hhec shop: mumbai regional office the hhec of india ltd. chowpatty tejkiran co-operative housing...

HHEC

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ContentsBoard of Directors............................................................................................4

Chairman’s Message ................................................................................10-11

notice of AGM ..............................................................................................12

Directors’ Report ...................................................................................... 13-20

Management Discussion & Analysis Report ............................................ 21-24

Corporate Governance Report ................................................................ 25-28

MGt-9 ...................................................................................................... 29-33

Report on CsR Activities ......................................................................... 34-35

Corporate Governance Compliance Certificate .............................................36

Balance sheet ...............................................................................................39

Profit & Loss Account ....................................................................................40

Cash Flow statement for the year ended 31 March, 2016 ............................41

Notes on Balance Sheet and Profit & Loss Account ............................... 42-63

Significant Accounting Policies ............................................................... 64-67

Additional notes on Accounts .................................................................. 68-80

Auditors’ Report & Management’s Replies of Comments of the staturtory

Auditors ................................................................................................... 81-92

Comments of Comptroller & Auditor General of India ............................. 93-95

Management’s Reply to C&AG Comment ............................................... 96-97

AnnuAl RepoRt 2015-16

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Key Officials

Shri Puneet Agarwal, IASChairman-cum-Managing Director

(from 08.12.2016)

Dr. K Gopal, IASGovernment Nominee Director

(From 28.01.2016)Shri A MadhuKumar Reddy, IRTSGovernment Nominee Director

(from 04.02.2015 to 28.01.2016)

Shri Sunil Sethi Independent Director

(from 01.08.2012 to 31.07.2015)

Ujjal DattaChief Finance Manager

Ms. Indrani KaushalGovernment Nominee Director

(from 07.01.2014 to 28.01.2016)

Ms. Ritu SethiIndependent Director

(from 01.08.2012 to 31.07.2015)

Ms. Azra BanuDirector (Finance)(from 11.07.2011)

Shri Alok Kumar, IASGovernment Nominee Director

(from 28.01.2016)

Shri Nirmal SinhaChairman-cum-Managing Director(from 20.07.2010 to 08.12.2016)

Board of

Directors

Board of Directors and Key Officials of the Corporation

HHEC

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BOARD OF DIRECTORSChairman and Managing Director

shri Puneet Agarwal, IAs (from 8.12.2016)shri nirmal sinha (from 20.07.2010 to 8.12.2016)

Directorsshri Alok Kumar, IAs, (from 28.01.2016)

Dr. K Gopal, IAs (From 28.01.2016) Ms. Azra Banu (from 11.07.2011)

shri A. Madhukumar Reddy, IRts (from 04.02.2015 to 28.01.2016) Ms. Indrani Kaushal (from 07.01.2014 to 28.01.2016)

Mr. sunil sethi (from 01.08.2012 to 31.07.2015)Ms. Ritu sethi (from 01.08.2012 to 31.07.2015)

AUDITORSCorporate OfficeM/s. Bansal & Co.

Chartered Accountants, new Delhi

Mumbai Branch M/s. C.C. Dangi & Associates Chartered Accountants, Mumbai

Chennai BranchM/s. TN Rajendran & Co.

Chartered Accountants, Chennai

Kolkata BranchM/s. Ghosal Basu & Ray

Chartered Accountants, Kolkata

Bankersstate Bank of India

Registered Office5th floor, Jawahar Vyapar Bhawan Annexe,

1, tolstoy Marg, new Delhi 110001CIN: U74899DL1958GOI002925


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REGISTERED OFFICEThe HHEC of India Ltd. Jawahar Vyapar Bhawan Annexe,1, tolstoy Marg, new Delhi-110001Phone: 011-23701086Fax: 011-23701051e-mail: [email protected] [email protected]: www.hhecworld.come- shop: www.hheconline.in

CORPORATE OFFICEThe HHEC of India Ltd. Noida Complex, A-2, Sector-2, Udyog Marg, noida - 201301Distt. Gautam Budha nagar (U.P.)Phone no. 0120-22539155, 2539156Fax No.: 0120-2537003e-mail: [email protected] [email protected] Website: www.hhecworld.come- shop: www.hheconline.in

BRANChES IN INDIAChENNAI REGIONAL OFFICEThe HHEC of India Ltd. Plot no. sP 31-32Guindy Industrial estateGuindy, Chennai- 630032 Phone no.: 044-22255653/ 22255654Fax No.: 044-42702991/ 22251979e-mail: [email protected] [email protected]: www.hhecworld.come- shop: www.hheconline.in

KOLKATA REGIONAL OFFICE The HHEC of India Ltd. 2nd floor , flat 1-A , Metropolitan Building ,7 Jawahar Lal Nehru Road, Kolkata-700013Phone: 033-22280931/ 22280932Fax : 033-22286864email : [email protected] Website: www.hhecworld.come- shop: www.hheconline.in

MUMBAI REGIONAL OFFICEThe HHEC of India Ltd. Chowpatty Tejkiran Co-operative Housing Society Ltd.,2nd Dadi Seth Lane,Babulnath, Mumbai-400007Phone : 022-23634326 Fax: 022-23640354emal: [email protected]: www.hhecworld.come- shop: www.hheconline.in

AhMEDABAD OFFICEThe HHEC of India Ltd.103, Abhirath Complex,Sardar Vallabhbhai Patel Statue, NaranpuraAhmedabad – 380013 (Gujarat)Tele fax: 079-27680096email: [email protected]: www.hhecworld.come- shop: www.hheconline.in

HHEC

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3rd India Africa Forum Summit 2015, HHEc entrusted the work of designing and sewing of silk Ikat Kurta and Jacket for Head of states of various African countries on customization basis. HHEC has got appreciation as token of acknowledgement for valuable contribution.

Hon’ble Secretary (Textiles) Ms. Rashmi Verma, IAS and Shri Nirmal Sinha, Ex-Chairman cum Managing Director, HHEC after signing MoU for the year 2016-17.


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shri Puneet Aggarwal, IAs, Chaiman cum Managing Director, Ms. Azra Banu, Director (Finance) alongwith HHEC’s Officials during Digitization Campaign at Corporate Office, ‘Noida Complex’ on 22.12.2016.

Shri Nirmal Sinha, Ex- chairman cum Managing Director showing products to Hon’ble Secretary (Textiles), Ms. Rashmi Verma, IAS at IHGF Autumn 2015, Greater Noida.

Ms. Azra Banu, Director (Finance) alongwith senior officials of HHEC receiving Award on ‘Asset Utilization’ at 4th PSU Awards, 2016 from Shri Ram Vilas Paswan, Hon’ble Union Minister of Food and Public Distribution.

HHEC

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Shri Nirmal Sinha, Ex- Chairman cum Managing Director alongwith HHEC’s Officials after Flag hoisting on Republic day.

Shri Nirmal Sinha, Ex- Chaimran cum Managing Director, Ms. Azra Banu, Director ( Finance), Ms. Shubha Singh, Ex- CM (Admin) at Corporate office during Swatchh Bharat Pakhwara.

Ms. Azra Banu, Director (Finance), shri Ujjal Datta, Chief Finanace Manager along with HHeC’s officials at Corporate office on the occasion of Hindi Diwas 2016.


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It is indeed a matter of pride to take over the reins of this esteemed Corporation as your next Chairman-cum-Managing Director on behalf of Ministry of textiles. I and the Board of Directors of your Corporation welcome you to the 58th Annual General Meeting of “The Handicrafts and Handlooms Exports Corporation of India Limited”. I also convey our sincere thanks to all of you for being with us on this occasion.

the notice of AGM, Directors’ Report and Audited Accounts for the year ended 31st March, 2016 is already with you and with your permission I take them as read.

During Financial year 2015-16, the total turnover of the Corporation was Rs. 1970.37 crores which is a reduction of 28 % over the previous year. this was on account of various factors like decline in Bullion Business, reduction in exports Business due to adverse international market situations. Reduction in Margins from bullion business due to withdrawal of 80:20 scheme and reduction in Bullion and Core turnover has resulted in to the operating losses to the tune of Rs. 15.26 Crores and net loss after tax Rs. 10.76 Crores for the Year 2015-16. The major reason for Loss is mainly on account of reduction in exports business and provisions for Doubtful Debts which was considered on prudent Accounting policies. other reasons are explained in further points.

On account of the above, Corporation could achieve “Good” grading for MOU 2015-16.

Your Board is concerned about the decline in the turnover in its core business and increased efforts and initiatives are being planned to be taken up. Corporation has embarked with vigor to devise Marketing strategy for mid-term and long term plan to become Export Centric in line with the Mission and vision of the Corporation. With .renewed efforts and following initiatives, it is expected that Corporation would revitalize its business in the coming years.

• Tapping Potential Markets for Exports Business of the Corporation by participating in international Fairs & exhibition and taking up the present social audit compliances of major buyers. Further, a proposal for opening Franchise shops abroad under MAI scheme is proposed to be taken up.

• Your Corporation is encashing the opportunity of old trends coming back into the fashion from its rich and exclusive collections of around a million samples stocked in its Handloom Library.

• Revisiting our old buyers and reviving business with them.

ChAIRMAN’S MESSAGEDear Shareholders,

HHEC

10 Chairman’s Message

• Discussions with AsI are on to allot shops at its prime tourist destinations like taj Mahal, Qutab Minar and Lal Quila.

• sustained efforts to develop and increase Corporate Institutional sales especially showcasing varied range of products for various events and occasions.

• We also expect to reap benefits from our MSME registration for apparel/ garments and as aggregator for procurements from registered vendors of O/o DC(HC) & (HL).

Under Corporate social Responsibility, with ongoing swachh Bharat Abhiyan all over India, during the year 2015-16, the Corporation had successfully undertaken 2 distinctive projects of creation of sanitation Facility by constructing Toilet Complex and creation of Drinking Water facilities by installation of 5 Mark II Hand-pumps in Bhadohi district of Uttar Pradesh through sulabh sanitation Mission Foundation. Further, Corporation has also contributed Rs. 2.00 Lakhs towards NMCG (National Mission for Clean Ganga).

HHEC continues to emphasize on use of Hindi for official work and to ensure implementation of official language policy of Government of India. The Corporation has observed “Hindi Pakhwara” starting from 15th september, 2015 to 29th september, 2016 to encourage use of Hindi by every employee in the day-to-day working.

HHEC is committed to achieve the standard of the Corporate Governance to keep the confidence of the stakeholders intact. the information as required to be placed as per DPe guidelines on Corporate Governance have been placed in the Directors’ Report and the compliance certificate from the practicing Company Secretary is annexed to the Directors’ Report. It is heartening to note that we are rated Excellent by DPe for compliance of Corporate Governance for 2014-15 and likely to be graded same for 2015-16 also.

C&AG has conducted the supplementary audit made on the Accounts of HHeC for the year ended 31st March, 2016 and the comments under section 143(6)(b) of the Companies Act, 2013 which is annexed to the Directors’ Report along with statutory Auditors’ Report and Management’s Reply on both thereof.

I would like to thank our valued existing as well new customers, vendors, artisans, weavers and craftsmen and other business associates for their continuous support. I would like to acknowledge the co-operation and support received from the Ministry of Textiles, Development Commissioner (Handicrafts), Development Commissioner (Handlooms), Ministry of Commerce, Director General of Foreign trade and state Bank of India and other Bankers. I would like to acknowledge with thanks constructive suggestions received from the Comptroller & Auditor General of India and the Statutory Auditors. I also take this opportunity to express my gratitude to all executives and employees of the Corporation for their devotion and commitment.

sd/- (Puneet Agarwal)

Chairman-cum-Managing Director

Place: new DelhiDated: 15th December, 2016


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Chairman’s Message

ThE hANDICRAFTS & hANDLOOMS ExPORTS CORPORATION OF INDIA LTD.Registered Office: - Jawahar Vyapar Bhawan Annexe, 1 Tolstoy Marg,

New Delhi -110001, Office No. 011-23701086 / 23701016, Fax No: - 011-23701051E- Mail: - [email protected], Website: - www.hhecworld.in

CIN: - U74899DL1958GOI002925

NOTICEnotice is hereby given that the 58th Annual General Meeting of The Handicrafts & Handlooms Exports Corporation of India Limited will be held at the Registered Office of the Company at Jawahar Vyapar Bhawan Annexe, 1, Tolstoy Marg, new Delhi-110001 on 15th December, 2016 (thursday) at 4:30 PM to transact the following business:

ORDINARY BUSINESS

1. To receive, consider and adopt the Audited Financial Statements of the Company for the financial year ended on 31st March, 2016, together with the Board’s Report, the Report of Auditors’ thereon and Comments of the Comptroller & Auditor General of India, in terms of section 143(6) of the Companies Act, 2013.

2. To fix Auditors’ remuneration by passing the following resolution with or without modification (s)

“Resolved that pursuant to section 142 of the Companies Act, 2013 the remuneration of the auditors of the Company for the Financial Year 2015-16 be fixed as tabulated below.

S. No. Name of the Chartered Accountants Firms

Station Audit Fee(Rupees)

1. M/s. Bansal & Co. statutory Auditors 3,25,000/-2. M/s. CC Dangi & Associates Branch Auditors, Mumbai and Ahmedabad 32,000/-3. M/s. t.n. Rajendran & Co. Branch Auditors, Chennai 50,000/-4. M/s. Ghosal Basu & Ray Branch Auditors, Kolkata 20,000/-

TOTAL 4,27,000/-

By order of the Board of Directors

sd/- Ujjal Datta

Chief Finance ManagerPlace: new Delhi Dated: 15.12.2016

Notes:1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROxY TO ATTEND AND VOTE

INSTEAD OF HIMSELF AND THE PROxY NEED NOT BE A MEMBER (PROxY FORM IS ENCLOSED).

HHEC

12 notice of AGM

DIRECTORS’ REPORTYour Directors have pleasure in presenting the 58th Annual Report on the business and operations of your Corporation together with the Audited statement of Accounts, Auditors’ Report and the Review of Accounts by C&AG of India for the Financial Year ended 31st March 2016.

1.0 FINANCIAL HIGHLIGHTS1.1 Financial Performance The financial performance for the year 2015-16 is summarized here under:

(Rs. in Crores)

2015-16 2014-15Revenue 1970.37 2738.19- Core Group turnover - Bullion Imports

46.36 48.441924.01 2689.75

other operating Revenue 2.15 2.63other Receipts 6.84 6.89total Revenue 1979.36 2747.71Expenditure 1994.62 2730.19Operating Profit/(Loss) for the Year(Before PPI, Exceptional item & Provision for Taxation)

(15.26) 17.52

Prior Period Items (1.06) 3.37Exceptional Items 0.09 9.21Profit/(Loss) Before Tax (PBT) (14.29) 4.94Income tax- Current tax - 3.16

Earlier years Tax 0.02 0.01Less: MAT credit entitlement (0.07) 0.05 (0.57) 2.60Deferred Tax (3.48) (1.06)Profit/(Loss) After Tax (10.76) 3.40Reserves & Surplus (opening balance) 8.45 5.69Sub Total (2.31) 9.09Less: Transfer to Retained Earnings during the Year

- 0.22

Sub Total (2.31) 8.87Dividend - 0.35Dividend Tax - 0.07Closing Balance (2.31) 8.45

During the year 2015-16 Corporation earned Gross operating Margin amounts to Rs. 14.13 Crores (includes Rs. 2.54 Crores from bullion Business) as against Rs. 38.33 Crores (including Rs.26.29 Crores From Bullion Business) last year.

Corporation ended the year with a Net loss after tax of Rs. 10.76 crores as against Net Profit after tax Rs. 3.40 crores last year. The major reason for such Loss is mainly on account of provisions of Doubtful Debts following the prudent Accounting policies. Other reasons are explained in further points.

1.2 Operations Review

the total turnover of the Corporation decreased from Rs 2738.19 crores in 2014-15 to Rs. 1970.37 crores during the year, an decrease of Rs.767.82 crores ( 28.04 %). the decrease is mainly due to:-• Bullion Business is an opportunity driven business. During the year Bullion Imports decreased by Rs.1063.79

crores (40%) due to slacking of demand, weak rupee and withdrawal of 20/80 scheme of Government.


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Directors’ Report

• Decrease in Core Group Business by Rs. 2.08 crores (4.30 %) due to volatility in world economy. HHeC’s initiatives to focus on Core Group are continued and so far we have added 15 new Buyers. With regard

to Domestic Market, we have taken initiatives to obtain registration as a MsMe in the category of Manufactures of all types of Textile Garments and clothing accessories and Curtains, bed covers and furnishings and further appointed as Aggregator for procurements made from registered Vendors office of development commissioner (Handicrafts & Handlooms)

The Operating profits have been converted into operating losses amounting to Rs. 15.26 crores during the year as compared to operating Profits of Rs. 17.52 crores in the previous year mainly due to following reasons:

• Decrease in Opportunity Driven Bullion Business as per Ministry Directions,• Reduction in Margins on the Bullion business due to withdrawal of 20:80 scheme.• Downfall in Core Business with regard to exports on account of lack of skilled manpower at various levels.• Provisions of Doubtful debts as prudent Accounting policy.

Further, considering the tax and other provisions, we have ended with the Net Loss after tax of Rs 10.76 crores as against Net Profit after tax Rs. 3.40 crores last year.

1.3 Core Group Turnover Product wise sales are as under:- (Rs. in Crores)

2015-16 2014-15TRADING : DIRECT 46.36 48.44ExportsHandicrafts 3.64 6.80Handlooms 8.57 10.52Ready-to-wear 7.85 13.07Carpets - -Sub total 20.06 30.39

Gold & Gold Jewellery - 0.03Sub total - 0.03

TOTAL ExPORTS 20.06 30.42

Domestic 26.29 18.02

• Exports In rupees terms, direct exports amounted to Rs. 20.06 crores ($ 3.00 millions) as against 30.42 crores ($

5.00 million) last year, a decrease of Rs. 10.36 crores ($ 2.00 millions). Exports have decreased by 34.1 %, mainly due to decline of Exports in European Countries like Germany, USA etc. However, exports to countries like Japan have increased.

• Domestic Business Domestic business in Core group has increased from Rs. 18.02 crores in 2014-15 to Rs. 26.29 Crores,

an increase of Rs. 8.27 Crores (45.89%). the increase is mainly due to opening of new retail outlets and corporate institutional sales and other aggressive Marketing strategies adopted.

1.4 Imports sales Bullion Imports have decreased from Rs. 2689.75 crores in 2014-15 to Rs. 1625.96 crores during the year, an

decrease of Rs. 1063.79 crores ( 39.54 %) as per the strategy drawn in line with Ministry of Textiles directions to phase out the opportunity driven Bullion Business.

HHEC

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1.5 Reserves & Surplus A balance of Rs. 8.45 Crores was available in the Reserves & surplus as on 1st April, 2016. An amount of

Rs. 10.76 Crores has been transferred from Profit & Loss account to “Reserves & Surplus”. Accordingly, a negative sum of Rs. 2.31 crores is available in “Reserves & Surplus” of your Company as on 31st March, 2016.

1.6 Liquidity The Corporation continues to be liquid. The Cash Flow Statement for the year is annexed to with the Annual

Accounts.

1.7 Deposits The Corporation has not accepted any deposits within the meaning of Chapter V of the Companies Act, 2013.

1.8 Particulars of Loans, Guarantees or Investments Made Under Section 186 of the Companies Act, 2013 there were no loans, guarantees or investments made by the Company under section 186 of the Companies

Act, 2013 during the year under review and hence the said provision is not applicable.

1.9 Particulars of Contracts or Arrangements Made With Related Parties Section 188 of the Companies Act, 2013

There was no contract or arrangements made with related parties as defined under Section 188 of the Companies Act, 2013 during the year under review.

1.10 Financial Accounting the Financial statements have been prepared in accordance with the Generally Accepted Accounting Principles

(GAAP) and in compliance with all applicable Accounting standards issued by the Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 2013.

1.11 Risks and Concerns The Corporation is exposed to foreign currency risks since it is engaged in exports of handicrafts, handlooms,

jewellery, etc. as well as import of bullion. there are various policies / schemes by Government to promote the growth of the foreign trade by way of duty drawback schemes, interest rate subsidies, etc. Withdrawal of these policies / schemes may affect the profitability of the Corporation.

1.12 Internal Control Financial Systems and their Adequacy The Company has in place well-established internal financial controls. The Company has a well-defined Delegation

of Powers (DOP), which lays down the financial powers available to various levels of Company’s executives. The DOP helps facilitate faster and prudent commercial decision-making by executives at various levels. The Company has an Internal Audit Mannual, Internal Audit done by an outside independent professional Chartered Accountant firm, to conducts internal audit of Company’s corporate office as well as branches and suggests various preventive and corrective steps. the audit observations are periodically reviewed by the Management and the Board of Directors and necessary directions are issued wherever required.

the Corporation has put in place adequate internal controls and checks and balances which are being reviewed

on a continuous basis to ensure that the assets and resources of the Corporation are safeguarded.

The Corporation has appointed external firms of Chartered Accountants to conduct internal audit at its units / branches whose periodic reports are reviewed by the Management for bringing about possible improvement wherever necessary.

2.0 SHAREHOLDERS’ FUND the authorized and paid up capital of the Corporation remained unchanged at Rs. 20.00 crores and Rs. 13.82

crores respectively during the year 2015-16. the entire paid-up capital has been subscribed by the Hon’ble President of India. Considering the operating losses and negative balance in General Reserve in year 2015-16, the Board of Directors has not recommended any dividend this year.


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3.0 EXPORT PROMOTION AND TRADE DEVELOPMENT3.1 the focus of the Corporation continues towards maintaining a harmonious blending of its developmental role

with commercial activities and greater emphasis is being made for development of business in the core business group of crafts and textiles in the exports as well as the retail markets by keeping the focus on sourcing mainly from primary sources i. e. artisans/ craftsmen, weaver, societies & clusters etc.

3.2 The Corporation has participated in various exhibitions in India and abroad to showcase the new samples developed from traditional crafts and textiles clusters as well as to upgrade knowledge on designs and fashions abroad. During the year, the Corporation participated in a number of International Fairs viz 26th India Home Furnishing Fair 2015, Japan; 36th India Garment Fair 2015, Japan; Namaste Stockholm 2015, Sweden; Heimtextil Fair 2016, Germany; Ambiente Fair 2016, Germany. Participation in domestic fair includes IHGF (AUTUM)-2015(Greater Noida); IHGF (SPRING)-2016(Greater Noida); Diwali Mela 2015 (Noida Complex); India International Handwoven Fair-2016, Chennai.

4.0 CORPORATE GOVERNANCE the Corporation is committed to following sound corporate practices and good Corporate Governance. the Board

lays strong emphasis on transparency, fairness, accountability, integrity and professionalism for the sustainable development of all stakeholders. Management Discussion and Analysis Report is annexed as Annexure – I to this Report. A report on the Corporate Governance for the year 2015-16 in terms of the Department of Public enterprises Guidelines on Corporate Governance for CPses vide order no. 18(18) 2005-GM dated 14.05.2010 is attached as Annexure-II to the Directors’ Report. The numbers of Board Meetings held during the year with their dates were mentioned in point I. (B) of Corporate Governance Report in Annexure II to Directors’ Report.

5.0 RIGHT TO INFORMATION ACT, 2005 In compliance with the provisions of the Right to Information Act, 2005 the Corporation has placed various

documents / records at its website. Assistant Public Information Officers at each branch and Central Public Information Officer at Corporate Office have been designated and all the application received under this Act has been attended and suitable reply / information furnished to the applicants.

6.0 CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

6.1 Conservation of Energy & Technology Absorption the information and details under section 134(3) (m) of the Companies Act, 2013, read with Rule 8(3) Co’s

(accounts) Rules, 2014 for the conservation of energy are stated as under:

Sl. No. Particulars(i) the steps taken or impact on

conservation of energyHHEC has taken a GREEN INITIATIVES and using energy generated by its solar Power Plant of 50 Kva installed at Corporate Office Building in Noida which is generating an average 5000-6000 kw units per months for consumption at Corporate office and Factory in Noida building

(ii) the steps taken by the company for utilizing alternate sources of energy

(iii) the capital investment on energy conservation equipments;

NIL

the Activities undertaken by the Corporation do not fall under the purview of the disclosure under section 134(3)

(m) of the Companies Act, 2013, read with Rule 8(3) Co’s (accounts) Rules, 2014 for the technology absorption.

6.2 Foreign Exchange Earnings & Outgo The particulars with regard to foreign exchange earnings and outgo appear at para nos. v) b) and v) c) of Note

no. 2.32 Additional notes on Accounts.

HHEC


7.0 HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS7.1 the Corporation gives due importance to impart training to its employees at all levels to develop them to realize

their true potentials, improve in the areas of lesser strengths and to work with a high sense of responsibility. Re-deployment and motivation are also given priority with a view to develop the inherent faculties and qualities of employees.

7.2 During the year under Report, industrial relations were cordial and harmonious at all Branches/Units. no man-days were lost due to strike or lockout. All the employees worked with a new vigour and zeal.

7.3 None of the employees of the Company received remuneration in excess of the limits prescribed in Rule 5(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014.

7.4 the Corporation strictly follows the directives issued by Government of India with regard to reservation of posts for the scheduled Castes, scheduled tribes, and other Backward Classes as also for handicapped persons. the roster for reservation of posts for sC/st/oBC is duly maintained to ensure that there is no violation of the rules/instruction in this regard. no posts reserved for sC/st/oBC got de-reserved for the period under report.

7.5 As per Guidelines on Human Resource Management issued by Department of Public enterprises, various activities were undertaken by the Corporation such as training programs on CAD/CAM operation, Risk Management, Finance for Non-Finance Executives, Merchandizing, MS Office (Excel), First Aid Training, Stores Management, Export-Import Procedures & Documentation, Workshop on E-Commerce, Factories Act 1948 & Rules Legal Issues etc.

7.6 Appointment of Persons With Disabilities (PWDs): As on 31-3-2016, total number of persons in positions was 114, out of which six persons (1-OH in Group ‘A’, 2-VH in Group ‘B’, 1-HH and 1-OH in Group ‘C’ and 1-HH in Group ‘D’ ) are in position against the posts reserved for persons with disabilities (PWDs). Earlier, reservation was made in group ‘C’ and ‘D’ only. With a view to implement the judgment of the Apex court, Three posts have been filled which are reserved for PWDs under Special Recruitment Drive i.e. one post each of Assistant (Group ‘C’) reserved for Hearing Handicapped, Assistant Marketing Manager (Group ‘B’) reserved for Visually Handicapped and Deputy Marketing Manager (Group ‘A’) reserved for Orthopedically Handicapped.

7.7 HHEC has constituted an Internal Complaints Committee (ICC) under the provisions of the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Act, 2013 to enquire into the complaints of sexual harassment. No complaint was received either by the ICC or the Management during the year 2015-16.

8.0 LOOKING AHEAD8.1 HHeC continued its endeavor to focus on Core Group activities and as per the recent instructions, HHeC has

begun to concentrate of Exports Business and undertake aggressive International Market Strategies. 8.2 In order to increase the exports of handicrafts & handlooms products, the Corporation has been making efforts

to rein in new buyers from the existing / untapped markets and also to bring back to its fold ex-buyers through competitive prices and dedicated services.

8.3 In order to increase our presence in Domestic Market, HHeC is taking up the following aggressive Marketing strategies:-

• Opening new Retail outlets/Museum Shops: During the year 2015-16 Four new retails outlets have been opened at sarnath Museum , sarnath, Varanasi, taken UP Handloom shops and started operation at new Friends Colony, new Delhi, noida-sector 27 and noida sector-21 .to link Textiles and Handicrafts with tourism talks in advance stage with AsI to open shops at Qutub Minar,Lal Quila at Delhi, taj Mahal, Agra & old Portuguese Church, Goa.

• Corporate institutional Sale: the Corporation has been especially focusing on corporate institutional sales with special focus on big organizations like President House, Vice-President House, Prime Minister Office, Parliament House, Ministry of External Affairs, LIC, HAL, ntPC, SAIL, IRCtC, OIL India, BHEL etc. along with other Corporations in Private sector. During the year, HHeC is planning to expand this segment with other private industry as well.


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Directors’ Report

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• E-Marketing: Keeping in view, the modern trend of shopping, the Corporation has signed the agreement with one of the leading online shopping websites in India craftsvilla for selling handicrafts & handloom products through their website. this will not only increase the visibility of HHeC on e-commerce portal and also provide the platform for dying Arts / Crafts of Artisans & weavers.

• Common Facility Centre/ Common Service Centres: With a view for upliftment of Handloom weavers of Varanasi, HHeC is managing two common Facility Centres in villages of Koodi & Karghana, Varanasi where yarn dyeing, raw material bank and allied facilities are available for the weavers

• Design & Technical Workshops: HHeC organized seven design and technology workshops in Varanasi, Bareilley, Delhi, Moradabad, Bastar, Gorakhpur and Patna with an objective to develop new prototypes to suit and taste the preference of contemporary Market using the traditional skills of artisans and introduction of new techniques and technologies for enhance production.

• Capacity Expansion: To cater specific buyers’ demands and to meet international standards and technology and in turn increasing buyers & demand for Ready-to- Wear, the Corporation has planned to further expand our Garment factory at Noida by adding new machine and it has also been planned to start utilizing HHeC’s space at okhla by setting up an infrastructure for factory for Ready-to- Wear.

• SAARC Museum: HHEC has signed agreement with Ministry of External Affairs for development of project, its maintenance and management. Accordingly, HHeC has signed agreement with DttDC for development and Civil works of sAARC Museum. Civil work at sAARC Museum has been completed. Work allocation to DttDC for interior work for sAARC Museum is under process.

• the 3rd India Africa Forum summit that took place from 26th to 29th october 2015 was attended by 41 Head of states, Government Representatives of all 54 countries of Africa. one of the important event during the summit was the ice breaking dinner hosted by Hon’ble Prime Minister of India for which the African leaders were requested to wear Silk Ikat Kurta and Raw Silk Jacket especially tailored for each one of them. the HHeC was entrusted the work to design and supply kurtas and jackets which has been successfully completed within a short span of time and received letter of appreciation from Ministry of External Affair.

• HHEC have been awarded Bronze for “Excellence in Design & Display” in the 26th India Home Furnishing Fair, osaka held from 22.07.2015 to 24.07.2015 by India trade Promotion organization (ItPo).

• HHEC Chennai Branch is set up at a plot area of approx two acres with existing crèche building, office building. now, HHeC has planned to utilize the vacant land by constructing a new building in the 1st phase without demolishing the existing building for which government support/ tie ups are under process.

9.0 MEMORANDUM OF UNDERSTANDING (MOU) MoU Performance evaluation based on our performance during 2015-16, our Corporation likely to be graded

“Good” keeping the factors as decided at the time of signing MOU.

A Memorandum of Understanding for the year 2016-17 was signed between Ministry of Textiles and the Corporation on 29.09.2016.

10.0 GENERAL

10.1 Vigilance Activities

The Vigilance Division of the Corporation continued to perform the function of creating consciousness of the vigilance requirements amongst the employees as per guidelines provided by Central Vigilance Commission from time to time, investigation of complaints received from various agencies/sources and constant liaison for systems improvement. The Corporation observed Vigilance Awareness Week from 26th October 2015 to 31st october 2015 during which seminar/Workshops were organized jointly with CCIC on “Preventive vigilance as a tool of Good Governance”

HHEC


10.2 Implementation of Official Language Your Corporation continued to promote progressive use of Hindi for officials work and to ensure implementation of

the official language policy of the Government of India. Celebration of “Hindi Diwas” (on 14th September, 2016) and “Hindi Pakhwara” (observing from 15th September, 2016 to 29th September, 2016), competitions in Hindi essay writing, Noting, Computer typing etc., incentives in cash and kind for motivation to employees and publication of house Journal “ Badte Kadam” are regular features to encourage usage of Hindi by every employee in the day-to-day working.

11.0 CORPORATE SOCIAL RESPONSIBILITY & SUSTAINABILITY the Corporation endeavors to contribute suitably to the society both directly and indirectly through various means,

viz. generating employment for the artisans and weavers who mainly belongs to Below Poverty Line, providing exposure to their ethnic arts and crafts at international level and providing free space to artisans and weavers in the events organized at Noida Complex for display and sale of their products. The Corporation has been always emphasizing on empowerment of weaker section of artisans and weavers by promoting and providing a platform to market their products and sourcing procurement from the textiles and craft clusters through its procurement centers.

During the year 2015-16, the Corporation had successfully undertaken two distinctive projects through sulabh Sanitation Mission Foundation with a total expenditure of Rs. 10.53 lakhs:

• Creation of Sanitation Facility by constructing 3 units of Toilet Complex with an expenditure of Rs. 6.00 lakhs in schools of Bhadohi

• Creation of Drinking Water facilities by installation of 5 Mark II Hand-pumps with an expenditure of Rs. 2.53 lakhs in schools Bhadohi

• Contribution of ` 2.00 Lakhs to National Clean Ganga Fund

the Annual report on CsR Activities as per the Companies (Corporate social Responsibility Policy) Rules, 2014 is attached as Annexure-IV to the Directors’ Report.

12.0 EXTRACT OF ANNUAL RETURN Extract of Annual Return pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12 of the Companies

(Management & Administration) Rules, 2014 in the prescribed form MGT-9 is attached as Annexure-III to the Directors’ Report.

13.0 AUDITORS’ REPORT M/s. Bansal & Co., statutory Auditors appointed by the Comptroller & Auditor General of India for the year 2015-

16 have made certain comments in their report to the shareholders on the Annual Accounts of the Corporation for the year ended 31st March 2016. the report along with the Management replies to these comments/observations as required under section 134(3) (f) (i) of the Companies Act, 2013 are given at Annexure ‘B’.

14.0 PUBLIC PROCUREMENT POLICY In pursuance of the Public Procurement Policy for Micro & small enterprises (Mses) order, 2012 (dated 23rd

March 2012) notified by Ministry of Micro, Small and Medium Enterprises, the Company had set an annual target of making a minimum 20 percent of its annual procurement of goods and services from Mses, including 4 percent from Mses owned by sC or st entrepreneurs.

the Corporation was formulated with mission to develop, promote and aggressively market the products of Indian

crafts and skills abroad thereby providing a marketing channel for craftsmen and artisans and generate adequate returns to the stakeholder. But being a trading Company HHeC mostly procures its products as per requirements of our buyers mainly through artisans, weavers and societies. With respect to our major procurements HHeC observes the following:-

• Procurement of Bullion: As far as procurement for bullion business is concerned, being a nominated agency for import of Gold, the Corporation imports Gold from either a LBMA member or a Bank as per the approved scheme by the Board of Directors. Hence, these procurements cannot be covered under the Public Procurement Policy.

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Directors’ Report

• Procurement of Core Group Merchandise: In case of Handicrafts, Handlooms, Ready-to-Wear and Carpets etc. samples of product are selected by the buyer and HHeC places orders to the buyers’ nominated suppliers as agreed and produced the samples.

However, we encourage procurements from MSME to the maximum and during financial year 2015-16 our trading purchases (Core Group) are to the tune of Rs. 28.32 Crores against which the procurements from registered MSEs sourced to the extent of 34 %.

16.0 COMMENTS OF C & AG the C & AG comments, if any, upon or supplement to the Auditors’ Report under section 143(5) of the Companies

Act, 2013 on the Annual Accounts of the Corporation for the year ended 31st March, 2016 are attached at Annexure V and Management’s Reply at Annexure VI.

17.0 DIRECTORS’ RESPONSIBILITY STATEMENT the Directors responsibility statement as required under section 134(5) of the Companies Act, 2013 are as under:

i) In the preparation of Annual Accounts for the year ended 31st March 2016, the applicable Accounting Standards had been followed along with proper explanations relating to material departures and non-compliances have been furnished in the notes on Account.

ii) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2015-16 and of the profit of the company for the year under review.

iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

iv) the Directors had prepared the Annual Accounts for the year ended 31st March 2016 on a going concern basis.

v) that the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

18.0 ACKNOWLEDGEMENTS

18.1 The Board gratefully acknowledges the support and assistance received from the Ministry of Textiles, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Development Commissioner for Handicrafts, Development Commissioner for Handlooms, Directorate General of Foreign trade, Commissioner of Customs, Comptroller and Auditor General of India, the Auditors of the Company, Reserve Bank of India and state Bank of India.

18.2 Your Directors take this opportunity to place on record their appreciation for the invaluable contribution made and excellent co-operation extended by the employees and executives at all levels for the continued progress and property of the company .

18.3 the Board is grateful to its large family of international customers and thousands of crafts persons and weavers whose dedicated work and skill made it possible for the Corporation to perform its role.

For and on Behalf of Board of Directors

sd/-

(Puneet Agarwal)Chairman-cum- Managing Director

(DIn no. 07192938)

Place: new DelhiDated: 14.12.2016

HHEC


Annexure –‘I’ to the Directors’ Report

MANAGEMENT DISCUSSION & ANALYSIS1. FORMATION HHEC was established in 1958 with the twin objective of development and export of Indian handlooms and

handicrafts and products of the cottage industries. the Corporation has played a vital role in development and marketing of handlooms and handicrafts products from the various textiles and craft clusters in India by showcasing these products in the international markets through its showrooms, warehouses, retail outlets and offices. The promotional efforts of the Corporation has yielded the desired result and the international markets have accepted the Indian crafts (including carpets) and textiles (including made-ups, floor coverings, garments, etc.) and this sector is today one of the major foreign exchange earner as well as provider of employment to artisans and weavers representing the weaker section of the society.

The Corporation is presently is a star export house engaged in exports of handicraft and handloom products (including hand knotted woolen carpets and ready- made garments) besides undertaking export of gold and silver jewellery / articles. the Corporation was nominated in the year 1997-98 for import of bullion and sale in the domestic market.

2. STRENGTh AND WEAKNESS:

Strengths

a) Infrastructure: The Registered Office is located at New Delhi and the Corporate Office is located at Noida and is supported by three regional branches and 12 procurement centers under their control. the noida and Chennai branches have in-house facility for production of ready-made garments. HHeC has 10 retail outlets all over India under its control viz. Craft Museum Shop, Delhi; Dilli Haat (INA), Delhi; National Museum Shop, Delhi; Salarjung Museum Shop, Hyderabad; New Delhi Patna Museum, Patna, Bihar Indira Gandhi National Centre for Arts, New Delhi, Handloom Marketing Complex, New Delhi, Sarnath Museum, Sarnath, Varanasi, as per MoU signed with UP Handloom State Corporation, we have opened Shops in noida sector-21, sector-27 and nFC, new Delhi.

b) Trade Related Skills: Over 55 years in the trade of development & exports resulting in strong customer relationship with some dedicated buyers and strong backward linkages with primary sources i. e. artisans, weavers, craftsmen, societies and clusters etc. Range of sample collections in handloom fabrics & made-ups. Control over sampling, competitive procurement, production monitoring and quality inspection in handlooms through the procurement centers. Control over manufacturing in garments.

Weakness

a) Lack of control over manufacturing: No direct control on manufacturing of handicrafts products. Lack of built-up facilities for manufacturing / finishing high value items like made-ups, fashion accessories, etc.

b) Imbalanced Organizational Structure: A vacuum has been created in the organizational structure of HHEC at various levels and divisions as experienced professional could not be recruited as per present rules and guidelines. Corporation proposals are under consideration at Ministries of Government of India.

3. OPPORTUNITIES AND ThREATS

Opportunities:

a) Global Market: Globalization, Liberalization and policies of Government for FDI, Make in INDIA etc. provide wide opportunities for export of textile and garments.

b) Opportunity Driven Business: sustain the opportunity driven business available under the Foreign trade Policy, viz., imports of bullion and exports of jewellery.


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Management Discussion & Analysis

c) Buying Agents: In-house skills to perform the role of buying agents in product lines like carpets, jewellery & furniture

d) the Corporation can improve its results by installing new and upgraded manufacturing facilities.

Threats:

a) Global Competition: Different countries are positioning themselves in specific product-lines by imitating machine made products as crafts.

b) Industry Structures: Competition from manufacturer exporter who have control over manufacturing / finishing. Competition from private players who have a lean structure and flexible policies.

c) Un-organized Supply Chain: scattered presence of the artisans/ weavers/ craftsmen across India, weaker/ old communication facilities and their financial status cause hindrance in having a smooth supply chain.

d) Availability of Cheap labour in neighbour countries.

e) Disturbed Operating Cycle: Cycle time of order to delivery expectations of customers have gone up because of changes in customer preferences, uncertainty in season change predictability, competitive scenario etc. so this requires the vendors to be flexible and quick as well to keep pace with the changing expectations.

4. INDUSTRY STRUCTURE AND DEVELOPMENTS

a) Overview of Global Economy: the World economy stumbled in 2015, amid weak aggregate demand, falling Commodity Prices and

increasing Financial Market volatility in major economies. the World Gross Product is projected to grow by a mere 2.4 per cent in 2015 marking a downward revision from the 2.8 per cent. the growth rates of gross fixed capital formation and aggregate demand continue to remain subdued.

the World economy is projected to grow by 2.9 per cent in 2016 and 3.2 per cent in 2017, supported by generally less restrictive fiscal and still accommodative monetary stances worldwide. The anticipated timing and pace of normalization of the United States monetary policy stance is expected to reduce policy uncertainties, while preventing excessive volatility in exchange rates and asset prices. While the normalization will eventually lead to higher borrowing costs, rising interest rates should encourage firms to front-load investments in the short run.

the improvement in global growth is also predicated on easing of downward pressures on commodity prices, which should encourage new investments and lift growth, particularly in commodity-dependent economies. The global economy has suffered a turbulent year defined by the ripple effect of China’s slowdown and the bursting of the oil price bubble amid a general decline in commodity prices. Monetary policies, politics and currency rates have also impacted on Global economic Growth in both overstretched and over-reliant markets.

b) Overview of Indian Economy: India has emerged as the fastest growing major economy in the world as per the Central statistics

organization (Cso) and International Monetary Fund (IMF). According to the economic survey 2015-16, the Indian economy will continue to grow more than 7 per cent in 2016-17.

Indian Economy gained momentum in Fiscal 2016 and is expected to grow at fast pace in next five years. Robust urban consumption and public investment have supported growth despite an unfavorable external environment. During 2015-16, the GDP of India advanced 7.6 per cent, higher than 7.2 per cent in the previous year. Indian economy is expected to grow at 7-7.75 per cent during FY 2016-17, despite the uncertainties in the global market. India has emerged as one of the strongest performers with respect to

HHEC

22 Management Discussion & Analysis

deals across the world in terms of Mergers and Acquisitions (M&A).the International Monetary Fund (IMF) and the Moody’s Investors service have forecasted that India will witness a GDP growth rate of 7.5 per cent in 2016, due to improved investor confidence, lower food prices and better policy reforms.

Furthermore, initiatives like Make in India and Digital India will play a vital role in the driving the Indian economy.

Further, Gst will be a game changing reform for Indian economy by developing a common Indian market and reducing the cascading effect of tax on the cost of goods and services.

The Government of India implemented three major initiatives during this financial year to promote the apparel exports industry.• Interest subvention scheme of 3% on all Rupee denominated pre and post shipment credit• Enhanced duty drawback capping • 2% export benefit on all exports to notified countries

Apart from this, the new textile policy announced recently by the Govt. of India will promote employment generation, economies of scale and boost exports. It is slated to generate over 1 Crore jobs in the textile and apparel industry, attract investments of about INR 74,000 crore and increase exports by $30 billion over the next three years.

c) Overview of the Corporation: the handlooms and handicrafts industry is spread across all over the country and is pre-dominantly

cottage industry located in semi-urban and rural areas. this industry is a major source of income for the artisans and weavers, who are mostly from the weaker section of the society, and provides employment opportunities to large number of people comprising mainly women and the weaker sections of the society.

During the year, there has been an decrease of 28.04 % in the total turnover of the Corporation. However, the Core Group has reported a decline of 4.30 % which is mainly due to decline in Exports on account of decline in business from european countries. Although, the Retail business has been increased by 45.89 %.

d) Segment Analysis and Review the key business segments of the Corporation comprises of Handicrafts (including carpets), Handlooms,

Gold Jewellery, Bullion & Others. The geographical segment comprises of inside India and outside India. The segment results are given in Note no. 2.32. (xi) ‘Additional Notes on Accounts’.

5. OVERALL REVIEW The Corporation is committed to increase the exports of handicraft and handloom products through development

of new products with new designs and quality and exploring new markets. The overall performance of the Corporation during the financial year 2015-16, the core business group of textiles and crafts both in export and retail market will be geared up from the next year with the new initiatives to be taken by the Corporation. With a view to create maximum stakeholder value, the Corporation resources are aimed at:

a) Development of niche products and tapping new markets, where there is negligible presence.b) Improvement in utilization of assets to achieve productivity gains.c) Measures to consistently reduce costs for enhanced profitability.d) Up gradation of facilities in manufacturing, design & development and other trade skills to be better

prepared for the potential growth in demand for the Indian textiles and crafts.e) Providing better market input to artisans & weavers to enable them to provide better quality and latest

design products to HHeC.


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Management Discussion & Analysis

6. MATERIAL DEVELOPMENT IN hUMAN RESOURCES The Corporation in the process of filling the key positions so that right person can be placed at right place to fill up

the vacuum and these posts are likely to be filled. In addition to that to retain the talent pool new policies are being worked out and management is in the process to formulate the plan. Performance appraisal has been taken in to the consideration as the key indication or the identification of the deserving employees. Hence, performance management system has been placed in the Corporation. The Corporation has been training its officials through various training program regularly.

HHEC has been planning with an eye on new parameters introduced in the field. HHEC would like to undergo Risk Management training programs, skill up gradation and training for acquiring Multi- skills will also be planned.

7. CAUTIONARY STATEMENTS Certain statements contained in this Annual Report may constitute forward looking statements within the meaning

of applicable laws and regulations. these statements are based on management’s views and assumptions at the time information was prepared and involve known and unknown risks and uncertainties that could cause actual results or performance to differ materially from those expressed or implied in such statements as discussed more fully elsewhere in this Annual Report. The corporation expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Corporation’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For and on behalf of Board of Directors


Chairman-cum- Managing Director(DIn no. 07192938)

Place: new DelhiDate: 14.12.2016

HHEC

24 Management Discussion & Analysis

Annexure –‘I’ to the Directors’ Report

CORPORATE GOVERNANCE REPORTCORPORATE GOVERNANCE PhILOSOPhY

the Corporation is committed to following sound corporate practices and good Corporate Governance. the Board lays strong emphasis on transparency, fairness, accountability, integrity and professionalism for the sustainable development of all stakeholders.

Company believes that good corporate governance is essential to achieve its long-term corporate goals and to enhance the shareholders value. Your Company believes in functioning in a transparent manner and believes in proper accountability, auditing, disclosure and reporting.

Company feels that the code of Corporate Governance is an excellent tool to secure the corporate excellence in the country. the company has complied with the code of Corporate Governance as required under DPe guidelines. I. BOARD OF DIRECTORS:-

(A) Composition of Board HHeC being a Government Company, appointment / nomination of all the Directors is done by the President

of India, through the Ministry of Textiles, Articles of Association of HHEC stipulate that the number of Directors shall not be less than five and more than eleven. As on 31st March, 2016, there were Four Directors on Board comprising a Chairman-cum-Managing Director and a Director (Finance) as Functional Directors; two part –time Official director as Government Nominees. The composition of the Board of Directors, numbers of the meetings held, attendance of the Directors at Board meeting and last Annual General Meeting in respect of each Director is given herein below:-S.No. Name /Category Total no of

meeting of BOD held in a year

Board Meetings attended during year

Attendance at the AGM held on 30.09.2015

No. of meetings held in the tenure of concerned Director in the Financial year

1. shri nirmal sinha,Chairman cum Managing Director

5 5 1 5

2. shri Alok Kumar, IAs, Development Commissioner(HL), Government nominee Director

5 1 nA 1

3. Dr. K. Gopal, Development Commissioner (HC), IAs, Government nominee Director

5 1 nA 1

4. shri A. Madhukumar Reddy, IRts, Govt. nominee Director

5 4 nA 4

5. Ms. Indrani Kaushal, Govt. nominee Director

5 2 nA 4

6. Ms. Azra Banu, Director (Finance)

5 5 1 5

7. Mr. sunil sethi, Independent Director

5 1 nA 1

8. Ms. Ritu sethi, Independent Director

5 1 nA 1


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Corporate Governance Report

During the year, the Board of HHeC was re-constituted twice.With reference to letter received from Ministry of Textiles, Govt. of India, Office Order No. 1/2/2014-HHEC dated 28.01.2016 and accordingly, Shri Alok Kumar, (IAS) Development Commissioner (HL) and Dr. K. Gopal, (IAS) Development Commissioner (HC), Ministry of Textiles, Govt. of India, has been appointed on the Board of HHEC as a Part time Official Director (Government Nominee Director) in place of Shri A. Madhukumar Reddy, Joint secretary and Ms. Indrani Kaushal, Addl. Eco. Adv., Ministry of Textiles w.e.f. 28.01.2016. As on 31.03.2016, shri Alok Kumar is also holding Directorships in national Handloom Development Corporation Limited and Central Cottage Industries Corporation Of India Ltd. With reference to letter received from Ministry of Textiles Order No. 1/12/2015-HHEC dated 8.12.2016, shri nirmal sinha, Chairman-cum-Managing Director (CMD) ,HHeC was relieved of his responsibilities in the HHEC with immediate effect and Shri Puneet Agarwal, Joint Secretary, Ministry of Textiles holds the charge of the post of CMD, HHeC till regular incumbent joins or until further orders, whichever is earlier. As on date Shri Puneet Agarwal is also holding directorships in Cotton Corporation of India Ltd.

(B) Number of Board Meetings held and date:

Five (5) Meetings of the Board of Directors were held during the financial year 2015-16. The dates on which the meetings were held are 05.06.2015, 29.08.2015, 28.09.2015, 28.12.2015 and 31.03.2016.

the 57th Annual General Meeting of your Company was held on 30th september, 2015.

The 58th Annual General Meeting is going to be held at the Registered Office of the Company at Jawahar Vyapar Bhawan Annexe, 1, Tolstoy Marg, New Delhi-110001 on 15th December, 2016 (thursday) at 4:30 PM.

(C) Code of Conduct & Whistle Blower Policy

(i) the Board of directors has laid down Code of conduct for all Board members and senior Management of the Company. The copies of Code of Conduct as applicable to the Executive Director (including Senior Management of the Company) and Non Executive Directors have been sent to all the Directors and senior Management Personnel. the Code of Conduct & Whistle Blower Policy has been posted on the web site of the company.

(ii) All the members of the Board of Directors and Senior Management personnel have affirmed

compliance with the Code as applicable to them during year ended March 31st, 2016.

II. DISCLOSURES:-

(A) Basis of related party transactions there were no material transactions with related parties during the year the details of “Related Party

Disclosures” are being disclosed in Note no. 2.32. (viii) ‘Additional Notes on Accounts’.

(B) Disclosure of Accounting Treatment the Company follows Accounting standards issued by the Institute of Chartered Accountants of India and

in the preparation of Financial statements, the Company has not adopted a treatment different from that prescribed in any Accounting standard as stated in note no. 2.31.(i) ‘Significant Accounting Policies’.

(C) Board Members and Senior Management Personnel affirmed compliance with the Code of Conduct of the company for the financial year ending on 31st March, 2016.

(D) Remuneration Committee the revised pay scales as per DPe Guidelines dated 26.11.2008 had been implemented w.e.f. 1.04.2011

in accordance with Presidential Directive dated 28.12.2012. Keeping in view the affordability of the Corporation only revised scales are being implemented for the present and other benefits/schemes will be implemented in due course as per the affordability of the Corporation. As the other schemes as per revised Pay scales like Performance related Pay etc. are not yet implemented in the Corporation, hence, the Remuneration Committees is not yet constituted.

HHEC

26 Corporate Governance Report

(E) Remuneration to Directors: The HHEC of India Ltd. being a Government Company, terms and conditions of appointment and remuneration

of whole-time Functional Directors are determined by the Government through the Administrative Ministry, Ministry of Textiles. Non-Executive part-time official Directors (Government Nominees and Independent Directors) do not draw any remuneration.

Remuneration of Functional Directors for the year ended on 31/03/2016 is as under: (Rupees in Lakhs)

S. No. Particulars Shri Nirmal SinhaChairman-cum-

Managing Director

Ms. Azra BanuDirector (Finance)

1. salary including DA 24.28 20.542. Other benefits / allowances paid 11.27 2.153. Performance Incentive - -4. Contribution to PF and other fund 2.54 2.155. Provision for leave as per As- 15 - -6. Provision for Gratuity as per As- 15 - -

Grand Total 38.09 24.84

(F) Board appointed sub- Committees: During the financial year 2015-16, One Audit Committee Meeting was called on 05.06.2015.

Composition of the Audit committee, name of members, Meeting and attendance during the year are as under:

Sr. No. Name of the Members Category No. of Meetings attended

1. shri nirmal sinha, Chairman-cum-Managing Director

Member 1

2 shri sunil sethi, Independent Director Member 13. Ms. Ritu sethi, Independent Director Member 14. Ms. Azra Banu, Director(Finance) Coordinator 1

the Audit Committee dissolved w.e.f 1.08.2015 as there is no Independent Directors on the Board of HHeC as the tenure of Independent Directors has been completed Appointment of independent directors is in process.

(G) the Board of Directors reviews the status on compliances of statutory dues on quarterly basis and accordingly, the Corporation has neither made any non-Compliance, nor are any penalties, strictures imposed on the Company by any statutory authority on any matter related to any guidelines issued by Government, during the last three years.

(h) Further, all other presidential Directives issued with respect to reconstitution of the Board are also complied with.

III. GENERAL BODY MEETINGS:- Location and time of General Meetings held in the last 3 years:

Year Type Date Venue Time2015 AGM 30.09.2015 Jawahar Vyapar Bhawan Annexe , 1 Tolstoy Marg,

new Delhi 110:30 AM

2014 AGM 30.09.2014 -do- 4:00 PM2013 AGM 30.09.2013 -do- 4:00 PM


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Corporate Governance Report

IV. ShAREhOLDING PATTERN:- As at 31.03.2016 (In Rupees)

S. NO. Name of the Shareholder No. of Share Face Value Amount 1. President of India 1381998 100 13,81,99,800/-2. Shri Nirmal Sinha Jointly with

President of India 1 100 100/-

3. Shri S.R. Gaikwad Jointly with President of India

1 100 100/-

Total 1382000 13,82,00,000/-

As at 31.03.2015 S. NO. Name of the Shareholder No. of Share Face Value Amount 1. President of India 1381998 100 13,81,99,800/-2. Shri Nirmal Sinha Jointly with

President of India 1 100 100

3. Shri S. R. Gaikwad Jointly with President of India

1 100 100/-

Total 1382000 13,82,00,000/-

V. ADDRESS FOR CORRESPONDENCE:-The Handicrafts & Handlooms Exports Corporation of India Ltd Jawahar Vyapar Bhawan Annexe, 1 Tolstoy Marg, New Delhi 1Phone no. 011-23701086Fax No. 011-23701051e mail- [email protected]

VI. GUIDELINES ON CORPORATE GOVERNANCE BY DPE:- In May, 2010 the Department of Public Enterprises has notified mandatory Guidelines on Corporate Governance,

2010 for Central Public sector enterprises (CPses). the Board of Directors of HHeC has adopted these guidelines as the policy on Corporate Governance.

For and on behalf of Board of Directors


Chairman-cum- Managing Director(DIn no. 07192938)


HHEC

28 Corporate Governance Report

Annexure III to Directors’ Report

Form No. MGT-9ExTRACTOFANNUALRETURN

as on the financial year ended on 31st March, 2016

[Pursuant to section 92(3) of theCompaniesAct, 2013 and rule12 (1) of theCompanies (Management and Administration) Rules, 2015]

I. REGISTRATION AND OThER DETAILS:i CIn U74899DL1958GOI002925ii Registration Date 11.04.1958iii name of the Company The Handicrafts & Handlooms Exports Corporation of

India Ltd.,iv Category/sub-Category of the Company Government Companyv Address of the Registered office and contact

detailsJawahar Vyapar Bhawan, Annexe 1 , Tolstoy Marg, new Delhi-110001

vi Whether listed company novii name, Address and Contact details of Registrar

and transfer Agent, if anynA

II. PRINCIPAL BUSINESS ACTIVITIES OF ThE COMPANY All the business activities contributing 10% or more of the total turnover of the company shall be stated:-

Sr. No.

Name and Description of main products/ services

NIC Code of the Product/ service

% to total turnover of the company

1 Basic Precious metals like Gold and silver

99611926 98%

III. PARTICULARS OF hOLDING, SUBSIDIARY AND ASSOCIATE COMPANIESSr. No.

Name And Address of The Company

CIN/GLN holding/ Subsidiary/Associate

%of shares held

ApplicableSection

1 NIL NIL NIL NIL NIL IV. ShARE hOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)

i. Category-wiseShareHoldingCategory ofShareholders

No. of Shares held at the beginning of the year

No. of Shares held at the end of the year

% Change during

the yearDemat Physical total % of

total shares

Demat Physical total % of total

sharesA. Promoter1) Indian

a) Individual/ HUF - 2 2 2% - 2 2% 2 -b) Central Govt. - 1381998 1381998 98% - 1381998 98% 1381998 -c) state Govt(s). - - - - - - - - -d) Bodies Corp - - - - - - - - -e) Banks / FI - - - - - - - - -f) Any other - - - - - - - - -

sub-total(A)(1):- - 1382000 1382000 100% - 1382000 100% 1382000 -


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MGt-9

2) Foreigng) nRIs-Individuals - - - - - - - - -

h) other-Individuals - - - - - - - - -

i) Bodies Corp. - - - - - - - - -

j) Banks / FI - - - - - - - - -

k) Any other…. - - - - - - - - -

sub-total(A)(2):- - - - - - - - - -

B. Public Shareholding1. Institutions - - - - - - - - -

a) Mutual Funds - - - - - - - - -

b) Banks / FI - - - - - - - - -

c) Central Govt - - - - - - - - -

d) state Govt(s) - - - - - - - - -

e) Venture Capital Funds

- - - - - - - - -

f) Insurance Companies - - - - - - - - -

g) FIIs - - - - - - - - -

h) Foreign Venture Capital Funds

- - - - - - - - -

i) others (specify) - - - - - - - - -

sub-total(B)(1) - - - - - - - - -

2. Non Institutions - - - - - - - - -

a) Bodies Corp.(i) Indian(ii) overseas

- - - - - - - - -

b) Individuals(i) Individual shareholders holding nominal share capital upto Rs. 1 lakh(ii) Individual shareholders holding nominal share capital in excess of Rs 1 lakh

- - - - - - - - -

c) others(specify) - - - - - - - - -

sub-total(B)(2) - - - - - - - - -

total Public shareholding (B)=(B)(1)+ (B)(2)

- - - - - - - - -

C. shares held by Custodian for GDRs & ADRs

- - - - - - - - -

Grand total(A+B+C)

- 1382000 1382000 100% - 1382000 100% 1382000 -

HHEC

30 MGt-9

ii. Share holding of PromotersSr. No

Share holder’s Name Share holding at the beginning of the year Share holding at the end of the year % change in share holding during the year

No. of Shares

% of total Shares of the company

%of Shares Pledged / encumbered to total shares

No. of Shares

% of total Shares of the company

%of Shares Pledged / encumbered to total shares

1 the President of India 1381998 98% - 1381998 98% - -

2 shri nirmal sinha 1 1% - 1 1% - -3 shri s.R.Gaikwad 1 1% - 1 1% - -

Total 1382000 100% - 1382000 100% - -

iii. Change in Promoters ‘Shareholding please specify, if there is no change.Sr. no

Shareholding at the beginning of the year

Cumulative Shareholding during the year

no. of shares % of total shares of the company

no. of shares % of total shares of the company

At the beginning of the year 1382000 100% 1382000 100%Date wise Increase / Decrease in Promoters share holding during the year specifying the reasons for increase/ decrease (e.g. allotment / transfer / bonus/ sweat equity etc):

NA NA NA NA

At the End of the year 1382000 100% 1382000 100%

V. INDEBTEDNESS Indebtedness of the Company including interest outstanding/accrued but not due for payment:

` In LakhsSecured Loans

excluding deposits

UnsecuredLoans

Deposits TotalIndebtedness

Indebtedness at the beginning of the financial yeari) Principal Amountii) Interest due but not paidiii) Interest accrued but not

2503.00

2503.00--

- - -

total(i+ii+iii) 2503.00 - - -Change in Indebtedness during the financial year - Addition - Reduction

-966.64

- - -

net Change 966.64 - - -Indebtedness at theend of the financial yeari) Principal Amountii) Interest due but notpaid iii) Interest accrued but not due

1536.36--

- - -

Total (i+ii+iii) 1536.36 - - -


31

58th

MGt-9

VI. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A. Remuneration to Managing Director, Whole-time Directors and /or Manager In `

Sl. No.

Particulars of Remuneration Name of MD/WTD/ Manager Total AmountShri Nirmal Sinha, CMD

Ms. Azra Banu, Director

(Finance)1 Gross salary

(a)salary as per provisions contained in section17(1) of the Income-tax Act,1961

33,24,605.00 22,44,135.00 55,68,740.00

(b)Value of perquisites u/s17(2)Income-tax Act,1961

- - -

(c)Profits in lieu of salary under section17(3)Income- tax Act,1961

2 stock option nA nA nA 3 sweat equity nA nA nA 4 Commission

- as% of profit- others, specify…

nA nA nA

5 others, please specify - - -6 total(A) 33,24,605.00 22,44,135.00 55,68,740.00

Ceiling as per the Act 60,00,000.00 60,00,000.00

B. Remuneration to other directors:Sl. No. Particulars of Remuneration Shri Sunil Sethi Mrs. Ritu Sethi Total

Amount1 Independent Directors

·Fee for attending board/Audit committee meetings·Commission·others, please specify

Rs. 2000 (Rs. 1000/- for each meeting)

Rs. 2000 (Rs. 1000/- for

each meeting)

Rs. 4000

total(1) Rs. 2000 Rs. 2000 Rs. 40002 other non-executive Directors

·Fee for attending board committee meetings·Commission·others, please specify

nil nil nil

total(2) nil nil niltotal(B)=(1+2) Rs. 2000 Rs. 2000 Rs. 4000

3 total Managerial Remuneration nA nA nA4 overall Ceiling as per the Act nA nA nA

shri sunil sethi and Ms. Ritu sethi ceased to be the Independent Directors of the company w.e.f. 31.07.2015.

HHEC

32 MGt-9

C. Remuneration to Key Managerial Personnel Other Than MD/Manager/WTDSl. No. Particulars of Remuneration Key Managerial Personnel

Ceo Companysecretary

CFo total

1 Gross salary(a) salary as per provisions

contained in section17(1)of the Income-tax Act,1961

(b) Value of perquisites u/s 17(2)Income-tax Act,1961

(c) Profits in lieu of salary under section 17(3)Income-tax Act,1961

- 168998.00 - -

2 stock option - - - -3 sweat equity - - - -4 Commission

- as %of profit-others, specify…

- - - -

5 others, please specify - - - -total - 168998.00 - -

VII. PENALTIES/PUNIShMENT/COMPOUNDING OF OFFENCES:Type Section of the

companies Act

Brief description

Details of Penalty/Punishment/ Compounding fees imposed

Authority[RD/NCLT/ Court]

Appeal made. If any(give details)

A. CompanyPenalty nA nA nA nA nAPunishment nA nA nA nA nACompounding nA nA nA nA nA

B. DirectorsPenalty nA nA nA nA nAPunishment nA nA nA nA nACompounding nA nA nA nA nA

C. Other Officers In DefaultPenalty nA nA nA nA nAPunishment nA nA nA nA nACompounding nA nA nA nA nA


33

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MGt-9

(1) A brief outline of the company’s CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or Programmes.

the Corporation endeavors to contribute suitably to the society both directly and indirectly through various means, viz. generating employment for the artisans and weavers who mainly belongs to Below Poverty Line, providing exposure to their ethnic arts and crafts at international level and providing free space to artisans and weavers in the events organized at Noida Complex for display and sale of their products. The Corporation has been always emphasizing on empowerment of weaker section of artisans and weavers by promoting and providing a platform to market their products and sourcing procurement from the textiles and craft clusters through its procurement centers.

The Corporation is also contributing towards the “Swachh Bharat Abhiyan” as launched by the Hon’ble Prime Minister of India, shri narendra Modi on 2nd october, 2015.

Web link for CsR Policy: http://www.hhecworld.com/csr/csr_policy.html

(2) The Composition of the CSR Committee. As per the minutes of the proceedings of the 327th Board meeting held on 20th march, 2013 at 11:30 a.m. at

Registered Office at Jawahar Vyapar Bhawan Annexe, 1, Tolstoy Marg, New Delhi-110001, Item No. 2.18 a Board Level Committee for Corporate Social Responsibility and Sustainability was formed in the following manner with the approval of the Board.:-

1. shri nirmal sinha, Chairman-cum-Managing Director, Member2. Ms. Azra Banu, Director(Finance),Member3. shri sunil sethi, Independent Director, Member

But the same stands dissolved w.e f. 1.08.2015 as there is no Independent Directors on the Board of HHeC as the tenure of Independent Directors has been completed and appointment of independent directors is in process.

(3) Average net profit of the company for last three financial years: ` 3.91 crores

(4) Prescribed CSR Expenditure (2% of the amount as in item 3 above): Rs.0.08 crores

(5) Details of CSR spent during the financial year. (a) Total amount to be spent for the financial year: Rs. 0.08 crores (i) Expenditure on creation of Drinking water and Sanitation facility: Rs. 0.11 crores

(b) Amount unspent, if any:- nA

Annexure IV to Directors’ Report

ThE ANNUAL REPORT ON CSR ACTIVITIES TO BE INCLUDED IN ThE BOARD’S REPORT

HHEC

34 CsR Report

(c) Manner in which the amount spent during the financial year is detailed below:S. No. Particulars TOTAL(1) CsR project or activity

identifiedCreation of sanitation facility

Creation of Drinking water facility

Contribution to Clean Ganga Fund

(2) sector in which the project is covered

Health & safety Health & safety

(3) Projects or programme(1) Local area or other(2) specify the state and

district where projects or programs was undertaken

Bhadohi Distt. Uttat Pradesh

Bhadohi Distt. Uttat Pradesh

(4) Amount outlay (budget) project or programme wise

` 8.53 lakhs ` 2.00 Lakhs ` 10 .53 lakhs

(5) Amount spent on the projects or programs subheads:1. Direct expenditure on projects or programs.2.overheads

` 6.00 lakhs ` 2.53 lakhs ` 2.00 lakhs ` 10.53 lakhs

(6) Cumulative expenditure up to the reporting period

` 6.00 lakhs ` 2.53 lakhs ` 2.00 Lakhs ` 10.53 lakhs

(7) Amount spent direct or through implementing agency

` 6.00 lakhsPaid directly to the implementing agency: sulabh sanitation Mission Foundation

` 2.53 lakhsPaid directly to the implementing agency: sulabh sanitation Mission Foundation

` 2.00 lakhsPaid directly to national Mission Clean Ganga Fund

` 10.53 lakhs

6. In case the company has failed to spend the two per cent of the average net profit of the last three financial years or any part thereof, the company shall provide the reasons for not spending the amount in its Board report: nA

It is certified that the implementation and monitoring of CSR Policy, is in compliance with CSR objectives and Policy of the company.

sd/- sd/-(Puneet Agarwal) (Azra Banu)Chairman-cum-Managing Director Director (Finance)(DIn no. 07192938) (DIn no. 03577753)



35

58th

CsR Report

HHEC

36 Corporate Governance Compliance Certificate


37

58th

HHEC

38 Financial Statements

BALANCE ShEET AS AT 31ST MARCh, 2016

Particulars Note No 31st MARCh, 2016 31st MARCh, 2015 Rs. in Lakhs

I. EQUITY AND LIABILITIES(1) Shareholder's Funds(a) share Capital 2.1 1,382.00 1,382.00 (b) Reserves and surplus 2.2 (230.88) 844.97 (2) Share application money pending allotment - - (3) Non-Current Liabilities(a) Other Long term liabilities 2.3 82.06 1,025.74 (b) Long term provisions 2.4 1,110.36 1,100.93 (4) Current Liabilities(a) short-term borrowings 2.5 1,536.36 2,503.00 (b) trade payables 2.6 5,095.20 3,385.45 (c) other current liabilities 2.7 2,300.80 1,772.24 (d) short-term provisions 2.8 94.91 172.66 Total 11,370.81 12,186.99

II. Assets(1) Non-current assets(a) Fixed assets

(i) tangible assets 2.9 886.62 870.48 (ii) Intangible assets 1.99 2.58 (iii) Capital work-in-progress - 62.83 (iv) Intangible assets under development - -

(b) non-current investments 2.10 0.06 0.06 (c) Deferred tax assets (net) 2.29 854.12 506.26 (d) Long term loans and advances 2.11 228.20 369.53 (e) other non-current assets 2.12 - 0.08 (2) Current assets(a) Inventories 2.13 4,775.56 396.32 (b) trade receivables 2.14 3,255.74 3,704.74 (c) Cash and Bank Balance 2.15 834.35 4,525.60 (d) short-term loans and advances 2.16 273.82 719.56 (e) other current assets 2.17 260.35 1,028.95 Total 11,370.81 12,186.99 Contingent Liabilities 2.18Significant Accounting Policies 2.31Additional notes on Account 2.32As per our report of even date

The handicrafts & handlooms Exports Corporation of India Ltd.

for Bansal & Co. Chartered Accountants Firm Regd. no: 001113n

sd/-(CA D.S Rawat)

PartnerMembership no: 083030

Place : New DelhiDated : 29 September, 2016

sd/- (Gopal Goyal)

Assistant Manager

sd/-(Ujjal Datta)

Chief Finance Manager sd/-(Nirmal Sinha)

Chairman-cum-Managing Director DIn - 01475224

sd/- (R. Govindarajan) Finance Manager

sd/-(Azra Banu)

Director (Finance) DIn - 03577753

sd/- (Riddhi Madan Gaur)

Assistant Company secretary


39

58th

Financial Statements

Particulars Note No 31st MARCh, 2016 31st MARCh, 2015 Rs. in Lakhs

I. Revenue from operations 2.19 197,252.01 274,081.73 II. other Income 2.20 683.75 689.41 III. Total Revenue (I +II) 197,935.76 274,771.14 IV. Expenses:Cost of materials consumed 2.21 30,742.39 2,207.01 Purchase of stock-in-trade 2.22 169,442.04 266,052.33 Changes in inventories of finished goods,work-inprogress and stock-in trade 2.23 (4,345.41) 1,989.06 Employee benefit expense 2.24 1,156.38 1,136.07 Financial costs 2.25 76.16 172.47 Depreciation and amortization expense 2.9 98.80 107.08 Other expenses 2.26 2,291.12 1,355.24 Total Expenses 199,461.48 273,019.26 V. Profit/(Loss) before prior period, exceptional and (1,525.72) 1,751.88 extrordinary items and tax (III-IV)VI. Prior Period Items 2.27 (105.90) 336.89 VII. Profit/(Loss) before exceptional, extraordinary items and tax (V-VI) (1,419.82) 1,414.99 VIII. Exceptional Items 2.28 8.86 921.38 Ix. Profit/(Loss) before extraordinary items and tax (VII-VIII) (1,428.68) 493.61 x. Extraordinary Items - - xI. Profit/(Loss) before tax (Ix - x) (1,428.68) 493.61 xII. Tax expense: 2.29 (1) Current tax - 316.00 (2) Earlier year tax 1.72 0.48 Less :MAT Credit Entitlement (6.69) (57.00)

(4.97) 259.48 (3) Deferred tax (347.86) (106.08)xIII. Profit/(Loss) for the period (xI-xII) (1,075.85) 340.21 xIV. Earning per equity share:(in Rs.) 2.30 (1) Basic (After exceptional item) (77.85) 24.62 (2) Diluted (After exceptional item) (77.85) 24.62 Contingent Liabilities 2.18Significant Accounting Policies 2.31Additional notes on Account 2.32 As per our report of even date

The handicrafts & handlooms Exports Corporation of India Ltd.STATEMENT OF PROFIT AND LOSS FOR ThE YEAR ENDED 31ST MARCh, 2016


sd/-(CA D.S Rawat)



sd/- (Gopal Goyal)

Assistant Manager

sd/-(Ujjal Datta)


Chairman -cum- Managing Director DIn - 01475224


sd/-(Azra Banu)




HHEC


Particulars 31st March, 2016 31st March, 2015 Rs. In Lakhs

A. CASh FLOW FROM OPERATING ACTIVITIES Net Profit / (Loss) before Tax (1,428.68) 493.61 Adjustments for: - Depreciation 98.80 107.08 - Interest Income (220.44) (268.61) - Interest Expenditure 76.16 172.46 - Profit / (Loss) on Fixed Assets sold / discarded (Net) 0.11 7.33 Operating Profit/(Loss) before Current / Non-Current Assets and Liabilities

(1,474.05) 511.87

Adjustments for: trade receivable 449.00 1,498.51 Inventories (4,379.24) 1,962.99 Short/Long term Loans/Advances & Other Current Assets 1,355.77 (244.90) Short/Long term Libilities and Provisions 192.74 (10,626.99) Gratuity, Leave encashment & Others Employees Benefit 110.32 (105.83) Cash generated from operation (3,745.46) (7,004.35) - Net Income Tax paid 4.97 (259.48) Net Cash from Operating Activities (A) (3,740.49) (7,263.83)

B. CASh FLOW FROM INVESTING ACTIVITIES - Purchase of Fixed Assets and change in Capital Work-in-Progress (52.59) (83.19) - Proceeds from sale of Fixed Assets 0.08 6.16 - Interest Received 220.44 268.61 Net Cash from Investing Activities (B) 167.93 191.58

C. CASh FLOW FROM FINANCING ACTIVITIES - Proceeds/(Repayment) of Secured Loans - - - Interest paid (76.16) (172.46) - Dividend paid (35.43) (33.86) - Dividend Tax paid (7.08) (5.75) Net Cash from Financing Activities (C) (118.67) (212.07) Net Increase / (Decrease) in Cash & Cash Equivalents (A+B+C) (3,691.25) (7,284.33) Cash & Cash equivalents as at 1st April, 2015 4,525.60 11,809.93 Cash & Cash equivalents as at 31st March, 2016 834.35 4,525.60 Notes to the Cash Flow Statement Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:- a. Cash on hand and balances with banks 350.13 1,526.23 b. Fixed Deposits with banks (Refer Note No. 2.15)* 484.22 2,999.37 c. Cash and Cash equivalents 834.35 4,525.60 d. Effect of exchange rate changes - - e. Cash and Cash equivalents restated as at 31st March, 2016 834.35 4,525.60

(-) Indicates Outflow.Note: The above cash flow statement has been prepared by using the indirect method as per Accounting Standard - 3 notified by Central Govt.*These deposit includes Rs. 101.06 Lakhs which are not free for use as these are given to Bank as lien.

The handicrafts & handlooms Exports Corporation of India Ltd.CASh FLOW STATEMENT FOR ThE YEAR ENDED


sd/-(CA D.S Rawat)



sd/- (Gopal Goyal)

Assistant Manager

sd/-(Ujjal Datta)




sd/-(Azra Banu)





41

58th


2 Notes on Account for the year ended as on 31st March, 2016 2.1 Share Capital

Particulars As at As at31st March, 2016

Rs. in lakhs31st March, 2015

Rs. in lakhsAuthorisedequity shares, Rs.100/- par value2,000,000 equity shares 2,000.00 2,000.00

Issued, subscribed and Paid upequity shares, Rs.100/- par value1,382,000 equity shares 1,382.00 1,382.00 [ of the above 15,207 equity shares of Rs.100/- eachwere alloted for consideration other than cash ]

1,382.00 1,382.00

the Company has only one class of shares referred to as equity shares having a par value of Rs.100/-each. each shareholder is entitled to one vote per share.

the details of shareholder holding more than 5% shares as at March 31, 2016 is set out belowName of the Shareholder As at March 31, 2016 As at March 31, 2015

No. of shares % held No. of shares % held President of India* 1382000 100 1382000 100.00

* includes 1 share held jointly with Nirmal Sinha and 1 share with S.R. Gaikwad

the reconciliation of the number of shares outstanding and the amount of share capital as at 31/03/2016 is set out below:Particulars As at March 31, 2016 As at March 31, 2015

No. of shares Rs. In Lakhs No. of shares Rs. In Lakhs number of shares at the beginning 1382000 1,382.00 1382000 1,382.00 Adjustment during the year - - - - Number of shares at the end 1382000 1,382.00 1382000 1,382.00

2.2 Reserve & SurplusParticulars As at As at

31st MARCh, 2016Rs. in lakhs

31st MARCh, 2015Rs. in lakhs

Surplus opening Balance 844.97 569.47 Add : Transfer from Profit and Loss Account (1,075.85) 340.21

(230.88) 909.68 Less : Transfer to Retained Earnings during the year* - 22.20 Closing Balance (230.88) 887.48 Amount available for appropriation (230.88) 887.48 Proposed Dividend - 35.43 Corporate Dividend Tax - 7.08 surplus - Closing Balance (230.88) 844.97

* In respect of assets, remaining useful life of which is nil as on 01.04.2014, the carrying cost remained apart from residual value is charged against opening retained earning as per Companies Act, 2013..

HHEC


2.3 Other Long Term LiabilitiesParticulars As at As at

31st March, 2016Rs. in lakhs


Long Term Trade Payables - 24.48

othersAdvance/eMD Received from Customers - 59.79 Other Contractual Liability - 810.89 Deffered Govt. Grant in Aid 6.39 7.28 Expenses payable - 36.71 security Deposits received 75.67 79.79 Misc. other long term liabilities - 6.80

82.06 1,025.74

2.4 Long Term ProvisionsParticular As at

31 MARCh, 2016Rs. in lakhs

As at31 MARCh, 2015

Rs. in lakhsProvisions for Employee Benefits - Provision for Gratuity 497.89 502.87 Less: Fair Value of Plan Assets 391.91 470.08

105.98 32.79

- Provision for Leave Encashment 223.75 218.51 Less: Fair Value of Plan Assets 203.08 213.85

20.67 4.66

- Provision for Post Retirement Medical 123.59 113.10 others- Provision for Property/Water Tax (Refer to note No. 2.18 (a) (vii) - 6.31 - Provision for Rent 336.37 419.98 - Provision for Pay Revision 523.75 524.09

1,110.36 1,100.93

2.5 Short Term BorrowingsParticulars As at As at



Short Term LoanBuyers Credit From state Bank of India (US$ 18,09,282.42 at a Interest- Libor + 0.41)secured (by hypothecation of the entire current assets including RM, sIP, FG, stores and spares, receivables, both present and future excluding bank deposits kept as pledge against loans and overdraft)

1,200.15 2,216.41

Working Capital LoanCash Credit 336.21 286.59 secured (by hypothecation of stocks, book debts and other moveable assets)

1,536.36 2,503.00


43

58th


2.6 Trade PayablesParticulars As at As at



trade Payables - others 5,095.20 3,385.45

5,095.20 3,385.45

Micro, Small and Medium Enterprises - The Information under MSMED Act has been disclosed to the extent such vendors have been identified by the company based on the Certificates provided by them. The details of amounts outstanding to them based on available information with the Company are as under Particulars As at As at



i) the principal amount and the interest due thereon remaining unpaid to any supplier

Principal Amount 90.36 157.59Interest thereon nil nil

ii) the amount of interest paid by the buyer in terms of section 18, alongwith the amount of the payment made to the supplier beyond the appointed day

nil nil

iii) the amount of interest due and payable for the year of delay in making payment (which have been paid but beyond the appointed day during the period) but without adding the interest specified under this act

nil nil

iv) the amount of interest accrued and remaining unpaid nil nil

v) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues above are actually paid to the small investors

nil nil

2.7 Other Current LiabilitiesParticular As at

31 March, 2016Rs in lakhs

31 March, 2015 Rs in lakhs

Duties & Taxes PayableVat Payable 23.64 66.84 PF Payable * 20.88 16.26 Sales Tax Payable 0.84 6.37 Service Tax Payable 0.43 - tDs Payable 33.05 99.42

78.84 188.89 othersAdvance Received from Customers 137.38 121.82 Other Contractual Liability 1,255.55 445.85 Amount Received for saarc Project 36.85 40.35 security Deposits received 30.00 19.51 Interest accrued but not due 0.73 1.23 Unspent balance of government grant ** 72.11 11.38Deffered Govt. grant-in-Aid 0.96 0.96Amount Payable to Bank - 1,527.99 Less:-Foreign Currency Receivable - 1,515.42

HHEC


Particular As at 31 March, 2016

Rs in lakhs 31 March, 2015

Rs in lakhs net - 12.57 Difference in Exchange (Forex) Payable - 352.68 Forward cover premium payable - 4.33 Expenses payable 671.94 569.70Misc. other liabilities 16.44 2.97

2,221.96 1,583.35 2,300.80 1,772.24

* The amount of PF payable - Employees Contribution is Rs. 12.22 lakhs (Previous Year Rs. 10.96 Lakhs), Employer Contribution is Rs. 6.92 Lakhs (Previous Year Rs. 6.12 Lakhs) and advances paid to CPF Trust is 1.74 Lakhs (Previous Year Rs. (0.83) Lakhs) The net effect of Rs. 20.88 Lakhs (Previous Year Rs. 16.26 Lakhs) is shown above.

** Unspent balances out of Government grants of Rs. 72.11 lakhs shown under short term liabilities (Previous Year Rs. 11.38 lakhs) include Rs. nil lakhs (Previous year Rs. nil lakhs) towards completed/cancelled projects.

2.8 Short Term ProvisionsParticulars As at As at



Provision for Employee Benefits - Provision for Gratuity 63.65 74.52 Less: Fair Value of Plan Assets 50.10 69.66

13.55 4.86

- Provision for Leave Encashment 19.38 20.89 Less: Fair Value of Plan Assets 17.59 20.45

1.79 0.44

- Provision for Post Retitrement Medical Benefit 9.83 9.24

others- Provision for Property/Water Tax (Refer to note No. 2.18 (a)(vii) 6.31 - Provision for Pay Revision 63.43 98.72 Provision for Taxation (Net of Advance Tax & TDS) - 16.89 Proposed Dividend - 35.43 Corporate Dividend Tax - 7.08

94.91 172.66


45

58th


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HHEC


2.10 Non Current InvestmentParticulars As at As at



Investment in shares - Unquoted(valued at cost)

All India Handloom Fabrics Marketing Co-Op Society Ltd. 0.06 0.06 6 'C' Class shares of Rs.1,000/- each

Ivory Tower Premises Co-op Society Ltd.5 shares of Rs.50/-each

- -

0.06 0.06

2.11 Long Term Loans & AdvancesParticulars As at As at



Loans to Staff - Unsecured, Considered Good 107.96 119.23

107.96 119.23 Advances to staff - Unsecured, Considered Good 1.78 3.33

1.78 3.33

Advances to Directors - Unsecured, Considered Good - 0.01

other Advances - Unsecured, Considered Good 21.95 54.21 - Considered Doubtful 70.44 37.01 Less : Provision for doubtful debts (70.44) (37.01)

21.95 54.21

sundry Deposits 48.18 86.03

- Considered Doubtful 44.82 0.79 Less : Provision for doubtful debts (44.82) (0.79)

48.18 86.03

Deposit with Registrar Small Causes Court, Mumbai * - 94.61

Income Tax Paid [Refer Note No:2.32 iv (a)] 44.24 8.05 Insurance claim receivable - Considered Doubtful 1.83 1.83 Less : Provision for doubtful advance (1.83) (1.83)

- - Sales Tax Recoverable - Unsecured, Considered Good 4.09 4.06 - Considered Doubtful 1.30 1.30 Less : Provision for doubtful advance (1.30) (1.30)

4.09 4.06 228.20 369.53

* The corporation has Deposited the Amount of Mesne profit @ Rs. 37 per sq. ft. per month from 01.03.2001 till December 2010 in the court of small Causes, Bombay vide order dated 30.07.2011. the sum has been released by Hon’ble Court to the concerned party in July, 12. The same has been adjusted in the Current Financial Year.


47

58th


2.12 Other Non Current AssetsParticulars As at As at



trade ReceivableOutstanding for a period exceeding 6 months from the due date - secured, Considered Good - - - Unsecured, Considered Good - -

- -

Unsecured - Doubtful 2,460.55 1,449.25 Less: Provision for doubtful debts (2,460.55) (1,449.25)

- - DePB Receivable - Unsecured, Considered Good - - - Considered Doubtful 6.78 5.02 Less : Provision for doubtful advance (6.78) (5.02)

- - Duty Drawback Receivable - Unsecured, Considered Good - 0.08 - Considered Doubtful 28.60 30.29 Less : Provision for doubtful advance (28.60) (30.29)

- 0.08 other Contractual Receivable - Considered Doubtful 1.26 - Less : Provision for doubtful advance (1.26) -

- - - 0.08

2.13 InventoriesParticulars As at As at



(a) Raw Material 64.52 28.67 stock in transit - -

64.52 28.67

(b) Stock in Trade (incl. Finished Goods) * 4,700.51 354.25 stock in transit 4.07 0.84

4,704.58 355.09

(c) spare Parts 3.89 3.89 (d) others (Packing Material) 2.57 8.67

4,775.56 396.32

* The above stock does not include the stock lying at vault agency at unfixed price.

Mode of Valuationa) Handloom / Ready to wear (except at Chennai Branch), Handicrafts and carpets inventories are valued

according to specific identification method of accounting - at lower of purchase cost and net realizable value [i.e. arrived after mark-down as per (b)]. In case of Chennai Branch - Handlooms and Ready to Wear inventories are valued according to FIFo method of accounting - at

lower of purchase cost or net realizable value [i.e. arrived after mark-down as per (b)].

HHEC


b) Mark-Down Unless the circumstance in any case demand a higher mark-down, as determined and approved by the

Management, inventories are marked down as below:-Age of Stocks % Mark-downBelow 1 year -

1-2 year 25%2-3 year 50%

Above 3 year 70%

c) Gold & silver stocks are valued at purchase cost or net realizable value, whichever is less.d) stock-in-transit (outwards) are valued at CIF/C&F/FoB value of purchase cost, whichever is lesse) stock-in-transit (inwards) are valued at purchase cost plus custom duty.f) Handlooms fabrics and Ready-to-wear items purchases for sampling and converted into samples are

taken at NIL valueg) Damaged stocks are written off.h) stores, spare parts and packing material are valued at purchase cost.i) Stationery stocks are taken at NIL value.

other disclosuresa) In pursuance of accounting policy no. 5(a) &(b), the stocks have been valued after mark-down (including

additional mark-down) by Rs.129.29 lakhs (Previous Year Rs. 128.94 lakhs) Particular 31 March, 2016

Rs. in lakhs31 March, 2015

Rs. in lakhsInventories of stock in trade & Raw Material Before mark- down

4,898.39 512.70

Mark down 129.29 128.94 Inventories of stock in trade & Raw Material After mark- down

4,769.10 383.76

b) The following discripencies were noticed during physical verification of stocks as compared to book records, which have been suitably dealt with in the books of accounts:- Particular 31 March, 2016

Rs. in lakhs31 March, 2015

Rs. in lakhsshortages 3.46 2.12 Excesses 1.45 0.64 Damages 5.79 1.91

c) Balance of stocks held on consignment with agents at book value of Rs.2.44 lakhs (Previous Year Rs.2.66 lakhs) and with others at book value of Rs.2.22 lakhs(Previous Year Rs.2.22 lakhs) have not been confirmed, stock of Rs.2.22 lakhs (Previous Year Rs.2.31 lakhs) ageing more than 3 years have been marked down 100%.

d) stocks held by the Corporation on consignments amounts to Rs.3.07 lakhs (Previous Year Rs. 5.84 lakhs).

e) The stock of Jayakar Volumes and silver articles held by the Corporation out of grants received from Government of India valuing Rs.1.63 lakhs (Previous Year Rs.1.63 lakhs) and Rs.0.31 lakhs (Previous Year Rs.0.38 lakhs) respectively have not been included in the inventory held by the Corporation.


49

58th


2.14 Trade ReceivablesParticulars As at As at



Outstanding for a period exceeding 6 months from the due date - secured, Considered Good (Refer note no. 2.32 (ii)(e) 554.00 554.00 - Unsecured, Considered Good (Refer note no.2.32(ii)(f) 701.41 743.88

1,255.41 1,297.88 other Debts - secured, Considered Good - - - Unsecured, Considered Good 2,000.33 2,406.86

2,000.33 2,406.86 3,255.74 3,704.74

2.15 Cash & Bank BalanceParticulars As at As at



Cash & Cash equivalentsCash in Hand 2.48 1.80 Cheques in Hand - - Balances with Bank:- - in India in current accounts 267.19 1,460.40 - outside India in current accounts 1.31 1.25

other Bank Balances- in deposits accounts 462.31 649.86 - in fixed deposits accounts -Margin Money* 21.91 2,349.50 - in India in Current accounts (for Court Case)(Refer Note No. 2.18(c)(ii)**

79.15 62.79

834.35 4,525.60

*The deposits are not free for use as these are to bank as lien.** These Deposit are not Free for use as it is Lien to Bank.

HHEC


Particular As at 31 March, 2016

Rs. in lakhs

As at31 March, 2015

Rs. in lakhsIn current accounts - in India

Axis Bank 4.55 5.39 Bank of Baroda 1.53 0.61 Canara Bank 0.27 3.89 Corporation Bank 4.57 4.52 Development Credit Bank Ltd. 1.45 45.81 HDFC Bank 0.95 1.65 IDBI Bank 97.62 58.34 Indian Bank 0.12 0.12 Indian overseas Bank 0.85 0.07 Indusind Bank 21.35 6.73 Jammu & Kashmir Bank 0.41 0.41 JSC VTB Bank 1.00 1.00 oriental Bank of Commerce 1.42 1.42 Punjab national Bank 4.55 5.08 Ratnakar Bank 0.62 1,271.93 state Bank of India 125.78 53.27 United Bank 0.10 0.11 Vijaya Bank 0.05 0.05

267.19 1,460.40 In current accounts - outside IndiaCommercial Bank of Kuwait, Kuwait 1.31 1.25

1.31 1.25 others Bank BalanceIn Deposit Accounts - In India

Corporation Bank 10.00 20.00 Development Credit Bank Ltd. - 320.00 IDBI Bank 215.93 249.16 Indusind Bank 105.00 Indusind Bank - term Deposit 0.38 0.32 Punjab national Bank 101.00 - state Bank of India 30.00 60.38

462.31 649.86

- in fixed deposits accounts -Banker 's lien against Buyer's Credit/Margin Money 21.91 2,349.50

Indusind Bank 21.91 2,349.50 In current accounts - in India

IDBI Bank 79.15 62.79 79.15 62.79


51

58th


2.16 Short Term Loan & AdvancesParticulars As at As at



Loans to Staff - Unsecured, Considered Good 18.86 19.84

Advance to staff - Unsecured, Considered Good 19.17 15.37

Advances to Directors - Unsecured, Considered Good 0.01 0.07

other Advances - Unsecured, Considered Good 41.15 526.36

MAt Credit entitlement 101.42 94.73 Insurance Claim Receivable 30.42 -

sundry Deposits 62.79 63.19 273.82 719.56

2.17 Other Current AssetsParticulars As at As at



Grant Receivable from Government 30.76 41.88 Duty Drawback Receivable 29.59 139.54 Focus Product License Receivable 116.96 116.89 Income Tax Refund - 210.00 Interest receivable on Fixed Deposits 18.41 71.68 Interest receivable on other 0.33 - Forward Premium Cover Deferred - 12.57 Forward cover cancel / early utilisation receivable - 362.17 Prepaid Expenses 7.31 10.94 Service Tax Deffered Input Credit 1.97 0.95 other Contractual Receivable 55.02 62.33

260.35 1,028.95

2.18 Contingent LiabilitiesParticulars As at


As at31st March, 2015

Rs. in lakhsa. Claims against the Corporation not acknowledged as debts 435.09 428.73b. Guarantee/counter guarantee given to banks 15.99 20.55

451.08 449.28

(a) Claims against the Corporation not acknowledged as debts, mainly includes:- (i) With regard to the matter relating to the property tax payable on the office building at Jawahar Vyapar

Bhawan, new Delhi, where stC, CCIC and HHeC are the co-licensees, the demand raised by nDMC, new Delhi has been disputed by stC. the pro-rata share of HHeC in payment made by stC to nDMC has been paid/provided in the accounts and balance of Rs.126.86 lakhs (Previous Year Rs. 126.86 lakhs) is taken as contingent liability. the Hon’ble High Court of Delhi has decided in favour of NDMC and STC in turn has filed SLP before the Hon’ble Supreme Court of India in March, 2006. The same has been admitted by the Hon’ble supreme Court of India and pending for hearing.

HHEC


(ii) M/s Ashok Metal Corporation the company’s sales representative in earlier years for sale of imported bullion has preferred an arbitration proceeding against the Corporation for various claims aggregating to Rs.752.04 lakhs. The Corporation has filed a suit in the Court of law, challenging the juridiction and tenability of the arbitration proceedings and also the claims as the claims are fictious and imaginary and thereby asking for permanent injuction to the arbitration. M/s. Ashok Metal Corporation filed an arbitration application before Mumbai Arbitrator against HHEC. Both the party has filed their written argument. Arbitral Tribunal has passed an order in favour of M/s Ashok Metal Corporation on 31.12.2013and further addendum dated 13.01.2014 directed the petitioner/HHEC to pay a sum of Rs. 106.22 Lakhs apart from the interest @15% p.a. from 01.01.2008 till 08.11.2013 and @ 18% p.a. thereafter till realisation. towards cost of arbitration learned tribunal awarded Rs. 12.47 Lakhs in favour of respondent /Ashok Metal Corporation. As per legal opinion Corporation has filed an appeal in the Hon’ble High Court, Delhi on 24.03.2014 and the appeal is admitted and pending in the Court.

Accordingly, the claim of Rs.106.22 Lakhs, interest of Rs. 139.08 lakhs and Rs.12.47 lakhs towards arbitration cost (Previous year Rs. 106.22 lakhs and interest of Rs. 119.96 lakhs and arbitration cost Rs. 12.47 lakhs) are considered as contingent liability.

(iii) the Corporation imported Mulbery Raw silk in 1999 for supply to M/s overseas trading Corporation (otC). there was shortage of 76 bales of raw silk when the goods landed at the port. M/s otC made full payment to HHeC for import of entire goods as per agreement. Due to shortages, there is still credit of Rs.18.55 lakhs in M/s otC account with us kept for the purpose of claims lodged with the insurance company. M/s OTC has filed a legal suit against HHEC for their dues along with interest aggregating to Rs.77.34 lakhs. However as per the agreement with the party, the Corporation is not responsible for the loss. the High Court disposed the present suit with direction that HHeC will pay the decretal amount of Rs.33.22 lakhs to the otC within 30 days of the receipt thereof from Unisilk, In case the said amount is not paid within 30 days of the receipt thereof, HHeC shall be liable to pay the same to the otC with interest at the rate of 18% p.a. till the date of realization. since it has been the categorical stand of HHeC that as soon as HHeC recover the amount from M/s. Unisilk, the claim of OTC will be satisfied after deducting the legal expenses. Accordingly HHEC has filed a modification petition to add the sentense “after deducting the expenses” and on 15.03.2013 High Court allowed our modification petition. To execute the decree, HHEC has filled an execution petition and pending on september, 2013 which is subjuidice. Hence claim of Rs.14.67 lakhs is taken as contingent liability.

(iv) HHeC applied for Rajiv Chowk shop no.7 (RCK-7) to Delhi Metro Rail Corporation (DMRC) and taken possession of the shop on 28.4.2010. An agreement was executed on 5.1.2011 between HHeC and DMRC. After possessing the shop HHeC had initially invested a considerable amount of money for development of the shop and deposited refundable interest free security deposit equivalent to one year’s License fees of Rs. 30.15 lakhs. However, HHEC continued to run the shop in spite of much maintenance related difficulties, which were required to be rectified by DMRC. On account of non-cooperation by DMRC, HHeC could not run the shop. to avoid its responsibility DMRC wrongfully terminated the contract through a letter dated 27.10.2011 by giving 7 days time to vacate the place. HHeC surrendered the Key of the said shop on 20.11.2011 to DMRC, with a claim to refund the security deposit. DMRC denied to refund the same and further demanded of Rs.15.93 lakhs towards license fees along with interest.

In the year 2012 DMRC had initiated the conciliation proceedings and HHEC had filed counter claim for damages and refund of security deposit under Arbitration and Conciliation Act, 1996. After completion of conciliation proceedings the matter referred to Arbitrator appointed by DMRC. the Learned Arbitrator has passed an award on 11.05.2016 in favour of DMRC and rejected all the claim of HHeC and directing HHeC to pay the following:


53

58th


Rs. In LakhsLicense fee 11.59Interest @24% on unpaid license fee 6.71Pendente lite interest on the above amount @24% 6.72Total 25.03

HHEC filed an Appeal in the month of July 2016 in Delhi High Court which is admitted and pending for hearing. the liability already provided in the books in earlier year amounted to Rs. 19.24 lakhs and the balance claims of Rs. 5.79 lakhs are considered as contingent liability.

(v) Disputed sales tax liability of Rs.16.92 lakhs being the demands raised by the sales tax department, Chennai for levy of sales tax for branch transfer of mulberry raw silk to the Banglore branch during the years 1985-86, 1986-87, 1989-90 and 1990-91. The sales tax department has treated these branch transfers as local turnover, which has been disputed by the Corporation. the cases pertaining to 1985-86 and 1986-87 are pending in appeal with the Hon’ble High Court, Chennai and the other two cases are pending in appeal with the Tamil Nadu Sales Tax Appellate Tribunal, Chennai. For the disputed tax, the Corporation has furnished bank guarantee for Rs.15.99 lakhs and for the balance, cash deposit of Rs.0.93 lakh has been made.

(vi) Demand notice received from Textile Committee, Coimbatore for payment of cess amount of Rs.6.77 lakhs for the period 2002-03 and 2003-04. the corporation has contested the payment on ground that cess is not payable and filed appeal. On a writ petition filed with Mumbai Court, the court has directed both the parties to go to Textile Committee Appellate Tribunal for contesting in this matter.

(vii) Demands received from Corporation of Chennai and Chennai Metro Water Board towards payment of water tax for the period 1998-1999 to 2011. The Corporation has filed an appeal for reduction of tax and remitted part amounts under protest.

Demand Rs. In Lakhs Paid during 2011-12 Rs. In Lakhs Balance Rs. In LakhsWater Tax 12.62 6.31 6.31Total 12.62 6.31 6.31

(b) Guarantee/counter guarantee given to banks is Rs. 15.99 lakhs (Previous Year Rs. 20.55 lakhs).

(c) Pending Court cases 36 (Previous Year 33), out of which 6 cases (Previous Year 8 cases) filed by employees / ex-employees of the Corporation for which the amount of contingent liability is indeterminable.

(i) In respect of writ petition filed by six contract workers at Chennai. The Corporation has obtained stay from the Madras High Court against the orders dated 08/11/2005 passed by CGIT-cum-Labour Court, Chennai. the Madras High Court ordered the Corporation to pay wages at Rs.1302.00 per month u/s 17-B wages under Industrial Dispute Act, 1947 with effect from 12.06.2006, from the date of filing writ petition till the case is settled.Total amount of Rs.0.94 lakhs (Previous Year Rs. 0.94 lakhs) has been paid to the six contract workers during the year. As the appeal is pending the amount of liability is indeterminable.

(ii) The Hon’ble Labour Court, Noida vide order dated 24.03.2011 pronounced the award pertaining to the case of 31 workers vs HHeC in favour of 31 workers. As per the award, the company was to reinstate 31 workers with full back wages and all benefits. Against the order, the Corporation had filed an appeal in Hon’ble High Court, Allahabad on 09.05.2011. The Corporation has further filed for modification application in the Hon’ble High Court, Allahabad on 30.05.2011. In compliance to the Hon’ble High Court interim order dated 16.05.2011, the Corporation has been continuously depositing minimum wages in a separate bank account opened for the purpose amounting to Rs.19.60 lakhs during the year (Previous Year Rs.21.23 Lakhs) also the Corporation is making payment @1500/- per month per workmen been the last drawn wages which works out to Rs.3.24 Lakhs for the year which is issued from the said bank account. Balance amount of Rs.79.15 lakhs (Previous Year Rs.62.77 lakhs) is laying with IDBI Bank, noida. the Hon’ble High Court, Allahabad was disposed of the writ petition and award in favour of HHeC on 22.08.2016 directed to the workmen to approach the appropriate Government within a period of three weeks.

(d) Standby Letter of Credits (L/C) with SBI for Rs.Nil lakhs (Previous year Rs. 1527.99 lakhs )

HHEC


2.19 Revenue from OperationParticulars For the year ended


31 March, 2015Rs in Lakhs

(a) sale of Products 197,037.09 273,818.67 (b) sale of service - - (c) other operating Revenue 214.92 263.06

197,252.01 274,081.73 Less: Excise Duty - -

197,252.01 274,081.73

Particulars For the year ended 31 March, 2016


Rs in Lakhs sale of products comprises : Manufactured GoodsReady to Wear 1,657.03 2,075.06 Handicrafts 177.26 493.71 Handlooms 16.85 888.50 Gold & Silver Jewellery 29,805.53 - Total - Sale of manufactured goods 31,656.67 3,457.27

traded goodsReady to Wear 0.28 21.93 Handicrafts 783.12 787.16 Handlooms 1,109.31 521.87 Bullion 162,596.00 268,975.00 Gold & Silver Jewellery 891.71 55.44 Total - Sale of traded goods 165,380.42 270,361.40 Total - Sale of products 197,037.09 273,818.67

other operating revenues comprise:Duty Drawback 117.38 189.42 Focus Incentive on Export 4.22 25.72 Premium on Import entitlements 29.56 36.01 Misc. trade Receipts - 11.91 Insurance Claim 63.76 -

Total - Other operating revenues 214.92 263.06


55

58th


2.20 Other IncomeParticulars For the year ended



Interest Income (a) 220.44 268.61 other non operating Income (b) 463.31 420.80 (Net of Expeneses)total 683.75 689.41 (a) Interest Income comprised of :- - On Fixed Deposits* 124.41 687.20 Less: Interest paid to Associates* 39.07 577.26

85.34 109.94 - On Staff Advances & others** 135.09 158.67

220.43 268.61

* As per agreement with bullion associates, interest on fixed deposits amounting to Rs.39.07 Lakhs (Previous Year Rs.577.26 Lakhs) have been transferred to them.

** The Corporation has recognized Rs. Nil Lakhs ( Previous Year Rs. 153.14 Lakhs) (Net) on account of interest earned on bullion creditors who has discontinued their business in earlier years.(b) other non operating Income comprised of :- - Maintenance charges received 57.07 55.84 - Govt. Grants 98.13 108.28 - Difference in Exchange 32.17 15.69 - Forward Cover Premium (5.06) 3.94 - Licence Fee Received 9.60 12.00 - Freight & otC 3.01 6.02 - Rent Received (net) 200.05 204.70 - Credit Balances Written Back* 67.11 13.33 - township Receipts 0.27 0.22 - Misc. Receipts 0.95 0.78

463.30 420.80

* During the year, credit balances outstanding for more than three years were reviewed on case to case basis and an amount of Rs. 67.11 Lakhs (Previous Year Rs. 13.33 lakhs) has been written back after ascertaining that there are no claims from the creditors / liability on the Corporation for payment.

HHEC


2.21 Cost of Material ConsumedParticulars For the year ended



Handloomsopening stock of raw material - - Add : Purchases 14.76 176.52 Add : Direct Expenses

Custom Duty - - Handling & Freight charges 0.58 4.30 Processing charges 1.15 54.65

Less : Closing stock of raw material 7.36 9.13 235.47

Handicraftsopening stock of raw material - - Add : Purchases 79.53 203.34 Add : Direct Expenses

Custom Duty 0.22 - Handling & Freight charges 6.26 6.20 Processing charges 26.15 57.01

Less : Closing stock of raw material - - 112.16 266.55

Ready-to-Wearopening stock of raw material 28.67 17.16 Add : Purchases 745.98 1,032.67 Add : Direct Expenses

Custom Duty 0.47 0.80 Handling & Freight charges 27.55 63.05 Processing charges 511.05 619.98 Power & Fuel - -

Less : Closing stock of raw material 61.59 28.67 1,252.13 1,704.99

JewelleryPurchase 26,492.19 - Add : Custom Duty 2,762.83 - Add : Processing charges 50.25 - Add : Freight charges - - AddL Difference in Exchange 63.70 -

29,368.97 - Cost of Material consumed 30,742.39 2,207.01


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2.22 Purchase of Stock-in-TradeParticulars For the year ended



Ready-to-Wear Purchases 0.21 4.02 Add : Custom Duty - - Add : Processing charges - 0.08 Add : Freight charges 1.79 1.80

2.00 5.90

Bullion Purchases 151,069.73 242,064.39 Add : Custom Duty 15,802.41 22,236.28 Add : Processing charges - - Add : Freight charges 20.09 5.11 Add : Difference in Exchange 320.87

167,213.10 264,305.78

Handicrafts Purchases 546.03 631.15 Add : Custom Duty - 0.14 Add : Processing charges 1.12 15.90 Add : Freight charges 19.03 27.46

566.18 674.65

Handlooms Purchases 873.91 943.03 Add : Custom Duty - 0.39 Add : Processing charges 92.78 51.60 Add : Freight charges 17.90 26.38

984.59 1,021.40

Jewellery Purchase 571.20 44.44 Add : Custom Duty - 0.16 Add : Processing charges 78.25 - Add : Freight charges 26.72 -

676.17 44.60 Total purchase of Stock in Trade 169,442.04 266,052.33

HHEC


2.23 Changes in inventories of Stock in TradeParticulars For the year ended



Inventories at the beginning of the year - Finished Goods - - Handicrafts 180.75 171.44 Handlooms 127.37 120.85 Ready-to-Wear 171.78 135.03

479.90 427.32 - stock-in-trade Bullion - 2,040.50 Jewellery 4.13 5.27

4.13 2,045.77 total 484.03 2,473.09

Inventories at the end of the year - Finished Goods Handicrafts 200.95 180.75 Handlooms 94.91 127.37 Ready-to-Wear 153.25 171.78

449.11 479.90 - stock-in-trade Bullion 4,377.50 - Jewellery 2.83 4.13

4,380.33 4.13 total 4,829.44 484.03 Net (increase)/decrease (4,345.41) 1,989.06

2.24 Employee Benefit ExpensesParticulars For the year ended



salaries & Allowances 883.23 879.11 Contribution to provident fund & others 76.49 78.31 staff Welfare 103.97 134.20 Gratuity 92.64 44.40 Benevolent Fund 0.05 0.05

1,156.38 1,136.07


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2.25 Financial CostParticulars For the year ended



InterestFrom BanksInterest on Advance Against FDR 25.57 307.19 Buyer's Credit/LC 8.51 25.87 Interest others 22.55 27.36

56.63 360.42 Less:Recovered from Associates 34.08 333.06

22.55 27.36 othersInterest on Suppliers Credit ( Forex) - - Interest others [note 2.25.1] 12.23 89.20

12.23 89.20 Less:Recovered from Associates - -

12.23 89.20

Interest on Late Deposit of Tax 4.30 0.13 Bank Charges 37.08 55.78

76.16 172.47

2.25.1 Includes Rs. 12.23 lakhs (Previous year Rs. 83.38 Lakhs) towards interest on outstanding princial amount of rent. In the matter of mesne profit a office premise in Mumbai, Hon’ble High Court, Mumbai determined the quantum of mesne profit of Rs. 120/- per month per Sq. Ft. w.e.f. 1.03.2001 till HHEC handed over vacant possession to landlord i. e. 31.12.2010. HHEC filed Review Petition in the Hon’ble Supreme Court, which was disposed off without giving any relief on 26.02.2015. Hence, liability for interest on principal amount of Rs. 203.81 lakhs for the period 2015-16 @ 6% per annum has been recognized in the profit & loss account.

2.26 Other Expenses Particulars For the year ended



Rent 71.77 78.55 Rates & Taxes 153.48 8.31 electricty & Water charges 76.05 83.06 travelling & Conveyance 74.49 93.82 Postage, telegrams, telephones etc. 109.51 110.04 Printing & stationery 25.04 29.69 Repairs, Renewal & Maintenance

- Building - Machinery - others

69.89 69.75 4.77 2.50

19.64 94.30 27.23 99.48 Service Vehicle Maintenance 11.44 15.76 Auditors Remuneration 6.24 6.92 Payment to Cost Auditors - 0.05

HHEC




Rs in Lakhs Magazine & Periodicals 1.65 1.92 Insurance 8.43 14.22 House Keeping & Maintenance 87.46 88.29 Miscellaneous Expenses 26.26 39.98 stipend to trainee 55.58 55.27 Fees for trade Council Membership 2.33 2.25 subscription to Club 1.86 1.86 Filing Fee 0.21 0.31 Donations 0.05 - Township Expenditure 7.98 5.37 Expenses on Corp. Social Responsibility (note 2.26.1)

10.53 35.48

Software Expenses 1.08 0.05 Advertisement & Publicity 24.31 20.66 sample & Product Development 62.14 89.25 Business Promotion 2.39 - entertainment 14.63 18.31 Fairs & Exhibition 58.23 73.52 Commission to selling Agents 114.94 66.48 Claims 1.24 5.32 Legal & Professional Charges 81.67 57.64 Exchange Variation 0.58 - Bad Debts & Advances written off - 39.33 Sales Tax paid for earlier years 0.22 0.16 Debit Balance adjusted 0.04 0.16 Profit Sharing with Shops 14.91 11.53 Provision for Doubtful Debts, Loans & Advances 1,090.08 202.20

2,291.12 1,355.24

2.26.1 The CSR Expenditure contains the following:

S. No. Particulars In Cash Yet to be paid in cash

Total

I sanitation Facility in backward Distict 6.03 6.03 II Drinking Water Facility in backward Distict 2.50 2.50 III Clean Ganga Fund 2.00 2.00

Total 10.53 - 10.53


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2.27 Prior Period Items



Rs in Lakhs Incomesales - - other Income - (2.34)other Receipts - (2.99)

- (5.33)ExpenditurePurchases 1.93 41.58 Custom Duty, Freight & other charges - 0.14 Fabrication Charges - - Employees Remuneration & Benefits (107.95) 0.52 Administration & Selling Expenses 0.12 5.44 Depreciation - - Interest - 283.88

(105.90) 331.56 Net Prior Period Items (105.90) 336.89

2.28 Exceptional Items



Rs in Lakhs Provision Written back - (49.80)Wages 8.29 8.89 Loss on sale of assets - 11.83 Profit on sale of assets (0.11) (4.51)Rent * - 144.47 Excess provision of Export Incentive Receivable written off/Refunded 0.33 5.51 Write-down of inventories to net realisable value 0.35 (6.48)Provision for Doubtful Debts - 811.47

8.86 921.38

Includes Rs. nil lakhs (Previous year 144.47) towards outstanding principal amount of rent. In the matter of mesne profit of a office premise in Mumbai, Hon’ble High Court, Mumbai determined the quantum of mesne profit of Rs. 120/- per month per Sq. Ft. w.e.f. 1.03.2001 till HHEC handed over vacant possession to landlord i. e. 31.12.2010. HHEC filed Review Petition in the Hon’ble Supreme Court, which was disposed off without giving any relief on 26.02.2015. Hence, nil liability for rent for the period 2015-16.

HHEC


2.29 Tax Expense(a) For Deferred Tax Assets / Liabilities

Particulars As on 31/03/2016 For the Year As on 01/04/2015Rs in lakhs Rs in lakhs Rs in lakhs

Deferred Tax Liabilities - Related to Fixed Assets 113.60 (13.32) 126.92

total 113.60 (13.32) 126.92 Deferred Tax Assets - Provision for doubtful debts / advances

808.09 313.14 494.95

- Related to employees 118.75 23.45 95.30 - Related u/s 43B 1.95 (0.10) 2.05 - Related u/s 40(a)(ia) 38.93 (1.95) 40.88

total 967.72 334.54 633.18 Net Deferred Tax Asset / (Liabilities)

854.12 347.86 506.26

2.30 Basic and Diluted Earnings per share (EPS) computed in accordance with Accounting Standard 20 “Earning per Share”Particulars For the year ended



Earnings per Equity share - BasicA. Profit/Loss after Tax (PAT) (1,075.85) 340.21 B. Weighted average number of shares 1,382,000.00 1,382,000.00 ePs -Basic (A/B) (77.85) 24.62 Face Value 100.00 100.00

Earnings per Equity share- DilutedA. Profit/Loss after Tax (PAT) (1,075.85) 340.21 B. Weighted average number of shares 1,382,000.00 1,382,000.00 ePs -Basic (A/B) (77.85) 24.62 Face Value 100.00 100.00


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2.31 SIGNIFICANT ACCOUNTING POLICIES

I) ACCOUNTING METhOD The financial statements have been prepared and presented under the historical cost convention, on the

accrual basis except for Medical Claim, Leave Travel Concession and other fringe benefits of accounting in accordance with the accounting principles generally accepted in India (‘Indian GAAP’) and comply with the Accounting standards prescribed in the Companies (Accounting standards) Rules, 2006 which continue to apply under section 133 of the Companies Act, 2013 read with rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable. The financial statements are presented in India Rupees.

II) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires

estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between actual results and estimates are recognised in the period in which the results are known / materialized.

III) FIxED ASSETS Fixed Assets are stated at cost less accumulated depreciation. Cost includes the purchase price and other

directly attributable expenses for bringing the asset to its intended use.

IV) DEPRECIATIONa) Depreciation on fixed assets is provided on the basis of estimated economic lives or useful life of

fixed assets in the manner as prescribed in Schedule II of Companies Act 2013. For the assets purchased / sold during the year, depreciation is charged on a pro-rata basis.

b) 100% depreciation is provided on fixed assets costing less than Rs. 5000/-.

c) In case of Leasehold Land, the cost is amortized over the period of lease.

d) In case of Interior design and structures expenses incurred at Retail Shops, the cost is amortized over the period of agreements or 3 years as the case may be.

e) In case of Software Expenditure, the expenditure incurred below Rs.1.00 lakh will charged to profit & loss account in the year of expenditure and expenditure above Rs.1.00 lakh is amortized equally over a period of three financial years commencing from the year in which the expenditure is incurred.

f) In case of trade mark, patent, copy right, license fees etc., the cost is amortized over the period of validity of such license.

V) INVENTORIES Inventories include Finished (trading) Goods and Raw material and are valued as under:

a) Handloom / Ready-to-wear (except at Chennai Branch), Handicrafts and Carpet inventories are valued according to specific identification method of accounting – at lower of purchase cost and net realizable value (i.e., arrived at after mark-down as per (b).

In case of Chennai Branch: Handlooms and Ready to wear inventories are valued according to FIFo method of accounting – at

lower of purchase cost and net realizable value (i.e., arrived at after mark-down as per (b).

b) Mark-down Unless the circumstances in any case demand a higher mark-down, as determined and approved by the

Management, inventories are marked-down on purchase cost as below:Age of Stocks Percentage of Mark-downBelow 1 year -

1-2 years 25%2-3 years 50%

Above 3 years 70%

HHEC

64 Significant Accounting Policies

c) Gold and silver stocks are valued at lower of landed cost or net realizable value.d) stocks-in-transit (outwards) are valued at CIF/C&F/FoB value of purchase cost, whichever is less.e) stocks-in-transit (inwards) are valued at purchase cost plus custom duty.f) Handloom fabrics and Ready-to-wear items purchased for sampling and converted into samples are

taken at NIL value.g) Damaged stocks are written off.h) stores, spare parts and packing material are valued at purchase cost. stationary stocks are taken at NIL value.

VI) SUNDRY DEBTORS, LOANS & ADVANCES Full provision is made in respect of unsecured debit balances (except receivables from Govt. Departments

and loans and advances to staff), outstanding for a period exceeding three years. Other debts are reviewed on a case-to-case basis and provided for wherever necessary.

VII) ACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONSa) Transactions in foreign currency (except those pertaining to fairs and exhibitions) are recorded at

the rate of exchange prevailing at the time of the transactions / remittance rate. Any gain or loss on account of exchange differences on settlement is recognized in the Profit & Loss Account except for Forward Cover taken on behalf of Business Associates, in which premium on discount transferred to Business Associates accounts.

b) Transactions pertaining to fairs and exhibitions abroad are recorded at the average rate of exhibition dates.

c) Year end balances of Current Assets and Current Liabilities (except for bullion import transactions) in foreign currencies are converted at year-end SBI exchange rates as under:

i) Debtors under collection and other Debit Balances (except Doubtful Debtors, Loans &

Advances) at the closing bill buying rates.ii) Doubtful Debtors, Loans and Advances, or in cases where realisability is uncertain including

litigation, no exchange variation is provided in the year-end.iii) Current Liabilities (except Creditors) at the closing TT selling rates.iv) Creditors at the closing Bill selling rates.v) Current Assets and Current Liabilities of Bullion Import transactions at RBI reference rate.

Any gain / loss on account of exchange difference arising out of such conversions are recognized in the Profit & Loss Account.

d) Forward Exchange Contracts – The premium or discount on forward exchange contracts is amortized as expenses or income over the life of the contracts. Exchange difference on such forward exchange contracts outstanding as at year end is recognized in the profit and loss account.

VIII) REVENUE RECOGNITION

a) Salesi) Export sales excluding sales of gold/silver jewellery/items in fairs and exhibitions abroad are

recognized at FoB value::• In case of FOB Contracts, as per the date of airway bill/bill of lading, as the case may

be. • In case of CIF/C&F Contracts, as per the date of negotiation of export documents with

the bank.

ii) Export sales of Gold/Silver Jewellery/Other items in fairs and exhibitions abroad are recognized at gross sale value converted into Indian Rupee on the basis of average of rates during the exhibitions period.


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Significant Accounting Policies

iii) Bullion sales:• To buyers are recognized at CIP cost (Cost, Insurance, Premium), custom duty and

pre-determined profit, on performance of the contract.• Through Commodity Exchanges are recognized at the Delivery Date Rate (DDR)

declared by the exchanges. The difference between the contracted rate and the DDR are recognized as marked-to-market (MtM) gain / loss.

iv) other sales in India and abroad are recognized:• In case of ex-godown and retail sales, at sales price on performance of the contract.• In case of sales through agents, at sales price in the year in which sale is effected.

b) Other Incomei) Exports incentive:

• Duty drawback and Duty Entitlement Pass Book are accounted for on accrual basis, on recognition of the export sale.

• License of Market Linked Focus Product Scheme (MLFPS) and Focus Market Scheme (FMs) are accounted for on accrual basis based on realizable value as on balance sheet date.

• Insurance and other claims are accounted for when it is reasonably certain that ultimate collection will be made, provided the amount of claim is measurable.

Ix) PURChASES a) In the case of import contracts (Bullion):

i) On outright basis with fixed price – at purchase price taken as per the rate fixed with the foreign supplier converted at the prevailing RBI exchange rate, on the date of Bill of Entry.

ii) On consignment basis with unfixed price:

• In cases where prices are fixed upto 30th April, at purchase price taken as per the rate fixed with foreign supplier on performance of the contract as per terms of the agreement converted at the prevailing RBI exchange rate, on the date of Bill of Entry.

• In the cases where prices are unfixed upto 30th April, at price taken on the basis of commercial invoice converted at the prevailing RBI exchange rate, on the date of Bill of entry.

b) In the case of local purchases – at purchase price on inspection and acceptance of the merchandise.

x) RETIREMENT AND OThER EMPLOYEES BENEFITS a) Provident Fund is a defined contribution plan. The Company has a Provident Fund Trust to whom

provident fund contribution are made as and when the contribution to the fund is due and the same is charged to profit & loss account.

b) Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation made at the end of the year by Life Insurance Corporation of India (LIC).

c) Leave encashment liability is a defined benefit obligation and is provided for on the basis of actuarial valuation made as at year end by Life Insurance Corporation of India (LIC).

d) Post retirement medical benefits are provided for on the basis of an actuarial valuation made at the end of the year.

e) Actuarial gains/losses are immediately taken to the Profit & Loss Account and are not deferred.

f) Long Service award are accounted for on an actual payments.

g) Claims on account of medical, leave travel concession and other fringe benefits not linked to pay and allowances are accounted for in the year of receipt of claim.

.

HHEC

66 Significant Accounting Policies

xI) ACCOUNTING FOR GRANTSa) Grants (to the extent of amount actually incurred) are recognised in the year of sanction if there

exists reasonable assurance of the compliance of the terms attached with the sanction and that the grants will be received.

b) Capital Grants:i) Assets acquired out of grants are recognized at cost price.ii) Grants relating to depreciable assets are taken to Deferred Govt. Grant-in-Aid and recognized

as income in the Profit & Loss Account over the useful life of the assets.

c) Revenue Grants:i) Revenue grants are recognised in the Profit & Loss Account to the extent of amount incurred,

in the year in which it is incurred.ii) Any expenditure incurred in excess of grant sanctioned/received is charged to the Profit and

Loss Account, in the year in which it is incurred.

d) Contingencies relating to grants, arising after the grant has been recognised, are treated in accordance with Accounting standard (As) 29..

xII) Provisions & Contingent Liabilitiesi) Provisions are recognized when a present obligation exists and the payment is probable and can be

reliably estimated.

ii) Disputed liabilities and claims against the Corporation including claims raised by fiscal authorities (Sales Tax, Income Tax, etc.) pending in appeal, are treated among contingent liabilities and are not provided for in the Accounts. Contingent Liabilities are disclosed in each case where the amount is above Rs. 5.00 lakhs.

xIII) Impairment of Assets the carrying amounts of assets are reviewed at the Balance sheet date and if there is any indication of

impairment based on Internal / External factors, an impairment loss is recognized wherever the carrying amount of an asset exceeds the recoverable amount.

xIV) Taxationa) Provision is made for current income tax liability, which is likely to arise on the results for the year, at

the current rate of tax in accordance with the provision of Income Tax Act, 1961.

b) Deferred income tax is provided on all timing difference at the Balance Sheet date between the tax base of Assets and Liability and their carrying amount for financial reporting purposes.

c) Deferred Tax Assets are recognised only to the extent that there is a reasonable certainty of realization. However, in case of unabsorbed depreciation and carry forward of losses under tax laws, deferred tax assets are recognized only to the extent of virtual certainty supported by convincing evidence that sufficient future taxable income will be available for set-off.

d) Deferred Tax Assets and Liability are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance sheet date.


sd/-(CA D.S Rawat)



sd/- (Gopal Goyal)

Assistant Manager

sd/-(Ujjal Datta)




sd/-(Azra Banu)





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2.32 Additional Notes on Accounts

i) Compliance of the Companies (Accounting standard) Rules, 2006 has been made. the Company has large number of transactions and diversified activities, which may have put operational constraints in strictly following the said rules. the deviation if any, have been stated in the accounting policies of the Company..

ii) Bullion imports on behalf of Customers.a) the Corporation being a nominated agency for import of Bullion has imported Gold / silver during

the year on back to back arrangements with the Customers. In case of import of gold, the same is done on outright purchase and in case of silver; the same is done on buyers credit/ LC basis. As per the agreement entered into with customers and business module, the sale proceeds are either placed under fixed deposit for a period mutually decided with the customer and/or repayment of the advance against fixed deposits, if any availed for repayment of the earlier buyers credit/letter of credit/stand by letter of credits. the payments to the foreign supplier are generally made by availing buyer’s credit and/or establishing letter of credit/stand by letter of credits in favour of the foreign supplier. the usance interest paid on the buyer’s credit /letter of credit /stand by letter of credit and the interest paid on the advance against fixed deposits are debited to the customer. Interest earned on fixed deposit is credited to the customers after deduction of TDS. Bank charges, withholding tax, forward cover premium/discount; exchange variation and profit /loss on forward cover cancellation /early utilization are debited/credited to the customers.

b) During the year Interest on Fixed Deposits aggregating to Rs.39.07 lakhs (Previous Year Rs 577.26 lakhs) credited to the local buyers of bullion as per the terms of agreement..

c) Against the liability on account of Bullion Imports on back to back basis with the Business Associates, the corporation hedges the liability from time to time by taking forward cover contracts with the banks as desired by the Business Associates. Details are as follows: Details In Foreign Currency

US$ (in lakhs) Rupees (in lakhs)

Exchange rate (in Rupees)

31.3.2016 31.3.2015 31.3.2016 31.3.2015 31.3.2016 31.3.2015Total Liability 18.09 35.41 1200.15 2216.41 66.3329 62.5908Hedged - 24.21 - 1515.42 - 62.5908Unhedged 18.09 11.20 1200.15 700.99 66.3329 62.5908

d) The Corporation has availed overdrafts against fixed deposit from the bank, as per agreed terms, on behalf of the customers for repayment of the buyer’s credit/letter of credit. For the banks, the Corporation is a single entity for the fixed deposits made by the Corporation on behalf of the customers. The overdraft interest has been calculated as per the cash flow of each customer at the agreed rate with the banks based on the interest rate on fixed deposit pertaining to each customer. Accordingly an amount of Rs. 86.10 lakhs (Previous Year Rs. 452.51 Lakhs) has been charged to the customers.

e) M/s. Aaryavart Commodities Pvt. Ltd. (ACPL) had given 14 boxes jewellery in the financial year 2008-09 to HHeC and also mortgaged immovable properties by way of deposit of title deeds of third parties valued of Rs.460 Lakhs as a Security. The jewelleries valued by Govt. approved valuer at Rs.935 Lakhs (including labour charges of Rs.127 Lakhs) with 92% purity of precious metal as security against their outstanding dues. Further out of 14 boxes of jewellery, ACPL lifted one Box Jewellery corresponding value to Rs.44 Lakhs against payment during the financial year 2012-13 and remaining 13 boxes of jewellery valued at Rs.764 Lakhs (excluding labour charges of Rs.127 Lakhs) remained with HHeC. Before auction the jewellery for recovery of debts, Corporation has carried out valuation of 13 boxes of Jewellery in March’15 from independent Govt. Approved valuer who reported the value as Rs.824 Lakhs (excluding labour charges) with purity range between 40% to 80 % except some items of one box of jewellery whose purity reported at 1% only. Due to difference in purity of precious metal, Corporation carried out valuation through independent Govt. Approved Valuer in July’15 and the valuer reported the value of two boxes at Rs.1.01 crores and remaining 11 boxes value reported at ‘Nil’ as artificial jewellery. HHEC lodged complaint against ACPL to CBI who have registered the Case and filed FIR. Investigation is in progress.

HHEC

68 Significant Accounting PoliciesAdditional notes on Accounts

In the mean time, ACPL has filed a petition under section 9 of Arbitration Act on 5.10.2015 in Delhi High Court with a prayer to stay the auction till initiation of arbitration proceeding. Hon’ble Court after hearing both the parties referred the matter to Mediation Cell attached to Delhi High Court. the matter is sub-judice.

In view of above, as on 31.03.2016 the amount of Rs. 554 lakhs in respect of trade receivables are secured by way of

1) Rs.101 lakhs jewelleries.

2) Rs.453 lakhs immovable properties of third party mortgaged to HHeC.

f) The total trade receivables for the Corporation (Refer Note:2.14) includes Rs.3642.73 Lakhs recoverable from Bullion Parties, against these receivables doubtful debts of Rs.1000.00 Lakhs has been made a provision for loss during the year on prudent basis pending confirmation/ reconciliation from bullion associates.

g) The Ministry of Textiles has taken a view that HHEC should focus on product diversification and market diversification for expanding its core business (i.e. Handicrafts and Handlooms) in market abroad and also explore the possibility of setting up of Joint Ventures. HHEC has been directed to gradually phase out its bullion import business in the next 3 years without impinging on its profitability and sustenance. The discontinuation of Bullion trade is not expected to adversely affect the financial position of the Corporation as the contribution of bullion trade in total margin of the Corporation is not significant.

iii) Changes in Accounting Policies & Estimates(i) Accounting Policies no. Ix) a) i) In case of Import contracts (Bullion) purchase and sales has been

changed accordingly its financial impact in accounts are as below for the F.Y. 2015-16.

a) Purchase understated by Rs.19.70 Lakhs.b) Difference in exchange overstated by Rs.19.70 Lakhs.

iv) a) Income Tax the liability, if any, in respect of pending assessments for the assessment years 2005-06, 2014-15

and 2015-16 cannot be ascertained although tax as per return/revised return has been paid in full.Assessment

YearStatus on Assessment Refund due

(Amount in Rs. Lakhs)

AY 2005-06 the Corporation has received full relief on all the issues from CIt (A). The refund of Rs. 118.64 Lakhs plus interest Lakhs is received in August, 2015. the Department has gone on appeal before ItAt against the order of CIt (A) and the appeal has been dismissed with partial relief to HHeC and the case has been set aside to A.o. and no notice has been received.

-

AY 2006-07 FBt refund is due since CIt (A) and ItAt decisions are in favour of the Corporation.

0.60


1.05


0.75

AY 2009-10 Appeal filed by the Corporation with the CIT (A) for addition of Rs. 11.41 lakhs as income against the order of the A.o. u/s 143(3). the appeal has been decided in favour of the Corporation. tDs of Rs.15.85 Lakhs plus interest has been received.

-

AY 2010-11 The Corporation has filed loss return. Assessment has been completed. scrutiny order has been received with no addition.

2.43

AY 2011-12 Assessment has been completed. scrutiny order received with no addition.

-


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Significant Accounting PoliciesAdditional notes on Accounts

AY 2012-13 Assessment has been completed with addition of Rs. 42.73 Lakhs. Against the order of DCIT, HHEC filed an appeal before CIt (A) and the same has also been disposed and no relief has been endorsed. No demand as the Corporation filed ‘Nil’ income return.

-

AY 2013-14 The Corporation has filed ‘Nil’ income return. Assessment has been completed. scrutiny order received with no addition.

-

AY 2014-15 The Corporation has filed ‘Nil’ income return. Scrutiny assessment is in progress.

-

AY 2015-16 The Corporation has filed returned income. Notice for scrutiny has been received and assessment is pending.

-

Total 4.83

b) Sales Tax Assessment Status:

Year Noida Delhi Chennai Kolkatta Ahemdabad Mumbai2013-14 Pending Pending * Pending Pending Pending2014-15 Pending Pending Pending Pending Pending Pending2015-16 Pending Pending Pending Pending Pending Pending

*Deemed Assessed.

v) Additional information pursuant to Schedule III-Part II of the Companies Act, 2013.a) (i) Auditors Remuneration includes: (Including Branch Auditors Remuneration)

2015-2016 2014-2015 Rs.(lakhs)

*Audit fee 4.87 4.88 Tax Audit fee 1.37 1.35 Certification Work 0.14 0.69Total 6.38 6.92

* include provision for increase in fees (inclusive of Service Tax) of Rs. 0.07 lakh (Previous

Year Rs. 0.11 lakh).

(ii) Cost Audit Fee Certification Work - 0.05 Total 0.00 0.05

b) Expenditure in foreign currency on account of:2015-2016 2014-2015

(Rs. In Lakhs)i. Commission to selling Agent 3.59 18.58ii. Custom duty, freight and other charges 0.59 3.99iii. Others (Fair & Exhibitions) 3.35 2.81iv. Foreign travel 8.88 12.03vi Interest - Forex* - 25.87vi. Bank Charges 1.64 0.06

Total 18.05 63.34

*Recovered from customers in Indian Rupees, hence expenditure booked is NIL.

HHEC


c) Earnings in Foreign Exchange on account of:2015-2016 2014-2015

(Rs. In Lakhs)i. sales - FOB value of exports

- Domestic sales (in foreign currency) 2010.37

3.713,042.19

10.35ii. Net Exchange Variation 32.17 15.69

Total 2,046.25 3,068.23

d) Value of Imports on CIF basis2015-2016 2014-2015

(Rs. In Lakhs) - Raw Material 16.69 17.01 - traded goods

• Gold 1,37,081.86 1,89,912.99• Silver 13,987.86 52,151.40

Total 1,51,086.41 2,42,081.40

vi) a) Value of Imported/Indigenous Raw/Packing Material, Stores & Spare Parts consumed:

2015-2016 2014-2015Value

(Rs. in Lakhs)% to total

ConsumptionValue

(Rs. in Lakhs)% to total

ConsumptionRaw and Packing Materials:- Imported at landed cost 16.69 21.98 17.01 11.56- Indigenously obtained 59.27 78.02 130.10 88.44

Total 75.96 100.00 147.11 100.00Component & spare PartsImported at landed cost - - - -- Indigenously obtained 0.01 100 1.09 100

Total 0.01 100 1.09 100

b) Opening stocks, Purchase, Sales & Closing stocks

(Value in Rs. in lakhs and quantity in Kgs)Items opening stocks

(including goods in transit) as at

Purchases for the year*

sales/transfers for the year

Closing stocks (including goods in

transit) as at1.4.2015 1.4.2014 2015-2016 2014-2015 2015-2016 2014-2015 31.3.2016 31.3.2015

Handicrafts(incl. Carpets)

96.20 95.95 652.83 908.15 960.38 1280.87 121.97 96.20

Handlooms 90.74 83.18 983.49 1225.80 1126.16 1410.37 73.05 90.74Ready-to-wear 192.69 147.55 1257.24 1656.75 1657.31 2096.99 193.75 192.69Gold & silver Jewellery

4.13 5.27

26542.44 2.76 29805.53 3.28 2.83 4.13

Gold - 1325.84 137081.86 189913.00 147510.37 210482.73 4041.70 -Quantity in KG - (50.00) (6850.000) (7790) (6708.000) (7840.00) 142.000 -silver - 697.04 13987.86 52151.40 15085.63 58492.27 335.80 -Quantity in KG - (1628.660) (43235.007) (139020.322) (42329.851) (140648.982) 905.156 -Gold/silver Coin - - 649.45 41.67 891.71 52.16 - -Total 383.76 2354.83 181155.17 245899.53 197037.09 273818.67 4769.10 383.76

* Includes fabrication & processing charges of Rs. 760.74 lakhs (Previous year Rs. 799.96 lakhs).


71

58th


vii) a) “Employee Benefits” as per Accounting Standard (AS-15)

The company has adopted the Accounting Standard AS-15 (revised) Employee Benefits and accordingly the employment benefits have been valued as per actuarial valuation in accordance with this standard. the present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employees benefit entitlement and measures each unit separately to build up the final obligation. The following table summarizes the component of the various employee benefits and the components of net benefit expenses recognized in the profit and loss account:

Defined Benefit Plan

A Changes in Present Value of Obligation

Post Retirement Medical Benefits

(Non-Funded)

Leave Encashment

(Funded)

Gratuity (Funded)

31.03.16 31.03.15 31.03.16 31.03.15 31.03.16 31.03.15i. Present value of obligation

as at the beginning of the period

122.34 115.84 239.40 257.61 570.65 600.07

ii. Interest Cost 9.57 9.00 19.15 20.61 45.65 48.01iii. Past service Cost - - - - - -iv. Current service Cost 1.54 1.56 41.50 38.83 11.69 13.59v. Curtailment / settlement

Cost- - - - - -

vi. Benefits Paid (8.44) (6.57) (38.27) (3.22) (143.12) (15.75)vii. Actuarial (gain) / loss

on obligation (Balancing figure)

8.41 2.51 (18.65) (74.43) 76.67 (75.27)

viii. Present value of obligation as at the end of the period

133.42 122.34 243.13 239.40 561.54 570.65

B Changes in fair value of plan assets

i. Fair Value of plan assets as at the beginning of the period

- - 234.30 211.75 539.74 490.85

ii. Expected return on plan assets

- - 19.45 19.93 41.37 45.67

iii. Contributions - - 5.19 5.84 4.02 18.97iv. Benefits paid - - (38.27) (3.22) (143.19) (15.75)v. Actuarial gain / (loss) on

obligation- - - - - -

vi. Fair value of plan assets as at the end of the period

- - 220.67 234.30 442.01 539.74

C The amounts to be recognized in the balance sheet.

i. the present value of obligation as at the end of the period

133.42 122.34 243.13 239.40 561.54 570.65

ii. Fair Value of plan assets at the end of the period.

- - 220.67 234.30 442.01 539.74

iii. Difference 133.42 122.34 22.46 5.10 119.53 30.91iv. net Assets / (liability)

recognized in balance sheet.

(133.42) (122.34) (22.46) (5.10) (119.53) (30.91)

HHEC


D Expenses recognized in the statement of profit and loss

i. Current service Cost 1.54 1.56 41.50 38.83 11.69 13.39ii. Past service Cost - - -iii. Interest Cost 9.57 9.00 19.15 20.61 45.65 48.01iv. Expected return on plan

assets.- - (19.45) (19.93) (41.37) (45.67)

v. Curtailment / settlement cost - - - - - -vi. net Actuarial (gain) / loss

recognized in the period.8.41 2.51 (18.65) (74.43) 76.67 (75.27)

vii. Expenses recognized in the statement of profit and loss

19.52 13.07 22.55 (34.92) 92.64 (59.34)

The principal assumptions used in determining employee benefits are given below:

Particulars Post Retirement Medical Benefits

Leave Encashment (Funded)

Gratuity (Funded)

2015-16 2014-15 2015-16 2014-15 2015-16 2014-15Discount Rate 8% 8% 8% 8% 8% 8% a) Mortality table LIC(1996-

98)Ult.LIC(1996-

98)Ult.- - - -

b) Rate of Withdrawal 1% to 3% depending

on age

1% to 3% depending

on age

- - - -

Expected rate of return on plan assetssalary escalation rate - - 5% 5% 5% 5%Attrition rate : RatesAge (Years) - - 1% to 3%

depending on age

1% to 3% depending

on age

1% to 3% depending

on age

1% to 3% depending

on age

The above information is certified by the Actuary.

the estimates of rate of escalation in salary considered in actuarial valuation, take in to account inflation, seniority, promotion and other relevant factors.

viii) “Related Party Disclosures” as per Accounting Standard (AS) 18

a) Key Management Personnel

shri nirmal sinha, Chairman and Managing Director. ( From 20.07.2010)

Ms. Azra Banu, Director (Finance) (From 11.07.2011 )

Directors. ( Govt. Nominee)

shri A. Madhu Kumar Reddy, IRts ( From 04.02.2015 to 28.01.2016)

Ms. Indrani Kaushal (From 07.01.2014 to 28.01.2016)

shri Alok Kumar, IAs (From 28.01.2016)

Dr. K. Gopal, IAs (From 28.01.2016 )

Independent Directors

shri sunil sethi (From 01.08.2012 to 31.07.2015)

Ms. Ritu sethi (From 01.08.2012 to 30.07.2015)


73

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b) Details of Transactions with the Related Parties

nature of transaction 2015-16 2014-15

(In lakhs)

Remuneration 62.91 53.06

sales - -

Loans – Disbursements - -

Loans – Recoveries 0.07 0.07

Loans outstanding as on 31st March 0.01 0.08

other Debit Balance as on 31st March 0.25 -

Note: Advances in the nature of TA/LTC are not considered for above disclosure.

ix) “Leases” as per Accounting Standard (AS) 19

The operating lease payments / (receipts) are recognized as an expense / (income) in the Profit and Loss Account on straight line basis over the lease term.

a) As Lessee

a) The Corporation has taken various offices, godown & residential premises under operating lease. these are generally cancelable and range between 11 month and 3 years and are renewal by mutual consent.

b) Lease payments are recognized in the Profit & Loss Account under the head Rent in Note no.2.19. the Corporation has paid lease rent of Rs. 14.12 lakh during the year 1995-96 for lease acquired for 60 years effective from october 1995. the balance lease rent as on 31st March 2015 to be absorbed in future years is as under:

2015-16 2014-15

(In lakhs)

Within one year 0.24 0.24

Later than one year and not later than five years

0.94 0.94

Later than five years 8.23 8.47

Total 9.41 9.65

HHEC


b) As Lessor

a) own property given on lease.

Office Building- JVB

Factory Shed Office Building -Noida

A) 2015-16 2014-15 2015-16 2014-15 2015-16 2014-15A Gross carrying

amount156.05 156.05 11.11 11.11 *Nil 81.12

B Accumulated Depreciation

25.11 22.50 7.84 7.50 *Nil 13.70

C Accumulated impairment losses

nil nil nil nil nil nil

i) Depreciation recognized in Profit & Loss account

2.61 2.61 nil nil nil 0.13

ii) Impairment losses recognized in Profit & Loss account


iii) Impairment losses reversed in Profit & Loss account


B) Future minimum lease payments under non-cancellation operating lease


i) not later than one year

256.60 248.84 2.91 2.82 nil nil

ii) Later than one year but not later than five years

nil nil 3.12 2.12 nil nil

iii) Later than five years


C) total rent recognized at income in the Profit & Loss account

256.60 248.84 3.15 2.45 nil 9.86

*2nd Floor full year vacant.

The Company has let out an office space for a further period of 3 years on a monthly rent of Rs. 0.36 lakh per month and the rent receivable has been properly reflected in the Profit & Loss account of the company. The said office space is held by the company as a lessee from Kolkata Municipal Corporation for the period of 60 (Sixty) years w.e.f. 13.10.1995. The necessary approval for let out has been obtained by the company. Rent received during the year Rs.4.32 lakh (Previous Year Rs. 4.32 lakh) including maintenance charges.


75

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x) “Impairment of Assets” as per Accounting Standard (AS) 28

In accordance with Accounting Standard (AS) 28 on “Impairment of Assets” issued by the Institute of Chartered Accountants of India, the Management is of the opinion that there were no such internal / external factors or changes in circumstance that indicate any impairment loss based on the economic value of assets in use / net recoverable amount of the assets. Hence, no provision for impairment loss is required to be recognized for the year.

xi) “SEGMENT REPORTING “ as per Accounting Standard (AS) 17

a. Primary Segment

Business Segment: As per Accounting standard (As) 17 on segment Reporting, issued by the Institute of Chartered Accountant of India, the Corporation has identified four reportable segments, viz. handicrafts (including carpets), handlooms, jewellery and bullion. segments have been identified and reported taking into account the nature of products, the differing risks and returns, and the internal business reporting systems.

Secondary Segment

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

- sales within India include sales to customers located in India.

- sales outside India include sales to customers located outside India.

the Accounting Policies adopted for segment Reporting are in line with the Accounting Policies of the Corporation with following additional policies for segment reporting:

a) Expenses and Revenues have been identified to a segment on the basis of relationship to the operating activities of the segment.

b) Expenses and Revenues that can be reasonably allocated to the segments on rational basis are also considered in determining segment results.

c) Corporate office expenses, general administrative expenses and expenses that arise at the enterprise level but not specifically related to a segment have been disclosed as “unallocable”.

d) Segment Assets and Liabilities represent assets and liabilities in respective segment. Investment, Tax related Assets and Liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as “unallocable”.

e) Jointly used Assets and Liabilities are allocated to segments if, and only if, their related Revenues and Expenses are allocated to these segments.

HHEC


Info

rmat

ion

abou

t Prim

ary

Bus

ines

s Se

gmen

ts(R

s. in

Lak

hs)

han

dicr

afts

Incl

. C

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tsh

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tota

l

2015

-16

2014

-15

2015

-16

2014

-15

2015

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2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

Rev

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- Ext

erna

l 1

,007

.42

1,3

63.5

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,196

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142

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21


77

58th


(Rs.

in L

akhs

)h

andi

craf

ts In

cl.

Car

pets

han

dloo

ms

Jew

elle

ryB

ullio

nR

TWTo

tal

2015

-16

2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

2015

-16

2014

-15

Oth

er In

form

atio

ns

egm

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sset

s 2

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lloca

ted

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ets

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HHEC


b. Geographical Segment

i) Based on location of customers (Rs. in Lakhs)

Sales Revenue by Geographic Market2015-16 2014-15

I Outside India- Middle east 6.74 3.27- UsA 957.77 1259.20- Japan 436.23 323.18- european Countries 521.76 1048.16- others 87.87 408.37Sub-total 2010.37 3042.18

II Inside India 195026.72 270776.49Total 197037.09 273818.67

ii) Based on location of Assets

Carrying Amount of Segment Assets Additions to Fixed Assets2015-16 2014-15 2015-16 2014-15

Inside India 11,369.50 12,185.74 52.59 83.19outside India 1.31 1.25 - -Total 11, 370.81 12,186.99 52.59 83.19

xii) General

a) HHEC entered into two commercial agreements with Front Line Papers Pvt. Ltd. (FPPL) on 01.09.2008 and on 01.02.2010 by handing over physical possession of the premises at 92, okhla Industrial estate, Phase-III, new Delhi consisting of 6714.15 sq.ft and 1964.90 sq. ft. area respectively. In that agreement FPPL agreed to make timely payment of agreed pre determined margin. FPPL could not achieve the minimum guaranteed turnover and were also erratic and irregular in making payment of the minimum guaranteed margin. Both the agreements came to an end on 31.8.2011. HHeC had contested the arbitration proceeding for recovery of dues for which HHEC has awarded on 26.10.2015 in its favour. HHEC has filed an Execution Petition on 08.08.2016.

HHEC has filed an eviction petition before Hon’ble Estate Officer, HHEC, in 2013 to evict the occupant Mr. Ashok Jain, Director of FPPL from Okhla premises measuring total 8679.05 sq. ft.of areas, along with a prayer for damages for wrongful possession. eviction order was passed and damages have been awarded @ Rs 100/- per sq.ft. per month from 1.9.2011 to 22.2.2013. The amounts come to Rs 1.54 crores. Against that order Mr. Ashok Jain, Director FPPL had filed an appeal in Saket Dist Court, which is still pending. In the mean time FPPL has been evicted from the premise on March, 2013.

b) During the year 2011-12 Chennai Corporation had sent demand notice for payment of property tax for the period 1998-1999 up to I half of 2011 amounting Rs. 38,87,625/-. Similar to the property tax, a demand notice was received from M/s Metropolitan Water Supply and sewerage Board during FY 2011-2012 for an amount of Rs. 12, 61,899/- for the period 1998-1999 to 2011.

A final notice was sent by Chennai Corporation during the year 2012-13, demanding for a final amount of Rs. 45, 09,644/- for the period from 1998-99 up to 2012-13. In order to go for an appeal to tribunal, 50% of the total demand Rs. 22,54,822/- was paid under protest and appeal in F.Y.2012-2013 to Chennai Corporation. However, our appeal got accepted by taxation appeals Tribunal, Chennai Corporation and awarded their order explicitly exempting our Corporation from paying Property Tax. Consequently, we have requested Revenue Officer, Zone-13, Chennai Corporation to refund Rs. 22,54,822/-. However, refund is pending from the Department.


79

58th



sd/-(CA D.S Rawat)



sd/- (Gopal Goyal)

Assistant Manager

sd/-(Ujjal Datta)




sd/-(Azra Banu)




c) Applications for extension of time / waiver / write-off are being made with the Authorized Dealers (Banks), wherever applicable, in cases where GR-I/sDF forms are pending for realization beyond due date. Liability, if any, will be accounted for in the year in which the order is received.

d) Bank charges, withholding tax, interest, forward premium / discount, exchange variation and profit/loss on forward cover cancellation/early utilization incurred on bullion imports are arrived at after adjusting the recoveries / credits made from the customers.

e) Letters for confirmation of debit balances and credit balances have been sent with request to confirm or comment by the stipulated date, failing which balance as indicated in the letter would be taken as confirmed. Confirmations have been received in few cases. However, no adverse comments from the parties have been received.

f) In the opinion of the Management, the value of Current Assets, Loans and Advances on realization in the ordinary course of business will not be less than the value at which these are stated in the Balance sheet.

g) Figures have been rounded off to the nearest multiple of Lakh in the case of, Balance Sheet, Profit & Loss Account, Cash Flow Statement, and Additional Notes on Accounts.

h) Wherever necessary previous year figures have been rearranged /regrouped to make them comparable with those of the current year.

i) notes 2.1 to 2.32 forms an integral part of the accounts and have been duly authenticated.

HHEC


Independent Auditors’ ReportTO ThE MEMBERS OFThE hANDICRAFTS AND hANDLOOMS ExPORTS CORPORATION OF INDIA LIMITED

MANAGEMENT’S REPLY

We have audited the accompanying standalone financial statements of The handicrafts & handlooms Exports Corporation of India Limited (“the Corporation”), which comprise the Balance sheet as at 31st March, 2016, the Statement of Profit and Loss, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.Management’s Responsibility for the Standalone Financial Statements

the Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. this responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.Auditor’s ResponsibilityOur responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit in accordance with the standards on Auditing specified under Section 143(10) of the Act. those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.


81

58th

Management’s Reply

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, 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 a basis for our Qualified audit opinion on the standalone financial statements.

Basis of Qualified Opinion on financial position

the title deeds of three properties situated at Delhi costing Rs. 212.18 Lacs have not been executed in favour of the corporation. the amount of liability on account of stamp duty on registration of title deeds cannot be ascertained. (Refer Note No 2.9-Fixed assets).

The matter regarding non-execution of title deed in respect of three properties had been pending for over 19 years despite constant follow-up.i) stamp duty along with the lease deed for property

at okhla Industrial estate, new Delhi has been deposited and being followed up for execution.

ii) the sub-lease agreement in favour of the Corporation for residential flats in S.T.C. Housing Colony, new Delhi is pending due to the non-execution of Lease Agreement between DDA & stC. However, demarcation of property between stC & HHeC has been completed. Action initiated for getting sub-lease in favour of HHeC and is pending due to no due certificate to be released from s.t.C.

iii) The execution of lease deed for the office building at Jawahar Vyapar Bhawan by L & DO in favour of STC is pending. After the execution of the lease, sub lease between HHeC and stC shall be signed. Execution of direct lease agreement between HHEC and L & DO is also being explored.

Qualified Opinion In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the basis for Qualified opinion paragraph above, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Corporation as at 31st March 2016, and its loss and its cash flows for the year ended on that date.

HHEC

82 Management’s Reply

Emphasis of Matter1. We draw attention to note no. 2.32 (ii) (e) and (f)

to the financial statement which explains that an amount of Rs.3642.73 Lakhs is recoverable from trade receivables mainly relating to Bullion trade which are unconfirmed and subject to reconciliations with the respective parties. In one of the receivables included above amount is of Rs.554 lakhs of M/s. ACPL and there is a dispute with the party. Ministry of Textiles, Government of India, has ordered a special audit of Bullion trade which led considerable dues pending to be recovered from various local buyers. the Corporation has made provisions for doubtful debts of Rs.1000 lakhs on prudent basis during the year against these receivables pending reconciliation with these parties, the outcome of such reconciliation with these parties (receivables) cannot be quantified at present.

2. the Corporation has incurred a substantial operating loss of Rs.1428.68 Lakhs during the year. there has been substantial erosion in net worth as a result of such loss. Further attention is invited to Note No. 2.32(ii) (g) to the financial statement wherein it has been explained that the Ministry of Textiles, Govt. of India, has decided on 2nd september 2016 to windup the bullion trade by HHEC during next three years w.e.f. Fy 2016-17. the discontinuation of the Bullion trade is not expected to adversely affect the financial position of the Corporation as the contribution of Bullion trade in total margin of the Corporation is not significant.

Our opinion is not to be qualified in respect of above two matters.

Suitably disclosed the factual position in financial statement vide Note No. 2.32 (ii) (e) and (f) to the financial statement

Suitably disclosed the factual position in financial statement vide Note No. 2.32(ii) (g) to the financial statement

Other Matter ParagraphWe did not audit the financial statements of three Branches included in the financial statements of the Corporation whose financial statements reflect total assets of Rs 1049.38 lakhs as at 31st March 2016 and the total revenue of Rs 7619.85 lakhs for the year ended on the date, as considered in the financial statement. The financial statements of these branches have been audited by the independent branch auditor appointed by the C& AG whose reports have been furnished to us and in our opinion in so far as it relates to the amount and disclosure included in respect of these branches, is based solely on the report of such branch auditors. Our opinion is not qualified in respect of this matter.


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Report on Other Legal and Regulatory Requirements1. As required by the Companies (Auditor’s Report)

Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A”, a statement on the matters specified in the paragraph 3 and 4 of the order.

2. As required by section 143 (3) of the Act, we report that:

a) We have sought and obtained all the information and explanations except as stated in the Basis of Qualified Opinion Paragraph, which to the best of our knowledge and belief were necessary for the purposes of our audit.

b) In our opinion, proper books of account as required by law have been kept by the Corporation so far as it appears from our examination of those books.

c) the reports on the accounts of the Branch offices of the Company audited under section 143(8) of the Act by Branch auditors have been properly dealt with by us in preparing this report.

d) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account. the reports on the accounts of the branch offices of the Corporation audited under section 143 (8) of the Act by branch auditors have been sent to us and have been properly dealt with by us in preparing this report.

e) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

f) Reporting on disqualification of directors, as on March 31, 2016, from being appointed as a director in terms of sub-section (2) of section 164 of the Companies Act, 2013 is not applicable to Government Companies vide MCA Notification No. GSR 463 (E) dated 05/06/2015.

HHEC


g) With respect to the adequacy of the internal financial controls over financial reporting of the Corporation and the operating effectiveness of such controls, refer to our separate report in “Annexure B”; and

h. With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. the Corporation has disclosed the impact of pending litigations on its financial position in its financial statements – Refer note 2.18 to the financial statements

ii. the Corporation didn’t have any long term contracts including derivative contracts for which there were any material foreseeable losses.

iii. there are no amounts which are required to be transferred to the Investor education and Protection Fund by the Corporation.

i. Directions u/s 143(5) of Companies Act, 2013 as issued by Comptroller & Auditor General of India and comments thereon is enclosed in “Annexure C”.

For Bansal & CoChartered Accountants Firm’s Registration No.-001113N

Sd/-D.S. RawatPartner Membership No. 083030

Place of Signature: New DelhiDate: 29th September, 2016


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“ANNExURE A” TO ThE INDEPENDENT AUDITOR’S REPORT(Referred to in paragraph 1 under “Report on Other Legal and Regulatory Requirements” Section of our Audit Report of even date on the account of hhEC for the year ended on 31st March, 2016)

MANAGEMENT’S REPLY

(i) (a) The Company has maintained proper fixed assets register.

(b) The fixed assets have been physically verified by the management reasonable interval i.e. annually. However, the physical asset records have not been compared with the books and to identify any discrepancies. We are therefore unable to comment as to whether any discrepancies were noticed and their impact on the books of accounts.

(c) the Company holds the title deeds of the immovable properties except in the following cases [refer note no. 2.9 (2)]

1. okhla Industrial estate : Rs 1.33 lakhs 2. stC Housing Colony : Rs 11.90 lakhs 3. Jawahar Vayapar Bhawan : Rs 198.95 lakhs

Reconciliation between physically verified fixed assets and fixed assets register is in progress and impact of variation if any will be accounted for during the financial year 2016-17.

(ii) As per explanation and information provided by the management, physical verification of inventories is undertaken by the Corporation through Independent Chartered accountant firm from time to time. In case of materials lying with third parties, certificates for stocks held have been received. However, the physical verification records do not give correct details of location of inventory in some cases.

In view of audit observation Separate Godown (Location-wise) stock is in progress and the same will be completed during the financial year 2016-17.

(iii) the Corporation has not granted any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 189 of the Companies Act.

(iv) the Corporation has not advanced any loan to the directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person as mentioned in section 185 of Companies Act 2013 and the Corporation does not hold any investment in other Companies as mentioned in section 186 of Companies Act 2013.

(v) the Corporation has not accepted any deposits from the public within the meaning of section 73 of the Company Act 2013.

(vi) the maintenance of cost records, is not applicable to the company pursuant to the Companies (Cost Records and Audit) Rules, 2014 prescribed by the Central Govt. in terms of sub-section 1 of section 148 of Companies Act, 2013, in accordance with rule 3 of the notification dated 30.06.2014 issued by MCA under CEATA mentioned under Textiles Industry is not applicable to the Corporation.

HHEC


(vii) (a) According to the information and explanations given to us and on the basis of our examination of the records of the Corporation, the Corporation is regular in depositing undisputed statutory dues including provident fund, employees' state insurance, income-tax, service tax, duty of customs, cess and any other material statutory dues applicable to it with the appropriate authorities. there are no arrears of outstanding statutory dues as on 31st March, 2016 concerned for a period of more than six months from the date they became payable.

(b) Particulars of disputed statutory dues as on 31st March 2015 are as under.

name of statute

nature of dues

Amount Period to which relates

Forum where dispute is pending

Central sales Tax

sales Tax

1,02,628 1985-86 Madras High Court, Chennai

Central sales Tax

sales Tax


Central sales Tax

sales Tax


Central sales Tax

sales Tax


Textile committee Cess

Cess 6,77,294 2002-03 Textile committee, tribunal, Mumbai

the collection of the demand of Rs.16.92 lakhs has been stayed for recovery by Sales Tax Department on furnishing of bank Guarantee of Rs.15.99 lakhs and cash deposits of Rs.0.93 lakhs.

(viii) In our opinion and according to the information and explanations given to us, the Corporation has not defaulted in repayment of dues to the financial institution or bank.

(ix) The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable.


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(x) According to the information and explanations given to us, no material fraud by the Corporation or on the Corporation by its officers or employees has been noticed or reported during the course of our audit.

(xi) According to the information and explanations given us, Central Government has exempted the Government Companies from the provisions of section 197. Accordingly, this clause of the order is not applicable to the Corporation.

(xii) In our opinion and according to the information and explanations given to us, the Corporation is not a Nidhi Corporation. Accordingly, paragraph 3(xii) of the order is not applicable.

(xiii) According to the information and explanations given to us and based on our examination of the records of the Corporation, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards.

(xiv) According to the information and explanations give to us and based on our examination of the records of the Corporation, the Corporation has complied with all the provision of section 42 of Companies Act 2013.

(xv) According to the information and explanations given to us and based on our examination of the records of the Corporation, the Corporation has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the order is not applicable.

(xvi) The Corporation is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934.

For Bansal &CoChartered Accountants Firm’s Registration No.-001113N


Place of Signature: New DelhiDate: 29th September, 2016

HHEC


“ANNExURE B” TO ThE INDEPENDENT AUDITOR’S REPORT(Referred to in paragraph 2 (f) under “Report on Other Legal and Regulatory Requirements” Section of our Audit Report of even date on the account of hhEC (The handicrafts & handlooms Exports Corporation of India Limited)for the year ended on 31st March, 2016) Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act Report on the Internal”)

We have audited the internal financial controls over financial reporting of the Company as of March 31, 2016 in conjunction with our audit of the financial statements of the Company for the year ended on that date.MANAGEMENT’S RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLSthe Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India”. these responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.AUDITORS’ RESPONSIBILITYOur responsibility is to express an opinion on the Company’s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) and the standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. those standards and the Guidance note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding


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of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. the procedures selected depend on the auditor’s judgments, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion on the Company’s internal financial controls system over financial reporting.MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTINGA company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.INhERENT LIMITATIONS OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTINGBecause of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.QUALIFIED OPINIONAccording to the information and explanations given to us and based on our audit, the following material weaknesses have been identified as at March 31, 2016:

HHEC


1. It was noticed that in case of bullion sales, the Corporation has not followed in-built controls with the respect to agreement entered with the bullion buyers. We also noticed the cases of overriding controls inbuilt in such agreement.

the procedure of bullion sales as per the agreement consistently followed in past also.

2. the controls over Inventory records are inadequate as the physical verification records do not give correct details of the location of the inventories. Further, the Corporation has not established any Internal control mechanism to document the compliance with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

Refer our reply in (ii) of under “ANNExURE A” TO THE InDePenDent AUDItoR’s RePoRt.

3. there is weakness in controls over payment vouchers. During the audit, it was observed that the vouchers were not numbered, replaced without proper authentication. However, as on date of completion of audit the vouchers were duly numbered.

Rectified during the course of audit. Hence no further comments.

4. the management needs to strengthen the controls over realizations of receivables by obtaining balance confirmations and maintaining periodic reconciliation of outstanding balances of trade receivables.

We have been periodically reviewing the old and long outstanding dues of trade debtors and efforts are continuously made for realization the same.

5. the Corporation has not documented all its controls and has not developed system for testing the effectiveness of controls.

View point of Audit is noted for compliance.

A ‘material weakness’ is a deficiency, or a combination of deficiencies, in internal financial control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. In our opinion, except for the possible effects of the material weakness described above on the achievement of the objectives of the control criteria, the Company has maintained, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating satisfactorily as of March 31, 2016, based on the internal control over financial reporting criteria established by the Corporation considering the essential components of internal control stated in the Guidance note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India.

For Bansal &CoChartered Accountants Firm’s Registration No.-001113N


Place of Signature: New Delhi Date: 29th September, 2016


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Annexure C to the Independent Auditor’s ReportDirections under section 143(5) of the Companies Act 2013

applicable from the year 2015-16 and onwardsDirections Comments

1 Whether the Company has clear title/lease deeds for free hold and lease hold respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available?

Company has clear title/lease deeds for freehold/leasehold land. However, title deeds of the following three properties are not executed in favour of Corporation.Particulars Area (sq. Mtr)1.okhla Industrial estate: 657.002. stC Housing Colony: 7908.003. Jawahar Vyapar Bhawan: 1356.94

2 Whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons thereof and the amount involved.

there are no cases of waiver/ write off of debts/ loans/ interest during the year.

3 Whether proper records are maintained for inventories lying with third parties & assets received as gift/grants(s) from Govt. or other authorities.

Company has maintained proper records for inventories lying with third parties.separate records has been maintained for assets received as gift/grants (s) from Govt. or other authorities.

Sub-DirectionsIndependent verification may be made of information/inputs furnished to Actuary, viz number of employees, average salary, retirement age and assumptions made by the Actuary regarding discount rate, future cost increase, mortality rate, etc for arriving at the provision for liability of retirement benefits, viz gratuity, leave encashment, post-retirement medical benefits etc.

Yes.Actuarial valuation has been done by LIC in case of Gratuity and Leave Encashment and in case of Post Retirement Medical benefit. Information /inputs furnished to actuary has been verified and found correct.

Other MatterThe Ministry of Textiles, Government of India, has ordered a special audit of Bullion Trade on account of considerable dues pending to be recovered from various local buyers, to be commissioned through the C & AG Office for the period upto March 2015. It has been explained to us that no final report has been submitted by the C & AG to the Government till 29th September, 2016. The Ministry of Textiles, Government of India, has decided on 2nd september 2016 to windup the Bullion Trade by HHEC during next three years w.e.f. Fy 2016-17.

For Bansal &CoChartered Accountants Firm’s Registration no.-001113n

sd/-D.S. RawatPartner Membership no. 083030

Place of signature: new DelhiDate: 29th september, 2016

HHEC



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C&AG Comments

HHEC

94 Significant Accounting PoliciesC&AG Comments


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C&AG Comments

MANAGEMENT’S REPLIES TO THE COMMENTS OF COMPTROLLER & AUDITOR GENERAL OF INDIAC&AG COMMENTS MANAGEMENT REPLIES

A. Comments on profitability A.1 Balance sheet as on 31 March 2016

Non-Current AssetsDeferred Tax Assets-Rs. 8.54 Crore.

The above represents Deferred Tax Assets (DTA) created in contravention of As-22 which stipulates that there should be reasonable certainty of future taxable profits to realize DTA. The company has long pending outstanding debtors of Rs. 36.43 crore towards bullion trade and provided only Rs. 10.00 crore in 2015-16 against these outstanding debtors. Further, Ministry of Textiles, Government of India has decided to wind up the Bullion trade business, which contributes 98 percent of total turnover, during the next three years. Accordingly, there is no reasonable certainty of earning taxable profits in future. Hence, the creation of DTA has resulted in overstatement of non-Current Assets and understatement of Negative reserve and surplus by Rs. 8.54 crore. Loss after tax for the current financial is also understated by Rs. 3.48 crore.

The total Deferred Tax Assets (DTA) of the Corporation as on 31.03.2016 of Rs.8.54 Crore including Rs. 3.48 Cr. recognized for the year 2015-16 vide our note no. 2.29 attached to the Financial statements, the majority amount is pertaining to Provision for Doubt Debts, loan & Advance and the balance amount is pertaining to related to employees (gratuity and leave encashments), late deposit of tDs other the same will be allowed in the near future as the related to employees is statutory dues and payable on the due date. the provision for D/F Debts, loan & Advance has Reasonable chances of reversing in coming years. on the basis of the above figure it is very clear that DTA has not been recognized due to the carry forward loss and deprecation.

As the business is going concern and no doubt is expressed on its going concern concept which is itself implies that there is reasonable certainty of reversing this amount in future. no DtA has been recognized on losses to be carry forward as it needs virtual certainty rather than reasonable certainty.

During the last 10 years HHEC incurred losses from the financial year 2006-07 to 2009-10 and further earned profit from the financial year 2010-11 to 2014-15 even HHeC had paid the dividend for the financial year 2013-14 and 2014-15. In current financial year 2015-16 incurred loss mainly due to decline in export business by 33% which will be recouped with our efforts and making provision of Rs.10.00 crores as a prudential accounting policy. During these periods Corporations net worth was always positive. Because of this, the financial statement reflects the true and fair view of position of business. Hence, it is implies that Corporation is going concern. As-22 meets the need of satisfying fundamental Matching Concept.We have recognized of DTA in the current financial year based on reasonable level of certainty of expected profits in future. Current year estimates as per MoU 2016-17 signed between Ministry of Textiles and HHEC. Also the projections for 2017-18 and 2018-19 as presented also projects reasonable profits on and are on based on discussion by Ministry of Textiles and various initiatives proposed to be embarked by HHeC in the short term.

It is correct that the core business of the company contributes less than 2 per cent of the total turnover. However it is also correct the bullion business is opportunity business and the margin of the bullion business is very less and the contribution of the same in the profitability of the company is not substantial except in one or two year. Hence accordingly HHeC is making a plan to phased out the same in a time period of 3 years without impinging its profitability and sustenance. HHeC has made the provision under the heading doubtful debts which was made as a prudent accounting. However HHeC is dealing with the two buyers still now and hope for the recovery in the near future. so, there is no overstatement of non-Current Assets and understatement of negative reserve and surplus and also there is no understated Loss after tax for the current financial year.

“Keeping in view the above, DtA has been recognized as on 31.03.2016 as per the Professionals’ Advice. However, the matter be referred to ICAI for seeking advice on As -22 (creation of DtA) and DTA will be reviewed at the end of next financial year 2016-17 in light of C&AG remarks and observations. Accordingly, suitable action will be taken in FY 2016-17 Financial statements.”

HHEC

96 Management Reply to C&AG Comments


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