Borrowings 7 26 54.38 25 41.20Trade Payables 8 41 38.29 32 06.59Other Current Liabilities 9 11 52.62 9 27.95Short Term Provisions 10 3 14.67 1 93.96

___________ ___________TOTAL 1 49 87.87 1 44 18.56___________ ___________

ASSETSNON-CURRENT ASSETS

Fixed AssetsTangible Assets 11 69 75.48 65 07.25Capital Work In Progress 1 28.61 70.22Non-Current Investments 12 96.05 1 27.28Deferred Tax Assets (Net) 4 12.67 --Long-Term Loans and Advances 13 4 86.90 3 63.14Other Non-Current Assets 14 20.64 8.32

CURRENT ASSETSInventories 15 29 38.34 34 91.76Trade Receivables 16 31 51.79 26 69.24Cash and Cash equivalents 17 2 61.81 1 83.57Short-Term Loans and Advances 18 7 79.51 9 00.98Other Current Assets 19 1 36.07 96.80

___________ ___________TOTAL 1 49 87.87 1 44 18.56___________ ___________

To be read with my report of even date attached attached

C A Venkatesan KG Baalakrishnan B SriramuluChartered Accountant Chairman Managing Director

M.No. 19753Coimbatore B Srihari A VelusamyMay 26 2014 Managing Director Director

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(‘ in Lakhs)

STATEMENT PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2014

PARTICULARS NOTE NO 31.03.2014 31.03.2013

REVENUERevenue from operations 20 1 50 81.42 1 30 10.12Other income 21 31.12 24.14

____________ ____________ TOTAL REVENUE 1 51 12.54 1 30 34.26____________ ____________

EXPENSES:Cost of material consumed 22 79 27.90 68 76.27Purchase of Stock-in-Trade 0.95 10.55Changes in Inventories of Finished Goods, 23 3 05.22 -13 39.09

Work-in-progress and Stock -in-TradeOther Manufacturing Expenses 24 49 60.14 45 55.20Employee Benefits Expenses 25 6 58.16 5 78.15Finance Costs 26 9 74.99 9 22.85Depreciation 3 49.56 3 44.20Other Expenses 27 5 98.29 5 21.84

____________ ____________ TOTAL EXPENSES 1 57 75.20 1 24 69.97____________ ____________PROFIT BEFORE TAX - 6 62.66 5 64.29TAX EXPENSESLess :: Current Tax _ 1 20.00 MAT Credit Entilement _ - 1 20.00 ADD :: Deferred Tax Asset 1 58.56 - 1 86.96

____________ ____________PROFIT AFTER TAX - 5 04.10 3 77.33____________ ____________EARNING PER EQUITY SHAREBasic and Diluted Earnings per share (in Rs.) (2.43) 1.82(FACE VALUE Rs.10 each)Significant Accounting Policies & Additionaldisclosers to Financial statements Note No. 28



M.No. 19753Coimbatore B Srihari A VelusamyMay 26, 2014 Managing Director Director

15

(‘ in Lakhs)

1 SHARE CAPITAL:Numbers Numbers Amount Amount

AUTHORISED 31.03.2014 31.03.2013 31.03.2014 31.03.2013Equity Shares of Rs.10/- each 2 10.00 2 10.00 21 00.00 21 00.00Preference Shares of Rs.100/- each 3.00 3.00 3 00.00 3 00.00

ISSUED, SUBSCRIBED& PAID UPEquity Shares 2 07.60 2 07.60 20 76.01 20 76.01Preference Shares 1.35 1.35 1 35.00 1 35.00

_________ _________ 22 11.01 22 11.01_________ _________

Reconciliation of number of sharesNo. of Equity Shares at the

beginning of the period 2 07 60 063 2 07 60 063No. of Equity Shares at the end of the period 2 07 60 063 2 07 60 063

6% Cumulative Reedeemable Preference SharesNo. of Preference Shares at the

beginning of the period 1 35 000 1 35 000No. of Preference Shares at the end of the period 1 35 000 1 35 000

Shareholders holding more than 5% sharesNo.of Shares No.of Shares

Mr KG Baalakrishnan 61 19 234 61 19 234K G Denim Limited 32 70 000 32 70 000Sri Kannapiran Mills Limited 28 25 575 28 25 575

Terms & Conditions of equity shares :The Company has two class of shares namely equity shares having a par value of Rs.10 pershare and preference having a par value of Rs.100 per share. Each Share holder is eligible forone vote per share.In the event of liquidation, the equity share holders are eligible to receive the remaining assetsof the company after distribution of all preferential amounts in proportion of their share holding.There are no shares alloted as fully paid without payments being received in cash, bonus sharesor shares bought back.The Preference Shares were allotted during the year 2009-10 and are redeemable at par on31-03-2018.

NOTES TO AND FORMING PART OF BALANCE SHEET AS AT 31.03.2014

PARTICULARS 31.03.2014 31.03.2013NOTENO

16

(‘ in Lakhs)(in Lakhs)

PARTICULARS 31.03.2014 31.03.2013

2 RESERVE & SURPLUS: (Rupees in Lakhs)

General ReserveOpening Balance 18.25 18.25(+) Current Year Transfer -- --(-) Written Back in Current Year -- --

_________ ________Closing Balance 18.25 18.25_________ ________Revaluation ReserveOpening Balance 13 92.25 13 92.25(+) Current Year Transfer -- --(-) Written Back in Current Year -- --

_________ ________

Closing Balance 13 92.25 13 92.25_________ ________SurplusOpening Balance - 36.86 - 4 14.19(+) Profit for the period - 5 04.10 3 77.33

_________ ________

- 5 40.96 - 36.86_________ ________ TOTAL 8 69.54 13 73.64_________ ________

3 LONG TERM BORROWINGSTERM LOANSFrom Banks - Secured 35 13.27 36 56.61Long Term maturities of finance lease obligations — 0.34_________ ________

TOTAL 35 13.27 36 56.95_________ ________

Mr. KG Baalakrishnan, Chairman of the Company has given personal gurantee to the banksfor the above Term loan and Working Capital Credit facilities.

The aggregate value of the personal guarantee was 1 14 23.00 1 12 93.00

There is no case of default as on the balance sheet date in repayment of loansand interest

NOTENO

17

(‘ in Lakhs)

SECURITY CLAUSE

Term loans from Canara Bank [outstanding ‘1051 lakhs], Oriental Bank of Commerce [outstanding‘600 lakhs], State Bank of Patiala [outstanding ‘392 lakhs] are secured by equitable mortgageof leasehold rights of 32.825 acres of land at SIPCOT Industrial Growth Centre, Perundurai togetherwith buildings and hypothecation of all plant and machinery situated thereon on pari passu firstcharge basis, second pari passu charge on machinery and equipments purchased for the EffluentTreatment Project & Expansion Scheme and second charge on the entire current assets.

Term loan from Indian Overseas Bank [outstanding ‘99 lakhs] is secured by equitable mortgageof leasehold rights of 32.825 acres of land at SIPCOT Industrial Growth Centre, Perundurai togetherwith buildings and hypothecation of all plant and machinery situated thereon on pari passu firstcharge basis and pari passu second charge on machinery and equipments purchased for theEffluent Treatment Project & Expansion Scheme.

Corporate loan from Indian Overseas Bank [outstanding ‘717 lakhs] is secured by an exclusivecharge on one acre of land at Trichy Road, Coimbatore by way of equitable mortgage besides thecorporate guarantee of associate company viz, Sri Kannapiran Mills Limited.

Term loan from State Bank of India [outstanding ‘655 lakhs] is secured by first charge onmachinery and equipment purchased out of the loan for the Effluent Treatment Project & ExpansionScheme, equitable mortgage of leasehold rights of 32.825 acres of land at SIPCOT IndustrialGrowth Centre, Perundurai together with buildings and hypothecation of all plant and machinerysituated thereon on pari passu second charge basis and pari passu second charge on the entirecurrent assets.

Term loan of Canara Bank ‘1051 lakhs [PY ‘1396 lakhs] is repayable in 12 quarterly installmentsending by March 2018. Rate of interest 10% p.a. as at year end [PY 10% p.a.]

Term loans of Oriental Bank of Commerce – Term Loan 1 ‘471 lakhs and Term Loan 2 ‘129lakhs [PY ‘643 lakhs and ‘177 lakhs respectively] are repayable in 36 monthly installmentsending by March 2018. Rate of interest 12.25% p.a. as at year end [PY 12.25% p.a.]

Term loan of State Bank of Patiala ‘392 lakhs [PY Rs.539 lakhs] is repayable in 11 quarterlyinstallments ending by Dec 2017. Rate of interest 13.75% p.a. as at year end [PY 13.75% p.a.]

Indian Overseas Bank has two Term loans - (a) Term loan of ‘99 lakhs [PY ‘136 lakhs] isrepayable in 29 monthly installments ending by August 2017. Rate of interest 14.25% p.a. as atyear end [PY 14.25% p.a.] (b) Corporate Loan of ‘717 lakhs is repayable in 43 monthly installmentsending by October 2018. Rate of interest 13.75% p.a. as at year end

Term loan of State Bank of India ‘655 lakhs {PY ‘500 lakhs ] is repayable in 55 monthlyinstallments ending by October 2019. Rate of interest 14.40% p.a. as at year end.

Mr K G Baalakrishnan, Chairman of the Company, has given personal guarantee to all the Banksfor the term loan and working capital facilities. The aggregate value of personal guarantee as on31.03.2014 was ‘11423 lakhs [PY ‘11293 lakhs].

Vehicle loan from Reliance Capital Limited has been secured by way of hypothecation of vehiclepurchased.

18

19

Notes Forming Part of Financial Statements


(‘ in Lakhs)

4 DEFERRED TAX LIABILITIES (NET)

Deferred Tax Liabilitieson account of Depreciation 8 42.33 8 14.07

Deferred Tax Assets on account of unabsorbed depreciation

and business loss 8 43.99 6 57.98on account of Gratuity 11.01 10.20_________ ________

8 55.00 6 68.18_________ ________DEFERRED TAX LIABILITIES / (-) ASSET (NET) - 12.67 1 45.89_________ ________

5 OTHER LONG-TERM LIABILITIES:

Trade PayablesTrade Deposits - Unsecured 1 01.00 1 32.50_________ ________

1 01.00 1 32.50_________ ________

6 LONG-TERM PROVISIONS:Provision for Gratuity ( Unfunded ) 33.09 28.87_________ ________

33.09 28.87_________ ________7 CURRENT LIABILIES

SHORT-TERM BORROWINGS:Loans & Advances repayable on demandCanara Bank 6 83.72 6 59.07State Bank of Patiala 13 29.88 13 30.36Oriental Bank of Commerce 6 40.78 5 51.77_________ ________from banks - Secured 26 54.38 25 41.20_________ ________

Working capital loans from Canara Bank, Oriental Bank of Commerce and State Bankof Patiala are secured by a pari passu first charge by way of hypothecation of entirecurrent assets and further secured by a pari passu second charge on all the fixed assetsat SIPCOT Industrial Growth Centre, Perundurai. The entire working capital facilities arealso guaranteed by Shri KG Baalakrishnan.

There is no case of default as on the balance sheet date in repayment of loans andinterest

20



(‘ in Lakhs)

8 TRADE PAYABLESDue to Micro, Small & Medium Enterprises NIL NIL

Trade Payables 29 28.82 25 98.59

Liablility for Capital Goods 1 74.01 --

Other Outstanding Expenses 10 35.46 6 08.00_________ ________

41 38.29 32 06.59_________ ________

9 OTHER CURRENT LIABILITIES

Current maturities of long term debts 10 88.16 8 68.52

Current maturities of finance lease obligations 0.35 1.41

Interest accrued but not due on borrowings 35.98 34.43

Advance from Customers 14.68 12.68

Others 13.44 10.92_________ ________

11 52.62 9 27.95_________ ________

10 SHORT-TERM PROVISIONS

Provision for Income Tax 3 12.12 1 92.12

Provision for Gratuity 2.55 1.84_________ ________

3 14.67 1 93.96_________ ________


PARTICULARS 31.03.2014 31.03.2013

11. FIXED ASSETSTANGIBLE ASSETSGROSS BLOCKASSETS OPENING ADDITION DELETION TOTAL1. Land * 17 12.29 -- -- 17 12.292. Buildings 20 58.67 62.50 -- 21 21.173. Plant & Machinery 42 05.51 6 72.18 -- 48 77.694. Electrical Machinery 6 75.03 82.73 -- 7 57.755. Office Equipments 62.13 0.29 -- 62.426. Furniture & Fixtures 21.22 0.07 -- 21.297. Vehicles 14.14 -- -- 14.148. Weighing Scales 20.25 -- -- 20.259. Tools & Equipments 20.63 -- -- 20.63________ _______ _______ ________

TOTAL OF THIS YEAR 87 89.86 8 17.77 -- 96 07.62________ _______ _______ ________TOTAL OF THE PREVIOUS YEAR 87 55.50 1 04.58 -- 88 60.08________ _______ _______ ________

* The Gross Block value of Land includes revaluation of Rs.1392 Lakhs during the year 2007-08

DEPRECIATION BLOCK OPENING ADDITION DELETION TOTAL1. Land -- -- -- --2. Buildings 4 09.68 63.61 -- 4 73.293. Plant & Machinery 15 38.09 2 28.39 -- 17 66.484. Electrical Machinery 2 45.74 50.87 -- 2 96.615. Office Equipments 56.20 2.70 -- 58.906. Furniture & Fixtures 13.93 0.70 -- 14.637. Vehicles 5.81 1.34 -- 7.158. Weighing Scales 6.60 0.96 -- 7.569. Tools & Equipments 6.55 0.98 -- 7.53________ _______ _______ ________

TOTAL OF THIS YEAR 22 82.60 3 49.57 -- 26 32.17________ _______ _______ ________TOTAL OF THE PREIVOUS YEAR 19 38.39 3 44.19 -- 22 82.60________ _______ _______ ________

NET BLOCK 31.03.2014 31.03.20131. Land 17 12.29 17 12.292. Buildings 16 47.87 16 48.993. Plant & Machinery 31 11.22 26 67.414. Electrical Machinery 4 61.15 4 29.295. Office Equipments 3.51 5.946. Furniture & Fixtures 6.67 7.277. Vehicles 6.99 8.338. Weighing Scales 12.69 13.659. Tools & Equipments 13.10 14.07________ ________

TOTAL OF THIS YEAR 69 75.48 65 07.25________ ________TOTAL OF THE PREVIOUS YEAR 65 77.47 68 17.10________ ________

NOTENO

21

22


PARTICULARS 31.03.2014 31.03.2013

(‘ in Lakhs)

NOTENO

12 NON CURRENT INVESTMENT:Face Numbers Numbers Amount AmountValue 31.03.2014 31.03.2013 31.03.2014 31.03.2013

Trade Investments - QuotedAssociates :Sri Kannapiran Mills Ltd 10 10000 10000 1.00 1.00Trade Investments - UnquotedGamma Green Power Ltd 10 910000 1200000 91.00 1 20.00MMS Steel & power 10 35750 35750 3.57 3.58A R S Steel Private Limite - Shares 10 100 _ 0.28 _TVH Energy Resources Pvt Ltd 10 _ 25000 -- 2.50Energy Resources Pvt Ltd 10 2030 2030 0.20 0.20_________ ________( 2030 Shares of Rs.10 each ) 96.05 1 27.28_________ ________

13 LONG TERM LOANS AND ADVANCES:(Unsecured, considered good)Security Deposits 1 74.78 51.02MAT Credit Entilement 3 12.12 3 12.12_________ ________

4 86.90 3 63.14_________ ________

14 OTHER NON-CURRENT ASSETSDuty Draw Back Receivables 20.64 8.32

_________ ________ 20.64 8.32_________ ________

CURRENT ASSETS15 INVENTORIES:

( At lower of Cost or Net realisable Value )Raw Materials – Cotton 87.28 2 74.09Raw Materials – Waste 1.34 1.34Work in progress 16 33.00 14 63.83Finished Goods 10 27.31 15 02.37Stock in Trade 28.40 27.72Stores & Spares 1 61.00 2 22.41_________ ________

29 38.34 34 91.76_________ ________

NOTENO

23

(‘ in Lakhs)Notes Forming Part of Financial Statements

PARTICULARS 31.03.2014 31.03.2013

16 TRADE RECEIVABLES:(Unsecured, considered good)Debts outstanding for a period exceeding 57.24 46.35

Six months from the due dateOther debts 30 94.54 26 22.89

_________ ________

31 51.79 26 69.24_________ ________17 CASH & BANK BALANCES :

CASH & CASH EQUIVALENTS :(a) BALANCE WITH BANKS

In Current Accounts 52.40 13.61(b) CASH ON HAND 4.45 3.47

Other Bank BalancesDeposits held as margin money 2 04.96 1 66.49

_________ ________

2 61.81 1 83.57_________ ________18 SHORT TERM LOANS & ADVANCES:

(Unsecured considered good)Advances recoverable in cash or in kind 4 18.00 7 55.39 for the value to be receivedPrepaid Expenses 36.03 37.37Advance Tax (including TDS) 3 25.49 1 08.22_________ ________

7 79.51 9 00.98_________ ________

19 OTHER CURRENT ASSETS:TUF Subsidy Receivable 1 23.71 91.67Duty Drawback Receivable 12.36 5.13

_________ ________

1 36.07 96.80_________ ________



24

20 REVENUESALE OF GOODS

Fabric 1 48 86.21 1 28 53.91Yarn 28.76 36.47Waste 89.21 86.94

SALE OF SERVICESConversion Charges 12.91 0.12

OTHER OPERATING REVENUESExport Incentives 64.32 32.68

__________ __________Net Revenue from Operations 1 50 81.42 1 30 10.12

__________ __________21 OTHER INCOME:

Interest Income 24.86 18.67Dividend Income 1.50 1.50Rent Receipts 4.77 3.97

__________ __________ 31.12 24.14

__________ __________

22 COST OF MATERIALS CONSUMED:Opening balance of Cotton, Waste Cotton Stock 2 75.43 7 78.08ADD : Purchases Cotton, Waste Cotton,

Chemicals & Yarn 77 41.10 65 94.02 80 16.53 73 72.10

Less: Sale of Raw material - 2 20.40Less: Closing balance of Cotton, Waste Cotton Stock 88.62 2 75.43

__________ __________Consumption of Materials 79 27.90 68 76.27

__________ __________

(‘ in Lakhs)


PARTICULARS 31.03.2014 31.03.2013

25

NOTENO

(‘ in Lakhs)

23 CHANGES IN INVENTORIESAt the beginning of the accounting periodFinished Goods - Fabric 15 02.37 3 85.82Work-In-Progress - Yarn & Fabric 14 63.83 12 51.17Stock In Trade - Shares 27.72 17.84

__________ __________ 29 93.93 16 54.83__________ __________

At the end of the accounting periodFinished Goods - Fabric 10 27.31 15 02.37Work-In-Progress - Yarn & Fabric 16 33.00 14 63.83Stock In Trade - Shares 28.40 27.72

__________ __________ 26 88.71 29 93.92__________ __________

NET TOTAL 3 05.22 - 13 39.09__________ __________

24 OTHER MANUFACTURING EXPENSESStores and Spares 72.33 62.16Power & Fuel 10 64.04 10 21.90Processing Charges 24 36.48 22 84.88Chemicals 11 10.53 8 86.16Repairs and Maintenance - Buildings 20.79 15.97Repairs and Maintenance - Machinery 2 55.96 2 84.13

__________ __________49 60.14 45 55.20

__________ __________25 EMPLOYEE BENEFITS EXPENSE

Salary and Wages 5 90.81 5 22.54Contribution to Provident Fund and Others 30.29 26.92Workers and Staff Welfare 37.06 28.69

__________ __________6 58.16 5 78.15__________ __________

26 FINANCIAL COSTS:a INTEREST EXPENSE

Interest on Term Loans 3 25.95 3 63.45Bank Charges 36.66 53.42

b Other Borrowing Costs 6 12.38 5 05.98__________ __________ 9 74.99 9 22.85__________ __________

26

27 OTHER EXPENSES:Taxes & Licenses 33.44 30.67Insurance 17.73 15.51Repairs and Maintenance General 4.04 9.00Postage, Courier & Telephone Expenses 28.18 15.08Professional & Legal Charges 24.31 12.27Auditors Remuneration 1.11 0.89Printing & Stationery 7.93 5.54Freight Outwards 67.62 65.20Brokerage and Commission 2 77.76 2 34.47Selling Expenses 54.59 1 07.08Travelling Expenses & Maintenance of Vehicle 66.18 32.11Foreign Exchange fluctuation Gain / Loss (Net) 15.38 - 6.06Miscellaneous Expenses 0.02 0.07

__________ __________ TOTAL 5 98.29 5 21.84

__________ __________



(‘ in Lakhs)

27

SCHEDULE 28

SIGNIFICANT ACCOUNTING POLICIES

A) AS-1 DISCLOSURE AND BASIS OF ACCOUNTING

i. Financial statements have been prepared under the Historical Cost Convention which is inaccordance with the Generally Accepted Accounting Principles and provisions of theCompanies Act, 1956. The Company has complied with the Accounting Standards prescribedby the Institute of Chartered Accountants of India ( ICAI ) and as referred u/s 211 (3C) ofthe Companies Act, 1956.

ii. The accounts are prepared on the basis of going concern concept.

iii. The Company has been consistently following the accrual basis of accounting in respectof its Income and Expenditure.

B) AS-2 VALUATION OF INVENTORIES

Stock of Stores - At Cost arrived at on Weighted Average Method

Raw Materials - At Cost or Net realisable value which ever is lower.

Process Stock - At Cost where cost included direct expenses and related overheads

Finished Goods - At Cost or net realisable value which ever is lower.

Waste - At since realised price.

C) AS -6 DEPRECIATION ACCOUNTING

Depreciation is provided on straight line method rates as specified in Schedule XIV of theCompanies Act, 1956.

D) AS-9 REVENUE/INCOME RECOGNITIONi Sales of goods is recognized on shipment or dispatches to Customersii Sales as reported are net of sales tax.iii Proceeds of export sales of Fabric/ Yarn are accounted on the basis of credit given by

our bankers. The Gain/ Loss on account of Foreign Exchange transactions if any isaccounted separately in Profit and Loss Account.

iv Revenue from service transactions are recognised on the completion of the contract at thecontracted rates only.

v Export incentives under DEPB licence and premium on transfer of Export incentives areaccounted on accrual basis.

E) AS-10 ACCOUNTING OF FIXED ASSETS

Fixed Assets are stated at the original cost of acquisition & installation etc., and includeamounts added on revaluation less accumulated depreciation.

F) AS-11 FOREIGN CURRENCY TRANSACTIONS

Foreign currency transactions are recorded at the prevailing rate of exchange in force at thetime of initial recognition.


28

Foreign Currency assets and liabilities other than for financing fixed assets are restated at therate of exchange prevailing at the year end and resultant gains / losses are recorded in the profitand loss account.

Premium in respect of forward foreign exchange contracts is recognized over the life of thecontracts.

Any profit or loss arising on cancellation or renewal of forward exchange contract is recognizedas income or as expense in the period in which they arise.

G) AS-13 ACCOUNTING OF INVESTMENTS

Long term investments are stated at cost. Permanent diminution in value, if any, will be writtenoff in the year of diminution.

H) AS-15 ACCOUNTING FOR EMPLOYEE RETIREMENT BENEFITS

Defined Contribution Plans

Company’s contributions paid/ payable during the year to Provident Fund and ESIC are recognisedin the Profit and Loss account.

Defined Benefit Plans

Company’s liabilities towards gratuity is determined using the projected unit credit methodwhich considers each period of service as giving rise to an additional unit of benefit entitlementand measures each unit separately to build up the final obligation. Past services are recognisedon a straight line basis over the average period until the amended benefits becomes vested.Actuarial gains or losses are recognized immediately in the profit and loss account as incomeor expenses. Obligation is measured at the present value of estimated future cash flows usinga discounted rate.

I) AS-16 BORROWING COSTS

Borrowing Costs that are attributable to the acquisition of construction of qualifying assets arecapitalized as part of the cost of such assets. A qualifying asset is one that necessarily takessubstantial period of time to get ready for intended use. All other borrowing costs are recognizedas an expense in the period in which they are incurred.

J) AS-18 RELATED PARTY DISCLOSURES

The related party transactions are disclosed in the notes of accounts as per the ICAI guidelines.

K) AS-19 LEASES

Leases, where the lessor effectively retains substantially all the risks and benefits of ownershipof the leased item, are classified as operating leases. Operating lease payments are recognizedas an expense in the profit and loss account on a straight line basis over the lease term.

L) AS-20 EARNING PER SHARE

The earning considered in ascertaining the Company’s earnings per share comprises of NetProfit after tax and includes post tax adjustments of prior period and extra ordinary items.




29

M) AS-22 ACCOUNTING FOR TAXES ON INCOME

i. Deferred tax resulting from timing differences between book and tax profits is accountedunder liability method at enacted or substantively enacted rate as on the balance sheetdate. Deferred tax asset, other than those arising on account of unabsorbed depreciationor carried forward of losses under tax loss, are recognised and carried forward subject toconsideration of prudence only to the extent that there is reasonable certainty that sufficientfuture taxable income will be available against which such deferred tax asset can berealized.

ii. Deferred tax asset, arising on account of unabsorbed depreciation or carried forward oflosses under tax loss, are recognised and carried forward subject to consideration ofprudence only to the extent that there is virtual certainty that sufficient future taxableincome will be available against which such deferred tax asset can be realised.

iii. Current Tax is determined at the amount of tax payable in respect of estimated taxableincome for the year.

N) AS-28 IMPAIRMENT OF ASSETS

An asset is impaired when the carrying amount of the asset exceeds its recoverable amount.An impairment loss is charged to the profit and loss account in the year in which an asset isidentified as impaired.

O) AS-29 PROVISIONS, CONTINGENT LIABILITY AND CONTINGENT ASSETS

a). Provisions involving degree of estimation in measurement are recognized when there is apresent obligation as a result of past event and it is probable that there will be an outflowof resources.

b) Contingent liabilities in respect of show cause notice received are considered only whenthey are converted to demands. Contingent liabilities are disclosed by way of notes toaccounts.

c) Contingent liability under various fiscal laws includes those in respect of which the company/department is in appeal.

OTHERS

SUNDRY DEBTORS AND ADVANCES

Specific debts and advances identified as irrecoverable if any are written off.

P) The Accounting policies not specifically referred to are consistent with the generallyaccepted accounting policies.


1. CONTINGENT LIABILITY:a. Estimated amount of contracts remaining to be executed on capital accounts not provided

for as on 31.03.2014 is R128.30 lakhs (31.3.2013 :

R70.22 lakhs).

b. Arrears of dividend on 6% cumulative Redeembale Preference Shares of R135 Lakhs for

the period 1st April 2010 to 31st March 2014 of R 32.40 (31.03.2013: Rs.24.30 Lakhs)

c. Income-tax Assessment for the Assessment years 2012-13 and onwards is pending.

2. RAW MATERIALS CONSUMPTION 31.03.2014 31.03.2013Yarn in Kgs (lakhs) 47.70 54.40Value in

R(lakhs) 7927.90 6876.27

(Rin lakhs)

3. Value of Imports – CIF basis 31.03.2014 31.03.2013Raw Materials 168.00 —Capital Goods 174.01 17.18Chemicals 512.52 304.39Machinery spares 84.00 146.85

4. Auditor Remuneration Rs. Rs.Statutory Audit Fees 56 180 33 708Tax Audit Fees 11 236 11 236Certification & Others 40 402 21 250Traveling Expenses 3 000 23 000__________ __________

1 10 818 89 194__________ __________

5. Income earned in Foreign Currency - R1180.05 Lakhs (P.Y.

R670.26)

6. Expenditure incurred in Foreign CurrencyTraveling Expenses –

R26.21 Lakhs (P.Y.

R2.78 Lakhs)

7. The Exchange Difference arising on account of foreign Currency fluctuation are :i)

RNIL (P.Y.

RNIL/-) on account of exchange fluctuation in respect of forward contracts.

ii)R15 38 253 /- (P.Y.

R6 05 927 /- ) on account of exchange fluctuation in respect of

dealings in materials, stores and spares, chemicals.8. The Company is yet to receive the status of the suppliers who are registered as Micro, Small

or Medium Enterprises under “The Micro, Small and Medium Enterprises Development Act,2006”

9. Balance of certain Creditors, Debtors, Loans and Advances given are subject to confirmationand reconciliation, if any. However in the opinion of the management, there would not be anymaterial impact on financial statements.

30

10. The segmental reporting as required under AS-17 issued by the ICAI is not applicable as theCompany operates in only one segment - Textile.

11. Provision towards Excise Duty does not arise as the company has opted for Zero Duty.12. Accounting Standard (AS) 18, Related Party Disclosures:

R

Particulars AssociatesPurchase of Goods 46 95 916Sale of Goods 86 15 006Rendering Service - Conversion Receipts 12 02 240Rendering Service - Conversion Payments 21 85 11 192

Name of the related Parties :1. Associates : Sri Kannapiran Mills Limited

KG Denim Limited2. Key Management Personnel : Mr K G Baalakrishnan, Chairman

Mr B Sriramulu, Managing DirectorMr B Srihari, Managing Director

13 AS – 20 Earnings per share31.03.2014 31.03.2013

Net profit / ( loss) after tax and adjustmentsR(5 04 09 647)

R3 77 32 937

No. of equity shares 2 07 60 065 2 07 60 065Earnings per share ( Face value

R 10 each)

R (2.43)

R1 .82

14. AS 22 – DEFERRED TAX LIABILITYBalance as on Adjustments made Closing as on

01.04.2013 during the year 31.03.2014Deferred Tax LiabilityDepreciation 8 14 07 011 28 26 337 8 42 33 348Gratuity Paid _ _ _

Total 8 14 07 011 28 26 337 8 42 33 348Deferred Tax AssetDepreciation – Set off carry forward 6 57 98 102 1 86 01 281 8 43 99 383Business Loss - Set off & Carry Forward _ _ _

Provision for Gratuity 10 20 279 81 068 11 01 347Total 6 68 18 381 1 86 82 349 8 55 00 730

Net Deferred Tax (Asset) / Liability 1 45 88 630 - 1 58 56 012 - 12 67 382

31

32

15. Employee BenefitsI. Principal Actuarial Assumptions 31.03.2014 31.03.2013

Discount Rate 8.00% 8.00%Salary Escalation Rate 4.00% 4.00%Attrition Rate 4.00% 4.00%Expected Rate of Return on Plan Assets 0.00% 0.00%

( R in thousands)

II. Changes in the present value of the obligation (PVO) – Gratuity (unfunded)Reconciliation of Opening and Closing BalancesPVO as at the beginning of the period 3071 2112Interest Cost 239 169Current Service Cost 385 382Past Service Cost – (Non Vested Benefits) 0 0Past Service Cost – ( Vested Benefits) 0 0Benefits Paid -185 0Actuarial loss / (gain) on obligation (balancing figure) 54 408PVO as at the end of the period 3564 3071

III. Changes in the fair value of plan assets – Reconciliationof opening and closing balancesFair value of the plan assets as at the beginning of the period 0 0Expected return on plan assets 0 0Contributions 185 0Benefits paid -185 0Actuarial gain / (loss) on plan assets (balancing figure) 0 0Fair value of plan assets as at the end of the period 0 0

IV. Actual return on plan assetsExpected return on plan assets 0 0Actuarial gain / (loss) on plan assets 0 0Actual return on plan assets 0 0

V. Actuarial gain / loss recognisedActuarial gain/(loss) for the period – Obligation -54 -408Actuarial gain / (loss) on plan assets 0 0Total (gain) / Loss for the period 54 408Actuarial (gain) / loss recognised in the period 54 408Unrecognised actuarial (gain) / loss at the end of the year 0 0

VI. Amounts recognised in the balance sheet and related analysesPresent value of the obligation 3564 3071Fair value of plan assets 0 0Difference 3564 3071Unrecognised transitional liability 0 0Unrecognised past service cost – non vested benefits 0 0Liability recognised in the balance sheet 3564 3071

VII. Expenses recognised in the statement of profit and lossCurrent service cost 385 382Interest Cost 239 169Expected return on plan assets 0 0Net actuarial (gain)/loss recognised in the year 54 408Transitional Liability recognised in the year 0 0Past service cost – non-vested benefits 0 0Past service cost – vested benefits 0 0Expenses recognised in the statement of profit and loss 677 959

VIII.Movements in the liability recognised in the balance sheetOpening net liability 3071 2112Expense as above 678 959Contribution paid -185 0Closing net liability 3564 3071

IX. Amount for the current periodPresent Value of obligation 3564 3071Plan assets 0 0Surplus (Deficit) -3564 -3071Experience adjustments on plan liabilities – (loss)/gain -387 -408Experience adjustments on plan assets – (loss)/gain 0 0

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X. Major categories of plan assets (As percentage of total plan assets)Government of India Securities 0.00% 0.00%State Government Securities 0.00% 0.00%High Quality Corporate Bonds 0.00% 0.00%Equity shares of listed companies 0.00% 0.00%Property 0.00% 0.00%Special Deposit Scheme 0.00% 0.00%Funds managed by Insurer 0.00% 0.00%Others (to specify) 0.00% 0.00%Total 0.00% 0.00%

XI. Enterprise’s Best Estimate of Contribution during next Year 0 0

Note : (i) The Salary escalation considered in actuarial valuation takes into account Inflation,seniority, promotion and other relevant factors such as supply and demand in theemployment market.

(ii) Gratuity is based on last drawn basic salary. The Scheme takes into account eachcompleted year of service or part thereof in excess of six months.

16. The figures are rounded off to the nearest Lakh rupee.

PLEASE COMPLETE THIS ATTENDANCE SLIP AND HAND IT OVER AT THE ENTRANCE OF THE HALL. ONLYMEMBERS OR THEIR PROXIES ARE ENTITLED TO BE PRESENT AT THE MEETING.

Name of the attending Members :

No. of Shares held :

I hereby record my presence at the 20th ANNUAL GENERAL MEETING of the Company on Wednesday,the 10th September, 2014 at 4.00 p.m.

Please see address slip for details of Folio No. & No. of Shares

Name of Proxy in Block Letters

[Pursuant to Section 105(6) of the Companies Act, 2013 and Rule 19(3) of the Companies (Management andAdministration) Rules, 2014]

Name of the Member(s) :Registered Address :

E-mail ID :Folio No. :

I/We being the member(s) of...........................................................shares of the above named Company, herebyappoint:

(1) Name ................................................................... Address ..........................................................................

E-mail Id ................................................................ Signature ............................................or failing him/her

(2) Name ................................................................... Address ..........................................................................


(3) Name ................................................................... Address ..........................................................................


as my/our proxy to attend and vote (on a poll) for me/us and on my/our behalf at the 20th Annual General Meetingof the Company, to be held on Wednesday, the 10th day of September, 2014 at 4.00 p.m. at Registered Office,Plot No.FF-1, SIPCOT IGC, Perundurai. and at any adjournment thereof.

Signed this.................day of...................2014

Signature of Shareholder(s)................................................................................................................

Signature of Proxyholder(s)...............................................................................................................

Notes: 1. This form of proxy in order to be effective should be duly completed and deposited at the Registered Office the Company, not less than48 hours before the commencement of the Meeting.

2. In the case of a Corporation, the proxy form shall be either given under the Common Seal signed on its behalf by an Attorney or Officerof the Corporation.

MGT - 11

ATTENDANCE SLIP

Folio No. :

*Strike out whichever is not applicable

Signature of the Shareholder/Proxy*

PROXY FORM

Re.1/-RevenueStamp





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