going beyond tomorrow spentex industries limited annual report 2008-09.pdf · 31-a, midc industrial...

SPENTEX INDUSTRIES LIMITED

th17 Annual Report

2008 - 2009

th17 Annual Report

2008 - 2009

Going Beyond Tomorrow...

BOARD OF DIRECTORS

Ajay Kumar Choudhary (Chairman)

Mukund Choudhary (Managing Director)

Kapil Choudhary (Deputy Managing Director)

Amrit Agrawal (Director - Finance)

Sitaram Parthasarathy (Director - Works)

Deepak Diwan

Prem Malik

Ram Kumar Thapliyal

Shyamal Ghosh

Vivek Chhachhi

Dhananjaya Prasad Singh

SECRETARY

Vivek Kumar

AUDITORS

Price Waterhouse

REGISTERED & CORPORATE OFFICE

A-60, Okhla Industrial Area

Phase-II, New Delhi-110020

Ph.: 011-26387738, 41614999

Fax : 011-26385181

PLANT

B-1, MIDC, Chincholi - Kondi

Dist. - Solapur, Maharashtra - 413255

D-48, MIDC, Baramati, Dist. Pune

Maharashtra - 413133

51-A, Industrial Area, Sector-III, Pithampur

Distt. Dhar, Madhya Pradesh - 454774

31-A, MIDC Industrial Area, Butibori

Nagpur - 441122, Maharashtra

2A, Zie Said Street, Tashkent City - 100042

Republic of Uzbekistan

2, Tashkent Yuli Street, Toytepa, Urta-chirchik

District,Tashkent Region - 102 300

Nadrazni 557 436 57, Litvinov, Czech Republic

BANKERS / INSTITUTIONS

State Bank ofIndia

ING Vysya Bank

Bank of Baroda

Indusind Bank

State Bank of Indore

Canara Bank

Indian Bank

Yes bank Ltd.

ICICI Bank Ltd.

Industrial Development Bank of India

Axis Bank Ltd.

Oriental Bank of Commerce

Page No.

Directors' Report 1

Corporate Governance Report 6

Management Discussions & Analysis 13

Auditors Report 15

Balance Sheet 19

Profit & Loss Account 20

Cash Flow Statement 21

Schedules 22

Auditors' Report on Consolidated 40Financial Statements

Consolidated balance Sheet 41

Consolidated Profit & Loss Account 42

Consolidated Cash Flow Statement 43

Consolidated Schedules 44

Financial Statements U/s 212 (8) of 61Companies Act 1956

INDEX

ANNUAL REPORT 2008 - 2009

01

FOR THE YEAR ENDED 31ST MARCH 2009

Your Directors have great pleasure in presenting the 17th Annual Report together with the Audited Accounts for the year ended March 31, 2009.

FINANCIAL RESULTS

The highlights of the financial results are as under : Rs. in Crores

Particulars 2008-2009 2007-2008

Consolidated Standalone Consolidated Standalone

Net Sales (Turnover) 1216.92 681.80 1337.31 759.72

Other Income 26.49 26.56 91.78 55.04

EBIDTA (44.87) 31.52 134.47 68.72

Financial charges 97.93 69.23 93.28 67.50

Depreciation 78.93 39.31 74.55 42.30

Exceptional items 12.72 0.00 0.00 0.00

Prior period adjustment 0.00 0.00 1.29 1.12

Profit/(Loss) before tax (PBT) (234.45) (77.02) (34.65) (42.20)

Provision for current tax 0.07 0.00 0.01 0.00

Provision for deferred tax 8.28 0.00 (-) 11.52 (-) 8.13

Fringe benefit tax 0.39 0.37 0.47 0.46

Profit/(Loss) after tax (PAT) but before Minority Int. (243.19) (77.39) (23.61) (34.53)

Minority Interest 7.01 0.00 (1.87) 0.00

Net Profit/(Loss) (236.18) (77.39) (21.74) (34.53)

OPERATING RESULTS AND BUSINESS

During the year under review, your Company has faced financial crunch due to all time high prices of cotton and global slowdown, due to which the consolidated revenue has been decreased to 1216.92 Crores as compared to Rs.1337.31 Crores in the previous year and standalone revenue down to Rs. 681.80 Crores as compared to Rs. 759.72 Crores in the previous year. Your Company has suffered a consolidated Loss after Tax of Rs. 236.18 Crores as against consolidated loss after Tax of Rs.21.74 Crores in the previous year and loss after tax in standalone basis was Rs. 77.39 Crores as compared to loss after tax of Rs. 34.53 Crores in the previous year. The increase in losses is due to the fact that the units had to restore to production cuts due to the un-viability of business and at the same time suffered loss on inventories.

The segment wise reporting of various business segments are provided in Note XXI of “Notes to Accounts” to the Audited Balance Sheet and also in “Management Discussion & Analysis”.

During the year, the Company has received approval from its bankers for revision of terms of its working capital and term loan facilities including reduction in interest rates and re-schedulement of debt repayment installments.

During the year under review, the Company has suspended the production of Unit II of Cimmco Spinners which was acquired from Bombay Dying and Manufacturing Company Limited (“BDMC”) due to high production cost and shifted the required plant & machinery of the said unit to other units of the Company as balancing equipments and selling the rest of the machines which are no more required.

DIVIDEND

During the year, the Company has no distributable profits hence your Directors do not recommend any dividend.

OVERVIEW OF ECONOMY

In the past year, markedly during the second half, the Indian as well as the global economy witnessed a high degree of uncertainty and rapid slowdown. The global recession impacted the fortunes of corporates across geographies. The IMF has estimated that world economic growth will fall to its lowest level since World War II.

The Indian economy too has not been isolated from what has been happening in the global economy. In fact, it only became abundantly clear that the fortunes of the Indian economy are not so decoupled from the rest of the world. As export demand continued to shrink during the year and external financing became progressively constrained, the pace of growth in the Indian economy also slowed down. The redeeming feature, however, is that the Indian economy is not entirely export dependent, which has worked to its advantage and its large domestic consumption demand has helped prop up the GDP growth rates and has prevented it from slipping into negative territory.

It is expected by many that once the global economy stabilizes and shows some signs of recovery, the Indian economy will be amongst the first few economies that would lead the world on the path of an economic turnaround.

FUTURE OUTLOOK AND STRATEGIES

India is one of the most preferred destinations for sourcing yarn and textile products. It is the world’s second biggest textile manufacturer, right after China and also ranks just after China and the USA in the production and consumption of cotton. Allocation of funds for technology up-gradation and encouragement for development of integrated textile parks, re-introducing of duty draw

DIRECTORS' REPORT

02


back scheme and various other incentive schemes/stimulus packages offered by the Government, will provide the Indian textiles industry with a large opportunity. Your Company will endeavor to fully utilize these opportunities to improve the results even in the current fiscal year 2009-2010.

To achieve better results your Company has already initiated the following strategies:

ØRevamping business plans by exploring new domestic markets since the demand in the international market is under pressure, which will enable the Company to be less dependent on the export market.

ØUpgrading the existing plant & machinery to achieve maximum output, improve the quality and also reduce the cost of production which ultimately increases the margin.

ØTo overcome fluctuations in the cotton prices and availability of cotton, the Company has tied-up supply of cotton till the end of third quarter of fiscal year 2009-10. This will ensure the stability of input costs.

CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION AND ANALYSIS

As stipulated under Clause 49 of the Listing Agreement with Stock Exchanges, a report on Corporate Governance is attached separately as a part of the Annual Report and also the Management Discussion and Analysis statement.

DIRECTORS

As per Article 102 of Articles of Association, Shri Deepak Diwan and Shri Amrit Agrawal retire by rotation in the forthcoming Annual General Meeting and being eligible offers themselves for re-appointment.

During the year, Shri D P Singh was appointed as Additional Director on 31/01/2009 in terms of Section 260 of the Act. The Company has received a notice in writing from a member proposing the candidature of Shri D P Singh as director, liable to retire by rotation.

Brief resume of the Directors proposed to be appointed/re-appointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership/chairmanships of Board Committees, as stipulated under Clause 49 of the listing agreement with stock exchanges in India, are provided in the Report of Corporate Governance forming part of Annual Report.

AUDITORS

M/s. Price Waterhouse, Chartered Accountants, who are the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their re-appointment, if made, would be in accordance with Section 224(1B) of the Companies Act, 1956. The Board recommends their re-appointment.

DIRECTORS VIEW ON AUDITORS OBSERVATIONS

Management response to the various observations of the auditors even though explained wherever necessary through appropriate notes to the Accounts, is reproduced hereunder- in compliance with the relevant legal provisions.

Reference para 4(a) of the Auditors Report

Butibori unit was initially granted Sales Tax Exemption for 14 years under the Package Scheme of Incentives, 1993, expiring on 31st December, 2008, vide Exemption certificate EC No. 2887. Consequent to High Court Order of demerger, Unit applied for issue of separate certificate in its favour, valid upto December 31, 2008 after splitting / canceling the above certificate. However Development Commissioner (Industries), Govt. of Maharastra, reduced the initial validity period from 14 yrs to 11 yrs expiring on 31 December, 2005. The unit has applied for the restoration of the original validity period upto December 31, 2008 in terms of the High Court order.

In view of expiry of the exemption benefits, the Butibori unit has given an undertaking to the Sales Tax Department for payment of taxes with interest with effect from January 1, 2006 in case it fails to get the extension of exemption period and is accordingly selling finished goods, waste and scrap etc. without charging sales tax (VAT and Central Sales Tax) under exemption. With effect from 1st Jan’2009 the unit is selling its products after charging sales tax / VAT as applicable.

In case the unit fails to get the exemption certificate from the authorities, the tax and interest payable as on March 31, 2009 shall be as under: :

Sales Value Sales Tax Interest Total(Rs.) (Rs.) (Rs.) (Rs.)

Jan, 06 – Mar, 06 165,414,164 6,475,767 3,156,936 9,632,703

Apr, 06 – Mar, 07 1,048,420,320 41,562,736 18703231 60,265,967

Apr,07 – Mar, 08 729,883,547 25,063,885 7,519,165 32,583,050

Apr,08 – Mar, 09 503,750,772 16,618,179 2,492,728 19,110,907

Total 2,447,468,803 89,720,567 31,872,060 121,592,627

Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs. 84,875,604 for the period January 1, 2006 to December 31, 2008 on the basis that the Sales Tax Exemption will be extended for a further period of 3 years with effect from January 1, 2006. The total loss, in the event such extension is not given to the Company, will be Rs. 121,592,627 (including Rs. 102,481,720 in respect of earlier years).

The unit has also filed a petition before the Hon’ble High Court, Nagpur to grant relief on the said matter and is hopeful of recovery of such amount. (Note 8 of Notes to Accounts in Schedule XXI of Accounts annexed).

Reference para 4(b) of the Auditors Report


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a) The Company has an investment of Rs 204,469,921 in Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2009. The accumulated losses in ASIL at the year end approximate 98% of its net worth. There is also a reduction in market value of these investments as at the year by Rs. 171,949,252. In the opinion of the management, the above diminutions in this long term investment are due to adverse business conditions and are not ultimately expected to continue in future. Based on recent performance and trends of ASIL and overall industry outlook, there is an increase in average selling prices of yarn, consistent increase in production level and reduction in procurement costs of raw materials. The management believes that ASIL would start earning cash profits within a reasonable period of time. The recoupment of losses by ASIL is dependent on the outcome of management’s future plans to revive the operations and generate adequate cash profits. Any further deterioration in the industry trends could adversely impact the operations of ASIL. However, management is optimistic with respect to the future financial viability of this subsidiary and accordingly, provision for the diminution in the value of this long term investment is not considered necessary at this stage.

Regarding the loans, advances, debtors and interest due on the loan amounting to Rs. 443,542,127, Rs. 36,441,681, Rs. 8,185,909 and Rs.10,053,942 respectively. The management believes that the amounts would be realized within a reasonable period of time once the operation starts generating adequate cash profits as stated above and is also negotiating with various vendors of ASIL to recover the advances paid by it and hence further improve the liquidity position. Accordingly no provision considered necessary. (Note 9(a) of Notes to Accounts in Schedule XXI of Accounts annexed).

b) Schoeller Litvinov k.s. (SLKS), the Czech step-down subsidiary of the Company, is adversely affected by global recession resulting in reduction in demand, increase in input costs and shortage of working capital. As a result of these, accumulated losses of the step-down subsidiary have exceeded its net worth as at March 31, 2009. Based on order of a Court in that country, this step-down subsidiary is in the process of submitting a reorganisation plan to restructure its assets and liabilities by early September 2009. The revival of this step-down subsidiary is dependent on the Court approving the reorganization plan and management being able to implement the plan successfully. The management believes that the reorganization plan coupled with improvement in the global textile market, will turn around the step-down subsidiary so as to make good its losses in a reasonable period of time and will also place the step-down subsidiary in a position to repay the debtors balance of Rs. 495,294,438 and advances of Rs. 20,310,823 due to the Company as at March 31, 2009. SLKS has sufficient stock and receivables which are expected to be realized during the year ending March 31, 2010 and the Company expects to reduce its outstanding advances significantly. Accordingly, provision against these balances is not considered necessary at this stage. (Note 9(b) of Notes to Accounts in Schedule XXI of Accounts annexed).

Reference para 4(c) of the Auditors Report

Sundry Debtors and Advances include amounts aggregating Rs. 18,135,371 and Rs. 22,473,335 respectively due from certain customers where payments are not forthcoming. Of the above, the Company has filed a suit for recovery of Rs. 18,135,371 against two of the customers. Further, in respect of the advances of Rs.22,473,335 the Company is making efforts to recover the same and expect to reduce these significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at this stage. (Note 11 of Notes to Accounts in Schedule XXI of Accounts annexed).

COST AUDITORS

The Central Government had directed an audit of the cost accounts maintained by the Company in respect of textile business. The Central Government has approved the appointment of Shri Rajesh Goyal, Cost Accountant of M/s. K G Goyal & Associates, Cost Accountants to conduct the audit of the Cost Accounts of the Company for the financial year ending 31st March, 2009 for the product “Textile”.

FIXED DEPOSITS

Your Company has not accepted any deposits during the year within the meaning of Section 58A of the Companies Act, 1956 and rules made there under.

SUBSIDIARIES

The Company had eight subsidiaries at the beginning of the year. The Ministry of Corporate Affairs, Government of India, vide order No.47/80/2009-CL-III dated May 19th 2009 has granted approval that the requirement to attach various documents in respect of subsidiary companies, as set out in sub-section (1) of Section 212 of the Companies Act, 1956, shall not apply to the Company. Accordingly, the Balance Sheet and Profit & Loss Account and other documents of subsidiary companies are not being attached with the Balance Sheet of the Company. Financial Information of the subsidiary companies, as required by the said order, is disclosed in the Annual Report. The Company will make available the Annual Accounts and related details upon request by any member of the Company. These documents will also be available for inspection at the registered office of the Company during business hours. The Consolidated Financial Statements presented by the Company includes financial results of its subsidiary companies.

CONSOLIDATED FINANCIAL STATEMENT

In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with Accounting Standard AS-23 on accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, your Directors hereby state and confirm that:

a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and there are no material departures;

04


b) the Directors have selected such accounting policies and applied them consistently and made judgment and estimates that are 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 and of the Loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts on a going concern basis.

PARTICULARS OF EMPLOYEES

Information relating to employees of the Company, as required under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of employees are set out in the Annexure - I to the Directors’ Report.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed under Section 217(1)(e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure – II to the Directors’ Report.

INDUSTRIAL RELATIONS

The industrial relations during the year under review remained harmonious and cordial. Your Directors wish to place on record their appreciation for the wholehearted co-operation received from all the employees at various units/divisions of the Company.

ACKNOWLEDGMENTS

Your Directors gratefully acknowledge the whole hearted support given by the customers, suppliers, shareholders, employees, central and state governments, financial institutions, banks, and look forward for continued cooperation and best wishes in their endeavor to steer the Company towards greater heights.

For and on behalf of Board of Directors

Place: New Delhi Ajay Kumar ChoudharyDated: July 30, 2009 Chairman

Annexure 1 to the Directors' ReportInformation Pursuant to Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975 and forming part of the Director's Report for the financial year ended 31st March, 2009.

Name Age Qualification Date of Designation Gross Experience Last EmployerJoining Remuneration

Ajay Kumar Choudhary 61 B.Com 31/12/2005 Chairman 48,00,000 39 CLC Global Ltd.

Mukund Choudhary 38 B.Com 21/06/2004 Managing Director 48,00,000 19 CLC Global Ltd.

Kapil Choudhary 36 B.Com 31/12/2005 Deputy Managing Director 48,00,000 14 CLC Global Ltd.

Amrit Agrawal 41 FCA, FCS 28/04/2007 Director- Finance 42,43,506 19 CLC Global Ltd.

Sitaram Parthasarthy 48 B. Sc (Hons.) 12/’05/2004 Director-Works 47,59,793 24 CLC Global Ltd.B. Tech (Textile)

Ravi Upadhyaya 61 MBA 15/07/2004 Head International Marketing 27,00,000 40 Shamken Spinners Ltd.

C. B. Kataria 42 MMS 27/04/2004 Sr. Vice President (Marketing) 27,00,000 20 Radhika Fabrics India Ltd.

Saumil Parikh 52 B Com 14/10/2006 Sr. Vice President (Purchase) 24,00,000 27 Ashima Ltd.

V. K. Jain 60 M. Tech 08/02/2007 President 29,07,044 26 Alis Industries Ltd.

L. N. Kaushik 42 M. Tech 19/05/2006 President 45,00,000 19 Abhishek Ind. Ltd.

Notes: 1. Gross Remuneration has the same meaning as assigned to it under Section 198 of the Companies Act, 1956.

2. The nature of employment in all cases is contractual.

3. Shri Ajay Kumar Choudhary, Shri Mukund Choudhary and Shri Kapil Choudhary are related to each other.

4. All the employees have adequate experience to discharge the responsibility assigned to them.




05

Annexure – II to the Directors' Report

Particulars required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 and forming part of the Directors' Report for the year ended March 31, 2009.

A. CONSERVATION OF ENERGY

During the year under review further efforts were made to ensure optimum utilization of fuel and electricity.

a. Energy conservation measures taken:

The Company is continuously taking efforts in energy conservation, energy saving tubes and electronic ballasts are continuously to be being installed in a phased manner for this purpose. During the year there was replacement of conventional copper ballast with electronic ballast, which helps in reducing the load form 15 amps to 7 amps.

Relevant data in respect of energy consumption is as below:

Electricity Current year Previous year

Purchased

Total Units consumed (KHW) 148,231,572 199621743

Total Amount (Rs. in Lacs) 6,001 7880.08

Rate per Unit (Rs.) 4.05 3.95

Own Generation through Generator Set

Units (KHW) 45,723 328770

Units per liter of Diesel/Furnace Oil 3.25 10.03

Cost / Unit (Rs.) 7.42 3.05

Electricity Consumption (Units)

Per Kg. of Production of yarn 2.84 3.12

B. TECHNOLOGY ABSORPTION

RESEARCH & DEVELOPMENT (R&D)

1. Specific areas in which R&D has been carried out by the Company:

Continue in identifying areas of improvements in the processes through properly documented systems to strengthen yarn quality, improvement in productivity and effective maintenance.

2. Benefits derived as result of the above R & D:

Improvement in effective utilization of resources and fulfillment of customers requirements.

3. Future plan of action:

Identifying measures to further improve productivity and increase contribution per unit of production.

4. Expenditure on R & D :

a) Capital -

b) Revenue Rs. 5.30 Lacs

c) Total Rs. 5.30 Lacs

d) Total R & D Expenditure as percentage of total turnover 0.01%

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

a) Efforts: Upgrading machines with technologically advanced accessories and spares.

b) Benefits: Higher output and improved quality of products.

c) Technology imported during the last 5 years: None

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

a) Efforts : In Spite of Stiff Global Competition and reduced margins the Company is continuing to put its best efforts in earning foreign exchange contributing to the national exchequer.

b) Earnings and Outgo : Particulars with regard to foreign exchange earnings and outgo appear in Schedule XXI of annual accounts.



CORPORATE GOVERNANCE REPORT FOR THE YEAR 2008-09(As required under Clause 49 of the Listing Agreement entered into with Stock Exchanges)

1. Company's Philosophy on Corporate Governance

The Company's philosophy on Corporate Governance is towards fostering greater accountability, transparency, responsibility, fairness and commitment to values in all spectrums of business through continual assessment of internal control mechanism vis-à-vis proactive risk management system for upholding ethos of corporate citizenship. Pre-emptive risk assessment and mitigation by using proper internal audit system, hiring top grade audit firms of international repute, best insurance and consultants, dynamic budgeting system with proper business planning and forecasting. The Company is committed to attend best-in-class higher levels disclosures to board and shareholders & society at large. The Company has a strong desire to enhance long-term shareholder value and respect minority rights in addition to complying with all complex and statutory requirements for Corporate Governance.

2. Board of Directors

The Company has 12 Directors, with an Executive Chairman. Of the 12 Directors, 5 (i.e. 41.67%) are Executive Directors and 7 (i.e. 58.33%) are Independent Directors. The composition of the Board is in conformity with clause 49 of the Listing Agreement entered into with Stock Exchanges and exceeds the percentages prescribed in the said Agreement.

5 nos. of Board Meetings were held during the year and the interval between any two meetings did not exceed four months (as stipulated by law in force). The respective dates on which Board Meetings were held are 30th April, 2008, 30th June, 2008, 31st July, 2008, 31st October, 2008 and 31st January, 2009.

The names and category of the Directors on the Board, their attendance at the Board Meetings and last Annual General Meeting, and number of Directorships and Committees Chairmanships/Memberships of each Director in other companies are as follows:

Directors Category No. of Board No. of Directorships and Attendance Meetings Chairmanship(s)/ at the

Membership(s) of Board last AGMCommittees of other companies

Held Attended Directorship* Member** Chairperson** Yes/No

Shri Ajay Kumar Choudhary Executive 5 5 1 - - No(Chairman)

Shri Mukund Choudhary - do - 5 5 4 1 - Yes(Managing Director)

Shri Kapil Choudhary - do - 5 5 3 - - Yes(Dy. Managing Director)

Shri Sitaram Parthasarathy -do- 5 5 - - - Yes(Director – Works)

Shri Amrit Agrawal - do - 5 5 3 - 1 Yes(Director – Finance)

Shri Deepak Diwan Non-Executive/ 5 4 1 - - NoIndependent

Director

Shri Prem Malik - do - 5 4 2 0 0 No

Shri R.K. Thapliyal - do - 5 5 1 - - No

Shri Pankaj Sharma # - do - 5 5 2 - - Yes

Shri Shyamal Ghosh - do - 5 5 7 3 - No

Shri D P Singh ## - do - - - - - - -

Shri Vivek Chhachhi Nominee 5 2 4 - - NoDirector

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* The Directorship(s) held by Directors do not include Alternate Directorships and Directorships of Foreign Companies, Private Limited Companies, Section 25 Companies.

** In accordance with Clause 49, Memberships/Chairmanships of only Audit Committees and Shareholders'/Investors' Grievance Committees of all Public Limited Companies (excluding Spentex Industries Limited) have been considered.

# Resigned as Director of the Company w.e.f. 01-05-2009

## Appointed as Additional Director of the Company w.e.f. 31-01-2009

Information supplied to the Board

1. Annual operating plans of business, Capital budget and updates.

2. Quarterly results of the Company and its operating divisions/manufacturing units, subsidiary and step-down subsidiary companies and business segments.


07

3. Performance of manufacturing units and functioning of key executives.

4. Performance of Quality Standards and platform for decision making on quality.

5. Image and credibility of the Company in the eyes of domestic and international customers by consistent disclosure and transparency.

6. Minutes of meetings of audit committee and other committees of the board, and also resolutions passed by circulation.

7. The information on recruitment and remuneration of senior officials next to the Board of Directors, including appointment or removal of the Company Secretary.

8. Details of joint venture or collaboration agreements entered into.

9. Borrowing Term Loans and Investment of surplus funds as and when happened.

10. Transactions that involve substantial payment towards goodwill, brand equity or intellectual property.

11. Notices like show cause, demand, penalty which are materially important / effluent and material default in financial obligations to and by the company and also non-receipt of payments for goods sold by the Company.

12. Significant development in Human Resources, Labour problems and their proposed solutions, signing of Wage Agreements etc.

13. Investments in subsidiaries, foreign exchange exposures and steps taken by the management on exchange rate movement and adverse exchange ratio etc.

14. Sale of material nature, of investment/subsidiaries/assets, which is not in normal course of business.

15. Fulfillment of various statutory compliances/listing requirements.

Disclosure of Appointment/Re-appointment of Directors at the Annual General Meeting

According to the Articles of Association, one-third of the Directors retires by rotation and, if eligible, seeks re-appointment at the Annual General Meeting of Shareholders. As per Article 102 of the Articles of Association, Shri Deepak Diwan and Shri Amrit Agrawal will retire in the ensuing Annual General Meeting. During the year, Shri Dhananjaya Prasad Singh a retired IAS officer has joined in the Board as Independent Director on 31st January, 2009 and holds office upto ensuing Annual General Meeting. The current term of Shri Mukund Choudhary as Managing Director expired on 20th June, 2009. The Board of Directors at their meeting held on 30th April, 2009, subject to approval of members and other requisite approvals as may be necessitate from time to time, re-appointed him as Managing Director for another term of 5 years w.e.f. 21st June, 2009. The Board has recommended the re-appointment/appointment of aforesaid retiring and newly appointed Directors.

a) Shri Mukund Choudhary (38) is Managing Director of the Company since 21st June 2004. He is having more than 17 years of experience in the Textile Industry. He is instrumental in the growth of the Spentex group and the group's entry into manufacturing of cotton yarn can be attributed to him. During his tenure, Company has acquired Indo Rama Textiles Ltd. and also spread its wings internationally by acquiring manufacturing units in Uzbekistan and Czech Republic. He is Director in Himalayan Crest Power Ltd, CLC & Sons Private Ltd, CLC Power Ltd, Tarini Hydro Electric Power Ltd, CLC Enterprises Ltd, CLC Textile Park Pvt. Ltd, Confederation of Indian Textile Industry, Spentex Mauritius Pvt. Ltd and Managing Director of Spentex (Netherlands) B.V.

Shri Mukund Choudhary is the Member of Banking Committee, Share Transfer & Shareholders'/Investors' Grievance Committee and Investment Committee of the Company.

Shri Choudhary holds 85,35,946 equity shares of the Company in his name as on 31st March, 2009.

b) Shri Deepak Diwan (59) is a Director of the Company since December 31, 2005. He holds Degree in Commerce and Law. Shri Diwan is Senior Corporate Law Advisor and provides consultation on corporate law matters to various Corporate(s). He is Director in Bharat Investment Growth Ltd. and TRC Corporate Consulting Pvt. Ltd.

Shri Diwan is the Member of Remuneration Committee, Banking Committee and Chairman of Share Transfer & Shareholders'/Investors' Grievance Committee of the Company.

Shri Diwan does not hold any shares of the Company.

c) Shri Amrit Agrawal (41) is a Director of the Company since April 28, 2007. He is a Fellow Member of the Institute of Chartered Accountants of India and Fellow Member of the Institute of Company Secretaries of India. He has an outstanding academic record – rank holder in Chartered Accountants and having 19 year experience in Finance, Corporate Secretarial & Legal. He is Director in Himalayan Crest Power Ltd, CLC Power Ltd. and Multiflex Lami Print Ltd. He is also Chairman of Audit Committee of Himalayan Crest Power Ltd.

Shri Agrawal is Member of the Audit Committee and Banking Committee of the Company.

Shri Agrawal holds 56,649 equity shares of the Company in his name as on 31st March, 2009.

d) Shri Dhananjaya Prasad Singh (63) is a Director of the Company since January 31, 2009. He is a retired IAS officer and former Secretary to Government of India. He is Chairman of National Institute of Fashion Technology, New Delhi.

Shri Singh does not hold any shares of the Company.

3. Audit Committee

The Audit Committee of the Board consists of two Non-Executive Independent Directors and one Executive Director viz. Shri Ram Kumar Thapliyal, Shri Prem Malik and Shri Amrit Agrawal, respectively. These members have the requisite accounting and financial management expertise. Statutory Auditors and Internal Auditor are invitees at the meetings of Audit Committee. The Company Secretary acts as Secretary to the Audit Committee.

Name of Director Category Sitting Fee Sitting Fee for Sitting Fee Salaries and Totalfor Board Remuneration for Audit Perquisites (Rs.)Meeting(s) Committee Committee per annum

(Rs.) Meetings (Rs.) Meetings (Rs.) (Rs.)

Shri Ajay Kumar Choudhary Executive - - - 48,00,000 48,00,000

Shri Mukund Choudhary - do - - - - 48,00,000 48,00,000

Shri Kapil Choudhary - do - - - - 48,00,000 48,00,000

Shri Sitaram Parthasarathy - do - - - - 47,59,793 47,59,793

Shri Amrit Agrawal - do - - - - 42,43,506 42,43,506

Shri Deepak Diwan Non-Executive/ 44,000 - - - 44,000 Independent

Director

Shri Prem Malik - do - 44,000 - 55,000 - 99,000

Shri R.K. Thapliyal - do - 55,000 - 55,000 - 1,10,000

Shri Pankaj Sharma* - do - 55,000 - - - 55,000

Shri Shyamal Ghosh -do- 55,000 - - - 55,000

Shri D P Singh** -do- - - - - -

Shri Vivek Chhachhi *** Nominee Director - - - - -

08


The Composition of Audit Committee meets the requirements of Section 292A and Clause 49 of the Listing Agreement.

The terms of reference / powers of the Audit Committee include the following:

1. Oversight of the Company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

2. Review and recommend the Revenue budgets and Capital budgets follows by updates from time to time.

3. Recommending to the Board, the appointment/re-appointment of the Statutory Auditors, Cost Auditor and the fixation of audit fees.

4. Reviewing the efficiency and effectiveness of internal audit function, adequacy of the internal control systems and other services rendered by the statutory auditors.

5. Reviewing the functioning and weaknesses, if any, observed by the internal auditors, management opinion on such weaknesses and solutions from time to time.

6. Reviewing, with the management, the annual financial statements i.e. directors responsibility statement under Section 217(2AA) of the Companies Act, 1956 accounting policies and practices, compliances with listing and other legal requirements disclosure of related party transactions, implementation of the Accounting Standards as notified u/s 211(3C) of the Companies Act, 1956 and Draft Audit Report before submission to the Board for approval.

7. Reviewing, with the management, the quarterly financial results before submitting it to the Board for approval.

8. To look into the reasons for any default/delay, if any, in the payment to the Lenders/Bankers/Financial Institutions, Debenture holder, Creditors and Shareholders (in case of dividend declaration).

5 nos. of Audit Committee Meetings were held during the year on 30th April, 2008, 30th June, 2008, 31st July, 2008, 31st October, 2008 and 31st January, 2009 The details of attendance of each member at the Audit Committee are as follows:

Name of the Director No. of Meetings held No. of Meetings attended

Shri R.K. Thapliyal (Chairman) 5 5

Shri Prem Malik 5 5

Shri Amrit Agrawal 5 5

4. Remuneration Committee

A Remuneration Committee of the Board has been constituted to review/recommend the remuneration package of the Managing Director/Executive Director(s) based on performance and defined criteria/HR policies, subject to the approval of members in Extra/Annual General Meeting. The Remuneration Committee comprises of Shri Prem Malik, (Chairman), Shri R K Thapliyal and Shri Deepak Diwan, (Members) all are Independent Directors. During the year no Committee Meeting was held.

The Remuneration of Chairman, Managing Director, Dy. Managing Director, Director-Works and Director-Finance are in accordance with Schedule XIII of the Companies Act, 1956 and approved by members of the Company.

Details of remuneration paid to Directors for the financial year 2008-09 are as under:

* Resigned as Director of the Company w.e.f. 01-05-2009

** Appointed as Additional Director of the Company w.e.f. 31-01-2009

*** Citigroup Venture Capital International Growth Partnership Mauritius Ltd., is not claming any sitting fee for attending any Board or Committee meetings by their nominees, accordingly the Company is not paying sitting fee to its nominee Shri Vivek Chhachhi.

Name of the Director No. of Meetings Held No. of Meetings Attended

Shri Mukund Choudhary 8 4

Shri Kapil Choudhary 8 6

Shri Deepak Diwan 8 5

Shri Pankaj Sharma* 8 6


6. Investment Committee

An Investment Committee has been constituted to explore various opportunities to set- up/acquire/establish textile business outside India besides its present expansion and acquisition plans in India and to execute various documents/agreements from time to time and to form subsidiary companies and fellow subsidiary companies. The Committee comprises of Shri Mukund Choudhary, Managing Director, Shri Kapil Choudhary, Dy. Managing Director, Shri Pankaj Sharma, Independent Director* and Shri Vivek Chhachhi, Nominee Director (representing CVCI). No Investment Committee meeting was held during the year.


7. Banking Committee

A Banking Committee has been constituted to authorize company officials to execute/sign various documents/cheques for availing various credit facilities/term loan provided by the Banks from time to time. The Committee comprises of Shri Mukund Choudhary, Managing Director, Shri Kapil Choudhary, Dy. Managing Director, Shri Amrit Agrawal, Director-Finance and Shri Pankaj Sharma, Independent Director. During the year, 11 Committee meetings were held The details of attendance of each member at the Banking Committee mentioned herein below. The Board of Directors had taken note on various facilities sanctioned by Banks.

ATTENDANCE DETAILS OF BANKING COMMITTEE:


09

Details of shares held by the Non-Executive Directors as on 31st March 2009

Name No. of shares held

Shri Deepak Diwan NIL

Shri Prem Malik 15,500

Shri R.K. Thapliyal NIL

Shri Pankaj Sharma 56,154

Shri Shyamal Ghosh NIL

Shri Vivek Chhachhi NIL

5. Share Transfer & Shareholders' Investors Grievance Committee:

The Share Transfer & Shareholders'/Investors Grievance Committee comprises of four members viz. Shri Mukund Choudhary, Managing Director, Shri Kapil Choudhary Dy. Managing Director, Shri Pankaj Sharma, Independent Director, Shri Deepak Diwan, Independent Director of the Company.

The Committee members met from time to time, inter alia approves issue of duplicate share certificates and oversees and review of all matters connected with the transfer of securities. The Committee also reviews the performance of the Registrar and Transfer Agents; supervise the mechanism of investor grievance redressal and to ensure cordial investor relation.

The committee also reviews all investors' complaints and their grievances. During the year the Company has received 28 complaints from the investors and has responded to their fullest satisfaction and 11 complaints were received from SEBI/Stock Exchanges, which were duly replied / redressed. There were no complaints outstanding as on 31st March 2009.

Shri Vivek Kumar, Company Secretary is the compliance officer for complying with the requirements of SEBI Regulations and the Listing Agreement with the Stock Exchanges in India.

ATTENDANCE DETAILS OF SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE:

Name of the Director No. of Meetings held No. of Meetings attended

Shri Mukund Choudhary 11 7

Shri Kapil Choudhary 11 10

Shri Amrit Agrawal 11 11

Shri Pankaj Sharma * 11 9

Shri Deepak Diwan ** - -


** Appointed as Member of the Committee w.e.f. 29-06-2009

8. General Body Meetings

(A) Annual General Meetings :

10


Details of last three Annual General Meetings (AGM) of the Company are as under:

AGM LOCATION DATE & TIME Special Resolution passed

14th AGM Banarsidas Chandiwala Sewa Smarak 12th Sept., 2006 1. For approval to make investments andTrust Guest House Auditorium, 11.00 A.M. granting loan in excess of limit as prescribed inChandiwala Estate, Maa Anandmai Section 372A of the Companies Act, 1956.Ashram Marg, Kalkaji, New Delhi -110019

15th AGM -do - 21st Aug., 2007 1. For appointment of Shri Amrit Agrawal as the11.00 A.M. Executive Director of the Company.

2. For amendment to Articles of Association of theCompany to increase in number of Directorsfrom 12 to 15.

16th AGM - do - 19th Sept., 200810.00 A.M. -

(B) Postal Ballot

No special resolution was passed through Postal Ballot during 2008-09.

9. Code of Conduct

The Board of Directors has adopted the Code of Conduct and ethics for Directors, Senior Management and the designated employees. The Code of Conduct has been communicated to the Directors and designated employees and they have compliance with the said code. The Code has also been posted on the company's website www.spentex.net

10. Compliance

a. Mandatory Requirements:

The Company is fully compliant with the applicable mandatory requirements of the revised Clause 49 of the Listing Agreement.

b. Adoption of Non-Mandatory Requirements:

Although it is not mandatory, three Committees of Board, namely Remuneration Committee, Banking Committee and Investment Committee are in place. Details of all the above mentioned committees have been provided in this report.

11. Disclosures

ØThe disclosure relating to transactions of material nature with the related parties are disclosed in the financial statements.

ØCompany has fulfilled all Statutory Compliances and there were no penalties, strictures imposed on the Company by Stock Exchanges or SEBI or any Statutory Authority, on any matter related to Capital Markets, during the last three years.

ØCompany has issued circular in connection with Whistle Blower Policy and no employee was denied to access to the Audit Committee.

ØPursuant to Clause 47(f) of the Listing Agreement, the Company has created a separate E-mail ID [email protected] exclusively for the purpose of registering complaints by investors and necessary follow up action by the company/compliance officer.

12. Means of Communication

ØInformation on quarterly/half yearly/annual financial results and press releases on significant developments in the Company, have been submitted to the Stock Exchanges to enable them to put them on their websites and communicate to their members.

ØThe quarterly/half-yearly/annual financial results are published in English (The Financial Express/Pioneer) and Hindi (Jansatta/Veer Arjun/Hari Bhoomi) newspapers and the same were also posted on the Company's website www.spentex.net

ØThe Management Discussions and Analysis is a part of Annual Report.

ØPursuant to Clause 51 of the Listing Agreement (relating to Electronic Data Information filing and Retrieval EDIFAR), the Company is regularly in filing the specific documents/ statements on website www.sebiedifar.nic.in, the Bombay Stock Exchange Ltd., website www.bseindia.com and the National Stock Exchange of India Ltd., website www.nseindia.com

13. General Shareholder information

ØThe 17th Annual General Meeting will be held at Lok Kala Manch, 20, Lodhi Institutional Area, Lodhi Road, New Delhi 110 003 on Wednesday the 30th day of September, 2009 at 9.30 A.M.

ØFinancial Calendar (Tentative) :

Financial reporting for the Quarter ending June 30, 2009 : July, 2009

Financial reporting for the Quarter ending September 30, 2009 : October, 2009

Financial reporting for the Quarter ending December 31, 2009 : January, 2010

Financial reporting for the Quarter ending March 31, 2010 : April, 2010

Alternatively

Annual Result for the year ended March 31, 2010 : May/June, 2010

ØDate of Book closure : Saturday the 26th September, 2009 to Tuesday the 29th September, 2009 (both days inclusive)

ØDividend Payment Date : Not Applicable


11

ØListing of Equity Shares on Stock Exchanges: The Bombay Stock Exchange Ltd., Mumbai (Scrip Code = 521082) and National Stock Exchange of India Ltd. Mumbai (Script Code = SPENTEX).

ØISIN No. INE376C01020

ØThe Annual Listing Fee has been paid till 31st March, 2010.

ØMarket Price Data : High/Low during each month in last financial year 2008-09 at BSE & NSE:

Month April May Jun July Aug Sep Oct Nov Dec Jan Feb Mar

BSE

High 26.55 24.45 20.00 16.20 14.50 13.10 9.70 7.38 7.46 7.00 4.85 5.18

Low 17.75 18.20 15.45 11.00 12.00 8.00 5.26 4.27 4.65 4.27 4.01 3.45

NSE

High 26.65 23.95 19.90 15.90 14.60 13.30 10.20 7.15 7.55 7.00 5.10 5.00

Low 17.70 19.05 15.05 10.75 12.25 8.60 5.20 4.70 4.70 4.20 4.00 3.25

ØRegistrars and Transfer Agents: M/s. Beetal Financial & Computer Services (P) Ltd., 99, Beetal House, Madangir, Near Dada Harsukh Dass Mandir, Behind Local Shopping Complex, New Delhi 110 062 Ph. No. 011 - 2996 1281 and 011 - 2996 1282 and Fax No. 011 - 2996 1284, E-mail [email protected]

ØShare Transfer System: The Company's shares are traded under compulsorily demat mode. Share in physical mode lodged for transfer are processed and returned to the shareholders within the stipulated time.

Ø Distribution of shareholding as on 31st March 2009 :

No. of Shares No. of Shareholders Percentage No. of Shares Percentage

1 to 500 40,703 89.38 40,80,615 5.71

501 to 1000 2,383 5.23 20,16,844 2.82

1001 to 2000 1,148 2.52 18,13,510 2.53

2001 to 3000 434 0.95 11,21,368 1.57

3001 to 4000 161 0.35 5,75,331 0.81

4001 to 5000 210 0.46 10,04,670 1.41

5001 to 10000 256 0.56 18,97,253 2.65

10001 and above 241 0.53 5,89,62,444 82.50

TOTAL 45,536 100 71,472,035 100.00

Shareholding Pattern as on 31st March 2009 :

Cate- Category of Number Total Number ofTotal Shareholding as Shares Pledgedgory Shareholders of Number Shares Held ina Percentage of Total or otherwiseCode Share Shares Dematerialized Number of Sharesencumbered

holders FormAs a As a Number As a

percentage percentage of percentageof (A+B) of (A+B+C) shares

(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX) =(VIII)/(IV)*100

(A) Shareholding of Promoter andPromoter Group (Indian)

Individuals/Hindu Undivided Family 10 30,967,504 30,966,500 43.33 43.33 30,752,985 99.31

Bodies Corporate 1 1,064,058 1,064,058 1.49 1.49 1,063,989 99.99

Total (A) 11 32,031,562 32,030,558 44.82 44.82 31,816,974 99.33

(B) Public Shareholding

(1) Institutions

Mutual Funds/UTI 13 22,115 10,306 0.03 0.03 - -

Financial Institutions/Banks 14 747,405 747,223 1.05 1.05 - -

Central / State Government(s) 1 59,337 59,337 0.08 0.08 - -

Foreign Institutional Investors 13 19,255,428 19,252,945 26.94 26.94 - -

Any Other - Foreign Bank 3 1,494 1,485 0.00 0.00 - -

Total (B) (1) 44 20,085,779 20,071,296 28.10 28.10 - -

(2) Non Institutions

Bodies Corporate 818 3,444,783 3,385,780 4.82 4.82 - -

Individuals 44,335 11,409,261 10,261,574 15.96 15.96 - -

12


nominal share capital upto Rs. 1 Lakhs

ii) Individuals shareholders holding normal 138 3,843,061 3,843,061 5.38 5.38 - - share capital in excess of Rs 1 .00 Lac

(c) Any Other -

Directors other than Promoters 4 196,453 196,453 0.27 0.27 - -

Trust 5 44,395 44,395 0.06 0.06 - -

Clearing Member 32 53,634 53,634 0.08 0.08 - -

NRI 149 363,107 275,949 0.51 0.51 - -

Total (B) (2) 45,481 19,354,694 18,060,846 27.08 27.08 - -

Total Public Shareholding (B 1) + (B 2) 45,525 39,440,473 38,132,142 55.18 55.18 - -

GRAND TOTAL (A) + (B) 45,536 71,472,035 70,162,700 100.00 100.00 31,816,974 99.33

i) Individuals shareholders holding

ØDematerialization of shares : As on 31st March, 2009 the shares in demat form were 70,162,700 representing 98.17% of total Shares allotted so far.

ØThe equity shares of the Company are frequently traded on The Bombay Stock Exchange Ltd., Mumbai (BSE) and National Stock Exchange of India Ltd., Mumbai (NSE)

ØManufacturing Location(s):

1. D-48, MIDC, Baramati, District. Pune, Maharashtra 413 133 2. B-1, MIDC, Chincholi – Kondi, Sholapur, Maharashtra 413 255 3. 31-A, MIDC Industrial Area, Butibori, Nagpur, Maharashtra 441 1224. 51-A, Industrial Area, Sector III, Pithampur, Madhya Pradesh 454 7745. 2A, Zie Said Street, Tashkent City – 100042 Republic of Uzbekistan6. 2, Tashkent Yuli Street, Toypeta, Urta-Chirchik District, Tashkent Region 102300, Republic of Uzbekistan.7. Nadrazni 557 436 57, Litvinov, Czech Republic

ØBranch Offices : Mumbai and Kolkata

ØAddress for Correspondence :

1. Registered Office Address : A-60, Okhla Industrial Area, Phase II, New Delhi 110 020 Ph. 011-2638 7738, 4161 4999, Fax: 011–2638 5181. Email: [email protected]

2. Registrars & Transfer Agents : M/s. Beetal Financial & Computer Services (P) Ltd, 99, Beetal House, Madangir, Near Dada Harsukh Dass Mandir, Behind Local Shopping Complex, New Delhi 110 062 Ph. No. 011 - 2996 1281 and 011 - 2996 1282 and Fax No. 011 - 2996 1284. E-mail : [email protected]

3. Compliance Officer : Shri Vivek Kumar, Company Secretary, Ph. 011 - 2638 7738, 4161 4999, Fax: 011 – 2638 5181. Email: [email protected]; [email protected]

CERTIFICATE ON CORPORATE GOVERNANCE

To

The Members of Spentex Industries Limited

We have examined the compliance of conditions of Corporate Governance by SPENTEX INDUSTRIES LIMITED, for the year ended March 31, 2009, as stipulated in Clause 49 of the Listing Agreement of the said Company with the concerned Stock Exchanges in India.

The Compliance of conditions of corporate governance is the responsibility of the management. Our examination is limited to procedures and implementation thereof, adopted by the Company, for ensuring the compliance of the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreements.

We state that in respect of the investor grievances received during the year ended 31st March, 2009, no such investor grievances remained unattended/pending for more than 30 days against the Company as per records maintained by the Shareholders/Investor Grievance Committee.

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

For Bajaj Sharma & Associates

Company Secretaries

(Balraj Sharma)

Place: New Delhi FCS-1605

Date: July 30, 2009 CP-824


13

The fiscal 2008-2009 has seen unprecedented global recession which affected all Industries across the globe. The textile industry also saw downtrend due to global slowdown including volatility in the currency rates. The textile industries in India has been suffering for quite some time before the melt down started because of appreciation of Indian rupee. The Indian textile industry also under tremendous pressure due to all time high prices of raw material and petroleum products which resulted into squeezing the margins all around.

INDUSTRY STRUCTURE & DEVELOPMENTS

India being one of the most preferred destinations for yarn and textile products, which is the single largest industry in India and accounts for 14 per cent of the total value of Indian Merchandize Exports.

To improve exports of textile industry the Government of India announced stimulus packages but despite that exports continue to fall. This cause mainly because of the fact that our competitors like China & Pakistan have given stimulus packages which are more attractive.

OPPORTUNITIES, RISKS, CONCERN & OUTLOOK

In view of various policy measures initiated by the Government in the recent past, the Indian textile industry is seen some light but it has to go a long way.

Inspite of various stimulus packages introduced by the Government the textile industry has to go a long way due to overall global slowdown and current recession worldwide which ultimately effected demand of the consumer. The all time high raw material prices and increase of production/employee cost, the margins of the Indian textile industry also dropped sharply which is also major concern for the growth of the industry.

The significant increase in the cotton production gives advantage to the domestic textiles industry to procure raw cotton at competitive prices which gives them a competitive edge in the global market. The reasons for increase in the production include increasing usage of BT cotton and implementation of the Technology Mission on Cotton which was affecting the viability of textiles mills, and on the persistent demand of the Industry, the Government abolished import duty on cotton. These measures will help to boost the moral of Indian Textile Industry as well as textile exporters.

PERFORMANCE REVIEW OF THE COMPANY

The Company's performance has been under pressure due to overall recession in the textile industry. The financial performance of Spentex industries Limited is discussed in two parts:

(i) Spentex Industries Limited (Standalone) which excludes the performance of subsidiaries of Spentex Industries Limited.

(ii) Spentex Industries Limited (Consolidated) which includes the performance of subsidiaries of Spentex Industries Limited. The Consolidated Financial Statements bring out comprehensively the performance of Spentex Group of companies and are more relevant for understanding the overall performance of Spentex Group.

The total income of Spentex Industries Limited (Standalone) aggregated Rs. 681.80 Crores in fiscal 2008-09 as compared to 759.72 Crores in fiscal 2007-08, declined by 10.25%.

In the fiscal 2008-09, total income of Spentex Industries Limited (Consolidated) aggregated 1216.92 Crores as compared to Rs. 1337.31 Crores in fiscal 2006-07, declined by 9.00%.

SEGMENT-WISE PERFORMANCE

Yarn Manufacturing

During the year under review, your Company has manufactured 52254.69 MT of yarn as compared to 64103.52 MT of yarn produced during the previous year which reflect decline by 18.48%.

Revenues from yarn manufacturing also correspondingly increased in the fiscal 2008-09 to Rs. 598.78 Crores as compared to Rs. 638.43 Crores in fiscal 2007-08, which shows decline of 6.21%.

Trading – Yarn & Others

The Company's revenue from trading goods is Rs. 45.52 Crores in fiscal 2008-09 as compared to Rs. 81.99 in fiscal 2007-08. The decline in trading activities during the year is due to Company's concentration on the core business activity i.e. yarn manufacturing.

PERFORMANCE OF SUBSIDIARIES

The Company had eight subsidiaries at the beginning of the year.

The turnover and overall performance of material subsidiary companies are as under:

Amit Spinning Industries Ltd., India: During the year its production of yarn has declined by 65% and sales turnover also declined by 61% as compared to previous year. The Company has its manufacturing facilities at Kolhapur, Maharashtra.

Spentex Tashkent Toytepa LLC, Uzbekistan: It has recorded a turnover of USD 66.06 Million and loss of USD 6.48 Million. The Company has two manufacturing units situated at Tashkent and Toytepa with a capacity of 220,000 spindles and 236 Air jet looms.

Schoeller Litvinov k.s., Czech Republic: It has recorded a turnover of USD 54.51 Million and loss of USD 21.71 Million. The Company has manufacturing unit situated at Czech Republic with a capacity of 59,000 spindles.

MANAGEMENT DISCUSSION AND ANALYSIS

14


INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has established adequate internal control systems, commensurate with its size and nature of business and such systems are periodically audited, verified and reviewed for their validity and improvement considering the changing business scenario from time to time.

HUMAN RESOURCES/INDUSTRIAL RELATIONS

Your company has been systematically nurturing its greatest resource–human resource. The Company and its management value the talent, commitment and dedication of its employees and acknowledge their contribution. Everyone in Company is working as a team and welcomes the ideas on making Spentex, a globally admired company. Management of your Company believes that it is the integration of human resources and business strategy that has culminated in its success. High performance orientation is the pivot of the HR philosophy of the Company and all the HR policies and strategies are centered on the same.

Industrial Relations remained cordial and not a single day's work was lost due to strike or any industrial dispute during the year.

INFORMATION TECHNOLOGY

Information Technology continues to be an integral part of Spentex's business strategy. In view of this, during the year the implementation of SAP has been completed in all Company's units located at different places, which will integrate business process, financial parameters, customer transactions and people effectively.

DISCLAIMER

"Management Discussion and Analysis Report" contains forward-looking statements, which may be identified by the use of the words in that direction, or connoting the same. All statements that address expectations or projections about the future, including, but not limited to statements about the Company's strategy for growth, product development, market position, expenditure and financial results are forward looking statements. The Company's actual results, performance or achievements could thus differ materially from those projected in such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events.

We, Mukund Choudhary, Chief Executive Officer and Managing Director and Amrit Agrawal, Director-Finance, to the best of our knowledge and belief, certify that:

1. We have reviewed the balance sheet and profit and loss account, cash flow statement and all its schedules and notes to accounts for the financial year 2008-2009.

2. Based on our knowledge and information, these statements do not contain any untrue statement of a material fact or omit to state a material fact or contain statements that might be misleading.

3. Based on our knowledge and information, the financial statements, and other financial information included in this report, present in all material respects, a true and fair view of the Company's affairs, and are in compliance with the existing accounting standards and / or applicable laws and regulations.

4. To the best of our knowledge and belief, no transactions entered into by the Company during the year are fraudulent, illegal or violative of the Company's code of conduct.

5. We are responsible for establishing and maintaining internal controls over financial reporting for the Company, and we have;

a) designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles;

b) evaluated the effectiveness of the Company's internal control systems pertaining to financial reporting; and,

c) disclosed in this report any change in the Company's internal control over financial reporting that has materially affected the Company's internal control over financial reporting.

6. We have disclosed to the Company's auditors and the Audit Committee of the Company's Board of Directors;

a) deficiencies in the design or operation on internal controls, if any, and steps taken / proposed to be taken to rectify these deficiencies;

b) significant changes in internal controls over financial reporting, if any, during the year covered by this report.

c) significant changes in accounting policies during the year, if any, and that the same have been disclosed in the notes to the financial statements, and

d) instances of significant fraud of which we are aware, if any, that involves management or other employees who have a significant role in the Company's internal controls system over financial reporting.

Place: New Delhi Mukund Choudhary Amrit Agrawal

Date: June 29, 2009 Chief Executive Officer & Managing Director Director - Finance

CHIEF EXECUTIVE OFFICER (CEO) AND CHIEF FINANCIAL OFFICER (CFO) CERTIFICATION


15

AUDITORS' REPORT TO THE MEMBERS OF SPENTEX INDUSTRIES LIMITED

1. We have audited the attached Balance Sheet of Spentex Industries Limited, as at March 31, 2009, and the related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto, which we have signed under reference to this report. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. As required by the Companies (Auditor's Report) Order, 2003, as amended by the Companies (Auditor's Report) (Amendment) Order, 2004, issued by the Central Government of India in terms of sub-section (4A) of Section 227 of 'The Companies Act, 1956' of India (the 'Act') and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and explanations given to us, we further report that :

3.1 (a) The Company is maintaining proper records showing full particulars including quantitative details and situation of fixed assets.

(b) The fixed assets are physically verified by the management according to a phased programme designed to cover all the items over a period of three years, which in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the programme, a portion of the fixed assets has been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

3.2 (a) The inventory (excluding stocks with third parties) has been physically verified by the management during the year. In respect of inventory lying with third parties, these have substantially been confirmed by them. In our opinion, the frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) On the basis of our examination of the inventory records, in our opinion, the Company is maintaining proper records of inventory. The discrepancies noticed on physical verification of inventory as compared to book records were not material.

3.3 (a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (b), (c) and (d) of the Order are not applicable.

(b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, paragraph 4(iii) (f) and (g) of the Order are not applicable.

3.4 In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of inventory, fixed assets and for the sale of goods. Further, on the basis of our examination of the books and records of the Company, and according to the information and explanations given to us, we have neither come across nor have been informed of any continuing failure to correct major weaknesses in the aforesaid internal control system.

3.5 According to the information and explanations given to us, there have been no contracts or arrangements referred to in Section 301 of the Act during the year to be entered in the register required to be maintained under that Section. Accordingly, commenting on transactions made in pursuance of such contracts or arrangements does not arise.

3.6 The Company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

3.7 In our opinion, the Company has an internal audit system commensurate with its size and nature of its business.

3.8 We have broadly reviewed the books of account maintained by the Company in respect of products where, pursuant to the Rules made by the Central Government of India, the maintenance of cost records has been prescribed under clause (d) of sub-section (1) of Section 209 of the Act and are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. We have not, however, made a detailed examination of the records with a view to determine whether they are accurate or complete.

3.9 (a) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the Company is regular in depositing the undisputed statutory dues including investor education and protection fund, wealth tax, customs duty, excise duty, employees' state insurance, provident fund, sales tax, and other material statutory dues with the appropriate authorities and is generally regular in depositing undisputed statutory dues in respect of income tax dues, service tax and cess, as applicable with the appropriate authorities.

(b) According to the information and explanations given to us and the records of the Company examined by us, the particulars of dues of income-tax, sales-tax, entry tax, excise duty and service tax at March 31, 2009 which have not been deposited on account of a dispute, are as follows -

16


Name of the Nature of dues Amount(Rs.) Period to Forum where the statute which the dispute is pending

amount relates

Sales Tax

Central Sales Tax, Unpaid Sales Tax 121,592,627 Jan 06 – Dec 08 Directorate of Industries1956 andMaharashtraSales Tax Act

The M.P. Penalty - purchase 164,195 1996-97 First Appellate AuthorityCommercial tax demand (including amountTax Act, 1994 paid Rs. 128,195)

The M.P. Sales tax demand 2,515,630 2003-04 Deputy Commissioner (Appeals), Commercial on sale of DEPB (including amount Indore – Rs. 705,085, AssessingTax Act, 1994 licenses paid Rs. 1,881,055) Authority Rs. 1,810,545

Entry Tax Entry tax demand 17,231,591 1992-2008 Deputy Commissioner (Appeals), Act, 1976 (including amount Indore – Rs. 15,864,529The M.P.

paid Rs.15,449,072) High Court – Rs. 567,816 Assessing Authority–Rs. 799,246

Delhi Sales Tax Demand due to non 191,560 2004-05 First Appellate Authority Act, 1975 submission of ST1 &

C forms

Income tax

Income Tax Disallowance u/s 80 31,061,929 A.Y. 2000-01 Income Tax Tribunal Delhi BenchAct, 1961 HHC on export (including amount to – Rs. 11,207,472Commissioner of

incentives paid Rs. 5,541,674) A.Y. 2004-05 Income Tax (Appeal), New Delhi –Rs. 19,854,457

Income Tax Disallowance of 3,981,354 A.Y. 2001-02 Income Tax Tribunal Delhi BenchAct, 1961 goodwill amortisation

& other expenses

The Income Tax Disallowances of 27,095,747 A.Y. 2003-04 Income Tax Tribunal Delhi Bench–Act,1961 various expenses viz. (including amount A.Y. 2005-06 Rs. 8,315,813Commissioner of

sales tax subsidy, etc. paid Rs. 2,000,000) A.Y. 2006-07 Income Tax (Appeal), New Delhi –Rs. 18,779,934

Central Excise and Service Tax Act

Central Excise Excise duty demands 10,806,176 June 1999 to Customs, Excise & Service TaxAct, 1944 (Baramati unit) Dec 2001 Appellate Tribunal, Mumbai

Central Excise Excise duty demands 27,861,240 Apr-00 to Customs, Excise & Service TaxAct, 1944 (Ahemdabad unit) Sept-01 and Appellate Tribunal, Ahemdabad

Feb-01 to Dec-01

Central Excise Demand on account of 1,213,435 Feb 2004 Joint Commissioner -Act, 1944 availing Cenvat credit Central Excise

on furnace oil(Ahemdabad unit)

The Central Excise Excise duty – demand 75,085,214 Aug, 2004 Deputy Commissioner of CentralAct, 1944 of duty on clearance of (including amount to Excise, Nagpur – Rs. 77,371

goods under notification paid Rs. 2,314,143) Apr, 2007 Commissioner, Central Excise30/2004 without Nagpur – Rs. 72,187,903 Additionalpayment of duty Commissioner of Central Excise,(Butibori unit) Nagpur–Rs. 505,797 Customs,

Excise & Service Tax AppellateTribunal, New Delhi–Rs. 2,314,143

The Central Excise Cenvat demand for 168,812 April, 2000 – Customs, Excise & Service TaxAct, 1944 packing material March, 2004 Appellate Tribunal, New Delhi

including penalty(Pithampur unit)

The Central Excise Cenvat demand on 1,020,219 April, 2003 – Customs, Excise & Service TaxAct, 1944 packing material/scrap (including amount June,2008 Appellate Tribunal, Nagpur –

(Butibori unit) paid under protest Rs. 49,114 Commissioner Rs. 4,006) (Appeals), Nagpur –Assistant

Commissioner – Rs. 457,906


17

3.10 The Company has accumulated losses as at March 31, 2009 which is more than fifty percent of its net worth and it has incurred cash losses in the financial year ended on that date against cash profit in the immediately preceding financial year.

3.11 According to the records of the Company examined by us and the information and explanation given to us, instalments aggregating Rs. 51,066,000 against loans from various banks were due for repayment on March 31, 2009 based on rescheduling of debt repayments under a corporate debt restructuring plan. These instalments have been repaid subsequent to the year end on various dates upto June 16, 2009.

3.12 The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

3.13 The provisions of any special statute applicable to chit fund / nidhi / mutual benefit fund/societies are not applicable to the Company.

3.14 In our opinion, the Company is not a dealer or trader in shares, securities, debentures and other investments.

3.15 In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company, for loans taken by others from banks or financial institutions during the year, are not prejudicial to the interest of the Company.

3.16 In our opinion, and according to the information and explanations given to us, on an overall basis, the term loans have been applied for the purposes for which they were obtained.

3.17 On the basis of an overall examination of the balance sheet of the Company, in our opinion and according to the information and explanations given to us, there are no funds raised on a short-term basis which have been used for long-term investment.

3.18 The Company has not made any preferential allotment of shares to parties and companies covered in the register maintained under Section 301 of the Act during the year.

3.19 The Company has created security or charge in respect of debentures issued and outstanding at the year-end

3.20 The Company has not raised any money by public issues during the year.

3.21 During the course of our examination of the books and records of the Company, carried out in accordance with the generally

Deputy Commissioner, CentralExcise, Nagpur – Rs. 513,199

The Central Excise Cenvat on samples 152,485 (including Apr, 2003 to Customs, Excise & Service TaxAct, 1944 used in quality control amount paid under Aug, 2008 Appellate Tribunal, Nagpur –

(Butibori unit) protest Rs. 67,597) Rs. 67,597 Deputy Commissioner, Central Excise, Nagpur–Rs. 62,934Deputy Commissioner, CentralExcise, Nagpur – Rs. 21,954

The Central Excise Demand for Cenvat 57,874,739 Apr, 2003 to High Court, Nagpur–Rs.26,019,722Act, 1944 reversal of furnace oil Aug, 2006 Deputy Commissioner of Central

used in generation of Excise, Nagpur – Rs. 694,852electricity on job-work Customs, Excise & Service Tax(Butibori unit) Appellate Tribunal–Rs. 20,822,518

Additional Commissioner of CentralExcise, Nagpur – Rs. 10,337,647

The Central Excise Refund of cenvat on 60,216,366 Oct, 2004 to Commissioner (Appeals), CentralAct, 1944 inputs under Rule 18 Jan, 2006 Excise, Indore

(Pithampur unit)

The Central Excise Refund of Additional 13,793,901 March, 2000 to Customs, Excise & Service TaxAct, 1944 Excise duty (T&TA) March, 2003 Appellate Tribunal

(Pithampur unit)

The Central Excise Rejection export claims 1,793,732 Jun, 2006 to Additional Commissioner ofAct, 1944 Jan, 2007 Central Excise, Nagpur

Finance Act, 1994 Refund against export 284,296 2006-09 Additional Commissioner ofservices Central Excise, Nagpur

The Central Excise Excise duty – demand 53,291,002 March, 2004 to Customs, Excise & Service TaxAct, 1944 of duty on clearance of Feb, 2007 Appellate Tribunal

goods under notification30/2004 without paymentof duty (Pithampur unit)

The Central Excise Duty on Yarn 41,871 2006 Commissioner (Appeals), CentralAct, 1944 Excise, Indore

The Central Excise Cenvat on Capital 2,551,564 2002-2003 Additional Commissioner ofAct, 1944 Goods Central Excise, Nagpur

18


accepted auditing practices in India, and according to the information and explanations given to us, we have neither come across any instance of fraud on or by the Company, noticed or reported during the year, nor have we been informed of such case by the management.

1. We draw attention to

(a) Note 8 on Schedule XXI, wherein the Butibori unit of the company has applied for the restoration of the original validity period for Sales Tax Exemption upto December 31, 2008.

Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs. 84,875,604 for the period January 1, 2006 to December 31, 2008 In case the unit fails to get such sales tax exemption from authorities, an amount, including interest, of Rs. 121,592,627 (Rs. 102,481,720 in respect of earlier years) will be payable. No provision, in this regard, has been made in the books of account.

Accordingly loss for the year is lower by the said amount with consequent impact on the net assets for the year then ended.

(b) Notes 9(a) and (b) on Schedule XXI, wherein we are unable to determine the extent of provision that may be required for diminution in the value of long term investment amounting to Rs 204,469,921/- in a subsidiary. Further, significant uncertainties exist in certain subsidiaries, relating to the recoverability of loans amounting to Rs. 443,542,127, interest accrued thereon amounting to Rs. 10,053,942 advances amounting to Rs. 56,752,504 and debtors amounting to Rs. 503,480,347.

(c) Note 11 on Schedule XXI, wherein we are unable to comment on the amounts recoverable relating to certain debtor and advance balances aggregating Rs. 18,135,371 and Rs. 22,473,335, respectively, for which no provision has been made in the books of account.

The impact of our remarks in paragraphs (b) and (c) above, cannot presently be ascertained due to the nature of the uncertainties.

5 Without qualifying our opinion, we draw attention to Note 10 on Schedule XXI regarding preparation of these accounts on a going concern basis due to reasons indicated therein.

6. Further to our comments in paragraphs 4 and 5 above, we report that:

(a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

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

(c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, subject to our remarks in paragraph 4(b) above, the Balance Sheet, Profit and Loss Account and Cash Flow, dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

(e) On the basis of written representations received from the directors, as on March 31, 2009 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Act;

(f) In our opinion and to the best of our information and according to the explanations given to us, the said financial statements together with the notes thereon and attached thereto give in the prescribed manner the information required by the Act and subject to our remarks in paragraph 4 above, give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2009;

(ii) in the case of the Profit and Loss Account, of the loss for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Kaushik DuttaPartner(Membership Number: F-088540)For and on behalf of

New Delhi Price WaterhouseJune 29, 2009 Chartered Accountants


19

ScheduleRupees Rupees

SOURCES OF FUNDS

Shareholders’ Funds

Capital I 714,720,350 714,720,350

Reserves and Surplus II 1,136,022,991 1,136,022,991

1,850,743,341 1,850,743,341

Loan Funds

Secured Loans III 4,882,029,120 5,061,408,487

Unsecured Loans IV 182,950,605 183,978,494

6,915,723,066 7,096,130,322

APPLICATION OF FUNDS

Fixed Assets

Gross Block V 6,362,105,188 6,447,619,786

Less: Depreciation 3,089,625,645 2,773,956,950

Net Block 3,272,479,543 3,673,662,836

Capital Work-in-Progress and Capital Advances 586,381 257,389,525

3,273,065,924 3,931,052,361

Investments VI 774,979,600 774,979,600

Current Assets, Loans & Advances

Inventories VII 494,088,033 1,161,692,341

Sundry Debtors VIII 964,556,903 860,315,572

Cash and Bank Balances IX 53,521,542 17,879,054

Other Current Assets X 732,223,078 955,218,969

Loans and Advances XI 910,790,291 664,073,970

3,155,179,847 3,659,179,906

Less : Current liabilities and Provisions

Liabilities XII 1,195,594,239 1,372,410,705

Provisions XIII 72,566,749 103,372,536

Net Current Assets 1,887,018,859 2,183,396,665

Profit and Loss Account (Dr.) 980,658,683 206,701,696

6,915,723,066 7,096,130,322

Statement on Significant Accounting Policies XX

Notes to Accounts XXI

The Schedules referred to above form an integral part of the Balance Sheet

March 31, 2009 March 31, 2008

BALANCE SHEET AS AT 31ST MARCH, 2009

This is the Balance Sheet referred to in ourReport of even date On behalf of the Board

Kaushik Dutta Mukund Choudhary Managing DirectorPartner Kapil Choudhary Deputy Managing Director(Membership No : F 088540) Amrit Agrawal Director - FinanceFor and on behalf of Vivek Kumar Company Secretary Price WaterhouseChartered Accountants

Place : New DelhiDate : June 29, 2009

20


Schedule 2008-2009 2007-2008Rupees Rupees

INCOME

Sales* (Refer Note 6 on Schedule XX) 6,846,470,016 7,630,623,092

Less Excise Duty (28,463,668) (33,382,034)

Net Sales 6,818,006,348 7,597,241,058

*Includes duty drawback on exports Rs. 206,218,841(Previous Year Rs. 235,578,295/-)

Other Income XIV 265,685,370 550,390,417

7,083,691,718 8,147,631,475

EXPENDITURE

Raw Materials Consumed XV 4,369,842,258 4,723,037,773

Cost of Traded Goods Sold 306,133,813 649,064,481

Salaries, Wages & Benefits XVI 467,177,909 558,229,243

Manufacturing and Other costs XVII 1,407,531,230 1,788,946,651

Depreciation / Amortisation V 393,065,658 422,977,305

Financial Charges XVIII 692,364,104 675,093,896

(Increase) / Decrease in Stocks XIX 217,808,833 (258,874,578)

7,853,923,805 8,558,474,771

Profit/ (loss) before Prior period items and Tax (770,232,087) (410,843,296)

Prior Period Items - 11,240,684

Profit /(loss) before Tax (770,232,087) (422,083,980)

Tax Expense (Refer Note 11 on Schedule XX)

Current Tax - -

Deferred Tax (net) (Refer Note 16 on Schedule XXI ) - (81,396,445)

Fringe Benefit Tax 3,724,900 4,585,570

3,724,900 (76,810,875)

Profit / (loss) after Tax (773,956,987) (345,273,105)

Profit / (loss) brought forward from Previous Year (206,701,696) 97,650,706

(980,658,683) (247,622,399)

Balance transferred from General Reserve - 40,920,703

Balance carried forward to Balance Sheet (980,658,683) (206,701,696)

Basic and Diluted Earnings per Share (10.83) (4.83)(Face Value Rs. 10 each)

(Refer Note 17 on Schedule XXI)



The Schedules referred to above form an integral part of the Profit & Loss Account

PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31ST MARCH 2009

This is the Profit & Loss Account referred to in ourReport of even date On behalf of the Board




21

CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2009For the year For the year ended

31.03.2009 (Rs.) 31.03.2008

Profit /(loss) before Tax (770,232,087) (422,083,980)Add:Depreciation / Amortisation 393,065,658 422,977,305(Profit) / Loss on Sale of Fixed Asset (net) (95,771,292) (7,790,995)Provision for Doubtful Debts and Advances 1,949,868 -Provision for Wealth Tax 3,766 4,715Loss on assets held for disposal 1,298,000 45,023,575Unrealised Exchange Fluctuation (net) (14,437,735) (22,674,972)Bad Debts and Advances Written off 4,378,969 32,642,978Liabilities no longer required written back (24,530,977) (39,617,628)Provision for Leave Encashment (5,306,724) 4,633,785Non Compete fees amortised - 1,100,000 Provision for Gratuity (8,333,400) 7,114,492Prior period items - 11,240,684Dividend Income (2,009) (354,129)Interest Income (48,559,378) (42,853,045)Interest Expense 692,364,104 675,093,896

Operating Profit Before Working Capital Changes 125,886,763 664,456,681

Adjustments for changes in working capital :- (Increase)/Decrease in Sundry Debtors (51,037,229) (185,799,006)- (Increase)/Decrease in Other Receivables (50,912,190) (128,466,870)- (Increase)/Decrease in Inventories 667,604,308 150,335,532- Increase/(Decrease) in Trade and Other Payables (187,560,545) 839,794,547

378,094,344 675,864,203Prior period items - (11,240,684)Direct Taxes Paid ( Net) 3,609,076 (16,159,707)

A. Cash Flow From Operating Activities 507,590,183 1,312,920,493Purchase of Fixed Assets (11,814,756) (173,736,026)Acquisition of Indo Rama Textiles Ltd. (IRTL) - -Sale proceeds of Fixed Assets 371,208,448 38,944,426 Purchase of Investment - - Dividend Received 2,009 354,129Interest Received 64,038,574 4,500,192

B. Cash Flow From Investing Activities 423,434,275 (129,937,279)Proceeds from Share Capital - 2,750,000Share Premium (net) - 6,293,650Repayment of 9% Non-convertible Debenture (19,230,770) (576,923,077)Proceeds from Term Loans 98,121,213 700,000,000 Repayment of Term Loans - (985,626,555)Repayment from Working Capital Loans (net) (294,731,777) 315,721,370 Vehicle Loans (net) (4,254,269) (5,047,305)Short term advances (net) (1,027,889) 55,190 Interest Paid (674,247,999) (670,501,385)Dividend paid (10,479) -

C. Cash Flow From Financing Activities (895,381,970) (1,213,278,112)Increase/(Decrease) in Cash Equivalents {A+B+C} 35,642,488 (30,294,898)Cash and Cash Equivalents at the Beginning of the Year 17,879,054 48,173,952Cash and Cash Equivalents at the End of the Year 53,521,542 17,879,054Increase / (Decrease) in Cash/Cash Equivalents 35,642,488 (30,294,898)Notes :- Cash and cash equivalents compriseCash and Cheques in hand 565,306 1,384,014In Current Accounts 42,273,423 11,521,929In Fixed Deposit Accounts @ 3,000,000 725,000In Margin Money Account @ 6,332,219 2,845,263In Other Banks 54,309 96,085In unpaid dividend accounts @ 1,296,285 1,306,763

53,521,542 17,879,054

Note : 1. The above Cash flow statement has been prepared under the Indirect method set out in Accounting Standard 3 notified under section 211(3C) of the Companies Act, 1956.

2. Figures in brackets indicate cash outgo.

3. @ Includes Margin Money Account, Unpaid Dividend Account and Fixed Deposit Accounts aggregating Rs. 10,628,504 (Previous year Rs. 4,877,026) which are not available for use by the Company (Refer Schedule IX in the accounts)



ended (Rs.)

This is the Cash Flow Statement referred to in ourReport of even date On behalf of the Board

Kaushik Dutta Mukund Choudhary Managing DirectorPartner Kapil Choudhary Deputy Managing Director(Membership No : F 088540) Amrit Agrawal Director - FinanceFor and on behalf of Price Waterhouse Vivek Kumar Company Secretary Chartered Accountants


22


SCHEDULES ATTACHED TO AND FORMING PART OF BALANCE SHEET

March 31, 2009 March 31, 2008Rupees Rupees

SCHEDULE I : SHARE CAPITAL

Authorised

114,000,000 Equity Shares of Rs 10 each 1,140,000,000 1,140,000,000

7,000,000 Redeemable Preference Shares of Rs. 10 each 70,000,000 70,000,000

1,210,000,000 1,210,000,000

Issued, Subscribed and Paid up

71,472,035 (Previous Year 71,197,035) 714,720,350 711,970,350Equity Shares of Rs. 10 each, fully paid up

Add: Nil (Previous Year 275,000 ) – 2,750,000Equity Shares of Rs. 10 each issued on accountof conversion of Share Warrants

7,147,720,350 7,147,720,350

SCHEDULE II : RESERVES AND SURPLUS

Capital Reserve :

Capital Reserve 138,231,706 138,231,706

Share Forfeiture Reserve 7,179,250 7,179,250

Profit on Restructure 2,358,587 2,358,587

147,769,543 147,769,543

Securities Premium Account

At Commencement of year 946,263,822 938,965,322

Add: Premium received on conversion of Share Warrants - 7,298,500

946,263,822 946,263,822

General Reserve :

At Commencement of year - 48,281,060

Less : Amounts transferred on implementation of Accounting - (7,360,357)Standard-15 (Revised) - Employee Benefits Rs. Nil (Previous Year net of deferred tax impact of Rs. 3,790,010)

Transferred to Profit & Loss Account - (40,920,703)

- -

Debenture Redemption Reserve 41,989,626 41,989,626

1,136,022,991 1,136,022,991

SCHEDULE III : SECURED LOANS

Debentures (Refer Notes 1 and 4(a) below)

10% (Previous Year 9%) Redeemable Non-convertible Debentures 365,384,615 384,615,385 Loans from Banks (Refer Notes 2 and 4(b) below)

a) Long Term

Rupee Term Loans (Includes Sub debt of Rs. 444,400,000, 3,013,714,648 2,819,945,833Previous Year Rs. 444,400,000)

Foreign Currency Loan 118,470,484 173,401,850

b) Short Term

Cash Credit Facilities 529,473,656 643,697,594

Export Packing Credit Facilities 852,002,858 1,032,510,697

Other loans (Refer Notes 3 and 4(c) below) Vehicle Loans 2,982,859 7,237,128

4,882,029,120 5,061,408,487

Notes :

1 Debentures

10% Redeemable Non-Convertible Debentures issued to Axis Bank Ltd. are secured by first pari-passu charge on all the fixed assets of the Company, both present and future. These loans are further secured by second pari passu charge on entire current assets and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis. These debentures are redeemable at par


23

PARTICULARS Gross Block Depreciation / Amortisation Net Block

Cost as at Additions Deletions/ Cost as at Upto For the year Deletions/ Up to As at As at01.04.2008 for the year Adjustments 31.03.2009 01.04.2008 Adjustments 31.03.2009 31.03.2009 31.03.2008

INTANGIBLE ASSETS

Goodwill 108,910,417 - - 108,910,417 83,564,168 10,891,044 - 94,455,212 14,455,205 25,346,249

Softwares 30,846,543 3,237,324 - 34,083,867 33,712 6,816,768 - 6,850,480 27,233,387 30,812,831

Total A 139,756,960 3,237,324 - 142,994,284 83,597,880 17,707,812 - 101,305,692 41,688,592 56,159,080

TANGIBLE ASSETSLand - Freehold Land 3,890,357 - - 3,890,357 - - - - 3,890,357 3,890,357 - Leasehold Land 53,944,536 - - 53,944,536 6,919,690 2,508,173 - 9,427,863 44,516,673 47,024,846Building 1,153,403,560 750,748 276,452 1,153,877,856 202,838,750 41,524,979 2,220 244,361,509 909,516,347 950,564,810 Plant & Machinery 4,961,941,298 29,553,936 120,630,550 4,870,864,684 2,411,540,708 317,798,911 76,961,275 2,652,378,344 2,218,486,340 2,550,400,590 Furniture & Fixtures 109,176,819 3,737,172 1,857,818 111,056,173 57,719,224 10,270,833 412,340 67,577,717 43,478,456 51,457,595 and Office Equipments Vehicle 25,506,256 - 28,958 25,477,298 11,340,698 3,254,950 21,128 14,574,520 10,902,778 14,165,558

Total B 6,307,862,826 34,041,856 122,793,778 6,219,110,904 2,690,359,070 375,357,846 77,396,963 2,988,319,953 3,230,790,951 3,617,503,756

Grand Total (A+B) 6,447,619,786 37,279,180 122,793,778 6,362,105,188 2,773,956,950 393,065,658 77,396,963 3,089,625,645 3,272,479,543 3,673,662,836

Capital Work-in-Progress 586,381 257,389,525

3,273,065,924 3,931,052,361

Previous Year 6,694,945,946 190,321,699 437,647,859 6,447,619,786 2,476,738,145 422,977,305 125,758,500 2,773,956,950 3,673,662,836 -

in 32 quarterly installments commencing from June 30, 2009.

2 Loans From Banks

i) Rupee Term Loans including Working Capital Term Loan from Banks, other than mentioned in note no. (ii) below, are secured by first pari-passu charge on all the fixed assets of the Company, both present and future. These loans are further secured by second pari passu charge on entire current assets and personal guarantee of the promoters. These loans, except for the ICICI Bank Term Loan, are also secured by pledge of promoters' shares (6,062,334 nos.) on pari-passu basis. The term loan from ICICI Bank is further secured by pledge of promoters' shares (20,647,140 nos.), on an exclusive basis.

ii) Sub-debt from ICICI Bank of Rs. 444,400,000 is secured by third charge on all the movable and immovable assets of the Company and personal guarantee of the promoters.

iii) Foreign Currency Term Loan from State Bank of India is secured by a first pari-passu charge over entire fixed assets of the Company, both present and future.This loan is further secured by second charge over current assets of the Company, personal guarantee of promoters and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis.

iv) Cash Credit and Export Packing Credit facilities from Banks are secured by first pari-passu charge on all the current assets of the Company , both present and future.These loans are further secured by second pari passu charge on entire fixed assets, personal guarantee of the promoters and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis.

3 Other loans

Vehicle loans are secured by hypothecation of Motor cars.

4 Repayment Terms

a) Debentures aggregating Rs. 36,538,400 ( Previous Year Rs. 76,923,077 ) are repayable within one year.

b) Term Loans aggregating Rs. 310,000,335 (Previous Year Rs. 616,300,635 ) are repayable within one year.

c) Vehicle Loans aggregating Rs. 2,319,471 (Previous Year Rs. 4,407,169) are repayable within one year.

5 The above mentioned loan facilities (other than the vehicle loan ) and interest thereupon were restructured during the year for change in repayment terms and interest rates with effect from July 1, 2008 under a corporate debt restructuring scheme. Charges against such loan facilities were also modified. The above disclosures take into account such restructuring / modifications.

SCHEDULE IV : UNSECURED LOANS

Short-term loans

From Others* 8,575,605 9,603,494

Deferred Purchase Payments** (Refer Note 5 on Schedule XXI) 174,375,000 174,375,000

182,950,605 183,978,494

* Repayble on demand

** Repayable within one year Rs. 56,250,000 (Previous Year Rs. Nil)


SCHEDULE V - FIXED ASSETS(Refer Notes 3, 4, 8 , 10 and 13 on Schedule XX) (Amount in Rs.)

24


SCHEDULE VI : INVESTMENTS (Long Term at Cost)

(Refer Note 7 on Schedule XX)

I) In Subsidiaries - QuotedAmit Spinning Industries Limited 20,981,077 204,469,921 204,469,921(Face value Rs. 5/- each, fully paid up)

Aggregate Market Value of Quoted Investments Rs. 32,520,669(Previous Year Rs. 87,071,470)

II) In Subsidiaries - Unquoted

Spentex Mauritius P Ltd 2 90 90 (Face value US Dollar 1/- each, fully paid up)

Spentex Netherlands B .V. 18200 561,011,339 561,011,339 (Face value Euro 1/- each, fully paid up)

Spentex Tashkent Toytepa LLC # 9,323,779 9,323,779

III) Other Investments - Quoted In Fully Paid-upequity shares of Rs. 10/- each :

Ceat Limited 100 5,724 5,724

CFL Capital Financial Services Limited 100 1,985 1,985

CESC Limited 100 5,553 5,553

Harrisons Malayalam Limited 100 3,744 3,744

KEC International Limited 100 6,909 6,909

Phillips Carbon Black Limited 100 5,653 5,653

RPG Cables Limited 170 5,382 5,382

RPG Transmission Limited 100 7,261 7,261

RPG Life Sciences Limited 100 8,065 8,065

Spencer & Co. Limited 200 7,563 7,563

Saregama India Limited 100 1,322 1,322

Aggregate Market Value of Quoted Investments Rs.103,333(Previous Year Rs. 209,387)

774,864,290 774,864,290

IV) Other Investments - Unquoted

The Baramati Co-operative Bank Limited 1300 26,000 26,000 (Face value Rs.20/- each, fully paid up)

The Sadguru Jangli Maharaj Co-operative Bank Ltd. 1000 50,000 50,000

(Face value Rs.50/- each, fully paid up)

National Saving Certificates * 39,310 39,310

115,310 115,310

774,979,600 774,979,600

# The Company has participating interest of 0.82% in Charter Capital of Spentex Tashkent Toytepa, LLC

* Pledged with sales tax authorities

SCHEDULE VII : INVENTORIES

(Refer Note 5 on Schedule XX

Stores, Spares & Packing Materials 42,245,895 52,242,508 (including stock in transit Rs. 2,589,150/-,Previous Year Rs. 4,674,525/-.)

Raw Materials (including stock in transit 165,521,492 541,558,439Rs.6,964,890/-, Previous Year Rs. 30,013,386/-)

Work-in-process 77,897,543 95,060,420

Finished goods

Manufactured (including stock in transit 204,363,440 460,768,018

Rs. 8,569,969/- Previous Year Rs. 32,054,630/- )

Traded 2,080,711 206,444,151 7,329,518 468,097,536

Waste 1,978,952 4,733,438

494,088,033 1,161,692,341



25

SCHEDULE VIII : SUNDRY DEBTORS


Unsecured

Outstanding for a period exceeding six months

Considered Good 586,912,922 76,456,060

Considered Doubtful 2,827,183 3,915,731

589,740,105 80,371,791

Other Debts

Considered Good 377,643,981 783,859,512

967,384,086 864,231,303

Less : Provision for doubtful debts 2,827,183 3,915,731

964,556,903 860,315,572

SCHEDULE IX : CASH & BANK BALANCES

Cash in hand 565,306 1,384,014

Balances with Scheduled Banks :

In Current Accounts 42,273,423 11,521,929

In Fixed Deposit Accounts* 3,000,000 725,000

In Margin Money Account ** 6,332,219 2,845,263

In Unpaid dividend accounts 1,296,285 1,306,763

Balances with other Banks :

In Current Accounts

Baramati Sahakari Bank 51,934 93,710

Shree Sadguru Jangli Maharaj Bank 2,375 2,375

53,521,542 17,879,054

* Fixed deposits pledged with sales tax and other government authorities

** Under lien with Banks

SCHEDULE X : Other Current Assets

Interest accrued on deposits (including interest accrued on loan to a 10,640,236 35,856,030

subsidiary Rs. 10,053,942, Previous Year Rs. 34,437,576.)

Claims and other receivables 413,328,171 615,660,995

Deposits 53,067,065 67,651,591

Fixed assets held for sale (at net book value or estimated net realisable 255,187,606 236,050,353

value, whichever is lower )

732,223,078 955,218,969

SCHEDULE XI : LOANS AND ADVANCES

Loans and advances to subsidiaries 598,242,184 422,688,456

Unsecured

Amounts recoverable in cash or in kind or for value to be received

Considered good 200,025,741 127,465,958

Considered doubtful 684,253 684,253

798,952,178 550,838,667

Less : Provision for Doubtful Advances 684,253 684,253

798,267,925 550,154,414

Balance with Customs , Excise, Govt Authorities, etc. 22,415,024 26,214,836

Advance Income Tax/Tax Deducted at Source 90,107,342 87,704,720

(includes advance fringe benefit tax Rs. 8,184,144/-, Previous Year Rs. 7,748,884/-)

910,790,291 664,073,970


26


SCHEDULE XII : CURRENT LIABILITIES

(Refer Note 3 on Schedule XXI)

Sundry Creditors

Total outstanding dues of micro enterprises and small enterprises and* - -

Total outstanding dues of creditors other than micro enterprises 1,116,497,657 1,291,024,866 and small enterprises @

Unpaid Dividend ** 1,296,285 1,306,763

Other Liabilities 53,614,727 74,009,611

Interest accrued but not due on loans and debentures 24,185,570 6,069,465

1,195,594,239 1,372,410,705

* As certified by the Management based on available information

** Not due to be credited to Investor Education and Protection Fund

@ Includes payable to Amit Spinning Industries Limited (subsidiary company)

Rs. 2,064,121, (Previous Year Rs. 49,710,024/-)

SCHEDULE XIII: PROVISIONS

(Refer Notes 9 ,11 and 14 on Schedule XX and Note 12, 15 and 18 On Schedule XXI)

For Taxation (including fringe benefit tax Rs. 8,098,913/- Previous Year Rs. 8,135,575/-) 14,675,837 26,325,239

For Wealth Tax 64,201 60,435

For Leave Encashment 18,203,691 27,892,322

For Gratuity 39,623,020 49,094,540

72,566,749 103,372,536

SCHEDULE XIV : OTHER INCOME 2008-2009 2007-2008(Refer Note 6 on Schedule XX)

Dividend from long term investments 2,009 354,129

Commission (gross) 3,890,205 19,664,920 (Tax Deducted at Source Rs. 905,274, Previous Year Rs. 2,298,973)

Interest on loans to a subsidiary (gross) 42,443,103 34,437,516 (Tax Deducted at Source Rs. 9,617,607, Previous Year Rs. 7,803,541)

Interest on deposits (gross) 6,116,275 8,415,529 (Tax Deducted at Source Rs. 875,043, Previous Year Rs. 608,676)

Rent Income 10,237,526 -

Conversion Charges (gross) - 181,541,263(Tax Deducted at Source Rs. Nil, Previous Year Rs. 3,757,442)

Liabilities no longer required written back 24,530,977 39,617,628

Profit on Sale of Fixed Assets (net) 95,771,292 7,790,995

Income from Forward and Swap Contracts (net) - 56,939,450

Export Incentives 42,020,666 123,211,254

Foreign Exchange Fluctuation Gain (net) - 33,415,752

Miscellaneous Income 40,673,317 45,001,981

265,685,370 550,390,417

SCHEDULE XV : RAW MATERIALS CONSUMED

Opening Stock 541,558,439 988,548,824

Add : Purchases 3,993,805,311 4,276,047,388

Less : Closing Stock 165,521,492 541,558,439

Raw Materials Consumed 4,369,842,258 4,723,037,773



27

2008-2009

Rupees Rupees

2007-2008

SCHEDULE XVI : SALARY, WAGES AND BENEFITS(Refer Notes 7 and 18 on Schedule XXI)

Salaries, Wages and Bonus 410,025,387 476,564,025

Contributions to Provident and Other Funds 32,593,480 41,729,194

Employees Welfare Expenses 28,498,198 42,636,024

Less: Salaries, Wages and Benefits charged to a subsidiary (3,939,156) (2,700,000)

467,177,909 558,229,243

SCHEDULE XVII : MANUFACTURING AND OTHER COSTS(Refer Notes 7, 14 & 23(b) on ScheduleXXI)

Stores, Spares and Packing Materials Consumed (net) 213,584,023 279,016,608

Sub-contracting Charges 7,885,061 19,477,680

Power, Fuel & Water 606,120,738 777,562,257

Rent 6,455,290 7,087,645

Rates & Taxes 3,595,136 2,471,971

Repairs & Maintenance :

Plant & Machinery 10,877,970 15,326,111

Building 1,048,133 5,285,605

Others 6,062,888 11,459,360

Insurance 9,266,152 13,586,053

Communication Expenses 10,429,950 14,683,494

Traveling and Conveyance 40,911,358 46,300,310

Legal and Professional charges 26,831,376 23,774,340

Commission 54,186,886 67,870,463

Freight Outward and Clearing Charges (net of recoveries) 248,433,607 338,312,477

Loss on assets held for disposal 1,298,000 45,023,575

Loss on Sale of Raw Materials 22,308,030 12,978,593

Donation and Contribution (other than to political parties) 64,300 1,273,341

Provision for doubtful debts 1,949,868 -

Bad debts and Advances written off 4,378,969 32,642,978

Foreign Exchange Fluctuation Loss (net) 46,542,573 -

Sitting Fees 363,000 407,000

Selling and Other Expenses 36,848,106 48,825,107

Miscellaneous Expenses 67,054,762 45,114,321

Less: Expenses charged to subsidiaries (18,964,946) (19,532,638)

1,407,531,230 1,788,946,651

SCHEDULE XVIII: FINANCIAL CHARGES(Refer Note 10 on Schedule XX)

Interest - Non Convertible Debentures 36,494,292 52,542,830

Interest

- Fixed Loans 302,340,002 273,751,164

- Others 266,379,290 309,357,194

Bank Charges 87,150,520 39,442,708

692,364,104 675,093,896

SCHEDULE XIX : (INCREASE) / DECREASE IN STOCKS

Opening Stock :

Finished goods 460,768,018 163,175,499

Work in process 95,060,420 76,267,691

Waste 4,733,438 4,749,996

560,561,876 244,193,186

Less: Transfer to Trial Production Expenses in Previous Year 52,136,139 -

(included in Capital Work in Progress)

Sub Total 508,425,737 244,193,186

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2008-2009

Rupees Rupees

2007-2008

Closing Stock :

Finished goods 204,363,440 460,768,018

Work in process 77,897,543 95,060,420

Waste 1,978,952 4,733,438

284,239,935 560,561,876

Sub Total 224,185,802 (316,368,690)

Less: Transfer to Trial Production Expenses - 52,136,139

(included in Capital Work in Progress)

Excise duty on (Increase) / Decrease in Stocks (6,376,969) 5,357,973

(Increase) / Decrease in Stocks 217,808,833 (258,874,578

SCHEDULE XX : STATEMENT ON SIGNIFICANT ACCOUNTING POLICIES

1. Basis of Accounting

These Financial Statements are prepared to comply in all material aspects with all the applicable accounting principles in India, the applicable accounting standards notified u/s 211(3C) of the Companies Act, 1956 and the relevant provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India.

2. Use of Estimates

The preparation of the financial statements in conformity with Indian Generally Accepted Accounting Principles requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes and the useful lives of fixed assets and intangible assets.

3. Fixed Assets

Fixed Assets are stated at their original cost including freight, duties (net of MODVAT/CENVAT), taxes and other incidental expenses relating to acquisition and installation.

4. Depreciation / Amortization

Depreciation on all fixed assets situated at manufacturing locations is provided on the straight line method on a pro-rata basis at the rates determined on the basis of useful lives of the respective assets. Management estimates the useful lives for the various fixed assets situated at manufacturing locations as follows

Description – Manufacturing locations Useful lives(in years)

Factory Building 17-29

Building (Other than factory building) 58

Plant and Machinery 2-18

Office Equipments 10-20

Computers 1-6

Furniture and Fixtures 2-15

Vehicles 10-12

The rates derived from the above useful lives are higher than the minimum rates specified in Schedule XIV to the Companies Act, 1956 ('Act').

Depreciation for all fixed assets at locations other than at manufacturing locations is provided on the written down value method at the rates specified in Schedule XIV to the Act.

Leasehold land is amortized over the lease period on a straight line basis.

Capitalised enterprise resource planning software (SAP) is amortised over a period of five years on straight line basis.

Acquired goodwill is amortized using the straight-line method over a period of 10 years.

5. Inventories

Inventories have been valued at lower of cost and net realizable value.

The cost in respect of raw materials is determined:

i) under the Specific identification of cost method for the Cotton Divisions

ii) using the weighted average method for the Synthetic Divisions. In respect of both divisions, cost includes customs duty, wherever paid, and are net of credit under MODVAT/CENVAT scheme, wherever applicable.

The cost in respect of work-in-progress, finished goods and stores and spares is determined using the weighted average cost method and includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, where applicable. Waste is valued at estimated net realizable value.


29

6. Revenue recognition

Sale of goods: Revenue on sale of goods is recognized on transfer of significant risk and rewards of ownership to the buyer and on reasonable certainty of the ultimate collection. Sales are net of excise duty, trade discounts and sales returns.

Interest: Income is recognised on a time proportion basis taking into account the amount outstanding and the applicable rates.

Commission and Insurance claim: Income is recognized when no significant uncertainty as to measurability or recoverability exists.

7. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

8. Foreign currency transactions

Transactions in foreign currency are accounted for at the exchange rates prevailing on the date of transaction. All monetary items denominated in foreign currency are translated at year end rates. Exchange differences arising on such transactions and also exchange differences arising on the settlement of such transactions are adjusted in the Profit and Loss Account.

Exchange differences arising on liabilities relating to acquisition of fixed assets are adjusted to the carrying amount of such fixed assets.

In case of forward contracts, the premium or discount on all such contracts arising at the inception of each contract is recognized / amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of such contracts is recognized as income or expense for the period.

In respect of foreign branch, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities are restated at the year end rates and resultant gains or losses are recognized in the Profit and Loss Account.

9. Employee benefits

The Company's contributions to recognized Provident Funds are charged to revenue on an accrual basis.

The Company has Defined Benefit plans namely Leave Encashment and Gratuity for all employees, the liability for which is determined on the basis of an actuarial valuation at the end of the year. Gratuity Fund (for other than Synthetic division) is administered through Life Insurance Corporation of India. Short term compensated absences are recognized at the undiscounted amount of benefit for services rendered during the year. Termination benefits are recognized as an expense immediately. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account as income or expense.

10. Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as a part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

11. Taxation

Tax expense for the year, comprising current tax, deferred tax and fringe benefit tax is included in determining the net profit/(loss) for the year.

A provision is made for the current tax and fringe benefit tax based on tax liability computed in accordance with relevant tax rates and tax laws. Deferred tax assets are recognised for all deductible timing differences and carried forward to the extent it is reasonably / virtually certain that future taxable profit will be available against which such deferred tax assets can be realised.

Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the Balance Sheet date.

12. Leases

Assets acquired under long term finance lease are capitalised and depreciated in accordance with Company's policy for assets situated at manufacturing and other locations. The associated obligations are included in other loans under “Secured Loans”.

The company has taken premises on lease. Lease rental in respect of operating lease arrangement are charged to Profit and Loss Account.

13. Impairment of Assets

At each balance sheet date, the Company assesses whether there is any indication that an asset may be impaired. If such indication exists, the Company estimates the recoverable amount and where carrying amount of the asset exceeds such recoverable amount, an impairment loss is recognized in the profit and loss account to the extent the carrying amount exceeds recoverable amount. Where there is any indication that an impairment loss recognized for an asset in prior accounting periods may no longer exist or may have decreased, the Company books a reversal of the impairment loss not exceeding the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior accounting periods.

14. Provisions and contingencies

The company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is possible obligation or a present obligation that probably will not require an outflow of resources or where a reliable estimate of the obligation cannot be made .

30


Schedule XXI - Notes to Accounts

1. Contingent Liabilities not provided for in respect of : (Amount in Rs.)

Description This Year(Rs.) Previous Year(Rs.)

a) Demands from Income Tax Authorities under appeal 62,139,030 51,232,534

b) Demands from Sales Tax Authorities under appeal 20,102,976 4,641,627

c) Show cause notices/demands raised by Excise / Customs Department(including applicable penalties), not acknowledged as debts 277,080,377 227,131,953

d) Show cause notices/demands raised by MP Government / MPEBDepartment, not acknowledged as debts 117,856,000 117,856,000

e) Claims against the Company not acknowledged as debts 13,298,670 13,298,670

f) Guarantees and Letters of credit issued on behalf of the Company,outstanding at the year end 944,489,958 871,212,262

g) Bills Discounted with Banks on behalf of the Company, outstandingat the year end 642,380,891 1,078,532,683

h) Corporate Guarantee given to IREDA for Loan to M/s HimalayanCrest Power Limited 266,222,000 271,206,500

i) Corporate Guarantee given to AXIS Bank Ltd.& UCO Bank for Loanto M/s Amit Spinning Industries Limited 419,201,873 302,866,520

j) Corporate Guarantee given to Tashkent Toytepa Textil for deferredpayment of purchase consideration on behalf of Spentex TashkentToytepa LLC Current Year USD 48,600,000 (Previous Year 48,600,000) 2,457,216,000 1,835,313,031

k) Corporate Guarantee given to CVCI for investment in Spentex(Netherlands) B.V.Current Year USD 20,00,000(Previous Year USD 20,00,000) 101,120,000 80,240,000

l) Corporate Guarantee given to Lehman Brothers and SBI - Tokyo Branch for loan to Spentex (Netherlands) B.V *Current YearUSD 21,650,704 (Previous Year USD 42,991,787) 1,094,659,594 1,724,830,494

*The company has been legally advised that the corporate guarantee given to Lehman Brothers is no longer valid as Lehman Brothers did not comply with the terms and conditions of the loan agreement based on which the guarantee was given. Accordingly, the figure for the current year do not include the portion of the guarantee relating to the loan from Lehman Brothers.

The Company has assumed liabilities for certain disputed cases in respect of excise duty amounting to Rs. 29,074,675 (Previous Year Rs. 29,074,675) under the terms of sale negotiated for purchase of assets from Bank of India at Ahmedabad. In the event that the outcome of these cases are not in the favour of the Company, the amount would be adjusted with the carrying value of assets taken over from Bank of India.

The amount shown in the items (a) to (e) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes. The amount shown in items (f) to (i) represent guarantees given and bills discounted in the normal course of the Company’s operations and are not expected to result in any loss to the Company on the basis of beneficiaries fulfilling their ordinary commercial obligations.


2. Estimated value of contracts remaining to be executed on capital account 778,239 11,204,36(net of advances)

3. Based on information available with the Company, there are no dues to Micro, Small and Medium

Enterprises, as defined in the Micro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2009.

4. In accordance with the current industry practice, plant and machinery of the Company has been treated as “Continuous Process Plant” as defined under Schedule XIV to the Companies Act,1956.

5. Deferred Purchase Payments for purchase of Plant and Machinery

During the previous year, the Company had terminated the contract manufacturing agreement with Bombay Dying and Manufacturing Company (BDMC) and purchased the assets from BDMC for Rs. 187,942,975 (including VAT of Rs. 20,882,553), payable over a period of three years . The repayment schedule has been modified. The following is the revised repayment schedule.


31

Sr. No. Payable date Amount (Rs.) Amount (Rs.)

1 Dec 31, 2007 13,567,975

2 Apr,1,2009 10,000,000

3 Apr, 25,2009 16,250,000

4 May, 25,2009 (Refer Note a below) 15,000,000

5 Jun, 25, 2009 15,000,000

6 Apr, 1, 2010 56,250,000

7 Apr, 1, 2011 61,875,000 174,375,000

Total 187,942,975

Notes:

a) Included in Schedule IV ‘Unsecured Loans’

b) As on March 31, 2009 these assets have been transferred to current assets and shown as ‘Assets held for sale’.

6. The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty.

However, the Department appealed in the Hon’ble High Court of Mumbai which was upheld by the Hon’ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing the Hon’ble High Court Order and allowing the rebate on input stage of duty.

Pending the decision in the matter by the Hon’ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to Rs 58,154,319 (including Rs 2,826,621 at its Pithampur Unit).

Further, relying on the judgment of the Hon’ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to Rs 60,216,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621 have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority).

While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs. 118,370,685 coupled with cenvat credit of Rs. 20,447,344 (accumulated as a result of inverted duty structure between raw materials and finished goods till previous year) over a reasonable period of time, in case the decision of the Hon’ble Supreme Court goes in favour of the department.

7. The Company has charged Rs 22,904,102 (Previous Year Rs 22,232,638) to Amit Spinning Industries Limited and Schoeller Litvinov, k.s. (its subsidiaries) in respect of expenses borne by it which are allocable to these subsidiaries. These amounts have been offset against the respective expense heads.

8. Butibori unit was initially granted Sales Tax Exemption for 14 years under the Package Scheme of Incentives, 1993, expiring on 31st December, 2008, vide Exemption certificate EC No. 2887. Consequent to High Court Order of demerger, Unit applied for issue of separate certificate in its favour, valid upto December 31, 2008 after splitting/ canceling the above certificate. However Development Commissioner (Industries), Govt. of Maharastra, reduced the initial validity period from 14 yrs to 11 yrs expiring on 31 December, 2005. The unit has applied for the restoration of the original validity period upto December 31, 2008 in terms of the High Court order.


In case the unit fails to get the exemption certificate from the authorities, the tax and interest payable as on March 31, 2009 shall be as under: -

Sales Value Sales Tax Interest Total(Rs.) (Rs.) (Rs.) (Rs.)

Jan, 06 – Mar, 06 165,414,164 6,475767 3,156,936 9,632,703

Apr, 06 - Mar, 07 1,048,420,320 41,562,736 18703231 60,265,967

Apr,07 - Mar, 08 729,883,547 25,063,885 7,519,165 32.583,050

Apr,08 - Mar, 09 503,750,772 16,618,179 2,492,728 19,110,907

Total 2,447,468,803 89,720,567 31,872,060 121,592,627


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The unit has also filed a petition before the Hon’ble High Court, Nagpur to grant relief on the said matter and is hopeful of recovery of such amount.

9 (a) The Company has an investment of Rs 204,469,921 in Amit Spinning Industries Limited (ASIL), a subsidiary, as on March 31, 2009, The accumulated losses in ASIL, at the year end approximates 98% of its net worth. There is also a reduction in market value of these investments as at the year end by Rs. 171,949,252. In the opinion of the management, the above diminutions in this long term investment are due to adverse business conditions and is not ultimately expected to continue in future. Based on recent performance and trends of ASIL and overall industry outlook, there is an increase in average selling prices of yarn, consistent increase in production level and reduction in procurement costs of raw materials. The management believes that ASIL would start earning cash profits within a reasonable period of time. The recoupment of losses by ASIL is dependent on the outcome of management’s future plans to revive the operations and generate adequate cash profits. Any further deterioration in the industry trends could adversely impact the operations of ASIL. However, management is optimistic with respect to the future financial viability of this subsidiary and accordingly, provision for the diminution in the value of this long term investment is not considered necessary at this stage.

Regarding the loans, advances, debtors and interest due on the loan amounting to Rs. 443,542,127, Rs. 36,441,681, Rs. 8,185,909.and Rs.10,053,942 respectively, management believes that the amounts would be realized within a reasonable period of time once the operation starts generating adequate cash profits as stated above and is also negotiating with various vendors of ASIL to recover the advances paid by it and hence further improve the liquidity position. Accordingly, no provision is considered necessary at this stage.

9 (b) Schoeller Litvinov k.s. (SLKS), the Czech step down subsidiary of the Company, is adversely affected by global recession resulting in reduction in demand, increase in input costs and shortage of working capital. As a result of these, accumulated losses of the step down subsidiary have exceeded its net worth as at March 31, 2009. Based on order of a Court in that country, this subsidiary is in the process of submitting a reorganisation plan to restructure its assets and liabilities by early September 2009. The revival of this subsidiary is dependent on the Court approving the reorganization plan and management being able to implement the plan successfully. The management believes that the reorganization plan coupled with improvement in the global textile market, will turn around the step down subsidiary so as to make good its losses in a reasonable period of time and will also place the step down subsidiary in a position to repay the debtors balance of Rs. 495,294,438 and advances of Rs. 20,310,823 due to the Company as at March 31, 2009. SLKS has sufficient stock and receivables which are expected to be realized during the year ending March 31,2010 and the Company expect to reduce its outstanding advances significantly. Accordingly, provision against these balances is not considered necessary at this stage.

10. As on March 31, 2009, accumulated losses of the Company have exceeded 50% of its net worth. In the opinion of the management the Company’s operations are affected by global business downturn which has resulted in reduction in demand, increase in input costs and shortage of working capital. Based on recent performance and trends of the Company and overall industry outlook, there is an increase in average selling prices of yarn, stability in production levels and reduction in procurement costs of raw materials. The management believes that losses incurred in past would be made good and the Company would start earning cash profit in foreseeable future. The financial statements have been prepared on a going concern basis on the strength of management’s plan of revival including reorganisation of business and restructuring of loan facilities under Corporate Debt Restructuring scheme.

11. Sundry Debtors and Advances include amounts aggregating Rs. 18,135,371 and Rs. 22,473,335 respectively due from certain customers where payments are not forthcoming. Of the above, the Company has filed a suit for recovery of Rs. 18,135,371 against two of the customers. Further, in respect of the advances of Rs. 22,473,335 the Company is making efforts to recover the same and expects to reduce them significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at this stage.

12. The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enterprises’ on an ‘arm’s length’ basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing of Return of Income. For the year ended March 31, 2009, the company has initiated the process of compliance with the said transfer pricing regulations for which the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

13. Leased Assets included in vehicles where the Company is a lessee under finance leases are :

This Year(Rs.) Previous Year(Rs.)

Not later than one year 2,511,711 4,927,346

Later than one year but not later than five years 744,108 3,089,931

Later than five years Nil Nil

Total Minimum lease payments 3,255,819 8,017,277

Less : Future finance charges on finance leases 272,960 780,149

Present value of finance lease liabilities 2,982,859 7,237,128

Representing lease liabilities:

Current 2,319,471 4,407,169

Non current 663,388 2,829,959

Total 2,982,859 7,237,128


33

The present value of finance lease liabilities may be analysed as follows :

Not later than one year 2,319,471 4,407,169

Later than one year but not later than five years 663,388 2,829,959

Later than five years Nil Nil

Total 2,982,859 7,237,128

14. Payment to Auditors:


a) As Auditors 1,985,400 4,157,320

b) In other capacity 2,134,840 2,671,921

c) Out of pocket expenses 170,011 227,385

(*) including taxes, as applicable 4,290,251 7,056,626

15. Remuneration to Managerial personnel


a) Salary and Allowances 21,564,876 21,511,124

b) Contributions to Provident Fund and Superannuation Fund 1,266,367 1,266,372

c) Estimated value of Perquisites 572,056 419,135

Total 23,403,299 23,196,631

Directors’ Sitting Fees 407,000 407,000

Foot Note:1. The contribution to Gratuity Fund and leave encashment have been made on group basis and separate figures applicable to an

individual employee are not available and have, therefore, not been taken into account in the above computation.2. Excludes amount held in trust Rs. 138,660 (Previous Year Rs. 63,856) for excess remuneration paid to managerial personnel,

subsequently recovered.

16. Taxation

Deferred Tax

Break-up of Deferred Tax Assets and Liabilities into major components This Year(Rs.) Previous Year(Rs.)of the respective balances is as under :I. Balance brought forward - Deferred Tax Asset / (Liability) - (85,186,455)

Transitional Adjustment for Employee benefits – Deferred Tax Asset - 3,790,010Balance brought forward after transitional adjustment for Employee - (81,396,445)Benefits as per AS-15

II. For the Year :(i) Tax impact of difference between carrying amount of fixed assets in (59,608,276) 30,070,076

the financial statements and the income tax return(ii) Tax impact of expenses charged in the financial statements but (4,486,576) 1,496,207

allowable as deduction in future years under income tax(iii) Realisation of tax impact of unabsorbed depreciation created in the 64,094,852 49,830,162

previous years (Refer Note b) below )Net Deferred Tax (Liability)/Asset - 81,396,445

III. Closing Deferred Tax (Liability)/Asset - -

Note : a) The tax impact for the above purpose has been arrived at by applying a tax rate of 33.99% (previous year 33.99%), being the prevailing tax rate for Indian Companies under the Income Tax Act, 1961

b) Deferred tax asset has been recognized only to the extent of deferred tax liability.

17. Earnings Per Share (EPS):

The following table reconciles the numerators and denominators used This Year(Rs.) Previous Year(Rs.)to calculate Basic and Diluted EPS for the Year :

Net profit / (loss) attributable to Equity Shareholders (773,956,987) (345,273,105)

Weighted Average Shares outstanding

Weighted average shares outstanding 71,472,035 71,421,693

Effect of Dilutive Securities * *

Diluted weighted average shares outstanding 71,472,035 71,421,693

Nominal value of Equity Shares (Rs.) 10 10

Basic Earnings per Share (Rs.) (10.83) (4.83)

Diluted Earnings per share (Rs.) (10.83) (4.83)

* There are no potential dilutive securities

34


18. Employee Benefits

(i) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Company has Defined Contribution plans for post retirement employment benefits’ namely Provident Fund and Employee State Insurance Scheme. Expense for the same is being charged to Profit and Loss account for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the Profit and Loss Account for the year.

(ii) Other employee benefits

Other employee benefits are accounted for on accrual basis. Liabilities for Compensated absences which is a defined benefit plan are determined based on independent year end actuarial valuation and the resulting charge is being accounted in Profit and Loss Account.

Currrent Year Previous Year (Amount in Rs.) (Amount in Rs.)

Gratuity Leave Gratuity LeaveEncashment Encashment

Funded Unfunded Funded Unfunded

A. Components of Employer Expense

1 Current Service Cost 5,316,439 4,061,052 5,773,869 4,349,681

2 Interest Cost 3,913,075 1,151,299 3,620,592 1,151,429

3 Curtailment Cost/(Credit) - - - -

4 Settlement Cost/(Credit) - - - -

5 Return on Plan Assets (810,269) - (370,200) -

6 Past Service Cost - - - -

7 Actuarial Losses/(Gains) (8,690,999) 2,827,508 8,002,740 2,443,084

Total expense recognised in the Statement of (271,754) 8,039,859 17,027,001 7,944,194Profit & Loss Account

The Gratuity and Leave Encashment Expenses have been recognised in “Salaries,Wages andBonus” under Schedule XVI

B. Change in Defined Benefit Obligations (DBO)during the year ended March 31, 2009

1 Present Value of DBO at the Beginning of Year 56,054,644 16,492,300 45,133,764 14,353,543


3 Interest Cost 3,913,075 1,151,299 3,620,592 1,151,429



6 Plan Amendments - - - -

7 Acquisitions - - - -

8 Actuarial (Gains)/Losses (8,690,999) 2,827,508 8,002,740 2,443,084

9 Benefits Paid (6,042,490) (6,328,468) (6,476,321) (5,805,437)

10 Present Value of DBO at the End of Year 50,550,669 18,203,691 56,054,644 16,492,300

C. Net Asset / (Liability) recognised in BalanceSheet as at March 31, 2009.

1 Present Value of Defined Benefit Obligation 50,550,669 18,203,691 56,054,644 16,492,300

2 Fair Value on Plan Assets 10,927,649 - 6,960,104 -

3 Status [Surplus/(Deficit) (39,623,020) (18,203,691) (49,094,540) (16,492,300)

4 Unrecognised Past Service Cos - - - -

Net Asset/(Liability) recognised in Balance Sheet (39,623,020) (18,203,691) (49,094,540 (16,492,300)

Note : Excluding impact of liability on account of short term compensated absences Rs. 11,400,022

D. Change in Fair Value of Assets during the yearended March 31, 2009

1 Plan Assets at the Beginning of Year 6,960,104 - 3,486,199 -

2 Acquisition Adjustment for Plan Assets 1,926,884 - - -


35

3 Expected Return on Plan Assets 810,269 - 313,758 -

4 Actuarial Gains/(Losses) (45,848) - 56,442 -

5 Actual Company Contribution 3,648,962 - 3,433,614 -

6 Benefits Paid (2,372,722) - (329,909) -

7 Plan Assets at the End of Year 10,927,649 - 6,960,104 -

E. Actuarial Assumptions Percentage Percentage

Gratuity Leave Gratuity Leaveencashment encashment

1 Discount Rate (%) at March 31, 2009 7.00% 7.00% 8.00% 8.00%

2 Expected Return on Plan Assets at March 31, 2009 9.00% N.A. 9.00% N.A.

3 Annual increase in salary cost 3.00% 3.00% 5.50% 5.50%

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

Note : In respect of the employee's gratuity fund, constitution of plan assets is not readily available from the Life Insurance Corporation of India

F. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

19. Related Party Disclosures

A) In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are :

i) Enterprises under significant influence:

a) Himalayan Crest Power Limited.

b) CLC & Sons (P) Limited

ii) Key Management Personnel and their Relatives

a) Mr. Ajay Kumar Choudhary Chairman

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

f) Mr. Chiranjilal Choudhary Father of Mr. Ajay Kumar Choudhary

g) Mrs. Chanderkala Choudhary Mother of Mr. Ajay Kumar Choudhary

h) Mrs. Lekha Devi Choudhary Wife of Mr. Ajay Kumar Choudhary

i) Mrs. Jyoti Choudhary Wife of Mr. Mukund Choudhary

j) Mrs. Ritu Choudhary Wife of Mr. Kapil Choudhary

iii) Subsidiaries

a) M/s Amit Spinning Industries Limited

b) M/s Spentex Tashkent Toytepa LLC

c) M/s Spentex Netherland B.V

d) M/s Spentex Mauritius P Ltd

e) M/s Spentex ( Cyprus ) P Ltd

f) M/s Spentex ( Singapore ) Pte Ltd ( discontinued w.e.f. March 11, 2009)

g) M/s. Schoeller Litvinov k.s.

h) M/s. Schoeller Textile Netherlands B.V.

i) M/s. Schoeller Textile Verwaltungs GMBH

j) M/s. Schoeller Textile GMBH & Co. KG

36


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37

20. Segment Disclosure

In accordance with Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India, the Company has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading. Further, two geographical segments by location of customers have been considered as secondary segments viz, Within India and Outside India .The segment wise disclosure are as follows :

A. Business Segment Reporting (Amount in Rs.)

DESCRIPTION TEXTILE- TEXTILE- OTHER TOTALMANUFACTURING TRADING TRADING

Segment Revenue

Total Revenue 6,487,135,762 436,038,489 22,844,561 6,946,018,811

(6,833,310,960) (718,461,782) (131,869,996) (7,683,642,738)

Inter - segment sales 128,012,463 - - 128,012,463

(86,401,680) - - (86,401,680)

External Sales 6,359,123,299 436,038,489 22,844,561 6,818,006,348

(6,746,909,280) (718,461,782) (131,869,996) (7,597,241,058)

Segment Results (128,494,390) 32,008,236 14,553,509 (81,932,645)

(288,362,876) (-12,594,732) (36,081,030) 311,849,174

Unallocated corporate expense (Net) - - - 44,494,715

- - - (90,451,619)

Operating Profit - - (126,427,360)

- - - (221,397,555)

Finance Charges - - - 692,364,104

- - - (675,093,896)

Interest income - - - 48,559,378

- - - 42,853,045

Profit/(Loss) before Prior - - - (770,232,086)period items and Tax

- - - (-410,843,296)

Income Tax - - - -

- - - -

Deferred Tax - - - -

- - - (81,396,445)

Fringe Benefit Tax - - - 3,724,900

- - - (4,585,570)

Prior Period Items - - - -

- - - (11,240,684)

Profit/(Loss) after tax - - - (773,956,987)

- - - (-345,273,105)

OTHER INFORMATION

Segment Assets 5,260,270,791 194,535,378 82,124,971 5,536,931,140

(6,460,654,472) (209,446,387) (99,642,924) (6,769,743,783)

Unallocated corporate assets - - - 6,723,166,601

(-) (-) (-) (1,595,468,084)

Total Assets - - - 12,260,097,740

- - - (8,365,211,867)

Segment liabilities 1,157,624,555 39,555,375 - 1,197,179,930

(1,308,495,039) (60,745,140) (2,189,286) (1,371,429,465)

Unallocated corporate liabilities - - - 10,192,833,161

- - - (5,349,740,752)

Total Liabilities - - - 11,390,013,082

- - - (6,721,170,222)

Capital expenditure incurred during the year - - - 11,814,755

- - - (425,017,369)

Depreciation and Amortisation for the year - - - 393,065,658

- - - (422,977,305)

38


B) GEOGRAPHICAL SEGMENT REPORTING :

DESCRIPTION REVENUE ASSETS

With in India 2,533,061,837 6,465,901,930

(2,489,579,837) (11,522,774,299)

Outside India 4,284,944,511 737,323,441

(5,107,661,221) (1,257,427,088)

Current Year 6,818,006,348 12,260,097,740

Previous Year (7,597,241,058) (8,365,211,867)

21. Information regarding Capacity, Production, Purchases,Sales and Closing Stocks:

a) Production Capacity

Product Unit Current year Previous Year Installed Installed

Cotton Yarn Spindles 91,440 135,072

Synthetic Yarn Spindles 122,976 122,976

Knitting Textile Products MT 214 214

1. As certified by the Management

2. The Cotton Yarn Spinning Industry has been delicensed.

b) Purchases, Sales and Stocks - Traded Goods

Product UOM Opening Stock Purchases Sales Closing Stock

Qty. Value (Rs.) Qty. Value (Rs.) Qty. Value (Rs.) Qty. Value (Rs.)

Cloths-Mt Mtrs 31,873 2,280,998 1,595,914 108,290,667 1,627,420 137,844,752 366 16,544

(271,475) (17,016,985) (3,551,688) (250,755,634) (3,791,290) (305,361,144) (31,873) (2,280,998)

Cotton Yarn Kgs 46,590 4,729,119 2,138,788 263,123,419 2,163,363 261,104,729 22,015 2,048,227

(69,591) (7,208,710) (3,602,332) (375,337,786) (3,625,333) (387,281,624) (46,590) (4,729,109)

PSF Kgs - - 559,446 32,862,400 559,446 31,164,829 - -

(-) (-) (-) (-) (-) (-) (-) (-)

VSF Kgs - - 16,742 2,095,823 16,742 2,194,488 - -

(-) (-) (-) (-) (-) (-) (-) (-)

Terry Towels Pcs - - - - - - - -

(3,296) (290,684) (-) (-) (3,296) (-) (-) (-)

Machinery Pcs - 319,411 - 22,525,150 - 22,844,561 - 15,940

Spare-Parts (-) (7,182,295) (238,500,262) (120,387,482) (-) (127,250,365) (-) (319,411)

Total 7,329,528 - 428,897,459 - 455,153,359 - 2,080,711

(31,698,674) (-) (746,480,902) (-) (819,893,133) (-) (7,329,518)

Purchase of yarn includes 110143 kgs (previous year 81192 kgs) amounting to Rs. 128,012,463 (previous year Rs. 86,401,680) on account of inter unit transfer.

The above sales figures do not include the export incentives - Duty Drawback of Rs 14,961,279 (Previous Year Rs. 77,402,538) (figures in brackets are for the previous year.)

c) Production, Sales and Stocks - Manufactured Goods

Product UOM Opening Stocks Production Sales Closing Stocks

Qty Value( Rs) Qty Qty Value( Rs) Qty Value( Rs)

Man Made Fibre Yarn Kgs. 1,404,823 146,178,812 15,302,745 16,157,604 1,691,186,320 549,964 53,695,491

(361,538) (34,893,989) (18,067,613) (17,024,328) (1,862,506,633) (1,404,823) (146,178,812)

Polyester Cotton Yarn Kgs. 1,438,704 125,250,420 17,318,198 18,070,092 1,828,242,465 686,810 63,161,053

(957,521) (81,179,380) (22,261,461) (21,780,278) (2,095,308,116) (1,438,704) (125,250,420)

Cotton Yarn Kgs. 1,616,672 179,098,172 18,891,037 20,084,563 2,362,536,233 423,146 72,444,591

(370,336) (44,415,791) (23,003,088) (21,756,751) (2,303,805,115) (1,616,673) (179,098,172)


39

Viscose / Cotton Kgs. 74,868 10,235,708 408,430 376,090 52,711,080 107,208 12,654,038

(20,235) (2,320,481) (663,481) (608,848) (99,917,693) (74,868) (10,235,708)

Others Kgs. 70 4,906 334,282 316,506 53,100,362 17,847 2,408,267

(Prev. Grouped with PC ) (2,535) (365,708) (107,876) (110,341) (22,795,909) (70) (4,906)

Waste Kgs. 141,288 4,733,438 9,760,115 9,831,950 403,441,234 69,453 1,978,953

(138,411) (4,749,737) (11,261,877) (11,259,000) (329,135,073) (141,288) (4,733,438)

Total 4,676,424 465,501,456 62,014,808 64,836,805 6,391,217,694 1,854,427 206,342,393

(1,850,576) (167,925,086) (75,365,396) (72,539,546) (6,713,468,540) (4,676,425) (465,501,456)

Sale of Yarn Includes 1,101,473 Kgs (Previous Year 81,192 Kgs), amouting to Rs 128,012,463 ( Previous Year Rs 86,401,680) on account of Inter Unit Transfer

The above sales figures do not include the export incentives - Duty Drawback of Rs 191,257,562 (Previous Year Rs. 158,175,757)

The above sales is inclusive of excise duty paid on Synthetic yarn sale amounting to Rs 28,463,668 ( Previous Year Rs 33,382,034 )

# Above figures includes Opening stock of trial production of 454,570 Kgs ( Previous year Nil ) amounting to Rs 45,780,423 (Previous year Nil), Current year production 301,633 Kg (Previous year 920,242 Kg), sales of trial production of 756,203 Kgs (Previous year 465,672 kg) amounting to Rs. 78,107,414 (Previous year Rs 51,915,195) and Finished goods stock of trial production NIL (Previous year 454,570 Kg) valued at Rs Nil (Previous year Rs. 45,780,43) and Cotton waste of Nil (Previous year 11,031 Kgs) valued at Rs Nil (Previous year Rs 411,691l).

Figures in brackets are for the previous year.

22. Raw Materials and Components consumed :

Description Current Year Previous Year

Kgs. Value (Rs) Kgs. Value (Rs)

Cotton 36,059,104 2,504,919,649 42,453,813 2,312,482,348

Polyster Staple Fiber 21,193,479 1,373,197,278 24,282,597 1,519,438,319

Viscose Staple Fibre 4,585,934 476,400,777 8,021,302 872,018,237

Single Yarn 18,982 2,026,549 32,528 4,092,307

Others* 121,176 13,298,005 150,061 150,065,62

Total 61,978,675 4,369,842,258 74,940,301 4,723,037,773

* It is not practicable to furnish quantitative information of other raw materials and components consumed in view of the large number of items which differ in size and nature, each being less than 10% in value of the total.

23. Value of Imported and Indigenous Raw Material, Components Stores, Spares and Packing Materials Consumed :

a) Raw Material and Components

Current Year Previous Year

% Value(Rs.) % Value(Rs.)

Imported 4.82 210,416,094 7.98 377,019,146

Indigenous 95.18 4,159,426,164 92.02 4,346,018,627

100.00 4,369,842,258 100.00 4,723,037,773

b) Store, Spare and Packing Materials Consumed:

Current Year Previous Year

% Value(Rs.) % Value(Rs.)

Imported 13.34 28,555,137 14.99 41,828,268

Indigenous 86.66 185,028,886 85.01 237,188,340

100.00 213,584,023 100.00 279,016,608

24. C I F Value of Imports :

Current Year (Rs.) Previous Year(Rs.)

Raw Materials 118,433,047 318,820,834

Stores and Spares & Packing Materials 30,515,401 40,950,233

Capital Goods - 15,984,260

148,948,449 375,755,327

40


25. Expenditure in Foreign Currency (On accrual basis-net of tax)

Current Year(Rs.) Previous Year(Rs.)

Travelling 7,479,209 4,237,305

Commission 41,583,338 50,742,619

Claim Paid on Export Sales 2,695,284 6,367,687

Others - 131,736

51,757,831 61,479,347

26. Earning in Foreign Exchange (On accrual basis)

Current Year(Rs.) Previous Year(Rs.)

FOB Value of Exports 3,886,804,094 4,552,863,870

3,886,804,094 4,552,863,870

27. Previous year's figures have been regrouped / recasted wherever necessary to conform to current year's classification.

On behalf of the Board

Mukund Choudhary Managing DirectorKapil Choudhary Deputy Managing Director

Place : New Delhi Amrit Agrawal Director - FinanceDate : June 29, 2009 Vivek Kumar Company Secretary

Auditors' Report on the Consolidated Financial Statements to the Board of Directors of Spentex Industries Limited

1. We have audited the attached consolidated Balance Sheet of Spentex Industries Limited (the Company') and its subsidiaries ('the Group') as at March 31, 2009, the consolidated Profit and Loss Account and the consolidated Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

3. We did not audit the financial statements of certain subsidiary companies, namely Amit Spinning Industries Limited and Schoeller Litvinov, ks., whose financial statements reflect total assets of As. 3,776,748,194 as at March 31, 2009 and total revenues of Rs. 2,832,778,285 for the year then ended. The financial statements of Schoeller Litvinov K.S. reflecting total assets of Rs. 2,833,041,353 as at March 31, 2009 and total revenues of Rs. 2,502,425,666 is unaudited (Refer para 4(c) below). The financial statements of Amit Spinning Industries Limited reflecting total assets as at March 31. 2009 of As. 943,706,841 and total revenues of Rs. 330,352,619 have been audited by another auditor, whose report has been furnished to us, and our opinion, in so far as it relates to the amounts included in respect of their audited subsidiary, is based solely on the report of the other auditor.

4. We draw attention to(a) Note 12 on Schedule XXI, wherein the Butibori unit of the company has applied for the Restoration of the original validity period for

Sales Tax Exemption upto December 31, 2008. Pending approval of such extension, the unit has accrued VAT receivable amounting to Rs. 84,875,604 for the period January 1, 2006 to December 31, 2008. In case the unit falls to get such sales tax exemption from authorities, an amount, including interest, of Rs. 121,592,627 (Rs. 102,481,720 in respect of earlier years) will be payable. No provision, in this regard, has been made in the books of account. Accordingly loss for the year is lower by the said amount with consequent impact on the net assets for the year then ended.

(b) Note 15 on Schedule XXI, wherein we are unable to comment on the amounts recoverable relating to certain debtor and advance balances aggregating Rs. 18,135,371 and Rs. 22,473,335, respectively, for which no provision has been made in the books of account. The impact of our remarks in the paragraph above cannot be presently ascertained due to the nature of the uncertainties.

(c ) Note 17 on Schedule XXI regarding consolidation of the financial statements of a subsidiary namely Schoeller Litvinov, Ks., on an unaudited basis (also referred to in paragraph 3 above). Accordingly, we are unable to express an opinion on the balances of this subsidiary and the nature and extent of adjustment if any, that may arise there from.

5. Without qualifying our opinion, we draw attention to Note 14 on Schedule XXI regarding Preparation of these accounts on a going concern basis due to reasons indicated therein.

6. We report that the consolidated financial statements have been prepared by the Company's management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, notified u/s 211(3C) of the Companies Act,1956.

7. On the basis of the information and explanations given to us and on consideration of the Separate audit reports on individual audited financial statements of Spentex Industries Limited and its aforesaid subsidiaries wherever available, in our opinion, subject to our Remarks in paragraph 4 above, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:(a) in the case of the consolidated balance sheet, of the consolidated state of affairs of the Group as at March31, 2009;(b) in the case of the consolidated profit and loss account, of the consolidated results of operations of the Group for the year then ended

on that date; and (c) in the case of the consolidated cash flow statement, of the consolidated cash flows of the Group for the year then ended on that date.

Kaushik Dutta, Partner,(Membership Number : F-088540)

Place : Gurgaon For and on behalf of Price WaterhouseDated : June 29, 2009 Chartered Accountants


41

Schedule 31-03-2009 31-03-2008

Rupees Rupees

SOURCES OF FUNDS

Shareholders' Funds

Capital I 714,720,350 714,720,350

Preference Share Application Money Pending Allotment 758,400,000 601,800,000

(Refer Note 5 On Schedule XXI)

Reserves and Surplus II 1,755,371,076 1,688,823,658

3,228,491,426 3,005,344,008

Minority Interest - 70,153,279

Loan Funds

Secured Loans III 8,219,410,915 8,214,275,121

Unsecured Loans IV 2,640,166,598 2,171,699,621

14,088,068,939 13,461,472,029


Fixed Assets

Gross Block V 16,580,296,897 15,908,314,206

Less: Depreciation 7,193,192,533 6,470,535,710

Net Block 9,387,104,364 9,437,778,496

Capital Work-in-Progress and Capital Advances 293,958,594 478,208,682

9,681,062,958 9,915,987,178

Investments VI 197,702 4,719,992

Deferred Tax Asset - 82,875,466 (Refer Note 24 On Schedule XXI)

Current Assets, Loans & Advances

Inventories VII 1,556,201,140 2,873,857,015

Sundry Debtors VIII 803,230,576 1,335,675,549

Cash and Bank Balances IX 346,747,807 122,286,951

Other Current Assets X 730,065,890 1,299,063,723

Loans and Advances XI 1,004,401,232 594,389,975

4,440,646,645 6,225,273,213

Less : Current liabilities and Provisions

Liabilities XII 2,242,786,003 2,672,599,409

Provisions XIII 79,296,547 120,819,325

Net Current Assets 2,118,564,095 3,431,854,479

Profit and Loss Account (Dr.) 2,288,244,184 26,034,914

14,088,068,939 13,461,472,029



The Schedules referred to above form an integral part of the Balance Sheet.

CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2009

This is the Consolidated Balance Sheet referred to in ourReport of even date On behalf of the Board



42


Schedule 31-03-2009 31-03-2008Rupees Rupees

INCOME

Sales * (Refer Note 7 On Schedule XX) 12,197,670,480 13,406,521,084

Less Excise Duty (28,463,668) (33,382,034)

Net Sales 12,169,206,812 13,373,139,050

*Includes duty drawback on exports Rs. 228,887,509(Previous Year Rs. 248,399,923 )

Other Income XIV 249,131,056 917,768,105

12,418,337,868 14,290,907,155

EXPENDITURE

Raw Materials Consumed XV 7,388,751,036 8,153,462,560

Cost of Traded Goods Sold 221,941,087 429,715,130

Salaries, Wages & Benefits XVI 1,344,432,058 1,401,956,477

Manufacturing and Other costs XVII 3,279,687,761 3,551,773,059

Depreciation / Amortisation V 789,317,271 745,532,756

Financial Charges XVIII 979,325,125 932,868,308

(Increase) / Decrease in Stocks XIX 632,244,393 (590,805,913)

14,635,698,731 14,624,502,377

Profit/ (loss) before Exceptional and Prior period items and Tax (2,217,360,863) (333,595,222)

Exceptional Item (Refer Note 10 On Schedule XXI) 127,190,873 -

Profit/ (loss) before Prior period items and Tax (2,344,551,736) (333,595,222)

Prior Period Items - 12,890,157

Profit/ (loss) before Tax (2,344,551,736) (346,485,379)

Tax Expense (Refer Note 12 On Schedule XX )

Current Tax 689,063 162,336

Deferred Tax (Refer Note 24 On Schedule XXI) 82,875,466 (115,198,204)

Fringe Benefit Tax 3,855,231 4,725,570

87,419,760 (110,310,298)

Profit / (loss) after Tax but before Minority Interest (2,431,971,496) (236,175,081)

Minority Interest (to the extent of available balance) (70,153,279) (18,738,336)

Profit/ (loss) after Tax and Minority Interest (2,361,818,217) (217,436,745)

Balance Brought forward from Previous Year (26,034,914) 181,504,079

(2,387,853,131) (35,932,666)

Gain / (Loss) on foreign currency translation on restatement of balancebrought forward from previous year (Refer Note 6 on Schedule XXI) 99,608,947 (31,022,951)

(2,288,244,184) (66,955,618)

Balance transferred from General Reserve - 40,920,703

Balance carried forward to Balance Sheet (2,288,244,184) (26,034,914)

Basic Earnings per Share (Face Value Rs. 10 each) (33.05) (3.04)

Diluted Earnings per share (Face Value Rs.10 each) (33.05) (3.04)(Refer Note 25 On Schedule XXI)


Notes to Accounts XXIThe Schedules referred to above form an integral part of the Profit & Loss Account

CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2009

This is the Consolidated Profit & Loss Account referred to in ourReport of even date On behalf of the Board




43

Year ended Year ended 31-03-2009 31-03-2008

Rupees Rupees

Profit /(loss) before Tax (2,344,551,736) (346,485,379)Add:Depreciation / Amortisation 789,317,271 745,532,756 (Profit) / Loss on Sale of Fixed Asset (net) (80,177,952) (16,957,173)Provision for Doubtful Debts and Advances 1,949,868 17,193,165 Provision for Wealth Tax 3,766 4,715 Loss on assets held for disposal (net) 6,810,122 45,023,575 Inventory written off 708,000 17,385,010 Unrealised Exchange Fluctuation (net) 1,244,720,511 (237,333,634)Bad Debts and Advances Written off 40,447,984 32,642,978 Liabilities no longer required written back (25,630,139) (74,804,282)Provision for Leave Encashment (15,947,863) 14,812,599 Non Compete fees amortised - 1,100,000 Provision for Gratuity (8,552,557) 11,822,938 Prior period items - 12,890,157 Government Grant (46,779,736) - Dividend Income (6,344) (4,064)Interest Income (30,021,151) (30,342,153)Interest Expense 979,325,125 932,868,308

Operating Profit Before Working Capital Changes 511,615,169 1,125,349,516 Adjustments for changes in working capital :- (Increase)/Decrease in Sundry Debtors 512,711,879 (456,265,059)- (Increase)/Decrease in Other Receivables 170,333,931 (262,494,092)- (Increase)/Decrease in Inventories 1,316,947,875 (1,050,934,863)- Increase/(Decrease) in Trade and Other Payables (537,159,115) 1,574,290,848

1,462,834,570 (195,403,166)Prior period items - (12,890,157)

Direct Taxes Paid ( net) (14,933,927) (20,038,178)

A. Cash Flow From Operating Activities 1,959,515,812 897,018,015 Purchase of Fixed Assets / CWIP (1,045,660,408) (1,622,820,960)Sale proceeds of Fixed Assets 564,635,187 349,696,635 Dividend Received 6,344 626,934 Interest Received 29,063,429 8,576,275

B. Cash Flow From Investing Activities (451,955,448) 1,263,921,116)Proceeds from Share Capital - 2,750,000 Repayment of 9% Non-convertible Debentures (19,230,770) (576,923,077)Proceeds from/ (Repayment of) Term Loans ( net) 344,859,337 968,226,418 Proceeds from/ (Repayment of) Working Capital Loans ( net) (583,369,305) - Proceeds from/ (Repayment of) Short Term Loans ( net) (83,660,922) 29,658,809 Repayment of Deferred Purchase Payment Liability - (633,531,200)Vehicle Loans (net) (4,291,371) (5,047,305)Government Grant Received - 46,779,735 Proceeds from/ (Repayment of) Short Term advances ( net) 8,575,604 (7,677,379)Finance Charges (943,916,894) (920,632,683)Dividend paid (10,478) -

C. Cash Flow From Financing Activities (1,281,044,799) 267,533,471

Increase/(Decrease) in Cash Equivalents {A+B+C} 226,515,565 (99,369,630)

Cash and Cash Equivalents at the Beginning of the Year 122,286,951 228,633,205 Exchange difference on translation of foreign currencycash and cash equivalents (2,054,709) (6,976,624)Cash and Cash Equivalents at the End of the Year 346,747,807 122,286,951

Increase / (Decrease) in Cash/Cash Equivalents 226,515,565 (99,369,630)Notes :-Cash and cash equivalents compriseCash and Cheques in hand 5,882,595 4,153,361 In Current Accounts 42,332,072 84,547,051 In Fixed Deposit Accounts @ 3,000,000 725,000 In Margin Money Account @ 7,591,759 6,321,594 In Other Banks 286,254,874 25,233,182 In unpaid interest reserve accounts @ 390,222 - In unpaid dividend accounts @ 1,296,285 1,306,763

346,747,807 122,286,951

# 1 The above Cash flow statement has been prepared under the Indirect method set out in Accounting Standard 3 notified under section 211(3C) of the Companies Act, 1956.# 2 Figures in brackets indicate cash outgo.# 3 @ Includes Margin Money Account, Unpaid Dividend Account, Unpaid Interest reserve account and Fixed Deposit Accounts aggregates Rs 12,278,266 (Previous year Rs 8,353,357) which are not available for use by the Company. ( Refer Schedule IX in the accounts )Statement on Significant Accounting Policies XXNotes to Accounts XXIThe Schedules referred to above form an integral part of the Cash Flow Statement

CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2009

This is the Consolidated Cash Flow Statement referred to in ourReport of even date On behalf of the Board



44


AS AT AS AT


SCHEDULE I : CAPITAL

Authorised

114,000,000 Equity Shares of Rs 10 each{Previous Year 114,000,000 Equity Shares of Rs. 10 each} 1,140,000,000 1,140,000,000

7,000,000 Redeemable Preference Shares of Rs. 10/- each 70,000,000 70,000,000

1,210,000,000 1,210,000,000

Issued, Subscribed and Paid up71,472,035 Equity Shares of Rs. 10 each, fully paid up 714,720,350 711,970,350

(Previous Year 71,197,035 nos.)

Nil Equity Shares of Rs. 10/- issued on account of conversion of Share Warrants - 2,750,000

(Previous Year 275,000 nos.) 714,720,350 714,720,350

SCHEDULE II : RESERVES AND SURPLUS(Refer Note 9 On Schedule XX)

a) Capital Reserve

At commencement of the year 789,497,060

Less : Exchange fluctuation on restatement of opening balance (47,000,295) 742,496,765 789,497,060

b) Share Forfeiture Reserve 7,179,250 7,179,250

c) Profit on Restructure 2,358,587 2,358,587

752,034,602 799,034,897

Government Grant( Refer note 3 On Schedule XXI )At commencement of the year 46,779,736

Less: Transferred to Profit and Loss Account (46,779,736) - 46,779,736

Securities Premium Account 946,263,822 946,263,822

Debenture Redemption Reserve 41,989,627 41989627

Foreign Currency Translation Reserve (FCTR)

At Commencement of the year (145,244,424)

Add: Transferred during the year 160,327,449 15,083,025 145,244,424)

1,755,371,076 1,688,823,658

SCHEDULE III : SECURED LOANS

Debentures (Refer Notes 1 and 4(a) below)

10% (Previous Year 9%) Redeemable Non-convertible Debentures

Loans from Banks (Refer Notes 2 , 4(b) and 5 below)

a) Long Term

Rupee Term Loans (Includes Sub debt of Rs. 444,400,000, 3,310,879,257 3,122,812,353Previous Year Rs. 444,400,000)

Foreign Currency Loan 2,267,270,484 1,878,501,850

b) Short Term

Cash Credit Facilities 1,385,699,140 1,600,198,616

Export Packing Credit Facilities 852,002,858 1,032,510,697

Interest Accrued and Due on above - 650,000

Others 35,191,702 187,711,990

Other loans (Refer Notes 3 and 4(c) below)

Vehicle Loans 2,982,859 7,274,230

8,219,410,915 8,214,275,121

365,384,615 384,615,385


45

Notes :

1 Debentures

10% Redeemable Non-Convertible Debentures issued to Axis Bank Ltd. are secured by first pari-passu charge on all the fixed

assets of the Company, both present and future. These loans are further secured by second pari passu charge on entire

current assets and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis. These debentures are redeemable at par

in 32 quarterly installments commencing from June 30, 2009.

2 Loans From Banks

i) Rupee Term Loans including Working Capital Term Loan from Banks, other than mentioned in note no. (ii) below, are

secured by first pari-passu charge on all the fixed assets of the Company, both present and future. These loans are further

secured by second pari passu charge on entire current assets and personal guarantee of the promoters. These loans,

except for the ICICI Bank Term Loan, are also secured by pledge of promoters' shares (6,062,334 nos.) on pari-passu

basis. The term loan from ICICI Bank is further secured by pledge of promoters' shares (20,647,140 nos.), on an exclusive

basis.

ii) Sub-debt from ICICI Bank of Rs. 444,400,000 is secured by third charge on all the movable and immovable assets of the

Company and personal guarantee of the promoters.

iii) Foreign Currency Term Loan from State Bank of India is secured by a first pari-passu charge over entire fixed assets of the

Company, both present and future.This loan is further secured by second charge over current assets of the Company,

personal guarantee of promoters and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis.

iv) Foreign Currency Term Loan from Lehman Brothers Commercial Corporation Asia Limited is secured by pledge of Interest

Reserve Bank Account maintained with Deutsche Bank AG, Amsterdam, assignment of Schoeller Textile Netherlands B.V.

(STNBV) credit agreement with the Spentex Netherlands B.V.(SNBV), pledge of 180 nos. of STNBV's shares and

assignment of Intergroup Credit agreement (between SNBV and Spentex Tashkent Toytepa LLC) .The loan is further

secured by fixed assets of Spentex Tashkent Toytepa LLC (Uzbek plant).

v) Short Term-Others - Secured by pledge of all assets of the Schoeller Litvinov K.S.

vi) Cash Credit and Export Packing Credit facilities from Banks are secured by first pari-passu charge on all the current

assets of the Company , both present and future. These loans are further secured by second pari passu charge on entire

fixed assets, personal guarantee of the promoters and pledge of promoters' shares (6,062,334 nos.) on pari-passu basis.

3 Other loans

Vehicle loans are secured by hypothecation of Motor cars.

4 Repayment Terms

a) Debentures aggregating to Rs. 36,538,400 ( Previous Year Rs 76,923,077 ) are repayable within one year

b) Term Loans aggregating Rs. 315,720,335 (Previous Year Rs. 673,444,635 ) are repayable within one year.

c) Vehicle Loans aggregating to Rs. 2,319,471 (Previous year Rs. 4,444,271) are repayable with in one year.

5 The above mentioned loan facilities (other than the vehicle loans ) and interest thereupon relating to the Parent Company was

restructured during the year for change in repayment terms and interest rates with effect from July 1, 2008 under a corporate

debt restructuring scheme. Charges against such loan facilities were also modified. The above disclosures take into account

such restructuring / modifications

SCHEDULE IV : UNSECURED LOANS

Short-term loans

From Others (Refer Note 1 below) 8,575,604 47,492,621

Deferred Purchase Payments (Refer Note 2 below) 2,631,590,994 2,124,207,000(Refer Note 9 on Schedule XXI)

2,640,166,598 2,171,699,621

Notes:

1) Repayable on demand

2) Deferred Purchase Payment Liability aggregating to Rs. 1,284,857,997 (Previous year Rs. 487,458,000) are repayable within one year


46


PARTICULARS Gross Block Depreciation / Amortisation Net Block

Cost as at Consequent to Additions Deletions/ Cost as Up to Consequent to For The Deletions/ Up to As at As at

01.04.2008 Acquisition of for Adjustments at 31.03.2009 01.04.2008 Acquisition of Year Adjustments 31.03.2009 31.03.2009 31.03.2008

a Subsidiary # the year @ a Subsidiary # @

INTANGIBLE ASSETS

Goodwill on Consolidation 589,242,748 - - 6,956,071 582,286,677 - - - - - 582,286,677 589,242,748

Goodwill 108,910,417 - - - 108,910,417 83,564,168 - 10,891,044 - 94,455,212 14,455,205 25,346,249

Softwares 45,603,492 - 3,237,324 155,929 48,684,887 13,943,300 - 7,010,506 208,540 20,745,266 27,939,621 31,660,191

Total A 743,756,657 - 3,237,324 7,112,000 739,881,981 97,507,468 - 17,901,550 208,540 115,200,478 624,681,503 646,249,189

TANGIBLE ASSETS

Land

- Freehold Land 33,948,268 - - 417,900 33,530,368 - - - - - 33,530,368 33,948,268

- Leasehold Land 53,944,536 - - - 53,944,536 6,919,690 - 2,508,173 - 9,427,863 44,516,673 47,024,846

Building 3,221,920,184 - 20,046,922 (130,698,712) 3,372,665,818 557,298,443 - 115,760,063 (9,120,952) 682,179,458 2,690,486,360 2,664,621,741

Plant & Machinery 11,131,519,279 - 92,622,155 (304,357,534) 11,528,498,968 5,577,723,886 - 610,942,954 83,642,659 6,105,024,181 5,423,474,787 5,553,795,393

Furniture & Fixtures and 669,714,638 - 14,147,765 (109,153,460) 793,015,862 211,044,507 - 36,436,114 (7,729,118) 255,209,739 537,806,124 458,670,131Office Equipments

Vehicle 53,510,644 - (143,670) (5,392,389) 58,759,364 20,041,716 - 5,768,417 (340,681) 26,150,814 32,608,549 33,468,928

Total B 15,164,557,549 - 126,673,172 (549,184,195) 15,840,414,916 6,373,028,242 - 771,415,721 66,451,908 7,077,992,055 8,762,422,861 8,791,529,307

Grand Total (A+B) 15,908,314,206 - 129,910,496 (542,072,195) 16,580,296,897 6,470,535,710 - 789,317,271 66,660,448 7,193,192,533 9,387,104,364 9,437,778,496

Capital Work -in-Progress 293,958,594 476,993,247

Capital Advance - 1,215,435

As on 31.03.2008 11,734,522,404 4,607,977,500 338,281,698 772,467,396 15,908,314,206 3,095,295,564 2,796,297,977 745,532,756 166,590,587 6,470,535,710 9,437,778,496 -

Notes :

# Taken over consequent to acquisition of Schoeller Litvinov k.s. , a subsidiary in the previous year.

@ Deletions/Adjustments to fixed assets under Gross Block and Depreciation/Amortisation include Rs. 876,262,722 (Previous Year Rs. 297,135,802) and Rs.55,101,718 (Previous Year Rs.12,103,752) respectively, on account of restatement at the closing exchange rate.

(at Cost)

SCHEDULE V - FIXED ASSETSRefer Notes 3, 4, 5 , 9 , 13 and 14 On Schedule XX) (Amount in Rs.)

SCHEDULE VI : INVESTMENTS - LONG TERM AT COST(Refer Note 8 On Schedule XX)

Nos. Value 31-03-2009 31-03-2008Rs. Rupees Rupees

I) Non Trade - QuotedIn Fully Paid-up equity shares of Rs. 10/- each :Ceat Limited 100 5,724 5,724 5,724 CFL Capital Financial Services Limited 100 1,985 1,985 1,985 CESC Limited 100 5,553 5,553 5,553 Harrisons Malayalam Limited 100 3,744 3,744 3,744 KEC International Limited 100 6,909 6,909 6,909Phillips Carbon Black Limited 100 5,653 5,653 5,653RPG Cables Limited 170 5,382 5,382 5,382RPG Transmission Limited 100 7,261 7,261 7,261RPG Life Sciences Limited 100 8,065 8,065 8,065Spencer & Co. Limited 200 7,563 7,563 7,563Saregama India Limited 1,322 1,322 1,322Aggregate Market Value of Quoted Investments Rs.103,333 (Previous Year Rs. 209,387) 59,161 59,161

II) Non Trade - UnquotedOthersThe Baramati Co-operative Bank Limited (Face value Rs.20/- each, fully paid up) 1,300 26,000 26,000 26,000The Sadguru Jangli Maharaj Co-operative Bank Ltd.(Face value Rs.50/- each, fully paid up) 1,000 50,000 50,000 50,000Shamrao Vithal Co-op Bank Ltd 250 2,500 2,500 2,500( Face Value Rs.10/- each ,fully paid up )United Yarn 1 31 31 31( Face Value Rs.31/- each ,fully paid up )Share of Lotus House Prem. Co-Op Hsg. Soc. 1,500 1,500 1,500 1,500Datta Nagari Patsanstha 500 5,000 5,000 5,000( Face Value Rs.10/- each ,fully paid up )Saraswat Co-op bank Ltd 1,420 10 14,200 14,200( Face Value Rs.10/- each ,fully paid up )Myantrade Corporation Pte Ltd - - - 4,522,290

National Saving Certificates 39,310 - - 39,310 (Pledged with sales Tax Authorities ) 138,541 4,660,831

197,702 4,719,992


47

SCHEDULE VII : INVENTORIES


Stores, Spares & Packing Materials 226,889,246 448,224,448(including stock in transit Rs. 2,589,150/-,Previous Year Rs. 4,674,525/-.)

Raw Materials (including stock in transit 433,869,733 803,585,651Rs.6,964,890/- Previous Year Rs. 117,644,050/-)

Work-in-process 189,404,820 267,581,901

Finished goodsManufactured (including stock in transit 645,706,944 1,255,145,445Rs. 8,569,969/- Previous Year Rs. 32,054,630/- )

Traded 57,943,145 703,650,089 93,790,399 1,348,935,844

Waste 2,387,252 5,529,171

1,556,201,140 2,873,857,015


SCHEDULE VIII : SUNDRY DEBTORS

Unsecured

Outstanding for a period over six months

Considered Good 668,184,888 79,484,063

Considered Doubtful 34,235,311 90,146,782

702,420,199 169,630,845

Other Debts

Considered Good 135,045,688 1,256,191,486

Considered Doubtful - 23,442,898

837,465,887 1,449,265,229

Less : Provision for doubtful debts 34,235,311 113,589,680

803,230,576 1,335,675,549

SCHEDULE IX : CASH & BANK BALANCES

Cash balance on hand 5,882,595 4,153,361

Balances with Scheduled Banks :

In Current Accounts 42,332,072 84,547,051

In Fixed Deposit Accounts* 3,000,000 725,000

In Margin Money Account ** 7,591,759 6,321,594

In unpaid dividend accounts 1,296,285 1,306,763

Balances with other Banks.

In Current Account 286,254,874 -

In Fixed Deposit Accounts - 9,780,349

In Margin Money Account - 15,356,748

Restricted cash ( Interest reserve account ) 390,222 -

346,747,807 122,286,951

* Fixed deposits pledged with sales tax and other government authorities

** Under lien with Banks

SCHEDULE X : Other Current Assets

Interest accrued on deposit and others 586,294 1,418,514

Claims and other receivables 420,831,269 993,619,273

Deposits 53,460,721 67,975,583

Fixed assets held for sale(at net book value or estimated net realisable value, whichever is lower ) 255,187,606 236,050,353

730,065,890 1,299,063,723

48


SCHEDULE XI : LOANS AND ADVANCESUnsecuredAmounts recoverable in cash or in kind or for value to be receivedConsidered good 729,964,489 468,195,604Considered doubtful 9,919,253 9,919,253

739,883,742 478,114,857

Less : Provision for Doubtful Advances 9,919,253 9,919,253

729,964,489 468,195,604

Balance with Customs , Excise, Govt Authorities, etc. 174,552,448 38,489,651Advance Income Tax/Tax Deducted at Source 99,884,295 87,704,720(includes advance fringe benefit tax Rs. 8,669,652/-,Previous Year Rs. 8,084,211/-)

1,004,401,232 594,389,975

SCHEDULE XII : CURRENT LIABILITIES ( Refer Note 7 On Schedule XXI)Sundry Creditors Total outstanding dues of micro enterprises and small enterprises and* 145,209 -Total outstanding dues of creditors other than micro enterprises and 2,019,247,904 2,344,084,752small enterprisesUnpaid Dividend ** 1,296,285 1,306,763Other Liabilities 157,391,847 297,911,367Interest accrued but not due on loans and debentures 64,704,758 29,296,527

2,242,786,003 2,672,599,409

* As certified by the Management based on available information** Not due to be credited to Investor Education and Protection Fund

SCHEDULE XIII: PROVISIONS(Refer Notes 10 ,12 and 15 On Schedule XX and Notes 20, 23 and 24 On Schedule XXI)For Taxation (including fringe benefit tax Rs. 8,584,271/-, 15,161,195 26,667,292Previous Year Rs. 8,477,628/-)For Wealth Tax 64,201 60,435For Leave Encashment 19,296,765 39,626,535For Gratuity 44,774,386 54,465,063

79,296,547 120,819,325

SCHEDULE XIV : OTHER INCOME 2008-2009 2007-2008( Refer Note 7 and 9 On Schedule XX)

Dividend from long term investments 6,344 4,064Commission (gross) 3,890,205 19,664,920(Tax Deducted at Source Rs. 905,274/-, Previous Year Rs. 2,298,973/-)Interest on deposits (gross) 30,021,151 30,342,153(Tax Deducted at Source Rs. 884,668/-, Previous Year Rs. 608,676/-)Rent Income 10,237,526 -Conversion Charges (gross) - 181,541,263(Tax Deducted at Source Rs. Nil , Previous Year Rs. 3,757,442 /-)Liabilities no longer required written back 25,630,139 74,804,282Profit on Sale of Fixed Assets (net) 80,177,952 16,957,173Income from Forward and Swap Contracts - 56,939,450Export Incentives 42,020,666 123,211,254Foreign Exchange Fluctuation Gain (net) - 291,075,513Miscellaneous Income 57,147,073 123,228,033

249,131,056 917,768,105



49

SCHEDULE XV : RAW MATERIALS CONSUMEDOpening Stock 803,585,651 1,268,477,046Additions consequent to acquisition/amalgamation - 153,800,070

803,585,651 1,422,277,116

Add : Purchases 7,019,035,118 7,534,771,095Less : Closing Stock 433,869,733 803,585,651

Raw Materials Consumed 7,388,751,036 8,153,462,560

SCHEDULE XVI : SALARY, WAGES AND BENEFITS( Refer Note 10 on Schedule XX and Notes 20 and 23 On Schedule XXI)Salaries, Wages and Bonus 1,074,828,200 1,094,419,423Contributions to Provident and Other Funds 192,347,069 258,984,465Employees Welfare Expenses 77,256,789 48,552,589

1,344,432,058 1,401,956,477

SCHEDULE XVII : MANUFACTURING AND OTHER COSTS(Refer Notes 21 and 22 On Schedule XXI)Stores, Spares and Packing Materials Consumed (net) 499,611,504 547,641,815Sub-contracting Charges 9,995,810 24,886,581Power, Fuel & Water 1,062,088,340 1,303,394,657Rent, Rates & Taxes 136,179,316 169,919,502Repairs & Maintenance :

Plant & Machinery 12,326,057 176,840,356Building 1,181,486 5,584,296Others 6,227,564 11,731,659

19,735,107 194,156,311

Insurance 65,604,543 90,782,323Communication Expenses 18,079,032 23,772,744Traveling and Conveyance 50,573,956 93,282,800Legal and Professional charges 94,291,026 76,655,909Commission 55,631,310 82,719,874Freight Outward and Clearing Charges (net of recoveries) 532,272,923 604,144,525Loss on assets held for disposal 6,810,122 45,023,575Loss on sale of raw materials 22,308,030 12,978,593Investment Written off 708,000 17,385,010Donation and Contribution (other than to political parties) 64,300 3,857,220Provision for Doubtful Debts 1,949,868 17,193,165Bad debts and Advances written off 40,447,984 32,642,978Sitting Fees 363,000 408,000Cost of outsourcing activities 30,433,322 -Selling and Other Expenses 37,785,324 90,871,169Foreign Exchange Fluctuation Loss (net) 400,484,718 -Miscellaneous Expenses 194,270,226 120,056,308

3,279,687,761 3,551,773,059

SCHEDULE XVIII: FINANCIAL CHARGES( Refer Note 11 On Schedule XX)Interest - Non Convertible DebenturesInterest 36,494,292 52,542,830- Fixed Loans 441,026,972 447,064,125- Others 376,012,584 320,777,027Bank Charges 125,791,277 112,484,326

979,325,125 932,868,308

2008-2009 2007-2008Rupees Rupees

50


SCHEDULE XIX : (INCREASE) / DECREASE IN STOCKSOpening Stock :Finished goods 1,255,145,445 347,852,962Work in process 267,581,901 125,168,930Waste 5,529,171 6,567,692

1,528,256,517 479,589,584Less: Transfer to Trial Production Expenses in Previous Year 52,136,139 -(included in Capital Work in Progress)

Sub Total 1,476,120,378 479,589,584

Additions consequent to acquisition/amalgamationFinished goods - 314,853,947Work in process - 85,512,961Waste - -

1,476,120,378 879,956,492

Closing Stock :Finished goods 645,706,944 1,255,145,445Work in process 189,404,820 267,581,901Waste 2,387,252 5,529,171

837,499,016 1,528,256,517

Sub Total 638,621,362 (648,300,025)Less: Transfer to Trial Production Expenses - 52,136,139(included in Capital Work-in-progress)Excise duty on (Increase) / Decrease in Stocks 6,376,969 (5,357,973)

(Increase) / Decrease in Stocks 632,244,393 (590,805,913)


SCHEDULE XX : STATEMENT ON SIGNIFICANT ACCOUNTING POLICIES

1. Basis for preparation of consolidated financial statements:

The consolidated financial statements of the Group have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the accounting principles generally accepted in India and comply with the applicable accounting standards notified u/s 211(3C) of the Companies Act, 1956.

The financial statements of the Parent Company and the subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances / transactions as per Accounting Standard 21 on Consolidated Financial Statements.

2. Use of Estimates

The preparation of the financial statements in conformity with Indian GAAP requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets.

3. Fixed Assets

Fixed Assets are stated at their original cost including freight, duties (net of MODVAT/CENVAT), taxes and other incidental expenses relating to acquisition and installation.

Expenditure incurred during the period of construction are carried forward as capital work-in-progress and on completion, the costs are allocated to the respective fixed assets.

4. Depreciation / Amortization

Depreciation for all fixed assets situated at manufacturing locations is provided on the straight line method on a pro-rata basis at the rates determined on the basis of useful lives of the respective assets. Management estimates the useful lives for the various fixed assets situated at manufacturing locations as follows :

Description – Manufacturing locations Useful lives(in years)

Factory Building 17-29

Building (Other than factory building) 58

Plant and Machinery 2-18

Office Equipments 10-20

Computers 1-6

Furniture and Fixtures 2-15

Vehicles 10


51

The rates derived from the above useful lives are higher than the minimum rates specified in Schedule XIV to the Companies Act, 1956 (‘Act’).

Depreciation for all fixed assets at locations other than at manufacturing locations is provided on the written down value method at the rates specified in Schedule XIV to the Act.

Leasehold land is amortized over the lease period on a straight line basis.

Capitalised enterprise resource planning software (SAP) is amortised over a period of five years on straight line basis

Acquired goodwill is amortized using the straight-line method over a period of 10 years.

5. Goodwill on Consolidation is stated at cost, and where applicable, impairment is recognized.

6. Inventories

Inventories have been valued at lower of cost and net realizable value.

The cost in respect of raw materials is determined:

i) under the Specific identification of cost method for the Cotton Divisions in India and weighted average method for Cotton Divisions outside India.

ii) using the weighted average method for the Synthetic Divisions.

In respect of above, it includes customs duty, wherever paid, and are net of credit under MODVAT/CENVAT scheme, wherever applicable.

The cost in respect of work-in-progress, finished goods and stores and spares is determined using the weighted average cost method and includes direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity, where applicable.

Waste is valued at estimated net realizable value.

7. Revenue recognition

Sale of goods : Revenue on sale of goods is recognized on transfer of significant risk and rewards of ownership to the buyer and on reasonable certainty of the ultimate collection. Sales are net of excise duty, trade discounts and sales returns.

Interest : Income is recognised on a time proportion basis taking into account the amount outstanding and the applicable rates.

Commission and Insurance claim : Income is recognized when no significant uncertainty as to measurability or recoverability exists.

8. Investments

Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments.

9. Foreign currency transactions

Transactions in foreign currency are accounted for at the exchange rates prevailing on the date of transaction. All monetary items denominated in foreign currency are translated at year end rates. Exchange differences arising on such transactions and also exchange differences arising on the settlement of such transactions are adjusted in the Profit and Loss Account.

In case of forward contracts, the premium or discount on all such contracts arising at the inception of each contract is recognized / amortized as income or expense over the life of the contract. Any profit or loss arising on the cancellation or renewal of such contracts is recognized as income or expense for the period.

In respect of foreign branch, all revenues, expenses, monetary assets/liabilities and fixed assets are accounted at the exchange rate prevailing on the date of the transaction. Monetary assets and liabilities are restated at the year end rates and resultant gains or losses are recognized in the Profit and Loss Account.

In respect of foreign operations identified as non-integral to the operations of the Company, the translation of functional currency into reporting currency is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using an appropriate weighted average exchange rate. The gain or loss resulting from such translations is accumulated in a foreign currency translation reserve.

Contingent liabilities are translated at the closing rate.

10. Employee benefits

a) In case of the Parent Company and its Indian subsidiary

The Company’s contributions to recognized Provident Funds are charged to revenue on an accrual basis.

The Company has Defined Benefit plans namely Leave Encashment and Gratuity for all employees, the liability for which is determined on the basis of an actuarial valuation at the end of the year. Gratuity Fund (for other than Synthetic division) is administered through Life Insurance Corporation of India. Short term compensated absences are recognized at the undiscounted amount of benefit for services rendered during the year.

Termination benefits are recognized as an expense immediately. Actuarial gains and losses comprise experience adjustments and the effects of changes in actuarial assumptions and are recognised immediately in the Profit and Loss Account as income or expense.

b) In case of a foreign subsidiary in Uzbekistan

Pension arrangements are as per the State Pension scheme of the Republic of Uzbekistan, which requires contributions by the employer calculated as a percentage of current gross salaries. The subsidiary’s State Pension scheme contribution amounts to 24 percent of employees’ gross salaries and 0.7 percent of turnover, and is expensed as incurred.

52


11. Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as a part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

12. TaxationTax expense for the year, comprising current tax, deferred tax and fringe benefit tax is included in determining the net profit/(loss) for the year.A provision is made for the current tax and fringe benefit tax based on tax liability computed in accordance with relevant tax rates and tax laws. Deferred tax assets are recognised for all deductible timing differences and carried forward to the extent it is reasonably / virtually certain that future taxable profit will be available against which such deferred tax assets can be realised. Deferred tax assets and liabilities are measured at the tax rates that have been enacted or substantively enacted by the Balance Sheet date.

13. LeasesAssets acquired under long term finance lease are capitalised and depreciated in accordance with Group’s policy for assets situated at manufacturing and other locations. The associated obligations are included in other loans under “Secured Loans”.The Group has taken premises on lease. Lease rental in respect of operating lease arrangement are charged to Profit and Loss Account.

14. Impairment of AssetsAt each balance sheet date, the Group assesses whether there is any indication that an asset may be impaired. If such indication exists, the Group estimates the recoverable amount and where carrying amount of the asset exceeds such recoverable amount, an impairment loss is recognised in the profit and loss account to the extent the carrying amount exceeds recoverable amount. Where there is any indication that an impairment loss recognised for an asset in prior accounting periods may no longer exist or may have decreased, the Group books a reversal of the impairment loss not exceeding the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior accounting periods.

15. Provisions and contingencies The Group creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of obligation. A disclosure for a contingent liability is made when there is possible obligation or a present obligation that probably will not require an outflow of resources or where a reliable estimate of the obligation cannot be made.

SCHEDULE XXI : Consolidated Notes to Accounts

GROUP COMPANIES

The Consolidated Financial Statements have been prepared in accordance with Accounting Standard 21 (AS 21) - “Consolidated Financial Statements” notified under section 211(3c) of the Companies Act, 1956.The Financial Statements of the following subsidiaries, drawn upto March 31, 2009, alongwith Spentex Industries Limited, the Parent, constituting the group, are considered in preparation of the consolidated Financial Statements :-

Name of Company Relationship Country of Percentage of PercentageIncorporation ownership of ownership

interest as on interest as onMarch 31, 2009 March 31, 2008

Spentex (Netherlands), B.V. Subsidiary Netherlands 100.00% 100.00%(100 % held by the Company and its nominees)

Spentex Tashkent Toytepa LLC ( STTL )(99.18% held by Spentex Subsidiary Uzbekistan 100.00% 100.00%(Netherlands), B.V. and 0.82% held by Spentex Industries Limited)

Spentex (Singapore) Pte Ltd. (a 100% subsidiary of Subsidiary Singapore 0.00% 100.00%Spentex (Netherlands), B.V.)(Refer Note below )

Spentex (Mauritius) Pvt. Ltd. Subsidiary Mauritius 100.00% 100.00%(a 100% subsidiary of the Company.)

Spentex (Cyprus) Pvt. Ltd. (a 100% subsidiary of Subsidiary Cyprus 100.00% 100.00%Spentex Mauritius Pvt. Ltd.)

Schoeller Textile (Netherland), B.V (a 100% subsidiary Subsidiary Netherlands 100.00% 100.00%of Spentex (Netherlands), B.V.)

Schoeller Litvinov K.S. #(25 % with Schoeller Textile (Netherlands), B.V. Subsidiary Czech Republic 100.00% 100.00%(limited partnership) and 75% with Schoeller Textil, GmbH & Co. KG(unlimited partnership))

Schoeller Textil GmbH & Co. KG #(100 % limited partnership Interest of Schoeller Subsidiary Germany 100.00% 100.00%Textile (Netherlands), B.V. and unlimited partnership interest of SchoellerTextiles Verwaltungs, GmbH)

Schoeller Textil Verwaltungs GmbH (a 100% subsidiary of Schoeller Textile Subsidiary Germany 100.00% 100.00%(Netherlands), B.V)

Amit Spinning Industries Limited (ASIL) Subsidiary India 50.96% 50.96%

Note : Spentex ( Singapore ) Pte Ltd has been closed during the current year# These are partnership firms which have been considered for the purpose of cosolidation as per AS -21


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2 Contingent Liabilities (Amount in Rs.)


a) Demands from Income Tax Authorities under appeal 62,139,030 51,232,534

b) Demands from Sales Tax Authorities under appeal 20,102,976 4,641,627

c) Show cause notices/demands raised by Excise / Customs Department 284,935,026 234,986,602(including applicable penalties), not acknowledged as debts

d) Show cause notices/demands raised by Madhya Pradesh Government / 132,211,000 132,211,000MPEB / MSEB, not acknowledged as debts

e) Claims against the Company not acknowledge as debts 13,298,670 13,298,670

f) Guarantees and Letters of credit issued on behalf of theCompany, outstanding at the year end 1,251,908,758 1,498,095,927

g) Bills Discounted with Banks on behalf of the Company, outstanding 642,380,891 1,078,532,683at the year end

h) Corporate Guarantee given to IREDA for Loan to M/s Himalayan 266,222,000 271,206,500Crest Power Limited

i) Corporate Guarantee given to AXIS Bank Ltd. and UCO Bank 419,201,873 302,866,520for Loan to M/s Amit Spinning Industries Limited

j) Corporate Guarantee given to Tashkent Toytepa Textil for deferred 2,457,215,994 1,835,313,031payment of purchase consideration on behalf of Spentex Tashkent Toytepa LLC. Current Year USD 48,600,000(Previous Year USD 48,600,000)

k) Corporate Guarantee given to CVCI for investment in Spentex 101,120,000 80,240,000(Netherlands) B.V.Current Year USD 20,00,000,(Previous Year USD 20,00,000)

l) Corporate Guarantee given to Lehman Brothers and State Bank of 1,565,859,594 2,461,430,494India, Tokyo Branch for loan to Spentex (Netherlands) B.V.* CurrentYear USD 32,275,704 (Previous Year USD 61,351,707)

*The company has been legally advised that the corporate guarantee given to Lehman Brothers is no longer valid as Lehman Brothers did not comply with the terms and conditions of the loan agreement based on which the guarantee was given. Accordingly, the figure for the current year do not include the portion of the guarantee relating to the loan from Lehman Brothers.

The amount shown in the items (a) to (f) represent the best possible estimates arrived at on the basis of available information. The uncertainties and possible reimbursements are dependent on outcome of the different legal processes which have been invoked by the Company or the claimants as the case may be and therefore cannot be predicted accurately. The Company engages reputed professional advisors to protect its interest and has been advised that it has strong legal positions against such disputes. The amount shown in items (g) to (l) represent guarantees given and bills discounted in the normal course of the Company’s operations and are not expected to result in any loss to the Company on the basis of beneficiaries fulfilling their ordinary commercial obligations.

m) The Parent Company has assumed liabilities for certain disputed cases in respect of excise duty amounting to Rs. 29,074,675 (Previous Year Rs. 29,074,675) under the terms of sale negotiated for purchase of assets from Bank of India at Ahmedabad. In the event that the outcome of these cases are not in the favour of the Parent Company, the amount would be adjusted with the carrying value of assets taken over from Bank of India.

n) In respect of one of the subsidiary company ( Amit Spinning Industries Limited ), the Income tax authorities have disallowed various expenses/ made additions amounting to Rs. 236,821,707 (adjusted against the brought forward loses of the Company). However, the subsidiary company has disputed the said disallowances/ additions before appellant authority and appeal for the same is pending.

3 During the year 2007-08, STTL, a subsidiary of the Company received Government grant in the form of exemption from import tax for technological equipment. Grants must be used to expand working capital and promote labour and modernisation and promoting new products. STTL transferred Government grant to Profit and Loss Account to the extent available on purchase of imported spare parts inventory and equipments i.e.UZS 1,515,829 thousand (equivalent to Rs.46,779,736)

4 Description This Year Previous Year

Estimated value of contracts remaining to be executed on capital account (net of advances) 1,025,390 23,755,460

5 During the year 2006-07, Spentex ( Netherlands ) B.V received USD 15,000,000 from Citigroup Venture Capital International Growth Partnership Mauritius Ltd. (CVC) for issue of Preference Share Capital which is still pending allotment at the year end.

6 Gain/(Loss) on foreign currency translation on restatement of balance brought forward from previous year represents foreign currency fluctuation on restatement of profit brought forward in respect of foreign subsidiaries.

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7 Disclosure in accordance with Section 22 of Micro, Small and Medium enterprise Development Act, 2006

Particulars Amount (Rs)

a) Principal amount and interest due theron remaining unpaid 145,209

b) Interest paid in terms of section 16 -

c) Interest due and payable for the period of delay in making payment -

d) Interest accured and remaining unpaid -

e) Interest due and payable even in succeeding years -

8 In accordance with the current industry practice, plant and machinery of the Group has been treated as “Continuous Process Plant” as defined under Schedule XIV to the Companies Act,1956.

9a) The Company’s subsidiary, Spentex Tashkent Toytepa LLC, entered into an asset sale and purchase agreement with Tashkent Toytepa Textile LLC on July 21, 2006. In accordance with this agreement, the amount outstanding as on March 31, 2009, USD 48,600,000 (equivalent to Rs. 2,457,215,994), is repayable in 2 equal installments of USD 12,150,000 and the remaining amount of USD 24,300,000 is repayable as last installment.

9b) During the previous year, the Company had terminated the contract manufacturing agreement with Bombay Dying and Manufacturing Company (BDMC) and purchased the assets from BDMC for Rs. 187,942,975 (including VAT of Rs. 20,882,553), payable over a period of three years. The repayment schedule has been modified. The following is the revised repayment schedule.

Sr. No. Payable date Amount Rs. Amount Rs.

1 Dec 31, 2007 13,567,975

2 Apr 1, 2009 10,000,000

3 Apr 25, 2009 16,250,000

4 May 25, 2009 (Refer Note a below) 15,000,000

5 June 25, 2009 15,000,000

6 Apr 1, 2010 56,250,000

7 Apr 1, 2011 61,875,000 174,375,000

Total 187,942,975

Notes :

a) Shown under Schedule IV ‘Unsecured Loans’

b) As on March 31, 2009 these assets have been transferred to current assets and shown as ‘Fixed assets held for sale’.

10 Exceptional Item represent write off of goodwill arising on consolidation in respect of one of the subsidiary company (Amit Spinning Industries Limited) amounting to Rs. 127,190,873 as the subsidiary’s net worth has been substantially eroded at the year end.

11 The Butibori Unit of the Synthetic Division had been exporting its goods under Rule 18 of the Central Excise Rules 2002 and claiming rebate on both input and output stage of duty. The Central Excise Department disallowed the rebate on Input Stage of duty at Butibori unit. The Synthetic Division has filed a revision petition with the Joint Secretary, Government of India who allowed rebate for both the stages of duty. However, the Department appealed in the Hon’ble High Court of Mumbai which was upheld by the Hon’ble High Court. The Synthetic Division has now filed a Special Leave Petition before the Hon’ble Supreme Court of India for quashing the Hon’ble High Court Order and allowing the rebate on input stage of duty. Pending the decision in the matter by the Hon’ble Supreme Court, the Synthetic Division has not yet reversed the rebate receivable on input duty aggregating to Rs 58,154,319 (including Rs 2,826,621 at its Pithampur Unit).

Further, relying on the judgment of the Hon’ble High Court of Mumbai for the Butibori unit, a demand has been raised by the Department on the Pithampur unit of the Synthetic Division against the refund already given of the rebate on input stage of duty amounting to Rs 60,216,366 along with interest. Also, pending claims for the input stage of duty amounting to Rs 2,826,621 have been disallowed during 2006-07. The Pithampur unit has gone into appeal against the said demand / disallowance. The Commissioner (Appeals) has rejected the appeal of the Synthetic Division for the pending claim, while the decision has been kept pending against the demand till the final order is received from the higher authority (Revision Authority). While the management is hopeful of the decision of the case in its favour, it is also reasonably confident of the liquidation / utilization of these cenvat balances of Rs. 118,370,685 coupled with cenvat credit of Rs. 20,447,344 (accumulated as a result of inverted duty structure between raw material and finished goods till previous year) over a reasonable period of time, incase the decision of the Hon'ble Supreme Court goes in favour of the department.

12 Butibori unit was initially granted Sales Tax Exemption for 14 years under the Package Scheme of Incentives, 1993, expiring on 31st December, 2008, vide Exemption certificate EC No. 2887. Consequent to High Court Order of demerger, Unit applied for issue of separate certificate in its favour, valid upto December 31, 2008 after splitting/ canceling the above certificate. However Development Commissioner (Industries), Govt. of Maharastra, reduced the initial validity period from 14 yrs to 11 yrs expiring on 31 December, 2005. The unit has applied for the restoration of the original validity period upto December 31, 2008 in terms of the High Court order.


55


In case the unit fails to get the exemption certificate from the authorities, the tax and interest payable as on March 31, 2009 shall be as under: -

Particulars Sales Value Sales Tax Interest Total(Rs.) (Rs.) (Rs.) (Rs.)

Jan, 06 – Mar, 06 165,414,164 6,475,767 3,156,936 9,632,703

Apr, 06 - Mar, 07 1,048,420,320 41,562,736 18,703,231 60,265,967

Apr, 07 - Mar, 08 729,883,547 25,063,885 7,519,165 32,583,050

Apr, 08 - Mar, 09 503,750,772 16,618,179 2,492,728 19,110,907

Total 2,447,468,803 89,720,567 31,872,060 121,592,627


The unit has also filed a petition before the Hon’ble High Court, Nagpur to grant relief on the said matter and is hopeful of recovery of such amount.

13 Schoeller Litvinov k.s. (SLKS), the Czech subsidiary of the Company, is adversely affected by global recession resulting in reduction in demand, increase in input costs and shortage of working capital. As a result of these, accumulated losses of the subsidiary have exceeded its net worth as at March 31, 2009. Based on order of a Court in that country, this subsidiary is in the process of submitting a reorganisation plan to restructure its assets and liabilities by early September 2009. The revival of this subsidiary is dependent on the Court approving the reorganization plan and management being able to implement the plan successfully. The management believes that the reorganization plan coupled with improvement in the global textile market, will turn around the subsidiary so as to make good its losses in a reasonable period of time.

14 As on March 31, 2009, accumulated losses of the Group have exceeded 50% of net worth. In the opinion of the management, the Group’s operations are affected by global business downturn which has resulted in reduction in demand, increase in input costs and shortage of working capital. Based on recent performance and trends of the Group and overall industry outlook, there is an increase in average selling prices of yarn, stability in production levels and reduction in procurement costs of raw materials. The management believes that losses incurred in past would be made good and the Group would start earning cash profit in foreseeable future. The financial statements have been prepared on a going concern basis on the strength of management’s plan of revival including reorganisation of business and restructuring of loan facilities under Corporate Debt Restructuring scheme.

15 Sundry Debtors and Advances include amounts aggregating Rs. 18,135,371 and Rs. 22,473,335 respectively due from certain customers where payments are not forthcoming. Of the above, the Company has filed a suit for recovery of Rs. 18,135,371 against two of the customers. Further, in respect of the advances of Rs. 22,473,335 the Company is making efforts to recover the same and expects to reduce them significantly. Based on outcome of the legal suit coupled with further negotiations with these parties, the management is of the opinion that ultimately there would be no losses against these old balances and hence no provision is considered necessary at this stage.

16 The Finance Act, 2001 has introduced, with effect from assessment year 2002-03 (effective April 1, 2001), detailed Transfer Pricing regulation for computing the taxable income from ‘international transactions’ between ‘associated enterprises’ on an ‘arm’s length’ basis. These regulations, inter alia, also require the maintenance of prescribed documents and information including furnishing a report from an Accountant within the due date of filing of Return of Income. For the year ended March 31, 2009, the Parent Company has initiated the process of compliance with the said transfer pricing regulations for which the prescribed certificate of the accountant will be obtained and the Company does not envisage any tax liability.

17. In respect of SKLS , the following amounts have been taken from the management prepared financial statements and considered in the consolidated financial statements on an unaudited basis

(Amount in Rs.)

Name of Subsidiary Schoeller Litvinov K.S.

Sales for the year ended March 31, 2009 2,502,425,666

(Loss) for the year ended March 31, 2009 (996,545,385)

Total assets as at March 31, 2009 2,833,041,353

Total liabilities as at March 31, 2009 2,814,778,031

The books of SLKS have been audited under the Czech laws and Czech GAAP for the calendar year ended December 31, 2008

18. In accordance with Accounting Standard - 17 on Segment Reporting issued by the Institute of Chartered Accountants of India,

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the Company has identified three business segments viz. Textile Manufacturing, Textile Trading and Other Trading. Further, two geographical segments by location of cutomers have been considered as secondary segments viz. Within India and Outside India . The segment wise disclosures are as follows

A. Business Segment Reporting (Amount in Rs.)

DESCRIPTION TEXTILE- TEXTILE- OTHER TOTALMANUFACTURING TRADING TRADING

Segment Revenue

Total Revenue 11,929,059,310 859,132,216 22,844,561 12,811,036,087

(13,200,952,356) (815,005,382) (131,869,995) (14,147,827,733)

Inter - segment sales 618,847,572 22,981,704 - 641,829,276

(643,912,186) (130,776,497) - (774,688,683)

External Sales 11,310,211,738 836,150,512 22,844,561 12,169,206,811

(12,557,040,170) (684,228,885) (131,869,995) (13,373,139,050)

Segment Results (1,005,238,702) 27,283,110 14,553,509 (963,402,081)

(592,765,364) (-13623106) (36,081,032) (615,223,290)

Unallocated corporate expense (Net) - - - (304,654,807)

(-) (-) (-) (46,292,357)

Operating Profit - - - (1,268,056,888)

(-) (-) (-) (568,930,933)

Finance Charges - - - 979,325,127

(-) (-) (-) (932,868,308)

Interest income - - - 30,021,152

(-) (-) (-) (30,342,153)

Exceptional Item - - - 127,190,873

(-) (-) (-) (-)

Profit/(Loss) before - - - (2,344,551,736)

Prior period items and Tax (-) (-) (-) (98,004,343)

Income Tax - - - 689,063

(-) (-) (-) (162,336)

Deferred Tax - - - 82,875,466

(-) (-) (-) (-115198204)

Fringe Benefit Tax - - - 3,855,231

(-) (-) (-) (4,725,570)

Prior Period Items - - - -

(-) (-) (-) (12,890,157)

Profit/(Loss) after tax but before Minority Interest - - - (2,431,971,496)

(-) (-) (-) (-236,175,081)

OTHER INFORMATION

Segment Assets 14,129,136,557 250,397,812 82,124,931 14,461,659,300

(15,329,445,674) (210,096,415) (99,642,924) (15,639,185,013)

Unallocated corporate assets - - - (339,751,995)

(-) (-) (-) (589,670,836)

Total Assets - - - 14,121,907,305

(-) (-) (-) (16,228,855,849)

Segment liabilities 2,857,368,834 39,555,335 - 2,896,924,168

(2,898,838,981) (69,659,168) (2,189,286) (2,970,687,435)

Unallocated corporate liabilities - - - 10,284,735,895

(-) (-) (-) (10,278,859,320)

Total Liabilities - - - 13,181,660,063

(-) (-) (-) (13,249,546,755)

Capital expenditure incurred during the year - - - 104,446,074

(-) (-) (-) (713,332,758)

Depreciation and Amortisation for the year - - - 789,317,271

(-) (-) (-) (745,532,756)


57

B) GEOGRAPHICAL SEGMENT REPORTING:

DESCRIPTION REVENUE ASSETSRs. Rs.

Domestic 2,488,289,561 5,968,283,905

(2,792,696,330) (7,826,466,548)

Outside India 9,680,917,250 8,153,623,400

(10,580,442,720) (8,402,389,301)

Current Year 12,169,206,811 14,121,907,305

Previous Year (13,373,139,050) (16,228,855,849)

19 Related Party Disclosures :

A) In accordance with the requirements of Accounting Standard (AS) - 18 on Related Party Disclosures, the names of the related parties where control exists and/or with whom transactions have taken place during the year and description of relationships, as identified and certified by the management, are:

i) Enterprises / entities under significant influence:

a) Himalayan Crest Power Limited.

b) CLC & Sons (P) Limited

ii) Key Management Personnel and their Relatives

a) Mr. Ajay Kumar Choudhary Chairman

b) Mr. Mukund Choudhary Managing Director

c) Mr. Kapil Choudhary Deputy Managing Director

d) Mr. Amrit Agrawal Director - Finance

e) Mr. Sitaram Parthasarathy Director - Works

19 B) Description of Transactions with the Related Parties in the ordinary course of business. Amount in Rs.

SI Name of the Party Remuneration Allotment Loans Loans Advances Outstanding Balances at year end

No. Paid of equity Given repayment Received Loans Guarantees AdvancesShares received Back Given Outstanding* Given

1 Himalayan Crest - - - - - - 266,222,000 -

Power Limited ** (-) (-) (-) (-) (-) (-) (271,206,500) (-)

2 CLC & Sons (P) - - - - - - - -

Limited (-) (-) (4,200,000) (4,217,928) (-) (17,928) (-) (-)

3 Mr. Ajay Kumar 4,800,000 - - - 47,787 - - -

Choudhary (4,800,000) (4,673,283) (-) (-) (-) (-) (-) (8,485)

4 Mr. Mukund 4,800,000 - - - 36,525 - - -

Choudhary (4,800,000) (2,796,004) (-) (-) (-) (-) (-) (28,760)

5 Mr. Kapil Choudhary 4,800,000 - - - - - - -

(4,800,000) (2,579,212) (-) (-) (-) (-) (-) (26,611)

6 Mr. Amrit Agrawal 4,243,506 - - - - - - -

(4,142,065) (-) (-) (-) (-) (-) (-) (-)

7 Mr. Sitaram 4,759,793 - - - - - - -Parthasarathy (4,654,566) (-) (-) (-) (-) (-) (-) (-)

Total 23,403,299 - - - 84,312 - 266,222,000 -

Previous Year (23,196,631) (10,048,499) (4,200,000) (4,217,928) (-) (17,928) (271,206,500) (63,856)

* Guarantees outstanding excludes personal guarantee given by Directors to Banks / Financial institutions for facilitation of business.

** Based on legal counsel opinion, the management is of the view that guarantee given on behalf of Himalayan Crest Power Limited does not result in non-compliance of Section 295 of the Companies Act. 1956.

Figures shown in brackets represents previous year figures.

20. Employee Benefits

These consolidated financial statements include the obligations as per requirement of this standard except for those subsidiaries which are incorporated outside India who have determined the valuation/provision for employee benefits as per requirements of their respective countries. In the opinion of the management, the impact of this deviation is not considered material

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(i) Post Retirement Employee Benefits

(a) Defined Contribution Plans:

The Group has Defined Contribution plans for post retirement employment benefits’ namely Provident Fund and Employee State Insurance Scheme. Expense for the same is being charged to Profit and Loss account for the year.

(b) Defined Benefit Plans:

The liability for gratuity is determined on the basis of an actuarial valuation at the end of the year. Gains and losses arising out of actuarial valuations are recognised in the Profit and Loss Account for the year.

(ii) Other employee benefits

Other employee benefits are accounted for on accrual basis. Liabilities for Compensated absences which is a defined benefit plan are determined based on independent year end actuarial valuation and the resulting charge is being accounted in Profit and Loss.

Current Year (Amount in Rs.) Previous Year (Amount in Rs.)

Gratuity Leave Encashment Gratuity Leave Encashment Funded Unfunded Funded Unfunded

A. Components of Employer Expense


2 Interest Cost 4,497,650 1,264,370 4,158,211 1,253,045



5 Return on Plan Assets (1,085,089) - (589,471) -

6 Past Service Cost - - - -

7 Actuarial Losses / (Gains) (9,219,921) 2,425,749 8,689,907 2,550,817

Total expense recognised in the 305,934 7,866,791 18,884,667 8,382,344Statement of Profit & Loss Account

The Gratuity and Leave Encashment Expenses have been recognised in “Salaries, Wages and Bonus”

under Schedule XVI

B. Change in Defined Benefit Obligations (DBO) during the year ended March 31, 2009

1 Present Value of DBO at the 64,428,663 18,112,034 51,835,636 15,620,264Beginning of Year


3 Interest Cost 4,497,650 1,264,370 4,158,211 1,253,045



6 Plan Amendments - - - -

7 Acquisitions - - - -

8 Actuarial (Gains)/Losses (9,219,921) 2,425,749 8,689,907 2,550,817

9 Benefits Paid (6,416,740) (6,682,060) (6,881,111) (5,890,574)

10 Present Value of DBO at the End of Year 59,402,946 19,296,765 64,428,663 18,112,034

C. Net Asset / (Liability) recognised in Balance Sheet as at March 31, 2009

1 Present Value of Defined Benefit Obligation 59,402,946 19,296,765 64,428,663 18,112,034

2 Fair Value on Plan Assets 14,628,560 - 9,963,600 -

3 Status [Surplus/(Deficit)] (44,774,386) (19,296,765) (54,465,063) (18,112,034)

4 Unrecognised Past Service Cost - - - -

Net Asset/(Liability) recognised in (44,774,386) (19,296,765) (54,465,063) (18,112,034)*Balance Sheet

Note:

* Excluding impact of liability on account of short term compensated absences Rs. 21,514,501


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D. Change in Fair Value of Assets during the year ended March 31, 2009

1 Plan Assets at the Beginning of Year 9,963,600 - 5,922,543 -

2 Adjustments 1,926,884 - - -

3 Expected Return on Plan Assets 1,085,089 - 533,029 -

4 Actuarial Gains/(Losses) (60,031) - 43,602 -

5 Actual Company Contribution 4,459,990 - 4,199,125 -

6 Benefits Paid (2,746,972) - (734,699) -

7 Plan Assets at the End of Year 14,628,560 - 9,963,600 -

Gratuity Leave Encashment Gratuity Leave Encashment Funded Unfunded Funded Unfunded

E. Actuarial Assumptions Percentage Percentage Percentage Percentage

1 Discount Rate (%) at March 31, 2009 7.00% 7.00% 8.00% 8.00%

2 Expected Return on Plan Assets 9.00% N.A. 8.00 % - 9.00% N . A .at March 31, 2009

3 Annual increase in salary cost 3.00% 3.00% 5.50% 5.50%

The estimates of future salary increases, considered in actuarial valuations take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

Note:

a) In respect of the Employee’s Gratuity Fund, constitution of Plan Assets is not readily available from the Life Insurance Corporation of India.

F. Basis used to determine the Expected Rate of Return on Plan Assets

The expected rate of return on plan assets is based on the current portfolio of assets, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are well diversified.

21 Leased Assets included in vehicles where the Group is a lessee under finance leases are :This Year Previous Year

(Rs.) (Rs.)

Not later than one year 2,511,711 4,969,826 Later than one year but not later than five years 744,108 3,089,931 Later than five years Nil Nil Total Minimum lease payments 3,255,819 8,059,757 Less : Future finance charges on finance leases 272,960 785,527 Present value of finance lease liabilities 2,982,859 7,274,230 Representing lease liabilities:- Current 2,319,471 4,444,271 - Non current 663,388 2,829,959

Total 2,982,859 7,274,230

The present value of finance lease liabilities may be analysed as follows :Not later than one year 2,319,471 4,444,271Later than one year but not later than five years 663,388 2,829,959 Later than five years Nil Nil

Total 2,982,859 7,274,230

22 Payment to Auditors :a) As Auditors 1,985,400 4,157,320 b) In other capacity 2,134,840 2,671,921 c) Out of pocket expenses 170,011 227,385

Total 4,290,251 7,056,626

(*) including taxes, as applicable.

23 Remuneration to Managerial Personnela) Salary and Allowances 21,564,876 21,511,124 c) Contributions to Provident Fund and Superannuation Fund 1,266,367 1,266,372 b) Estimated value of Perquisites 572,056 419,135

Total 23,403,299 23,196,631

Directors’ Sitting Fees 407,000 407,000

Foot Notes:

1 The contribution to Gratuity fund and leave encashment has been made on group basis and separate figures applicable to an individual employee are not available and have, therefore, not been taken into account in the above computation.

2 Excludes amount held in trust Rs. 138,660 (Previous Year Rs. 63,856) for excess remuneration paid to managerial personnel, subsequently recovered.

24 Taxation

Deferred Tax

Break-up of Deferred Tax Assets and Liabilities into major components of the respective balances is as under :

This Year Previous Year(Rs. (Rs.)

I. Balance brought forward - Deferred Tax Asset / (Liability) 82,875,466 (24,992,320)

Transitional Adjustment for Employee benefits - Deferred Tax Assets - 3,790,010

Balance brought forward after transitional adjustment for 82,875,466 (21,202,310)

Employee Benefit as per AS-15

Opening balance pertaining to Schoeller Litvinov K. S. - (11,120,428)

Total 82,875,466 (32,322,738)

II. For the Year :

(i) Tax impact of difference between carrying amount of fixed assets (57,127,311) 40,532,849in the financial statements and the income tax return

(ii) Tax impact of expenses charged in the financial statements but (3,869,764) 3,347,063allowable as deduction in future years under income tax

(iii) Realisation of tax impact of unabsorbed depreciation / carried (21,878,391) 71,318,292forward business losses created in the previous year

Net Deferred Tax (Liability)/Asset (82,875,466) 115,198,204

III. Closing Deferred Tax (Liability)/Asset 0 82,875,466

1 The tax impact for the above purpose has been arrived at by applying a tax rate of 33.99%, (Previous Year 33.99%) being the prevailing tax rate for Indian Companies under the Income Tax Act, 1961.

2 Deferred Tax Asset ( DTA ) has been recognized only to the extent of Deferred Tax Liability in view of there being no virtual certainity that DTA will be realised against future taxable profits

25 Earnings Per Share (EPS)

The following table reconciles the numerators and denominators used to calculate Basic and Diluted EPS for the Year:

Net profit/(loss) attributable to equity shareholders (2,361,818,217) (217,436,745)

Weighted Average Shares outstanding Nos. Nos.

Weighted average shares outstanding 71,472,035 71,421,693

Effect of Dilutive Securities - -

Diluted weighted average shares outstanding 71,472,035 71,421,693

Nominal value of Equity Shares Rs. 10 10

Basic Earnings per Share Rs. (33.05) (3.04)

Diluted Earnings per share Rs. (33.05) (3.04)

26. Previous year’s figures have been regrouped / recasted wherever necessary to conform to current year’s classification.

27. Pursuant to the exemption granted by the Department of Company affairs, Government of India, the Parent Company is publishing the consolidated and standalone financial statements of Spentex Industries Limited and its subsidiaries. The financial statements and auditors’ report of the individual subsidiaries are available for inspection by the shareholders at the registered office. However, the information in aggregate on capital, reserves, total assets, total liabilities, details of investments turnover, profit before taxation, provision for taxation, profit/(loss) after taxation and proposed dividend for each subsidiary follows:

60



61

On behalf of the Board

Mukund Choudhary Managing DirectorKapil Choudhary Deputy Managing DirectorAmrit Agrawal Director - FinanceVivek Kumar Company Secretary


(Amount in Rs.)

Sl. Name of Subsidiary Amit Spinning Spentex Textile Spentex Schoeller Textil Spentex Spentex Spentex SpentexNo. Industries Ltd. (Netherlands) Tashkent Verwaltungs (Netherlands) Singapore (Mauritius) Cyprus

B.V. Toytepa, LLC GmbH B.V. Pte. Ltd. Pvt. Ltd. Pvt. Ltd.

1 Share Capital (including 205,848,335 1,205,856 1,070,582,155 1,674,800 759,735,492 - 101 116,389

share application money) (205,848,335) (1,138,846) (935,757,901) (1,581,731) (603,041,714) (58) (80) (92,356)

2 Reserves and Surplus (201,159,510) 10,383,894 83,232,582 (266,159) 394,507,643 - -2,220,427 (1,048,210)

(56,903,467) (3,945,271) (257,927,262) (-176,104) (535,455,314) (-493,027) (-1,097,242) (-555,983)

3 Total Assets (Fixed Assets 943,683,610 1,003,578,010 4,567,145,823 1,408,641 1,679,695,068 - 1,820 -+ Incidental ExpenditurePending Capitalisation +current assets + Deferred (1,079,586,183) (905,993,942) (4,318,553,618) (1,385,019) (1,514,730,131) (140,866) (1,444) (2,207)Tax Asset + MiscellaneousExpenditure)

4 Total Liabilities (Debts + 939,018,016 1,185,566,535 3,413,331,086 - 2,336,556,754 - 2,338,535 931,821Current Liabilities + Deferred Tax Liability) (937,697,042) (1,092,083,066) (3,125,098,017) (-) (1,813,367,752) (633,835) (1,190,882) (465,833)

5 Investment 23,231 193,578,274 - - 1,811,104,821 - 116,389 -

(4,545,521) (182,821,071) (-) (-) (1,437,134,681) (-) (92,276) (-)

6 Turnover 330,352,619 - 3,032,238,991 - - - - -

(800,145,364) (-) (3,505,452,976) (-) (-) (-) (-) (-)

7 Profit/(loss) before Taxation (147,130,846) 14,684,969 (297,366,332) (56,472) (254,678,711) - (760,471) (315,517)

(60,589,304) (-3,945,271) (115,354,816) (-176,104) (73,010,389) (-244,034) (-512,671) (-312,073)

8 Provision for Taxation (4,129,906) - - - - - - -

(Deferred Tax) (-22,378,995) (-) (-) (-) (-) (-) (-) (-)

9 Profit/(loss) after Taxation (143,000,940) 14,684,969 (297,366,332) (56,472) (254,678,711) - (760,471) (315,517)

(-38,210,309) (-3,945,271) (115,354,816) (-176,104) (73,010,389) (-244,034) (-512,671) (-312,073)

10 Proposed Dividend - - - - - - - -

(-) (-) (-) (-) (-) (-) (-) (-)

Note: Spentex (Singapore) Pte Ltd. has been deregistred w.e.f. 11th March 2009.

Figures shown in brackets represents previous year figures.

I. REGISTRATION DETAILS :

Registration No. 1 3 8 1 5 3 State Code 5 5

CIN L 7 4 8 9 9 D L 1 9 9 1 P L C 1 3 8 1 5 3

Balance Sheet Date 3 1 - 0 3 - 2 0 0 9

II. CAPITAL RAISED DURING THE YEAR ( Amount in Rs. Thousands)

Public Issue Rights Issue

N I L N I L

Bonus Issue Private Placement/Scheme of Amalgamation

N I L N I L

III POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousands)

Total Liabilities Total Assets

6 9 1 5 7 2 3 6 9 1 5 7 2 3

SOURCES OF FUNDS :

Paid up Capital Reserves and Surplus

7 1 4 7 2 0 1 1 3 6 0 2 3

Secured Loans Unsecured Loans

4 8 8 2 0 2 9 1 8 2 9 5 1


Net Fixed Assets Investments

3 2 7 3 0 6 6 7 7 4 9 7 9

Net Current Assets Miscellaneous Expenditure

1 8 8 7 0 1 9 N I L

Accumulated Loss

9 8 0 6 5 9

IV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousands)

Turnover (Including Other Income) Total Expenditure

7 0 8 3 6 9 2 7 8 5 3 9 2 4

Profit before tax Profit after tax

7 7 0 2 3 2 7 7 3 9 5 7

Earning per Share in Rs. Dividend rate

( ( 1 0 . 8 3 ) N I L

V. GENERIC NAMES OF PRINCIPAL PRODUCTS/SERVICES OF COMPANY (As Per Monetary Terms)

Item Code NO. (ITC Code) 5 2 0 5 3 4 1 1

Product Description C O T T O N Y A R N

BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

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63

N O T I C E

Notice is hereby given that the 17th Annual General Meeting of the Members of Spentex Industries Limited will be held on Wednesday the 30th day of September, 2009 at 09.30 A.M. at Lok Kala Manch, 20, Lodhi Institutional Area, Lodhi Road, New Delhi 110 003 to transact the following business:

ORDINARY BUSINESS :

1. To receive, consider and adopt the Audited Profit & Loss Account for the year ended 31st March 2009, the Balance Sheet as at that date and the Reports of the Board of Directors' and Auditors' thereon.

2. To appoint a Director in place of Shri Deepak Diwan, who retires by rotation and being eligible, offers himself for re-appointment.

3. To appoint a Director in place of Shri Amrit Agrawal, who retires by rotation and being eligible, offers himself for re-appointment.

4. To appoint Auditors, and fix their remuneration.

SPECIAL BUSINESS :

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

“RESOLVED THAT in accordance with the provisions of Section 257 and all other applicable provisions, if any, of the Companies Act, 1956, Shri Dhananjaya Prasad Singh, an Additional Director who holds office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice in writing from a member proposing his candidature for the office of director be and is hereby appointed as a Director of the Company, liable to retire by rotation.”

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

“RESOLVED THAT subject to the approval of Central Government and in accordance with the provisions of section 198, 269, 309, 317 read with Schedule XIII and other applicable provision, if any, of the Companies Act, 1956 or any statutory modification(s) or re-enactment thereof, approval of the Company be and is hereby accorded to the re-appointment of Shri Mukund Choudhary as Managing Director of the company for a period of five years with effect from 21/06/2009 on the terms and conditions including remuneration as set out in the explanatory statement annexed to the Notice convening this Meeting, with liberty to the Board of Directors (hereinafter referred to as “the Board” which term shall be deemed to include any Committee of the Board constituted to exercise its powers, including the powers conferred by this Resolution) to alter and vary the terms and conditions and / or remuneration, subject to the same not exceeding the limits specified under Schedule XIII to the Companies Act, 1956 or any statutory modification(s) or re-enactment thereof or in accordance with the approval of Central Government.

RESOVED FURTHER THAT the Board be and is hereby authorised to take all such steps as may be necessary, proper or expedient to give effect to this Resolution.”

By Order of the BoardFor SPENTEX INDUSTRIES LIMITED

Place: New Delhi Vivek KumarDate : July 30, 2009 COMPANY SECRETARY

NOTES:

A. Explanatory Statement setting out all material facts regarding Special Business contained in Item Nos. 5 to 6 as required under Section 173 (2) of the Companies Act, 1956, is annexed hereto.

B. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. PROXY SHOULD BE LODGED AT THE REGISTERED OFFICE OF THE COMPANY ATLEAST 48 HOURS BEFORE THE COMMENCEMENT OF THE MEETING.

C. The Register of Members and Share Transfer Books of the Company will remain closed from Saturday the 26th day of September, 2009 to Tuesday the 29th day of September, 2009 (both days inclusive).

D. All documents referred in the notice are open for inspection at the Registered Office of the Company between 10.00 A.M. to 1.00 P.M. on any working day upto the date of Annual General Meeting and also at the meeting.

E. Members are requested to intimate the change, if any, in their registered address immediately.

F. Members/Proxies should bring the attendance slips duly filled in for attending the meeting.

G. It will be appreciated that queries, if any, on accounts and operations of the Company are sent to the Registered Office of the company ten days in advance of the meeting so that the information may be made readily available.

H. As per provisions of the Companies Act, 1956, facility for making nomination is now available to the members in respect of the shares held by them.

I. For any queries on the Depository System, members may contact any depository participant or the Share Department at the Registered Office of the Company

J. In terms of Clause 49 of the Listing Agreement, a brief resume of directors who are proposed to be appointed/re-appointed at this meeting is given in Corporate Governance.

ANNEXURE TO THE NOTICE

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956

ITEM NO. 5

Shri Dhananjaya Prasad Singh was appointed as an Additional Director with effect from January, 31st 2009 in terms of Section 260 of the Companies Act, 1956. Shri Dhananjaya Prasad Singh holds office as Director until this Annual General Meeting and eligible for re-appointment. The Company has received a notice in writing from a member along with deposit of Rs.500, as required under Section 257 of the Companies Act, 1956, proposing the candidature Shri Dhananjaya Prasad Singh as a Director of the Company, liable to retire by rotation.

Shri Dhananjaya Prasad Singh, born on 08-09-1946 is IAS and retired as Secretary to Government of India, Ministry of Textiles. At present he is Chairman of National Institute of Fashion Technology, New Delhi.

None of the Directors of the Company, except Shri Dhananjaya Prasad Singh, are deemed to be interested in the resolution placed before the meeting directly or indirectly.

ITEM NO. 6

The members of the company at their meeting held on 1st September, 2004 approved the appointment of Shri Mukund Choudhary as Managing Director for a period of 5 years w.e.f. 21st June, 2004. The current term of Shri Mukund Choudhary as Managing Director expired on 20th June, 2009. The Board of Directors at their meeting held on 30th April, 2009, subject to approval of members and other statutory approvals as may be necessitate from time to time, re-appointed him as Managing Director for another term 5 years w.e.f. 21st June, 2009.

OVERALL REMUNERATION

Subject to the provision of Section 198,269, 309 & 317 and other applicable provisions, if any, of the Companies Act, 1956, remuneration payable to Chairman, Managing Director, Directors in a financial year does not exceed 5% of the annual net profit of the Company for one such managerial person and subject to further to the overall limit of 10% of the annual net profit of the Company for all of them together.

64


Notwithstanding anything contrary herein contained, where in any financial year during the currency of tenure of the aforesaid Directors, the Company has no profits or its profits are inadequate, the Company will pay remuneration for a maximum permissible limit by way of salary, commission and perquisites as provided here below or the maximum remuneration payable as per the limits set out in Section II of Part II of Schedule XIII of the Companies Act, 1956, which ever is lower, unless otherwise determined by the Board of Directors or the Remuneration Committee, subject to the approval of Central Government, if required, as minimum remuneration.

Within the aforesaid ceiling remuneration payable to Shri Mukund Choudhary shall be as follows:

I. Salary : Rs. 4,00,000 per month

II. Perquisites :

Shri Mukund Choudhary shall be entitled to the following perquisites in addition to salary:

A. i) The Company shall provide Car(s) with chauffeur(s) or alternatively the Company shall maintain personal car and provide him chauffeur. The monetary value in respect to the private use of Car shall be evaluated in accordance with the applicable Income Tax Rules.

ii) Telephone and fax facility at the residence of Managing Director.

iii) Medical Benefits: Reimbursement of medical expenses for himself and his family actually incurred during the continuance of his employment, as per rules of the Company up to a limit of Rs. 15000/- in a year.

iv) Club Fees: Fees of Clubs, subject to a maximum of two clubs.

v) Personal Accident Insurance: Premium not to exceed Rs. 2000/- p.a.

B. The following shall not be included in the above said limit of perquisites:

i) Company's contribution to Provident Fund, Superannuation Fund or Annuity fund to the extent these either singly or put together are not taxable under the Income Tax Act, 1961.

ii) Leave Encashment : Encashment of un-availed leave at the end of his tenure or in accordance with the rules specified by the Company.

iii) Gratuity payable at a rate not exceeding half a month's Salary for each completed year of service.

OTHER TERMS

1. The Managing Director shall not be paid sitting fees for attending meeting of Board/committee of the Board attended by him.

2. The Managing Director shall be entitled to reimbursement of actual expenses including on entertainment and traveling, incurred in the course of the Company's business.

3. The appointment may be terminated by the Company or by the Managing Director by giving not less than three month's prior written notice.

The above may be treated as an abstract of material terms of the re-appointment of Shri Mukund Choudhary under Section 302 of the Companies Act, 1956.

As required under Schedule XIII to the Companies Act, 1956, the relevant details to be sent along with the notice calling the General Meeting are as under:

I. General Information

1. Nature of Industry – Textile Industry

2. Date or expected date of commencement of commercial production: The Company was incorporated on 25.11.1991 and already commenced commercial production thereafter.

3. In case of new Companies, Expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus: Not applicable.

4. Financial performance based on given indicators (as per audited financial statements for the year ended 31.03.2009)

Particulars Rs. In Crores

Sales and other Income 708.36

EBIDTA 31.52

Net Profit/(Loss) (77.39)

5. Export performance and net foreign exchange collaborations (as per audited financial statements for the year ended 31.03.2009).

Earnings in foreign exchange by exports (FOB value): Rs. 388.68 Crores

6. Foreign investments or collaborations, if any: Not applicable

II. Information about the appointee

1. Background details:

Shri Mukund Choudhary aged 38 years, is a Commerce Graduate having more than 17 years of experience in the Textile Industry. He is instrumental in the growth of the Spentex group and the group's entry into manufacturing of cotton yarn can be attributed to him. During his tenure, Company has acquired Indo Rama Textiles Ltd. and also spread its wings internationally by acquiring manufacturing units in Uzbekistan and Czech Republic. His inbuilt leadership qualities make him uniquely qualified to be re-appointed as Managing Director. The Board of Directors, subject to approval of members of the Company has re-appointed Shri Mukund Choudhary as Managing Director.

2. Past remuneration: Rs. 4,00,000 p.m. plus perks

3. Job profile and his responsibility:

He is Managing Director of the Company since 21st June, 2004 and has been instrumental in the growth of the Company as well as group. He is in-charge of overall management of the Company, subject to directions, superintendence and control of the Board of Directors of the Company.

4. Remuneration proposed: As mentioned herein above.

5. Comparative profile with respect to industry, size of the Company, profile of the position and person:

Considering the size of the Company, the profile of the Managing Director, the responsibilities shouldered by him and the industry benchmarks, the remuneration proposed is commensurate with the remuneration paid to similar appointees in other Companies.

6. Pecuniary relationship directly or indirectly with the Company or relationship with the managerial personnel, if any:

Besides the remuneration proposed Shri Mukund Choudhary has no pecuniary relationship with the Company except as general shareholder of the Company. Mr. Ajay Kumar Choudhary, Chairman and Shri Kapil Choudhary, Dy. Managing Director of the Company are related to Shri Mukund Choudhary.

The material documents pertaining to the remuneration payable to the aforesaid Director are available for inspection by the shareholders at the Registered Office of the Company during business hours on any working day between 10.00 a.m. to 1.00 p.m. (excluding Saturday).

Shri Mukund Choudhary in interested in the resolution set out at Item No.6 of the Notice, which pertains to his re-appointment and remuneration payable to him. Further, Mr. Ajay Kumar Choudhary and Shri Kapil Choudhary may deemed to be interested in the Resolution pertaining to re-appointment and remuneration payable to Shri Mukund Choudhary, as they all are related to each other. Save and except the above, none of the Directors of the Company is, any way, concerned or interested the resolution.

The Board recommends the resolution at Item Nos. 6 for your approval.

By Order of the BoardFor SPENTEX INDUSTRIES LIMITED

Place: New Delhi Vivek KumarDate : July 30, 2009 COMPANY SECRETARY

SPENTEX INDUSTRIES LIMITEDRegd. Office: A-60, Okhla Industrial Area, Phase II, New Delhi 110 020

ATTENDANCE SLIP

DP ID …………………………… Regd. Folio No. …..........................

Client ID ………………………… No. of Shares held ……..................

I certify that I am a registered Member/Proxy for the registered member of the Company. I hereby record my presence at the 17th Annual General Meeting of the Company on Wednesday the 30th September, 2009 at 09.30 A.M. at Lok Kala Munch, 20, Lodhi Institutional Area, Lodhi Road, New Delhi 110 003.

……………………................................................... ………………………………Name of the Member/Proxy ( in BLOCK LETTERS) Signature of Member/Proxy

Note: Please complete this attendance slip and hand it over at the Entrance of the Meeting Hall

SPENTEX INDUSTRIES LIMITEDRegd. Office: A-60, Okhla Industrial Area, Phase II, New Delhi 110 020

PROXY FORM

I/We .................................................................. of ........………………. being a member/members

of the above named Company hereby appoint Mr/.Mrs./Ms. ........…..……………………………. or

failing ................……………………………. of …………………………………………… as my/our

Proxy to attend and vote for me/us on my/our behalf at the 17th Annual General Meeting of

the Company to be held on Wednesday the 30th September, 2009 at 09.30 A..M. at Lok Kala

Munch, 20, Lodhi Institutional Area, Lodhi Road, New Delhi 110 003.

Signed this …………….............................................. day of ..............................……………. 2009.

Signature ...............................................................................................

DPID & Client ID No. ...............................................................................

Folio No. ……………………………….....................................................

No of Shares held ………………………...................................................

Note : THIS FORM DULY COMPLETED MUST BE DEPOSITED AT THE REGISTERED OFFICE OF THE

COMPANY NOT LESS THAN 48 HOURS BEFORE THE TIME FOR HOLDING THE MEETING.

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