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Vardhman Textiles Limited

(Formerly known as Mahavir Spinning Mills Limited)


Vardhman

BOARD OF DIRECTORS
SH. SHRI PAUL OSWAL Chairman & Managing Director SH. AJAY KUMAR CHAKRABORTY (Nominee of ICICI Bank Ltd.) SH.VINOD KUMAR SAXENA (Nominee of IDBI) DR. TRILOKI NATH KAPOOR SH. PRAFULL ANUBHAI SH. SURINDER KUMAR BANSAL SH. SUBASH KHANCHAND BIJLANI SMT. SHAKUN OSWAL SH. SACHIT JAIN Executive Director SH. DARSHAN LAL SHARMA President & Executive Director CHIEF FINANCIAL OFFICER SH. NEERAJ JAIN COMPANY SECRETARY SH. VIPIN GUPTA AUDITORS M/s S.C. VASUDEVA & CO., CHARTERED ACCOUNTANTS, NEW DELHI BANKERS STATE BANK OF PATIALA, ALLAHABAD BANK ICICI BANK LTD., PUNJAB NATIONAL BANK STATE BANK OF INDIA, BANK OF BARODA CORPORATION BANK, BANK OF AMERICA UNION BANK OF INDIA, CANARA BANK STANDARD CHARTERED BANK, BANQUE NATIONALE DE PARIS REGISTRAR & TRANSFER AGENT ALANKIT ASSIGNMENTS LIMITED, NEW DELHI

CONTENTS
Notice ....................................................................................................................................................................................... 3-4 Directors Report ..................................................................................................................................................................... 5-11 Corporate Governance Report .............................................................................................................................................. 12-18 Auditors Report .................................................................................................................................................................... 19-21 Balance Sheet ....................................................................................................................................................................... 22-22 Profit & Loss Account ............................................................................................................................................................ 23-23 Cash Flow Statement ............................................................................................................................................................. 24-24 Schedules to Accounts .......................................................................................................................................................... 25-46 Auditors Report on Consolidated Financial Statements ........................................................................................................ 47-47 Consolidated Balance Sheet .................................................................................................................................................. 48-48 Consolidated Profit & Loss Account ...................................................................................................................................... 49-49 Consolidated Cash Flow Statement ....................................................................................................................................... 50-50 Consolidated Schedules to Accounts .................................................................................................................................... 51-65 Statement under Section 212 of the Companies Act, 1956 ................................................................................................... 66-66 SUBSIDIARIES VMT Spinning Company Limited .......................................................................................................................................... 67-84 Vardhman Threads Limited ................................................................................................................................................. 85-102 Vardhman Yarns & Threads Limited ................................................................................................................................. 103-110

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

REGISTERED & CORPORATE OFFICE


CHANDIGARH ROAD, LUDHIANA-141 010. Phones : (0161) 2228943-48 Fax : (0161) 2601048 & 2602710. E-mail: secretarial.lud@vardhman.com Web site: www.vardhman.com

WORKS
ANANT SPINNING MILLS, MANDIDEEP ARIHANT SPINNING MILLS, MALERKOTLA ARISHT SPINNING MILLS, BADDI AURO SPINNING MILLS, BADDI AURO DYEING , BADDI AURO WEAVING MILLS, BADDI AURO TEXTILES, BADDI MAHAVIR SPINNING MILLS (Gassed Mercerised Yarn Unit), HOSHIARPUR MAHAVIR SPINNING MILLS, (Sewing Thread Unit I), HOSHIARPUR MAHAVIR SPINNING MILLS, (Sewing Thread, Unit-II), LUDHIANA MAHAVIR SPINNING MILLS, (Sewing Thread Unit III), PERUNDURAI MAHAVIR SPINNING MILLS (Textile Division) BADDI VARDHMAN SPINNING MILLS, BADDI VARDHMAN SPINNING AND GENERAL MILLS, (UNIT-I & II), LUDHIANA VARDHMAN SPECIAL STEELS, LUDHIANA VARDHMAN FABRICS, BUDHNI VARDHMAN YARNS, SATLAPUR

BRANCHES
Chandigarh Road, Ludhiana-141 010 314, Solaris-II, Opp. L&T Gate No. 6, Saki Vihar Road, Andheri (East), Mumbai-400 072 Solaris-II, Universal Industrial Estate, Gala Number G-7 To G-14 & B-12 to B-14, Saki Vihar Road, Andheri (East), Mumbai-400 072 C-40 & 42, Okhla Industrial Area, Phase-II, New Delhi-110 020 212, Deen Dayal Upadhyaya Marg, Urdu Ghar, Ist Floor, New Delhi-110 002 5th Floor Plot No. 19, Sagar Plaza Building, Laxmi Nagar, District Centre, New Delhi-110092 310, Surya Kiran Building, 19, Kasturba Gandhi Marg, New Delhi-110001 B-47, Sector-6, Noida-201 301 Plot No. 60, Sector 1, Parwanoo Mezzanine Floor, Abhishek Plaza, Exhibition Road, Patna-800 001 Realty Warehousing, Gat No. 2323/1, Wagholi, Pune-411 014 Jyoti Sangam Lane, Upper Bazar, Ranchi-834 001 No-40-LRG Layout, Narayan Knitting Mills Compound, Kongu Nagar Extension, Tirupur-641 607 377-B, Muthuswami Industrial Complex, Palladam Road, Tirupur

30 & 33, Shri Krishna Centre, 1st Floor, Near Mithakhali Six Road, Navrang Pura, Ahmedabad-380 009 Building No. 101 & 102, JB Kaval, KHB Colony, Nandini Layout Post, Yeswantpur, Bangalore-560 022 S.C.O. 1,2 & 3 Sector-17 B, Chandigarh- 160017 D8, Industrial Estate, Guindy, Chennai 600 032 450/1, G.K. Industrial Estate, Arcot Road, Alaparkkam, Porpur, Chennai-600 116 36/2303, D & K, Ammankovil Road, Ernakulam (Cochin)-682 035 Plot No. 543H, Pace City - II, Sector 37, Gurgaon 3-6-270/2, Himayat Nagar, Opp. Telugu Academy, Hyderabad-580 029 Plot No.141, Pipila Road, A.B. Road, Indore-452 017 B-34, Sangam Bhawan, Vijay Path, Tilak Nagar, Jaipur-302 004 H.No. 23, Ambedkar Lane, Buta Nagar Paloura, Teh. & Distt. Jammu 84/55, G.T. Road, Near Zarib Chowki, Near Bankey Bihari Dham Banquet Hall, Kanpur-208 003 P-22, 3rd Floor, Flat No. 6, C.I.T. Road, Scheme-IV, Kolkata-700 014 55, Canal East Road, Belighatta, Kolkata-700 085

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

NOTICE
NOTICE is hereby given that the THIRTY FOURTH ANNUAL GENERAL MEETING of Vardhman Textiles Limited will be held on Saturday, the 18 th day of August, 2007 at 3.30 p.m. at the Registered Office of the Company situated at Chandigarh Road, Ludhiana, to transact the following business:ORDINARY BUSINESS: 1. To receive, consider and adopt the Audited Balance Sheet as at 31st March, 2007, Profit and Loss Account for the year ended on that date, together with Report of Auditors and Directors thereon. 2. a). To appoint a Director in place of Mr. S.K Bansal, who retires by rotation in accordance with Article 108 of the Articles of Association of the Company and being eligible, offers himself for re-appointment. b) To appoint a Director in place of Mr. S.K Bijlani, who retires by rotation in accordance with Article 108 of the Articles of Association of the Company and being eligible, offers himself for re-appointment. 3. To appoint Auditors for the year 2007-2008 and to fix their remuneration. SPECIAL BUSINESS: 4. To Consider and if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:RESOLVED THAT pursuant to the provisions of Section 309,310, and other applicable provisions, if any, of the Companies Act, 1956, approval of the Members of the Company be and is hereby given to the enhancement of the sitting fee payable to the Directors from Rs. 8,000/and Rs. 5,000/- per Meeting to Rs. 10,000/- and Rs. 6,000/ - per Meeting for attending the Board Meeting and Committee Meeting respectively. 5. To Consider and if thought fit, to pass with or without modification(s), the following resolutions as Ordinary Resolutions :a) RESOLVED THAT Mrs. Shakun Oswal, who was appointed as an Additional Director by the Board of Directors under Section 260 of the Companies Act, 1956 and hold office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice under section 257 of the Companies Act, 1956, be and is hereby appointed a Director of the Company, liable to retire by rotation, under the Articles of Association of the Company.. b) RESOLVED THAT Mr. A.K Purwar, who was appointed as an Additional Director by the Board of Directors under Section 260 of the Companies Act, 1956 and hold office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice under section 257 of the Companies Act, 1956, be and is hereby appointed a Director of the Company, liable to retire by rotation, under the Articles of Association of the Company.. BY ORDER OF THE BOARD PLACE : LUDHIANA DATED : 28th May, 2007 (VIPIN GUPTA) COMPANY SECRETARY

NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE ON A POLL INSTEAD OF HIMSELF/ HERSELF AND SUCH PROXY NEED NOT BE A MEMBER OF THE COMPANY. THE PROXY, IN ORDER TO BE EFFECTIVE, MUST BE RECEIVED BY THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING. THE BLANK PROXY FORM IS ENCLOSED. 2. The information pursuant to Corporate Governance Clause of the Listing Agreement(s) regarding the directors seeking appointment/re-appointment in the Annual General Meeting as proposed in Item No. 2(a) & 2(b) and Item No. 5(a) & 5(b) of the Notice is also being annexed hereto separately and forms part of the Notice. 3. The Register of Members and the Share Transfer Books of the Company shall remain closed from 17th August, 2007 to 18th August, 2007. 4. The Members holding shares in physical mode are requested to notify the change in their address, if any, at the earliest to the Registrar & Transfer Agent/Company. However members, holding shares in electronic mode may notify the change in their address, if any, to their respective Depository Participants. 5. Members desiring any information, as regards Accounts, are requested to write to the Company at its Registered Office at least 10 days before the date of Annual General Meeting so as to enable the management to keep the information ready. 6. The copies of relevant documents can be inspected at the Registered Office of the Company on any working day between 10.30 A.M. to 12.30 P.M. 7. Members are requested to bring their copy of Annual Report alongwith them to the Annual General Meeting. 8. Members holding shares in the same/identical name(s) under different folios are requested to apply for consolidation of such folios and send relevant share certificates to the Company/Registrar and Transfer Agent. BY ORDER OF THE BOARD PLACE : LUDHIANA DATED : 28th May, 2007 (VIPIN GUPTA) COMPANY SECRETARY

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

ANNEXURE TO THE NOTICE : EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956:
ITEM NO. 4 OF THE SPECIAL BUSINESS Article 96 of the Articles of Association of your Company provides for the payment of sitting fee to every Director for attending a meeting of the Board or its Committee subject to such maximum fee as may be prescribed by Central Government from time to time. In terms of Circular No G.S.R 580 (E) dated 24.07.2003 issued by the Central Government, your Company can pay a maximum amount of Rs. 20,000/- as sitting fee for each meeting of the Board of Directors or Committee of Directors. Keeping in view the contribution made by Directors in framing the progressive policies and giving their valuable guidance / suggestions from time to time to the Company , the Board of Directors in its meeting held on 28th May, 2007 had enhanced the sitting fees from Rs. 8,000/- to Rs. 10,000/- and from Rs. 5,000/- to Rs. 6,000/- for attending the meeting of Board of Directors and Committee of Directors respectively. Except Mr. S.P Oswal, Chairman and Managing Director, Mr. D.L Sharma, President & Executive Director and Mr. Sachit Jain, Executive Director, all other Directors of the Company are concerned or interested in this resolution. ITEM NO. 5 (a) & (b) OF THE SPECIAL BUSINESS : (a) Mrs Suchita Jain had resigned from the Board of Directors of the Company. The Board of Directors appointed Mrs Shakun Oswal as an Additional Director on the Board of the Company pursuant to Article 105 of the Articles of Association of the Company and section 260 of Companies Act 1956, Mrs. Shakun Oswal is also on the Board of Vardhman Holdings Limited and various other Investment Companies. The Company has received a notice from one of the members of the Company u/s 257 of the Companies Act, 1956, together with the requisite deposit, proposing the candidature of Mrs. Shakun Oswal as a Director of the Company. None of the Directors except Mrs. Shakun Oswal, the appointee herself, and Sh S.P Oswal and Sh Sachit Jain, being relatives of Mrs. Shakun Oswal, is concerned or interested in this resolution. (b) The Board of Directors in its meeting held on 28.05.2007 had appointed Mr. A.K Purwar as Additional Director on the Board of the Company pursuant to Article 105 of the Articles of Association of the Company and section 260 of Companies Act 1956, w.e.f. 01.06.2007. Mr. Purwar is an eminent Banker and was the Chairman of the State Bank of India and its associate Banks upto May 31st, 2006. He has a rich experience of more than 36 years. The Company has received a notice from one of the members of the Company u/s 257 of the Companies Act, 1956, together with the requisite deposit, proposing the candidature of Mr. A.K. Purwar as a Director of the Company. Non of the Directors except Mr. A.K. Purwar, the appointee himself is concerned or interested in this resolution. BY ORDER OF THE BOARD PLACE : LUDHIANA DATED : 28th May, 2007 (VIPIN GUPTA) COMPANY SECRETARY

Information Pursuant to Corporate Governance Clause of the Listing Agreement(s) regarding the Directors seeking appointment/ re-appointment in the Annual General Meeting
Name of the Director Date of Birth Date of Appointment Expertise in specific of more functional area Qualification Directorships of Other Companies as on 31st March, 2007 Sh. S.K. Bansal 15.05.1946 30.03.2005 Mrs. Shakun Oswal 18.08.1946 28.05.2007 Mr. A.K Purwar 14.05.1946 28.05.2007 (w.e.f. 01.06.2007) Eminent Banker having Experience of more than 36 years in Banking M.Com, PGDBA 1. Indiareit Fund Advisors Pvt. Ltd. Sh. S. K. Bijlani 06.09.1942 30.03.2005 Industrial & Business experience than 30 years & Finance B.Tech., PGDC In Mgt & Fin. 1. Magnus Engineers Private Limited 2. Punjab Information & Communication Technology Corporation Limited 3. Chandigarh Industrial & Tourism Development Corporation Ltd.

Practising Chartered Accountant having Investment Activities more than 34 years experience in Audit, Accounts and Taxation F.C.A. 1. Marudhar Hotels Pvt. Ltd. 2. Steel Strips Wheels Ltd. 3. Shri Bhavni Power Project Pvt. Ltd. B.A 1. Vardhman Holdings Ltd. 2. Adinath Investment and Trading Company 3. Devakar Investment and Trading Co. Pvt. Ltd. 4. Ramaniya Finance and Investment Co. Ltd. 5. Flamingo Finance and Investment Co. Ltd. 6. Srestha Holdings Limited 7. Santon Finance and Investment Co. Ltd. 8. Pradeep Mercantile Co. Pvt. Ltd. 9. Plaza Trading Co. Pvt. Ltd. 10. Vardhman Textile Processors pvt. Ltd. 11. Marshal Investment & Trading Co. Pvt. Ltd. 12. Sharda Investment & Trading Co. Pvt. Ltd.

Chairman/ Member of Committtees of Other Companies as on 31st March, 2007 No. of Shares Held

Audit Committee 1. Steel Strips Wheels Ltd. (Member)

Nil

1,53,583

Nil

Nil

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

DIRECTORS REPORT
Dear Members, The Directors of your Company have pleasure in presenting their 34th Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2007. 1. FINANCIAL RESULTS: The Financial Results for the year are as under :(Rs. in Lac) PARTICULARS 2006-2007 2005-2006 Turnover Profit before Depreciation, Interest & Tax (PBDIT) Interest & Financial expenses Profit before Depreciation & Tax (PBDT) Depreciation Profit before Tax (PBT) Provision for Tax - Current - Fringe Benefit Tax - Deferred (Net of adjustment) - Income Tax Adjustment for earlier years Profit after Tax (PAT) Add: Debenture Redemption Reserve Balance brought forward Balance available for appropriation Appropriations: Interim Dividend on: - Equity Shares 2,310.78 - Corporate Dividend Tax 324.09 Proposed Dividend on: - Equity Shares - Corporate Dividend Tax Transfer to General Reserve Surplus carried to Balance Sheet Earnings per share (Rs.) - Basic - Diluted Dividend per share (Rs.) 2. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: a) Textile Business: The global textile industry is undergoing growth, restructuring and relocation in the wake of dismantling of restrictions on the movement of textile products across the world. The industry is growing at a rapid pace in countries like China, India, Pakistan, Bangladesh, Srilanka and East European countries. China has emerged the largest global player in the international textile business with a turnover of about $280 bn, of which exports alone accounted for $146 bn in 2006. 5 215,009.02 38,290.82 3,769.50 34,521.32 11,944.53 22,576.79 5,017.00 100.00 294.77 (5.06) 17,170.08 625.00 5,023.59 22,818.67 195,724.74 39,142.16 3,949.03 35,193.13 10,133.99 25,059.14 5,700.00 110.00 (374.84) (7.64) 19,631.62 625.00 3,877.49 24,134.11

2,634.87

2,310.78 324.09

15,000.00 5,183.80 22,818.67 29.72 16.56 4.00

2,634.87 16,475.65 5,023.59 24,134.11 33.98 16.50 4.00

The global fibre consumption is growing at about 3.5 per cent per annum with synthetic fibres dominating the total fibre consumption. The global fibre consumption increased from 52.7 million tons in the year 2000 to 68.7 million tons in 2006. Of this synthetic fibres accounted for 40.8 million tons. It is worth mentioning here that the cotton fibre consumption has recorded impressive growth during the recent years. The global trade in textile and clothing recorded growth of about 7 per cent in 2005 at $479 bn compared to $453 bn a year ago. The textile trade recorded a growth of 5 per cent while clothing grew faster at 7 per cent. A large part of the

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) increase in trade was captured by China, which is almost 25 per cent. China has also chalked out an ambitious plan to increase its market share to about 50 per cent in the coming years. According to study conducted by Technopak, the world trade in textile and clothing is expected to grow to $805 billion by 2015. Though India enjoyed strong position in world trade of Textiles in early 80s but we lost ground between this period by the reason of fiscal policies of reservations in the small scale sector. During this period, China took advantage by modernizing and expanding at fast speed and has emerged to capture more than 20% of world trade. Whereas India is still occupying about 4% of the world trade. The government introduced TUF scheme in 1999 in order to increase investment for modernizing and expanding of certain sectors of Textile Industry. In 2004, government brought in a major change in fiscal policy by bringing a level playing field among the different sectors of the Industry. This has given a fillip to investment in Textile Industry and offtake of loans under TUF picked up in a massive way during the last three years. The investment need to continue for next 5 years if we have to reach a level where we are not seen as a minisucle player vis a vis China and that is the reason that the Finance Minister in his budget speech in 2007 extended the TUF scheme for another 5 years. Your Company has taken full advantage of the scheme by launching expansion and modernization of its capacities. The implementation is going on and this will enable the Company to serve various products, to provide good service to its customers by supplying materials like Yarns, Fabrics, Threads to enable the garmentors to acquire a cutting edge in competitiveness. The Indian textile industry has been growing at 810 per cent in recent years. The growth of textile industry has become more volatile in the wake of growing production centres like Cambodia and Vietnam. Further considering sensitivity to prices and competitive conditions, the countrys relative market share undergoes major changes. For example, the exports from India recorded a growth of about 20 per cent during 2004 and 2005 but during the last year, the exports recorded a meagre growth of 7 per cent. Relocation, Consolidation and Collaboration are expected to characterize the textile industry in next few years. At the same time a few large textile conglomerates would emerge. The Indian textile has seen rapid integration with the global textile industry in terms of alliance and acquisitions. In view of global forces mentioned above, the competencies required in the textile industry are rapidly changing with cost, services and innovation as the key drivers. The competition in textile industry would further intensify and the survivors would be the one who understand the directional change and build better competencies. Outlook on opportunities The fundamental growth drivers remain strong. There would be growing opportunities in the international market and the domestic market. The mill fibre consumption has reached a level of 6.4 mn tons which shows significant growth in the last three years. The consumption is growing in response to growing per capita income, population and strong retail push. Besides the growth opportunities in the World market consequent to opening of the world trade in 2005, there exists immense opportunities due to increased consumption that is expected to take place due to growing income. It is estimated by Technopak in its projection upto 2015 that Domestic Economy will grow from USD 20-25 Million to USD 50-55 Million. In order to reach that level, the country has to achieve much bigger capacities in all sectors of textile production. Your Company has already planned expansion of 2.9 lac spindles at Satlapur and Budhni in Madhya Pradesh. Partial capacity of 34,800 spindles has already been commissioned. The balance capacity is likely to go on stream during the year 20072008. The fabric capacity in existing facility has already been increased to 54 million meter. Our new plant at Budhni will create a capacity of 40 million meters of processed fabric to start with. The provision has also been made to increase the capacity by 20 mn meters. The fabric facility in Budhni shall also be coming up in the year 2007-2008. It has also been our continuous endeavour that we diversify the products so that the Company can offer to the buyers more and more value added products. b) Steel Business The steel division of the Company has focused on Alloy and Special Steel. This caters to the demand of Automobile Sector, Forging Industry and Special Steel users in the Capital Goods Industry. The growth in Automobile Sector and Auto Component Sector is likely to create increase in demand for these varieties of Steel. The Steel business has performed well and looking at the growth trend in the automobile sector, it is expected that the steel business of the Company should perform well in the coming years. c) Financial Analysis and Review of Operations: 6

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) Your directors are pleased to report performance of the business operations as follows : PRODUCTION & SALES REVIEW: During the year under review, your company has registered a turnover of Rs. 215,009.02 lac as compared to Rs. 195,724.74 lac showing an increase of 9.85 % over the previous year turnover. The export of the Company increased from Rs. 36,741.54 lac to Rs. 43,401.84 lac, showing an increase of 18.13% over the previous year owing to enhanced production and better product/market penetration. The businesswise performance is as under:i) Yarn: The production of yarn increased from 77,967 MT to 87,476 MT during 2006-2007. The sales revenue of yarn increased from Rs. 92,619.62 lac to Rs. 102,873.31 lac during the year under review ii) Sewing Thread: During the year, the production of Sewing Thread was 8783 MT as against 8129 MT in the previous year. The sales revenue of Sewing Thread Division decreased from Rs.32,281.52 lacs to Rs. 29,634.83 lacs mainly because of change in accounting system of discounts allowed on sales which were earlier given through credit notes, and now reduced from the invoice value it self. iii) Steel: During the year, the production of Steel Ingots/Billets has been 88378 MT (Previous year 79452 MT) and that of Rolled Products has been 81537 MT (Previous year 73087 MT). The sales revenue of the division has been Rs. 34,702.19 lac (Previous year Rs.31,850.21 lac.). iv) Fabric: During the year, the production of processed fabric increased from 32.62 million meters to 36.53 million meter, showing an increase of 11.99 % over the previous year. The sales revenue of processed fabric also increased from Rs. 28,945.39 lac, to Rs 33,239.58 lac. showing an increase of 14.84% over the previous year. PROFITABILITY: The Company earned profit before depreciation, interest and tax of Rs. 38,325.34 lac as against Rs.39,142.16 lac (including extraordinary income of Rs. 2,714 lac) in the previous year. After providing for depreciation of Rs11,944.53 lac, (Previous year Rs.10,133.99 lac), provision for current tax Rs. 5,017.00 lac (Previous year Rs.5,700.00 lac), provision for deferred tax (net of adjustments), Rs.294.77 lac (previous year Rs.374.84 lac), income tax adjustments for earlier years Rs.(5.06) Previous year Rs.(7.64) lac) and provision for Fringe Benefit Tax of Rs. 100 lac (Previous Year 110 lac) the net profit worked out to Rs.17,170.08 lac as compared to Rs.19,631.62 lac in the previous year. 7
Vardhman

The fabric business has suffered setback in the current year due to multiplicity of reasons. The expected increase in production could not be achieved because of some internal and external constraints which have substantially been overcome. Because certain commitments with customers could not be properly fulfilled, some extraordinary costs had to be borne by the Company. We are hopeful that this year there could be significant improvement in fabric business. RESOURCES UTILISATION: i) Fixed Assets: The gross fixed assets (including work-in-progress) as at 31st March, 2007 were Rs. 264,933.62 lac as compared to Rs. 185,633.23 lac in the previous year. ii) Current Assets: Debtors outstanding for more than six months were Rs. 1,058.30 lac as compared to Rs. 1,392.70 lac in the previous year. The net current assets as on 31st March, 2007 were Rs. 1,12,401.66 lac as against Rs. 1,05,010.07 lac in the previous year. Inventory level was at Rs. 69584.82 lac which was more than the previous year level of Rs. 56,899.59 lac.

FINANCIAL CONDITIONS & LIQUIDITY: The Company enjoys a rating of AA- and P1+ from Credit Rating Information Services of India Limited (CRISIL) for long term and short term borrowings respectively. Management believes that the Companys liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below :(Rs. in lac) 2006-2007 2005-2006 Cash & Cash equivalents: Beginning of the year 27,154.81 2,272.43 End of the Year 21,673.36 27,154.82 Net cash provided (used) by: Operating Activities 19,481.15 23,294.18 Investing Activities (78,355.81) (27,171.35) Financial Activities 53,393.19 28,759.56 D) Internal Control System: The Company has well defined internal control system. The Company takes abundant care to design, review and monitor the working of internal control system. Internal Audit in the organisation is an independent appraisal activity and it measures the efficiency, adequacy and effectiveness of other controls in the organisation. All significant issues are brought to the attention of the Audit Committee of the Board. E) Management perception of Risk & concern: The textile business, like other businesses, is

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) Rs. 522.83 lac in the previous year. Vardhman Yarns & Threads Limited (VYTL): This subsidiary of the Company has not yet started its operations. A statement under Section 212 of the Companies Act, 1956, relating to the subsidiaries of the Company viz., VMT Spinning Company Limited, Vardhman Threads Limited and Vardhman Yarns & Threads Limited is enclosed herewith together with Annual Reports of the respective Companies. 6. BUSINESS RE-ORGANISATION: The Board of Directors of the Company had approved the Scheme of Arrangement, Re-orgenisation and Demerger among Vardhman Textiles Limited, Vardhman Threads Limited and Vardhman Yarns & Threads Limited and their respective Shareholders & Creditors with the end intent of consolidating the Thread Business of the Company and that of Vardhman Threads Limited, a 100% subsidiary of the Company. The Petition under Section 391 has been filed in the High Court for the States of Punjab & Haryana at Chandigarh for approval of the above said scheme by the Hon,ble high Court, which was heard on 26th April, 2007. The Honble High Court has issued the necessary directions to convene the Meetings of the Equity Shareholders, Secured & Unsecured Creditors of the Company. The said Meetings are scheduled to be held on 16th June, 2007 at the Regd. Office of the Company. 7. PUBLIC DEPOSITS: At the end of the year, fixed deposits from the Public were outstanding to the tune of Rs.266.64 lac. Out of these deposits, 20 deposits amounting to Rs. 3.51 lac were due for payment on or before 31st March, 2007 but were not claimed by the depositors. Since then, 2 deposits amounting to Rs. 0.47 lac have either been repaid or renewed and for the balance 18 deposits amounting to Rs.3.04 lac, instructions of the depositors are awaited. 9. DIVIDEND: The Board of Directors of your Company had declared an interim dividend of Rs. 4 per share, which has been paid in March, 2007. No final dividend has been recommended by the Board. 10. DIRECTORS: Mr. S.K Bansal & Mr. S.K Bijlani, Directors of the Company, retire by rotation at the conclusion of the forthcoming Annual General Meeting of the Company, pursuant to article 108 of the Articles of Association of the Company and being eligible offer themselves for re appointment. Mrs Suchita Jain resigned from the Board of Directors of the Company w.e.f. 28.05.2007. The Board in its Meeting held on 8

susceptible to various risks. The primary risk factor is the raw material prices, which is the largest component of cost, as the commodity prices are cyclical in nature. As a result, they exert significant impact on profitability. Fortunately the availability of cotton in the country has improved considerably during the last few years. The Company has significant exports and large project imports. The recent volatility in foreign exchange markets has a bearing on the profitability and the cost of production. The rapid strengthening of the rupee against the dollar is likely to adversely affect the profitability of the company. We are taking all possible measures to mitigate the adverse impact of the movements in the foreign exchange markets. The rate of inflation in the country has gone up in the recent quarters. This has consequences for the cost of inputs used by the Company. Coupled with price increase resistance, the increased input cost tend to reduce profitability. Finally the Company has chalked out major expansion in capacities. The successful installation and stabilization of operations is subject to project execution risk. However, the Company is fully prepared to meet this challenge and execute the projects keeping the down side risk to a minimum. F) Human Resources/Industrial Relations: The Company continues to lay emphasis on building and sustaining an excellent organisation climate based on human performance. Performance management is the key word for the Company. During the year the Company employed over 17600 employees. Pursuit of proactive policies for industrial relations has a peaceful and harmonious situation. 3. SUBSIDIARIES: The Company has following subsidiary companies the details of profitability of which is given below :VMT Spinning Company Limited (VMT): Business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation and Toho Rayon Company Limited of Japan remained steady. The sales revenue of the Company increased to Rs. 6,787.49 Lac from Rs.5,939.55 lac. The net profits of the Company increased from Rs.480.66 lac to Rs. 1,139.51 lac. Out of the total present paid-up capital of Rs.2,070.02 lac, your Company holds 73.33%. The Board of Directors of VMT has recommended a dividend of 9 % for the year 2006-2007. Vardhman Threads Limited (VTL): This 100% subsidiary of your Company recorded a sales volume of Rs. 2,228.97 lac as against Rs. 2,137.67 lac, an increase of 4.27 percent. The net profit of the Company is Rs. 655.04 lac as against

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) 28th May, 2007 appointed Mrs Shakun Oswal as additional Director on the Board of the Company. The Board also appointed Mr. A.K. Purwar, former Chairman of State Bank of India as Additional Director w.e.f. from 1st June, 2007 pursuant to the provisions of Section 260 of the Companies Act,1956. Notices have been received from members pursuant to section 257 of the Companies Act 1956, together with requisite deposits proposing the candidatures of Mrs. Shakun Oswal and Mr. A.K. Purwar as Directors of the Company. Requisite approval of the members for their appointment is being sought at the ensuing Annual General Meeting. 11. CORPORATE GOVERNANCE: The Company has in place a system of Corporate Governance. A separate report on Corporate Governance forming part of the Annual Report of the Company is annexed hereto. A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Corporate Governance Clause of the Listing Agreement is annexed to the report on Corporate Governance. 12. AUDITORS: M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi, Auditors of the Company, retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. 13. AUDITORS REPORT: The Auditors Report on the Accounts of the Company for the year under review is self-explanatory and requires no comments. 14. COST AUDITORS: The Board of Directors have re-appointed M/s. Ramanath Iyer & Company, Cost Accountants, New Delhi, as the Cost Auditors of the Company under Section 233B of the Companies Act, 1956, subject to the approval of the Central Government for the year 2007-2008. The Cost Auditors Report for the financial year 2006-2007 will be forwarded to the Central Government as required under law. 15. STATEMENT OF PARTICULARS OF EMPLOYEES: A Statement of Particulars of Employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956, is enclosed and forms part of this report. 16. GROUP: The Company, inter-alia with the following entities, constitute a Group as defined under the Monopolies and Restrictive Trade Practices Act, 1969:a) Vardhman Holdings Limited b) Vardhman Threads Limited c) Adinath Investment and Trading Company
Vardhman

d) Devakar Investment and Trading Company Private Limited 17. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: Energy conservation continues to be an area of major emphasis in your Company. Efforts are made to optimise the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per Section217(1) (e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are annexed hereto and form part of this report. 18. DIRECTORS RESPONSIBILITY STATEMENT: Pursuant to Section-217(2AA) of the Companies Act, 1956, the Directors confirm that a) in the preparation of the annual accounts, the applicable accounting standards have been followed; b) appropriate accounting policies have been selected and applied consistently, and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2007 and of the profit of the Company for the year ended on 31st March, 2007; c) proper and sufficient care has been taken 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 annual accounts have been prepared on a going concern basis. 19. NAME CHANGE: The name of the Company has been changed form Mahavir Spinning Mills Limited to Vardhman Textiles Limited w.e.f 5th September, 2006. 20. ACKNOWLEDGMENT: Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year. FOR AND ON BEHALF OF THE BOARD PLACE : LUDHIANA DATED : 28th May, 2007 9 (S.P. OSWAL) CHAIRMAN & MANAGING DIRECTOR

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

ANNEXURE TO THE DIRECTORS REPORT


INFORMATION AS PER SECTION 217 (1) (e) READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988, AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007:
I. CONSERVATION OF ENERGY: The Company has over the previous years taken several steps to conserve energy wherever possible. This continues to remain thrust area with studies, discussions and analysis being undertaken regularly for further improvements. The Company has put in heat recovery systems, lighting system to channelise heat energy and also condensate recovery system in its boilers. The use of inverters is being explored as well. The desired information is enclosed herewith Conservation measure taken, proposed measures being implemented for reduction of consumption of energy and consequent impact thereof on the cost of production of goods:
S. Energy Consuption Measures Taken in No. 2006-07/proposed and being implemented in 2007-08 1 2 3 4 Installation Of Electronic Chokes, Cfl, Servo Stablizer. Installation Of Vfds, Energy Efficient Motors. Machine Section Installation of Energy Efficient Motors, Vfds, Optimisation of Motor Loading, Automation of Boiler. Installation Of Capacitors, High Efficient Pumps, High Efficient Compressors, Operating High Efficiency D.G. Sets. Saving In Husk(ton) /Year Saving In Rs. /Year Heat Recovery From Compressors,D.G. Sets,. Saving In Water(kl) / Year Saving In Rs. /Year Heat Recovery, Recovery Of Condenstae, Reuse of Used Water. Total Saving In Rs.in Lakh / Year Saving In KWH (Lac) /Year 2006-07 3.94 16.57 14.38 25.62 Saving In Rs. (Lac) /Year 2006-07 16.37 59.40 52.28 356.68 Proposed Saving Proposed Saving In KWH (Lac) /Year In Rs. (Lac) /Year 2007-08 2007-08 5.52 12.16 40.62 242.92 23.03 53.68 159.84 1,013.49

1 2

906 62700

101.87 94.54 681.14

136.40 4.26 1390.70

FORM-A: PARTICULARS 1. ELECTRICITY: a) Purchased: Units Total amount Rate per unit

B) UNIT 2006-07 2005-06 1.

(KWH in lac) (Rs.in lac) (Rs.)

5207.07 19131.04 3.67 700.71 4.04 5.17 59.46 2.54 4,271.64 4,643.65 884.92 19.06 96,126.65 2,608.67 2,713.78

4069.06 15744.54 3.87 1,332.12 4.11 4.19 773.15 33.15 4,287.65 4,439.36 781.22 17.60 85,790.58 1,782.89 2,078.19

CONSUMPTION PER UNIT OF PRODUCTION: Yarn (Cotton & Acrylic): Electricity (KWH per Kg) Coal (In per kgs.) Husk (In per kgs.) Fabric: Electricity-grey fabric Electricity-Processed fabric Husk Steam (used for grey Fabric) Steam (used for processed Fabric) Sewing Thread: Electricity Diesel Husk Steel Billets/Ingots: Electricity Furnace Oil/LDO Rolled Steel: Electricity Oil (FO/LDO) (KWH/mtr) (KWH/mtr) (Kgs/mtr) (Kgs/mtr) (Kgs/mtr)

4.12 1.70 2.36 0.85 0.50 1.34 0.51 6.12

4.04 0.12 2.70 0.85 0.42 1.14 0.59 4.96

2.

b) Own generation through: Diesel Generator (KWH in lac) Unit/Ltr. of Diesel (KWH) Cost per unit (Rs.) 2. Coal (Used in Boiler): Quantity Total cost Average rate Oil (LDO/HSP/RFO/HPS): Quantity Total Cost Average rate Others (Husk used in Boiler): Total quantity Total cost Average cost (MT) (Rs. in lac) (Rs. per MT) (K.LTRS) (Rs.in lac) (Rs. per Litre) (MT) (Rs.in lac) (Rs. per MT)

3.

3.

(KWH per Kg.) (Ltr per Kg.) (Kg. per Kg.) (KWH per MT) (Ltr. per MT) (KWH per MT) (Ltr. per MT)

3.46 1.90 879.95 12.11 72.75 41.98

3.48 0.03 1.93 885.50 11.88 74.53 40.25

4.

4.

5.

II. A) 1.

TECHNOLOGY ABSORPTION: Efforts made in Technology Absorption are furnished in FORM-B as under :RESEARCH AND DEVELOPMENT (R&D): Specific areas in which Research & Development is carried out by the Company: Research & Development is carried out for development of new products and for improvement in the production process and quality of products. The Company has been able to pioneer the launch of new products which have been successful in the market due to its R & D efforts.

2. Benefits derived as a result of R & D: The Company has been continuously improving the quality of its existing products and entered into new products and also been able to reduce the cost of production. 3. Future Course of action: Management is committed to strengthen R & D activities further to improve its competitiveness in times to come.

10

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
4. Expenditure on R & D: 2006-2007 Capital Recurring Total :Total R & D expenditure as a Precentage of turn over is B) 1. TECHNOLOGY INNOVATION: ABSORPTION, 492.41 59.69 552.10 0.26% ADAPTATION (Rs. in lac) 2005-2006 233.62 32.64 266.26 0.12% AND
Vardhman

Developed products from new generation fibres like Fair Trade Cotton, Tencel, Modal, Barnboo etc. Got registration for Fair trade and extended registartion to six units for Organic Cotton and organic blended yarn We have developed new markets and thereby increasing our market base like Honduras, Russia, Brazil, USA etc. We participated in trade fair and buyers sellers meet held during March 2007 in Turkey which is an emerging and prospective market. More concerted efforts on value added products from our existing range and by modifying production process. Total Foreign Exchange earned and used : (Rs.in lac) 2006-2007 a) b) Earnings ( FOB value of Exports, commission earned Outgo (CIF value of Imports and expenditure In foreign currency) 43,401.84 47,952.55 2005-2006 36,741.54 26,417.04

Efforts made: The Company is continuously making efforts for adaptation of latest technology in all its units. The Company has also created specific cell for studying and analyzing the existing processes for further improvement. Particulars of technology imported in the last five years. a) Technology imported Nil b) Year of import N.A c) Has technology been fully absorbed N.A Activities relating to export, initiatives takien to increase exports, development of new export market for products and services and export plans are given hereunder:

2.

III. FOREIGN EXCHANGE EARNINGS AND OUTGO:

STATEMENT OF PARTICULARS OF EMPLOYEES


INFORMATION REQUIRED AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956 READ WITH COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975 AND FORMING PART OF DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007. S. Name of Employee No. Designation/Nature of duties Remuneration (In Rs.) Qualification Age (Years) Experience (Years) Date of Employment Particulars of last Employment

(A) PERSONS EMPLOYED THROUGHOUT THE FINANCIAL YEAR, WHO WERE IN RECEIPT OF REMUNERATION WHICH, IN THE AGGREGATE, WAS NOT LESS THAN Rs. 24,00,000/- PER ANNUM. 1. Mr. S.P. Oswal Chairman & Managing 522.81 Lac Director President & Executive 34.63 Lac Director Executive Director 44.48 Lac M.Com. 65 40 1.6.2005 Chairman & Managing Director Vardhman Spinning & General Mills Limited General Manager, Vardhman Spinning and General Mills Limited Executive Director, Vardhman Spinning and General Mills Limited Executive Director, Vardhman Spinning and General Mills Limited Chief Commercial Manager, Usha Alloys & Steels Ltd., Jamshedpur Chief Spinning Master, Shree Bhiwani Cotton Mills & Industries, Abohar

2.

Mr. D.L. Sharma

B.S.C. (Engg.), M.B.A.

58

34

1.8.1985

3.

Mr. Sachit Jain

B.Tech., M.B.A. 41

17

30.03.2005

4.

Mrs. Suchita Jain

Executive Director

29.96 Lac

M. Com.

39

14

30.03.2005

5. 6.

Mr. B.K Chaudary Mr. IMJS Sidhu

President 30.45 Lac (Steel Division) Chief Executive & 24.27 Director Sewing Thread Manufacturing

B.Sc, M.Com, M.B.A B.Text

56 59

31 36

23.12.1985 03.03.1981

(B)

PERSONS EMPLOYED FOR A PART OF THE FINANCIAL YEAR, WHO WERE IN RECEIPT OF REMUNERATION FOR ANY PART OF THE YEAR, AT A RATE WHICH, IN THE AGGREGATE, WAS NOT LESS THAN Rs. 2,00,000/- PER MONTH. Not Applicable

NOTES : 1. 2. 3. Remuneration includes Salary, Commission, Contribution to Provident Fund, Leave Travel Concession, Medical Assistance and other allowances paid in cash and taxable value of non cash perquisites. Mr. S.P. Oswal, Mr. Sachit Jain and Mrs. Suchita Jain are not related to any of the Directors of the Company except themselves, being relatives. Mr. D.L. Sharma, Mr. B.K. Choudhary and Mr. IMJS Sidhu are not related to any of the Directors of the Company. Appointment of Mr. S.P. Oswal, Mr. D.L. Sharma, Mr. Sachit Jain and Mrs. Suchita Jain are contractual in nature.

11

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

CORPORATE GOVERNANCE REPORT


This Report on Corporate Governance forms part of the Annual Report. Corporate Governance refers to a combination of laws, regulations, procedures, implicit rules and good corporate practices which ensure that a Company meets its obligations to optimize shareholders value and fulfil its responsibilities to the community, customers, employees, Government and other segments of society. Your Company is committed on adopting the best practices of Corporate Governance as manifested in the Companys functioning to achieve the business excellence by enhancing long-term shareholders value. Efficient conduct of the business of the Company through commitment to transparency and business ethics in discharging its corporate responsibilities are hall marks of the best practices followed by the Company. This report on Corporate Governance, besides being in compliance of the mandatory Listing Agreement, gives an insight into the functioning of the Company. 1. COMPANYS PHILOSOPHY: Faith in bright future of Indian textiles and hence continued expansion in areas which we know best. Total customer focus in all operational areas. Products to be of best available quality for premium market segments through TQM and zero defect implementation. Global orientation targeting at least 20% production for exports. Integrated diversification/ product range expansion. World class manufacturing facilities with most modern R&D and process technology. Faith in individual potential and respect for human values. Encouraging innovation for constant improvements to achieve excellence in all functional areas. Accepting change as a way of life. Appreciating our role as a responsible corporate citizen. 2. BOARD OF DIRECTORS: a) Board Meetings: During the financial year 2006-2007, seven Board Meetings were held on the following dates :15th January, 2007 - 20th May, 2006 - 22nd July, 2006 29th January, 2007 - 31st October, 2006 26th February, 2007. 10th March, 2007 b) Composition as on March 31st, 2007: The Board of Directors comprises of a Chairman & Managing Director, three Executive Directors and Six NonExecutive Independent Directors including two Nominee Directors of Financial Institutions. The composition of the Board of Directors and their attendance at the Board Meetings during the year and at last Annual General Meeting of the Company as also the number of Directorship/Chairmanship of Board and Chairmanship/Membership of Committees (as stipulated in clause 49 of the listing agreement) of other Indian Public Limited Companies, are as follows :Name of Director Designation & Category No. of Board meetings attended 7 1 7 1 6 7 6 2 7 1 7 Attendance at last AGM Yes No No No No Yes No No No No Yes Total No. of Directorships in other Companies 11 2 3 6 6 1 2 11 6 5 No. of Committee Memberships in other Companies 1 1 2 9 9 1 1 2 Total No. of Board Chairmanship in other Companies 5 1 Total No. of Committee Chairmanship in other Companies 1 4 3 1

Shri S.P. Oswal

Chairman & Managing Director Shri V.K. Saxena IDBI Nominee Non-Executive Independent Director Shri A.K. Chakraborty ICICI Nominee NonExecutive Independent Director Dr. J.C. Bakshi* Non-Executive Independent Director Dr. T.N. Kapoor Non-Executive Independent Director Shri Prafull Anubhai Non-Executive Independent Director Shri S.K. Bansal Non-Executive Independent Director Shri S.K. Bijlani Non-Executive Independent Director Shri Sachit Jain Executive Director Smt. Suchita Jain Executive Director Shri D.L. Sharma President & Executive Director *Resigned w.e.f. 22.7.2006

12

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

Disclosure of Change Mrs. Suchita Jain has resigned from the Board of Directors of the Company w.e.f. 28.05.2007. The Board of Directors in its Meeting held on 28th May, 2007 appointed Mrs. Shakun Oswal as Additional Director. The Board also appointed Mr. A.K. Purwar former Chairman of State Bank Of India, as additional Director w.e.f. 01.06.2007 pursuant to section 260 of the Companies Act 1956. 3. AUDIT COMMITTEE: As at 31st March, 2007, the Audit Committee comprised of four Directors i.e. Mr. Prafull Anubhai, Mr. S.K. Bansal, Mr. S.K. Bijlani and Mrs. Suchita Jain. Mr. Prafull Anubhai is the Chairman of the Committee. Mr. Vipin Gupta is the Secretary of the Committee. The terms of reference of the Audit Committee are as contained in Section 292A of the Companies Act, 1956 and also as contained in Corporate Governance Clause of the Listing Agreement. The Audit Committee met four times during the financial year 2006-07 on the following dates :20th May, 2006 22nd July, 2006 - 31st October, 2006 - 29th January, 2007

The attendance of present and past members of the Audit Committee during the financial year 2006-07 is given below :Committee Members Mr. Prafull Anubhai Mr. S.K. Bansal Mr. S.K. Bijlani Mrs. Suchita Jain Category No. of Audit Committee Meetings Attended 4 4 1 2

Non-Executive Independent Director Non-Executive Independent Director Non-Executive Independent Director Executive Director

4. DIRECTORS REMUNERATION: i) Chairman and Managing Director/Executive Directors: The Company pays remuneration to Chairman and Managing Director and to the Executive Directors as approved by the Board of Directors and the Members of the Company in the General Meeting. Details of remuneration paid to the Directors is as given below:
(Rs. in lac) Name Mr.S.P. Oswal Mr. D.L. Sharma Mr. Sachit Jain Mrs. Suchita Jain Designation Chairman & Managing Director President & Executive Director Executive Director Executive Director Salary 36.75 14.25 16.80 12.90 Perquisites 19.35 7.98 15.06 5.83 P.F. Contribution 4.41 1.71 2.02 1.55 Commis- Gross remusion neration 462.30 10.69 12.60 9.67 522.81 34.63 46.48 29.95

ii) Non-Executive Directors: Non-Executive Directors have not been paid any remuneration except sitting fees for attending Board & Committee Meetings. The detail of sitting fees paid to the Non-Executive Directors during the financial year 2006-07 is given hereunder:S.No. 1 2. 3. 4. 5. 6. Name of Director Mr. A.K Chakraborty Mr. S.K Bijlani Mr. S.K Bansal Mr. Prafull Anubhai Dr. T.N Kapoor Dr. J.C Bakshi 13 Sitting Fee (Rs.) 48,000/21,000/61,000/69,000/53,000/11,000/-

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

5. SHAREHOLDING OF DIRECTORS AS ON 31.03.2007 The shareholding of the Directors in the Equity Share Capital of the Company is given as follows:Name of Directors Number of Shares held Mr. S.P Oswal 6,43,156 Ms. Suchita Jain 2,61,334 Mr. Sachit Jain 40,005 Mr. D.L Sharma 3,394 Mr. Prafull Anubhai 1,513 No other Director holds any share in the Equity Share Capital of the Company. 6. SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE: The Shareholders/Investors Grievance Committee consisting of Dr. T.N. Kapoor as Chairman, Mr. S.K Bansal and Mr. Sachit Jain as members. The Shareholders/Investors Grievance Committee met 2 times during the year on 19.08.2006 and 29.01.2007. The Compliance Officer for this Committee is Mr. Vipin Gupta, Company Secretary. During the financial year 2006-07, the Company has received 259 complaints related to non receipt of Dividend, Bonus Shares, Annual Report and transfer of shares etc. All the complaints have been duly replied by the Company and there is no pendency in respect of shares received for transfer during 2006-2007 except those that are disputed / sub-judice. 7. GENERAL BODY MEETINGS: The details of General Body Meetings held during the last three financial years are given as follows :Meeting 33rd Annual General Meeting for the Financial Year ended 31st March, 2006 Extra Ordinary General Meeting held on 22nd November, 2005 32nd Annual General Meeting for the Financial Year ended 31st March, 2005 Extra Ordinary General Meeting held on 5th March, 2005 31st Annual General Meeting for the Financial Year ended 31st March, 2004 Day, Date and Time of the Meeting Saturday, 26th August, 2006 at 3.00 p.m. Tuesday, 22nd at 11.00 a.m. Saturday, 27th at 3.30 p.m. Venue No. of Special Resolutions 2 1 3

Regd. Office, Chandigarh Road, Ludhiana-141 010. November, 2005 Regd. Office, Chandigarh Road, Ludhiana-141 010. August, 2005 Regd. Office, Chandigarh Road, Ludhiana-141 010. Regd. Office, Chandigarh Road, Ludhiana-141 010 Regd. Office, Chandigarh Road, Ludhiana-141 010.

Saturday, 5th March, 2005 at 11.00 a.m. Saturday, 28th August, 2004 at 3.30 p.m.

1 2

The Company has not passed any resolution through postal ballot, during the financial year 2006-2007. No resolution is proposed to be passed by postal ballot in the forthcoming Annual General Meeting. 8. DISCLOSURES: During the year, there was no material significant transaction with the directors, management and their relatives etc. that have any potential conflict with the interest of the Company at large. Also there has not been any noncompliance by the Company in respect of which penalties or strictures were imposed by the stock exchanges, the Securities and Exchange Board of India or any other statutory authority during the last three years. Further, the Company has complied with all mandatory requirements of Clause 49 of the Listing Agreement. The Company may also take up the non-mandatory requirements of Clause 49 in due course of time. 9. MEANS OF COMMUNICATION: The Company communicates with the shareholders at large through its Annual Reports, publication of financial results, press releases in leading newspapers and by filing of various reports and returns with the Statutory Bodies like Stock Exchanges and the Registrar of Companies. The Quarterly Financial Results are published in prominent daily newspapers viz., The Business Standard and Desh Sewak. The Financial Results of the Company are also made available at the Companys web-site www.vardhman.in Further, the financial results and shareholding pattern of the Company are also available on the EDIFAR web-site viz., www.sebiedifar.nic.in 14

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) GENERAL INFORMATION FOR SHAREHOLDERS
34 Annual General Meeting Date Time Venue ii) Financial Calendar 2007-2008 (Tentative) First Quarter Results Second Quarter Results Third Quarter Results Annual Results iii) Dates of Book Closure iv) Dividend payment date v) Listing i)
th
Vardhman

: : : : : : : : : :

18th August, 2007 3.30 P.M. Regd. Office, Chandigarh Road, Ludhiana-141 010

July, 2007 October, 2007 January, 2008 May, 2008 17th August, 2007 to 18th August, 2007 No final dividend has been recommended by the Board of Directors. The equity shares of the Company are listed on the following Stock Exchanges:1. Bombay Stock Exchange Limited, Mumbai (BSE), 1st Floor, New Trading Ring, Rotunda Building, P.J. Towers, Dalal Street, Fort, Mumbai-400 001. 2. The National Stock Exchange of India Limited (NSE), Exchange Plaza, Bandra-Kurla Complex, Bandra (East), Mumbai. The Company has duly paid the listing fee to both the aforesaid Stock Exchanges for the financial year 2007-08 : : 502986 VTL

vi) Stock Code : The Bombay Stock Exchange Limited, Mumbai The National Stock Exchange of India Limited

vii) Stock Market Data : The month-wise highest and lowest and closing stock prices vis-a-vis BSE Sensex during the financial year 2006-07 are given below :Financial Year 2006-07 Share Prices of Vardhman Textiles Limited Highest (Rs.) Lowest (Rs.) Closing (Rs.) %age change over last months closing 2.2 -1.15 -11.34 -5.66 -1.60 -7.44 4.57 -7.50 4.59 -7.98 -12.90 -7.14 Highest BSE Sensex Lowest Closing %age change over last months closing 6.76 -13.65 2.03 1.27 8.89 6.46 4.07 5.67 0.66 2.20 -8.18 1.04

April May June July August September October November December January February March

385.00 419.95 380.00 329.00 314.00 315.00 328.90 290.00 283.00 292.00 256.00 232.75

335.00 301.00 243.00 250.00 275.15 265.00 230.10 256.05 255.00 251.00 202.00 185.00

360.00 355.85 315.50 297.65 292.90 271.10 283.50 262.25 274.30 252.40 219.85 204.15

12102.00 12671.11 10626.84 10940.45 11794.43 12485.17 13075.85 13799.08 14035.30 14325.92 14723.88 13386.95

11008.43 9826.91 8799.01 9875.35 10645.99 11444.18 12178.83 12937.30 12801.65 13303.22 12800.91 12316.10

12042.56 10398.61 10609.25 10743.88 11699.05 12454.42 12961.90 13696.31 13786.91 14090.92 12938.09 13072.10

viii) Information regarding Dividend Payment :

a)

Dividends remaining unpaid/unclaimed upto the financial year 1998-99 have been transferred to the Investors Education and Protection Fund (IEPF). Further, pursuant to the provisions of Section 205A read with Section 205C of the Companies Act, 1956, dividend declared in the financial year 1999-2000 and onwards, which remains unpaid/unclaimed for a period of 7 years, is required to be transferred to the IEPF. It may be noted that no claim will lie against the Company or the Fund in respect of the said unclaimed dividend amount so transferred to the Fund. Accordingly, Members who have not claimed their dividend for the financial year 1999-2000 and onwards are requested to make their claim to the Company immediately. b) The Company provides the facility of paying dividend through Electronic Clearing Service (ECS). Members who wish to avail this facility should give necessary directions to Depository Participants (in case shares are held in demat form) and to the Registrar & Transfer Agent of the Company (in case shares are held in physical form).

15

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) Registrar & Transfer Agent: The work related to Share Transfer Registry in terms of both physical and electronic mode is being dealt with by M/s. Alankit Assignments Limited at the address given below :M/s. Alankit Assignments Limited, (Unit: Vardhman Textiles Ltd.) 2E/21, Alankit House Jhandewalan Extension, New Delhi - 110 055. Phone: (011) 41540060-63, Fax: (011) 41540064, E-mail: rta@alankit.com Share Transfer System: The Company has constituted a Share Transfer Committee of its directors. The Committee meets on an average once in a fortnight. The list of valid transfers prepared by the Transfer Agent in respect of transfer cases received by them and objections, if any, are placed before the Committee for its approval/confirmation. The Share Certificates are returned back to the shareholders by Transfer Agent normally within 15 days from the date of receipt by them. The shares of the Company are traded on the Stock Exchanges compulsorily in demat form. The Company has participated as an issuer both with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). The shareholders may operate through any of the depositories, based on tariffs, quality and range of services being offered by them. The International Securities Identification Number (ISIN) of the Company is INE 825 A01012. Distribution of Shareholding as on 31st March, 2007:
RANGE No. of Shares SHAREHOLDERS Numbers of total Holders % to Total Holders Numbers to total Shares 2330905 937792 837692 452542 292778 272731 864999 51780088 57769527 SHARES % to Total Shares

ix)

x)

xi)

Upto-500 501-1000 1001-2000 2001-3000 3001-4000 4001-5000 5001-6000 10001 & Above Total

19707 1372 598 181 84 60 120 194 22316

88.30 6.14 2.67 0.81 0.37 0.26 0.54 0.86 100.00

4.03 1.62 1.45 0.78 0.51 0.47 1.50 89.64 100.00

xii)

Dematerialisation of shares: As on 31st March, 2007, 61.23% of the capital comprising 3,53,70,543 shares out of total of 5,77,69,527 were dematerialised.

16

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) xiii) Plant Location: Arihant Spinning Mills Industrial Area, Malerkotla-148 023. Anant Spinning Mills, New Industrial Area, Mandideep-462 046. Arisht Spinning Mills Vill. Baddi, Teh. Nalagarh, Distt. Solan (H.P.)- 173 205 Auro Spinning Mills, Vill. Baddi, Teh. Nalagarh, Distt. Solan (H.P.)- 173 205 Auro Dyeing, Vill. Baddi, Teh. Nalagarh, Distt. Solan (H.P.)- 173 205 Auro Textiles, Vill. Baddi, Teh. Nalagarh, Distt. Solan (H.P.)- 173 205 Auro Weaving Mills, Vill. Baddi, Teh. Nalagarh, Distt. Solan (H.P.)- 173 205 Mahavir Spinning Mills (Gassed Mercerised Yarn Unit) Phagwara Road, Hoshiarpur-146 001 Mahavir Spinning Mills (Sewing Thread Unit-I) Phagwara Road, Hoshiarpur-146 001 xiv) Address for correspondence: Registered Office Tel Fax E-mail (exclusively for redressal investors grievances) : : : : Mahavir Spinning Mills (Sewing Thread Unit-II) Phase-VIII, Focal Point, Ludhiana-141 123 Mahavir Spinning Mills (Sewing Thread Unit-III) Plot No.E-13 & H-10, SIPCOT, Industrial Growth Centre, P.V. Palayam (P.O.) Perundurai-638 052 Mahavir Spinning Mills, (Textile Division) Village Baddi, Teh. Nalagarh, Distt. Solan (HP) Pin : 173205 Vardhman Spinning Mills, Vill. Baddi, Teh Nalagarh, Distt. Solan, (H.P.)-173 205. Vardhman Spinning and General Mills (Unit-I & II), Chandigarh Road, Ludhiana-141 010. Vardhman Special Steels, C-58, Focal Point, Ludhiana-141 010. Vardhman Fabrics Budhni, Distt. Sehore (M.P) Vardhman Yarns Satlapur, Distt. Raisen (M.P)
Vardhman

Chandigarh Road, Ludhiana-141 010. 0161-2228943-48 0161-2601048, 2602710, 2222616 secretarial.lud@vardhman.com

17

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

Chairman & Managing Directors (CMD) declaration


I, S.P. Oswal, Chairman & Managing Director of Vardhman Textiles Ltd. (formerly Mahavir Spinning Mills Limited) declare that all Board Members and Senior Management personnel have affirmed compliance with Code of Conduct for Board & Senior Management Personnel for the year ended 31st March, 2007. S.P. Oswal Chairman & Managing Director PLACE : LUDHIANA DATED: 28th May, 2007

Auditors Certificate on Compliance of Corporate Governance Under Corporate Governance Clause of the Listing Agreement(s)
To The Members of Vardhman Textiles Limited
We have examined the compliance of the conditions of Corporate Governance by Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Ltd.) for the year ended on 31st March, 2007 as stipulated in Clause 49 of the Listing Agreement of the Company with Stock Exchanges. The Compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to review of the procedures and implementation thereof, adopted by the Company, for ensuring the compliance of the conditions of 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 and based on the representation made by the Directors and Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement. We state that no investor grievance is pending for a period of exceeding one month against the Company as per the records maintained by the Shareholders/Investors 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 S.C. VASUDEVA & CO. CHARTERED ACCOUNTANTS

PLACE : LUDHIANA DATED: 28th May, 2007

(SANJIV MOHAN) PARTNER Membership No. 86066

18

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

AUDITORS REPORT
To The Shareholders, Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Limited)
1.

We have audited the attached Balance Sheet of Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Limited) as at 31st March, 2007, the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. These 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 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. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the annexure a statement on the matters specified in paragraph 4 and 5 of the said order. Further to our comments in the annexure referred to in paragraph 3 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 purpose 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, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; e) on the basis of the written representations received from the directors as on 31st March,2007 and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause(g) of sub-section (1) of section 274 of the Companies Act,1956; f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting

2.

policies and other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of Balance Sheet, of the state of affairs of the company as at 31st March, 2007; ii) in the case of Profit and Loss account, of the profit for the year ended on that date; and iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date. For S.C. VASUDEVA & CO., CHARTERED ACCOUNTANTS
(SANJIV MOHAN) PLACE : LUDHIANA DATED : 28th May, 2007 PARTNER Membership No. 86066

3.

ANNEXURE TO THE AUDITORS REPORT


(Referred to in paragraph 3) i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. According to the information and explanations given to us, the company has adopted a policy of physically verifying the fixed assets once in every three years. The last verification of entire fixed assets was done in the year ended March 31, 2004. Pursuant to the said policy, the company had physically verified the entire block of plant and machinery in the year ended 31st March 2005 and the entire block of vehicles in the year ended 31st March 2006. During the year under audit the remaining fixed assets have been physically verified by the management. No material discrepancies were noticed on such physical verification. Further, in our opinion, the frequency of physical verification of fixed assets is reasonable having regard to the size of the company and nature of its business. According to the information and explanations given to us, the company has not disposed off substantial part of its fixed assets during the year. According to the information and explanations given to us, inventories have been physically verified by the management at the close of the year. In our opinion the frequency of verification is reasonable.

4.

b)

c)

(ii) a)

19

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management as evidenced by the written procedures and instructions are reasonable and adequate in relation to the size of the company and nature of its business. On the basis of our examination of the records of inventories, we are of the opinion that the company is maintaining proper records of inventories. As explained to us, no material discrepancies were noticed on physical verification between physical stocks and book records. failure to correct major weaknesses in internal control systems. (v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register maintained under that section. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rupees five lacs or more in respect of each party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time. (vi) According to the information and explanations given to us the company has complied with the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules 1975 with regard to deposits accepted from the public. According to the information given to us, no order has been passed by the Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal. (vii) In our opinion the company has an internal audit system commensurate with its size and nature of its business. (viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete. (ix) (a) According to the records of the company, undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to the company, if any, have been regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March, 2007, for a period of more than six months from the date they became payable. b) According to the records of the company, the details of disputed statutory dues aggregating to Rs. 121302413/- that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax, custom duty, service tax and excise duty are given below:

b)

c)

(iii) (a) The Company has during the year granted unsecured loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The aggregate amount involved in the transaction together with the opening balance of Rs. 1300 lacs is Rs. 3440 lacs. No amount is outstanding as at the close of the year. (b) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loans given by the company, are not prima-facie prejudicial to the interest of the company. (c) In our opinion and according to the information and explanations given to us, the receipt of principal amount and interest in respect of the aforesaid loans was regular. (d) In our opinion and according to the information and explanations given to us, there are no overdue amounts in respect of the unsecured loans given by the company. (e) The Company has during the year taken unsecured loans from one party covered in the register maintained under section 301 of the Companies Act, 1956. The amount involved in the transaction is Rs. 70 lacs. There is no amount which is payable as at the close of the year. (f) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loan taken by the company, is not prima-facie prejudicial to the interest of the company.

(g) In our opinion and according to the information and explanations given to us, the payment of principal amount and interest in respect of the aforesaid loan was regular. (iv) 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 nature of its business for the purchase of inventory and fixed assets and sale of goods and services. During the course of our audit, we have not observed any continuing

20

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Nature of Dues/Name of Statute Sales tax The Central Sales Tax Act,1956 The Delhi Sales Tax Act,1975 Uttar Pradesh Sales Tax Act, 1948 Andhra Pradesh Sales Tax Act,1957 Gujrat Sales Tax Act,1969 The Central Sales Tax Act, 1956 Rajasthan Sales Tax Act,1994 The Punjab Sales Tax Act, 1957 The Punjab Sales Tax Act, 1957 The Punjab Sales Tax Act, 1957 The Punjab Sales Tax Act, 1957 M.P. Commercial Tax Act, 1994 Disputed Amount (Rs.) 26,47,354 48,642 59,291 67,417 2,51,327 10,45,145 33,810 1,04,740 3,66,750 82,500 2,30,250 6,28,339 Forum where Dispute is pending. Additional Commissioner (Sales tax), New Delhi Additional Commissioner (Sales tax), New Delhi Assistant Commissioner (Sales Tax ), Kanpur Andhra Pradesh High Court Commisioner (Sales Tax), Ahemdabad Commissioner (Sales Tax Officer), Tirpur Deputy Commissioner, Commercial Tax , Jaipur Deputy Excise & Taxation Commissioner cum Joint Director, Jalandhar Joint Director Mobile Wing Patiala Division , Patiala Joint Director (Enforcement), Patiala Excise & Taxation Officer Cum Assistant Director, Patiala Asstt. Commissioner, (Appeals), Commercial Tax Department, Division- 2, Bhopal
Vardhman

Excise Duty The Central Excise Act, 1944 7,01,362 Assistant Commissioner Central Excise, Shimla The Central Excise Act, 1944 5,32,70,410 Custom, Excise & Service Tax Appellate Tribunal, New Delhi The Central Excise Act, 1944 27,78,084 Commissioner (Appeals) Central Excise , Ludhiana The Central Excise Act, 1944 9,51,035 Joint Commissioner, Central Excise, Ludhiana The Central Excise Act, 1944 4,64,622 Deputy Commissioner, Central Excise, Ludhiana The Central Excise Act, 1944 1,33,333 Deputy Commissioner, Central Excise, Ludhiana The Central Excise Act, 1944 16,18,315 Commissioner, Central Excise, Chandigarh Customs Duty Customs Act, 1962 1,47,147 Assistant Commissioner CFS, Ludhiana Service tax Finance Act, 1994 7,06,322 Assistant Commissioner Central Excise, Shimla Finance Act, 1994 27,66,218 Adjudication Authority, Ludhiana Income-tax Income-tax Act, 1961 5,22,00,000 Commissioner of Income-tax(Appeals) According to the information and explanations given to us there are no disputed statutory dues pending in respect of wealth tax and cess. (x) The Company does not have accumulated losses as at 31st

March 2007. The latter part of the question relating to net worth is thus not applicable to the company. Further, the company has not incurred cash losses during the financial year covered under audit and in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to banks, financial institutions or debenture holders. (xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the above said order are not applicable to the company. (xiii) The Company is not a chit fund or a nidhi mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the above said order are not applicable to the company. (xiv) According to the information and explanations given to us, the company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the above said order are not applicable to the company. (xv) The Company has given guarantees for loans taken by others from banks. In our opinion and according to the information and explanations given to us, the terms and conditions thereof are not prima facie prejudicial to the interest of the company. (xvi) In our opinion and according to the information and

explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained. (xvii) According to information and explanations given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long term investment. (xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) According to the information and explanations given to us the company has not issued debentures during the year. Accordingly the provisions of clause 4 (xix) of the above said order are not applicable to the company. (xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the year. Accordingly the provisions of clause 4 (xx) of the above said order are not applicable to the company. (xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year ended 31st March 2007. For S.C. VASUDEVA & CO., CHARTERED ACCOUNTANTS PLACE : LUDHIANA DATED : 28th May, 2007 (SANJIV MOHAN) PARTNER MEMBERSHIP NO. 86066

21

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

BALANCE SHEET as at 31st March, 2007


Particulars Schedule No. As at 31.03.2007 (Rs. in Lac) As at 31.03.2006 (Rs. in Lac)

I.

SOURCES OF FUNDS 1. Shareholders' Funds a) Capital b) Reserves and Surplus 2. Loan Funds a) Secured Loans b) Unsecured Loans

1 2

5,776.91 103,425.95 109,202.86 146,061.93 26,364.61 172,426.54 9,509.93 291,139.33

5,776.91 90,389.79 96,166.70 83,107.64 27,114.77 110,222.41 9,215.16 215,604.27

3 4

3. Deferred Tax Liability TOTAL II. APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-Progress 2 Investments 3 Current Assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Loans and Advances Less: Current Liabilities and Provisions a) Liabilities b) Provisions

5 210,865.79 93,074.72 117,791.07 54,071.84 171,862.91 6,874.76 69,584.82 25,241.09 21,673.36 23,300.73 139,800.00 27,985.13 (586.79) 27,398.34 112,401.66 291,139.33 175,985.49 81,876.97 94,108.52 9,647.74 103,756.26 6,837.94 56,899.58 22,204.18 27,154.82 18,319.85 124,578.43 16,356.58 3,211.78 19,568.36 105,010.07 215,604.27

6 7 8

A 9

B Net Current Assets (A-B) TOTAL NOTES ON ACCOUNTS 18 The Schedules refered to above form an integral part of the Balance Sheet

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No. 86066) PLACE : LUDHIANA DATED : 28th May, 2007

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

22

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2007
Particulars INCOME
Sales (Gross) Less: Excise Duty Sales (Net) Other Income TOTAL EXPENDITURE Raw Material Consumed and Purchase of Finished Goods Manufacturing Expenses Personnel Expenses Administrative and Other Expenses Interest and Financial Charges Selling and Distribution Expenses (Increase)/Decrease in Work in Process and Finished Stock Difference of Excise Duty on Stocks Depreciation & Amortisation Prior Period Items TOTAL Profit for the year before tax Less : Provision for - Current Tax [Including Rs. 20.00 Lac (Previous Year Rs 15.00 Lac) for Wealth Tax] - Fringe Benefit Tax - Deferred Tax - Deferred Tax Adjustment - Income Tax Adjustment for earlier Years Profit for the year after tax Add : Debenture Redemption Reserve Written Back Balance brought forward Balance available for appropriation Appropriations: Interim Dividend - On Equity Shares - Corporate Dividend Tax thereon Proposed Dividend - On Equity Shares Corporate Dividend Tax thereon Transferred to General Reserve Balance carried to Balance Sheet 215,009.02 6,246.02 208,763.00 3,402.81 212,165.81 95,855.32 51,881.82 12,706.45 5,567.99 3,769.50 10,542.98 (2,828.02) 113.93 11,944.53 34.52 189,589.02 22,576.79 5,017.00 100.00 143.75 151.02 294.77 (5.06) 17,170.08 625.00 5,023.59 22,818.67 (99.53) (275.31) 195,724.74 6,808.54 188,916.20 4,843.30 193,759.50 80,206.78 45,569.72 11,016.86 4,964.80 3,949.03 14,529.49 (1,522.14) (139.59) 10,133.99 (8.58) 168,700.36 25,059.14 5,700.00 110.00 (374.84) (7.64) 19,631.62 625.00 3,877.49 24,134.11

Schedule No.

Current Year (Rs. in Lac)

Previous Year (Rs. in Lac)

10 11 12 13 14 15 16 17

2,310.78 324.09 -

2,634.87 15,000.00 5,183.80 22,818.67 29.72 16.56

2,310.78 324.09

2,634.87 16,475.65 5,023.59 24,134.11 33.98 16.50

Earning per share of Rs. 10/- each (Refer Note No 19 of Notes on accounts) - Basic - Diluted NOTES ON ACCOUNTS: 18 The Schedules refered to above form an integral part of the Profit and Loss Account. As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No. 86066) PLACE : LUDHIANA DATED : 28th May, 2007

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

23

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

CASH FLOW STATEMENT for the year ended 31st March, 2007
Particulars Schedule No. Current Year (Rs. in Lac) Previous Year (Rs. in Lac)

A.

CASH FLOW FROM OPERATING ACTIVITIES Net Profit before Tax and Extraordinary items Adjustments for : Depreciation/Amortisation Interest Expense Interest/Dividend Income (Profit)/Loss on sale of Assets(Net) (Profit)/Loss on sale of Investments (Net) Provision no longer required written Back(Net) Sundry Balances Written Off(Net) Provision for Doubtful Debts Exchange Rate Fluctuation Operating Profit before Working Capital Changes Adjustments for : (Increase)/Decrease in Trade & other Receivables (Increase)/Decrease in Inventories Increase/(Decrease) in Trade Payables & other Liabilities

22,576.79 11,944.53 3,897.60 (1,838.06) (125.68) (317.41) 229.78 (693.00) 13,097.76 35,674.55 (7,783.46) (12,685.24) 10,482.40 (9,986.30) 25,688.25 (6,207.10) (6,207.10) 19,481.15 (80,734.11) 783.04 (536.82) 500.00 1,632.09 (78,355.80) 62,144.31 810.06 (55.42) 30.00 (94.75) (5,165.81) (4,275.20) 53,393.19 (5,481.46) 27,154.82 21,673.36 15,649.04 264.11 26,765.30 (7,469.44) (571.16) (1,988.68) (3889.61) (6,560.47) (4,206.29) 3,886.88 (5,391.55) (31,869.61) 1,061.56 (253.00) 3,293.51 596.19 10,133.99 3,831.82 (598.61) (885.30) (2,092.94) (319.33) 292.64 58.23 85.97

25,059.14

10,506.47 35,565.61

Cash Generation from Operation Taxes Paid Net Cash from Operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Purchase of Investments Sale of Investments Interest/Dividend Received Net Cash used in investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of Share Capital Proceeds from Long Term Borrowings(Net) Proceeds from Short Term Borrowings(Net) Proceeds from Zero Coupon Foreign Currency Convertible Bonds Proceeds from Unsecured Borrowings Capital Subsidy Received FCCB Issue Expenses Paid Dividend Paid Interest Paid Net Cash from Financing Activities Net Increase in cash & cash equivalents Cash & cash equivalents as on beginning Cash & cash equivalents as on end NOTES ON ACCOUNTS 18 The Schedules referred to above form an integral part of the Accounts As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No. 86066) PLACE : LUDHIANA DATED : 28th May, 2007

(6,879.88) 28,685.73 (5,391.55) 23,294.18

(27,171.35)

28,759.56 24,882.39 2,272.43 27,154.82

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

AUDITORS CERTIFICATE We have checked the above Cash Flow Statement of Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Limited), derived from the audited financial statements for the year ended 31st March, 2007 with the books & records maintained in the ordinary course of business and found the same in accordance therewith. For S.C. Vasudeva & Co., Chartered Accountants PLACE : LUDHIANA DATED : 28th May, 2007 Sanjiv Mohan Partner (M.No. 86066)

24

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

Schedules 1 to 18 Annexed to and forming part of the Balance Sheet as at 31st March, 2007 and Profit & Loss Account for the year ended 31st March, 2007
As at 31.03.2007 As at 31.03.2006 (Rs. in Lac) (Rs. in Lac)

SCHEDULE 1 SHARE CAPITAL Authorised 9,00,00,000 Equity Shares of Rs. 10/- each (Previous Year 9,00,00,000) 1,00,00,000 Redeemable Cumulative Preference Shares of Rs. 10/- each (Previous Year 1,00,00,000) Issued, Subscribed & Paid-up 5,77,69,527 Equity Shares (Previous Year 5,77,69,527) of Rs. 10/- each Less: Calls in arrears from others
NOTES:

9,000.00 1,000.00 1,000.00 5,776.96 0.05 5,776.91

9,000.00 1,000.00 1,000.00 5,776.96 0.05 5,776.91

Of the above: (a) 1,35,916 (previous year 1,35,916) Equity Shares of Rs.10/- each are allotted as fully paid up, pursuant to a contract without payment being received in cash. (b) 3,54,27,580 (previous year 3,54,27,580) Equity Shares of Rs.10/- each are allotted as fully paid up, by way of bonus shares by capitalisation of Share Premium, Capital Redemption Reserve and General Reserve.

As at 31.03.2007 (Rs. in Lac) SCHEDULE 2 RESERVES AND SURPLUS Capital Reserve Capital Redemption Reserve As per last account Less: Utilised for issuing fully paid up Bonus Shares Capital Subsidy Reserve As per last account Add: Capital Investment Subsidy during the year Share Premium As per last account Less: Utilised for writing off expenses on issue of Zero Coupon Foreign Currency Convertible Bonds Less: Utilised for providing for the premium payable on redemption of Zero Coupon Foreign Currency Convertible Bonds Less : Calls in arrears from others Debenture Redemption Reserve As per last account Less: Transferred to Profit and Loss Account General Reserve As per last account Less: Utilised for issuing fully paid up Bonus Shares Add: Transferred from Profit and Loss Account Surplus i.e., Balance as per annexed Profit and Loss Account 124.33 75.00 90.00 8,542.30 1,589.05 6,953.25 0.43 1,625.00 625.00 75,000.00 15,000.00 6,952.82 1,000.00 165.00 450.00 450.00 75.00 9,404.77 665.91 196.56 8,542.30 0.43 2,250.00 625.00 60,000.00 1,475.65 16,475.65

As at 31.03.2006 (Rs. in Lac) 124.33 75.00

8,541.87 1,625.00

90,000.00 5,183.80 103,425.95

75,000.00 5,023.59 90,389.79

25

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) As at 31.03.2007 (Rs. in Lac) As at 31.03.2006 (Rs. in Lac)

SCHEDULE 3 SECURED LOANS Debentures 40 (Previous Year 40), 8.49% Secured Redeemable Non Convertible Debentures of Rs. 25 Lacs each (Previous Year Rs 50 Lacs each) Nil (Previous Year 25), 7.90% Secured Redeemable Non Convertible Debentures of Rs. Nil (Previous Year Rs 100 Lacs each) Loans and Advances from Banks - Term Loans - Working Capital - Interest accrued and due on above Other Loans and Advances - Term Loans from others 122,561.75 22,500.18

1,000.00

2,000.00

56,017.44 21,690.12 0.08 900.00

2,500.00

145,061.93 146,061.93

77,707.64 900.00 83,107.64

NOTES: 1. The Debentures and Term Loans from Banks and Others are secured by mortgage created or to be created on all the immovable assets of the Company, both present and future and hypothecation of all the movable assets including movable machinery, machinery parts, tools and accessories and other movables both present and future (except book debts), subject to charges created or to be created in favour of the Bankers for securing the working capital limits. 2. Working Capital Borrowings from Banks are secured by hypothecation of entire present and future tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the company. 3. 40-8.49% Non Convertible Debentures of Rs 100 lac each are redeemable at par in four equal yearly instalments of Rs 25 lac each commencing from the end of the second year from the date of allotment i.e. 7th March,2003. The third instalment of Rs 25 lac each, amounting to Rs 1000 lac has been paid during the year. The earliest date of redemption of the fourth and last instalment is 7th March,2008. 4. 25 - 7.90% Non Convertible Debentures were redeemable at par at the end of 36th month after the deemed date of allotment i.e 3rd June, 2003. The said debentures have been redeemed during the year on due date. 5. Amount due for repayment out of Debentures and Term Loans within one year is Rs. 8,593.25 lac (Previous Year Rs. 8,866.65 lac).

As at 31.03.2007 (Rs. in Lac) SCHEDULE 4 UNSECURED LOANS Fixed Deposits Interest accrued and due on above Short Term Loan and Advances a) From Others Other Loans and Advances Zero Coupon Foreign Currency Convertible Bonds 266.64 0.97 15.00

As at 31.03.2006 (Rs. in Lac) 335.56 2.71 1.50

26,082.00 26,364.61

26,775.00 27,114.77

NOTE: Amount due for repayment out of Fixed Deposits and Short term Loans and Advances within one year is Rs. 115.80 Lac (Previous Year Rs. 144.43 Lac).

26

SCHEDULE 5 FIXED ASSETS


(Rs. in Lac)

A) TANGIBLE ASSETS

GROSS BLOCK As at 01.04.2006 As at 31.03.2007 4,976.41 846.09 32,875.72 # 168,706.75 1,771.02 815.96 209,991.95 7.75 5,490.85 74,965.51 960.45 234.78 81,659.34 9.08 6,222.09 85,258.15 949.23 261.81 92,700.36 4,976.41 837.01 26,653.63 83,448.60 821.79 554.15 117,291.59 8.35 ** 731.47 10,903.39 133.30 67.40 11,843.91 7.02 0.23 610.75 144.52 40.37 802.89 Upto 31.03.2007 As at 31.03.2007 3,492.14 839.88 27,102.72 141,865.17 1,730.71 683.60 175,714.22 1,551.82 8.94 5,783.90 27,877.49 250.21 209.71 35,682.07 67.55 2.73 10.90 1,035.91 209.90 77.35 1,404.34 Additions during the year Sales/ Adjustments As at 01.04.2006 For the year Adjustment As at 31.03.2006 3,492.14 832.13 21,611.87 66,899.66 770.26 448.82 94,054.88

DEPRECIATION

NET BLOCK

Sr. Particulars No.

1. 2. 3. 4. 5. 6.

B) GROSS BLOCK As at 01.04.2006 As at 31.03.2007 272.14 272.14 217.63 217.63 5.86 5.86 (30.53) (30.53) 0.91 0.91 0.04 0.04 Additions during the year Sales/ Adjustments As at 01.04.2006 For the year Adjustment AMORTISATION

Freehold land Leasehold land Buildings Plant & machinery Furniture & Fittings Vehicles Total (A) INTANGIBLE ASSETS

Vardhman Textiles Limited

NET BLOCK Upto 31.03.2007 254.02 254.02 As at 31.03.2007 18.12 18.12 As at 31.03.2006 53.64 53.64

(Formerly known as Mahavir Spinning Mills Limited)

Sr. Particulars No.

1.

C) GROSS BLOCK As at 01.04.2006 As at 31.03.2007 601.70 601.70 210,865.79 175,985.49 81,876.97 72,810.29 601.70 601.70 36,284.68 28,694.46 1,404.38 1,276.52 Additions during the year Sales/ Adjustments As at 01.04.2006

Computer Software 271.27 Total (B) 271.27 EXPENDITURE ON POWER LINES AMORTISATION For the year 120.34 120.34 11,970.11 10,144.49

27

NET BLOCK Adjustment Upto 31.03.2007 772.36 1,077.81 120.34 120.34 93,074.72 81,876.97 As at 31.03.2007 481.36 481.36 117,791.07 94,108.52 As at 31.03.2006 94,108.52

Sr. Particulars No.

1.

Expenditure on Power Lines Total (C) Grand Total (A+B+C) 175,985.49 Previous Year 148,567.55

Notes:

**

Includes Rs. 248.20 lac (Previous year Rs. 248.20 lac) cost of Residential flats at Mandideep, the land cost of which has not been excluded from this cost. The depreciation for the year has been taken on the entire cost of Rs. 248.20 lac (Previous Year Rs. 248.20 lac) Represents proportionate premium for acquisition of leasehold land being amortised over the period of lease. - Freehold land includes Rs. 113.00 lac(Previous Year Rs 113.00 lac) for the cost of land at Baddi, (Himachal Pradesh) for which title deeds are yet to be executed in favour of the Company. - Freehold land includes Rs. 396.50 lac(Previous Year Rs Nil) for the cost of land at Ludhiana for which title deeds are yet to be executed in favour of the Company, though the possession thereof has been taken by the company. - Freehold land includes Rs. 339.59 lac(Previous Year Rs. Nil) for the cost of land at Baddi (Himachal Pradesh) for which title deeds are yet to be executed in favour of the Company, though the possession thereof has been taken by the company. - Freehold land includes Rs. Nil (Previous Year Rs. 498.43) for the cost of land at Budhni, (Madhya Pradesh) for which title deeds are yet to be executed in favour of the Company. - Buildings includes Rs. 21.72 Lacs (Previous Year Rs. 21.72 Lacs) for the cost of Leasehold Building at Ludhiana, (Punjab). - Plant & Machinery includes Rs. 607.44 lac (Previous Year Rs. 234.83 lac) and Building includes Rs. 222.92 lacs (Previous Year Rs. 58.66 lacs) for the amount allocated out of Project and Preoperative Expenses. - Borrowing cost amounting to Rs. 566.92 Lacs (Previous year Rs. 39.85 Lacs) has been capitalised. - Depreciation for the year includes Rs. 25.58 lac (Previous Year Rs. 10.51 Lac ) which has been charged to Project and Pre-operative Expenses. - Depreciation for the year includes Rs. (-) 8.91 lac (Previous Year Rs. 18.50 lac ) pertaining to earlier years.

Vardhman

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) As at 31.03.2007 (Rs. in Lac) As at 31.03.2006 (Rs. in Lac) 1,375.29 2,682.52 2,128.25 2,987.27 474.41 9,647.74

SCHEDULE 6 CAPITAL WORK-IN-PROGRESS Building Under Construction Machinery Under Erection Machinery in Transit Capital Advances Project and Pre-operative Expenses (Pending Allocation : Refer Note No. 18 of notes on accounts) 10,938.32 29,429.41 4,092.80 7,615.15 1,996.16 54,071.84 SCHEDULE 7 INVESTMENTS
I 1. LONG TERM INVESTMENTS (AT COST) Trade (a) (QUOTED) 4,41,75,413 (Previous Year 4,41,21,673) Equity Shares of Rs. 10/- each fully paid up of Vardhman Acrylics Limited (b) (UNQUOTED) 3,00,000 (Previous year 3,00,000) Equity Shares of Rs.10/each fully paid-up of Vardhman Textile Components Limited (ii) In Subsidiary Companies 1,51,80,060 (Previous year 1,51,80,060) Equity Shares of Rs.10/- each fully paid up of VMT Spinning Company Limited 80,00,000 (Previous year 80,00,000) Equity Shares of Rs.10/- each fully paid up of Vardhman Threads Limited 50,000 (Previous year 50,000) Equity Shares of Rs.10/- each fully paid up of Vardhman Yarns & Threads Limited 2. OTHERS (UNQUOTED) 4,495 (Previous year 4,495) Equity shares of Rs.10/- each fully paid-up of Srestha Holdings Ltd.,80 shares (Previous Year 80 Shares)of Rs 50/- each fully paid-up in the Valencia Co-operative Housing Society Limited, Mumbai and 5 shares(Previous Year 5 Shares) Dalamal House Commercial Complex Society Ltd,Mumbai 8,461 Equity-Shares (Previous Year 7100 Shares ) of Rs 1000/- each fully paid-up of Perundurai Common Effluent Treatment Plant (Section 25 Company) 2,50,000 (Previous year 50,000) Equity Shares of Rs 10/- each fully paid-up of Nimbua Greenfield (Punjab) Limited II CURRENT INVESTMENTS (AT LOWER OF COST AND FAIR VALUE) OTHER THAN TRADE (QUOTED) 1,69,120 (Previous Year 1,69,120) Equity Shares of Rs.10/- each fully paid up of Industrial Devolpment Bank of India Limited

4,318.86

4,315.65 30.00

30.00

1,518.01 803.50 5.00

1,518.01 803.50 5.00

0.46 84.61 25.00 6,785.44

0.46 71.00 5.00 6,748.62

89.32 6,874.76

89.32 6,837.94

NOTES: 1. 2. 3. 4. Aggregate value of quoted investments Aggregate value of unquoted investments Market Value of quoted investments 49,98,900 units of PNB Principal Mutual Fund were purchased and sold during the year. 4,408.18 2,466.58 2,671.32 4,404.97 2,432.97 3,265.06

28

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) As at 31.03.2007 (Rs. in Lac) SCHEDULE 8 CURRENT ASSETS, LOANS AND ADVANCES (A) CURRENT ASSETS 1. Inventories Raw Materials Material in Transit Work-in-Process Finished Goods Stores and Spares Work-in-Progress Total (A) 2. Sundry Debtors (Considered good unless otherwise stated) Unsecured a) Debts outstanding for a period exceeding six months (i) Considered Good (ii) Considered Doubtful b) Other Debts: Considered Good Less : Provision for doubtful debts Total (B) 3. Cash and Bank Balances (a) Cash Balances Cash in hand Cheques in hand Remittance in transit (b) Bank Balances With Scheduled Banks: (i) in Current Accounts (ii) in Saving Bank Accounts (iii)Fixed Deposit Accounts [Including Rs. 3.48 lac (Previous Year Rs. 0.80 Lac) pledged with Government Authorities] Total (C)
Vardhman

As at 31.03.2006 (Rs. in Lac)

41,618.53 1,008.67 5,457.41 16,289.20 4,940.75 270.26

69,584.82 69,584.82

33,620.03 964.11 4,506.12 14,179.86 3,359.20 270.26

56,899.58 56,899.58

880.75 177.55 24,360.34 177.55

25,241.09 25,241.09

1,174.55 218.15 21,029.63 218.15

22,204.18 22,204.18

252.79 1,089.99 27.10

1,369.88

259.36 1,783.31 47.35

2,090.02

1,724.94 9.81 18,568.73 20,303.48

1,335.30 9.38 23,720.12 25,064.80

21,673.36

27,154.82

(B) LOANS AND ADVANCES (Unsecured, considered good unless otherwise stated) (a) Advance to subsidiary company (b) Advances recoverable in cash or in kind or for value to be received (c) Amount recoverable from Mahavir Share Trust in respect of Shares held in Trust (Refer Note No. 13 & 14 of notes on account) (d) Balances with Government Authorities Total (D) Total (A+B+C+D)

14,907.75

105.99 11,154.35

1,787.24 6,605.74 23,300.73 139,800.00

1,786.79 5,272.72 18,319.85 124,578.43

29

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) As at 31.03.2007 (Rs. in Lac) As at 31.03.2006 (Rs. in Lac)

SCHEDULE 9 CURRENT LIABILITIES AND PROVISIONS (A) CURRENT LIABILITIES Sundry Creditors Total outstanding dues to Small Scale Undertakings Total outstanding dues to entities other than Small Scale Undertakings Trade Deposits & Advances Unclaimed Dividends Other Liabilities Realisations under agreement to sell Interest accrued but not due Total (A) (B) PROVISIONS: Provision for Current Tax 25,831.21 Provision for Fringe Benefit Tax 210.00 Less: Prepaid Taxes 26,628.00 Proposed Dividend Corporate Dividend tax thereon Total (B) Total (A+B)

5.12 11,072.44 1,662.32 225.96 14,616.81 229.85 172.63 27,985.13 20,882.74 110.00 20,415.83 2,310.78 324.09

39.30 4,874.92 1,137.95 122.03 9,637.74 229.85 314.79 16,356.58

(586.79) (586.79) 27,398.34

576.91 2,634.87 3,211.78 19,568.36

Note : Unclaimed Dividends do not include any amount due and outstanding to be credited to the Investors Education and Protection Fund. Current Year (Rs. in Lac) SCHEDULE 10 OTHER INCOME Interest received (Gross) [TDS Rs 2.29 lac (Previous Year Rs 1.70 lac)] Claims received Provisions no longer required written back Dividend Income from Long Term Trade Investments - Subsidiaries - Other than Subsidiaries Dividend Income from Current investments - Others Profit on sale of Investments a) Long Term Investments b) Current Investments Profit on sale of fixed assets Benefit under Duty Entitlement Pass Book Scheme / Duty Drawback Provision for Doubtful Debts written back Exchange rate fluctuation (Net) Miscellaneous 1,150.90 165.66 323.24 89.28 127.90 2.68 215.23 914.73 40.60 17.91 354.68 3,402.81 165.17 115.26 343.41 88.55 69.96 1.28 2,083.72 9.22 1,001.52 456.63 60.08 448.50 4,843.30 Previous Year (Rs. in Lac)

30

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) Current Year (Rs. in Lac) SCHEDULE 11 RAW MATERIAL CONSUMED AND PURCHASE OF FINISHED GOODS Opening Stock Add : Purchases Less: Closing Stock Raw Material Consumed Add :Purchase of Finished Goods 33,620.03 102,863.57 136,483.60 41,618.53 94,865.07 990.25 95,855.32 31,381.32 81,636.00 113,017.32 33,620.03 79,397.29 809.49 80,206.78
Vardhman

Previous Year (Rs. in Lac)

SCHEDULE 12 MANUFACTURING EXPENSES Power and Fuel Packing Material and Charges Stores & Spares Consumed Dyes & Chemical Consumed Repairs to Plant and Machinery Processing Charges Techinal know-how Miscellaneous 27,246.91 4,424.72 3,920.41 8,436.04 6,397.86 903.58 4.06 548.24 51,881.82 24,405.35 4,036.11 3,580.54 7,288.01 5,034.19 675.08 1.60 548.84 45,569.72

SCHEDULE 13 PERSONNEL EXPENSES Salaries, Wages and Bonus Contribution to Provident and other Funds Workmen and Staff Welfare Miscellaneous 10,876.92 1,565.24 216.85 47.44 12,706.45 9,310.42 1,405.53 210.14 90.77 11,016.86

31

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) Current Year (Rs. in Lac) Previous Year (Rs. in Lac)

SCHEDULE 14 ADMINISTRATIVE AND OTHER EXPENSES Rent Fees,Rates and Taxes Building Repairs and Maintenance General Repairs and Maintenance Insurance Legal and Professional Travelling and Conveyance Printing and Stationery Postage and Telegrams Telephone and Telex Vehicle Maintenance Auditors Remuneration: Audit Fee Tax Audit Fee Reimbursement of Expenses In other capacity (certification) Cost Audit Fee Managerial Remuneration Directors Travelling Bad debts written off Provision for Doubtful Debts Loss on sale and Discarded fixed assets Charity and Donation Electricity & Water Miscellaneous 214.05 132.76 753.71 340.51 681.84 321.19 420.61 243.26 72.16 284.18 387.90 11.94 2.42 4.09 0.87 3.52 617.13 61.45 323.56 89.55 149.62 141.66 310.01 5,567.99 170.25 109.41 459.27 299.74 574.68 254.38 421.03 231.61 76.49 328.05 305.58 10.50 2.00 3.30 0.79 2.98 600.01 109.71 411.70 58.23 116.22 81.28 94.62 242.97 4,964.80

SCHEDULE 15 INTEREST AND FINANCIAL CHARGES Commission and Expenses on procuring Deposits Interest: On Debentures On Fixed Deposits On Term Loans On Working Capital (Net) Bank & Other charges 0.96 197.53 23.80 2,422.41 786.55 338.25 3,769.50 1.44 461.30 31.93 1,819.91 1,245.04 389.41 3,949.03

32

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) Current Year (Rs. in Lac) SCHEDULE 16 SELLING AND DISTRIBUTION EXPENSES Forwarding Charges and Octroi Commission to Selling Agents Rebate and Discount Cess duty Advertisement Sales promotion Miscellaneous 5,402.81 1,618.91 2,595.76 69.79 181.70 312.34 361.67 10,542.98 4,680.63 1,678.57 7,322.18 60.21 255.10 264.78 268.02 14,529.49
Vardhman

Previous Year (Rs. in Lac)

SCHEDULE 17 (INCREASE)/DECREASE IN WORK-IN-PROCESS AND FINISHED STOCK Opening Stock: Work-in-Process Finished Goods Add : Production during Trial Run Period Work-in-Process Finished Goods Less: Closing Stock: Work-in-Process Finished Goods

4,506.12 14,179.86

18,685.98

3,645.98 13,447.93

17,093.91

96.07 136.54

232.61 18,918.59

52.03 17.90

69.93 17,163.84

5,457.41 16,289.20

21,746.61 (2,828.02)

4,506.12 14,179.86

18,685.98 (1,522.14)

33

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

SCHEDULE 18 NOTES ON ACCOUNTS 1. SIGNIFICANT ACCOUNTING POLICIES: a) Accounting Convention: The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 211(3C) of the Companies Act, 1956 and other relevant provisions of the said Act. b) Revenue Recognition: i) Sales: Revenue from sale of goods is recognised : (i) when all the significant risks and rewards of ownership are transferred to the buyer and the company retains no effective control of the goods transferred to a degree usually associated with ownership; and (ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. ii) Interest: Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. iii) Dividend: Dividend is recognised as income when the right to receive the payment is established. (iv) Benefit under Duty Entitlement Pass Book Scheme / Duty Drawback Scheme Revenue in respect of the above benefit is recognised on post export basis. (v) Insurance and Other Claims Revenue in respect of claims is recognised when no significant uncertainity exists with regard to the amount to be realised and the ultimate collection thereof. c) Retirement Benefits: i) Gratuity: Provision for gratuity liability to employees is made on the basis of actuarial valuation as on 31.03.2007 and the amount so determined is paid to an approved gratuity fund. (ii) Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by an approved trust formed for the purpose. The premium in respect of such policy is recognised as an expense in the period in which it falls due. (iii) Provident Fund: Contribution to Provident Fund is made in accordance with the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to the profit and loss account. (iv) Leave Encashment: Provision for leave with wages is made on the basis of actuarial valuation as on 31.03.2007. d) Fixed Assets: Fixed Assets are stated at historical cost less accumulated depreciation. e) Intangible Assets: Intangibles are stated at cost less accumulated amount of amortisation. f) Depreciation: i) Depreciation on all assets except computers is provided on straight line method in accordance with and in the manner specified in Schedule XIV to the Companies Act,1956. In case of computers, depreciation is charged on a systematic basis to each accounting period during the estimated useful life thereof. ii) Depreciation on assets costing Rs.5000/ or below is charged @ 100% per annum on proportionate basis. g) Amortisation: Intangible assets are amortised on straight line method. These assets are amortised over their estimated useful life. h) Investments: Long term Investments are carried at cost less provision, if any, for decline in value which is other than temporary. Current investments are carried at lower of cost and fair value. 34

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) i)
Vardhman

j)

k)

l)

m)

n)

o)

p)

q)

Inventories: Inventories are valued at cost or net realisable value,whichever is lower. The cost in respect of the various items of inventory is computed as under: In case of raw materials at weighted average cost plus direct expenses. In case of stores and spares at weighted average cost plus direct expenses. In case of work in process at raw material cost plus conversion cost depending upon the stage of completion. In case of finished goods at raw material cost plus conversion costs, packing cost, excise duty and other overheads incurred to bring the goods to their present location & condition. In case of work in progress at the construction cost incurred in respect of the flats. Cenvat Credit: Cenvat credit on excise duty paid inputs, capital assets and input services is taken in accordance with the Cenvat Credit Rules,2004. Expenditure incurred during construction period: In respect of new/major expansion of units, the indirect expenditure incurred during construction period upto the date of the commencement of commercial production, which is attributable to the construction of the project, is capitalised on various catagory of fixed assets on proportionate basis. Subsidy: Government grants available to the company are recognised when there is a resonable assurance of compliance with the conditions attached to such grants and where benefits in respect thereof have been earned and it is resonably certain that the ultimate collection will be made. Government subsidy in the nature of promoters contribution is credited to Capital Reserve. The Government subsidy received for specific asset is reduced from the cost of the asset. Borrowing Costs: Borrowing costs that are directly attributable to the acquisition,construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as an expense in the the period in which they are incurred. Foreign Currency Conversion: i) Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate at the date of the transaction. ii) Foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise except in case of liabilities incurred for the purpose of acquiring the fixed assets from outside India in which case such exchange differences are adjusted in the carrying amount of fixed assets. iii) The premium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract. Exchange difference on such a contract is recognised in the statement of profit and loss in the reporting period in which the exchange rates change. Profit or Loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which such profit or loss arises. Accounting for Taxes on Income and Fringe Benefit Tax (i) The accounting treatment followed for taxes on income is to provide for Current Tax and Deferrred Tax. Current Tax is the aggregate amount of income-tax determined to be payable in respect of taxable income for a period. Deferred tax is the tax effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. (ii) Fringe Benefit Tax is provided on the aggregate amount of fringe benefits determined in accordance with the provisions of the relevant enactment at the specified rate of tax. Impairment of Assets: At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of account. Provision and Contingent Liabilities (i) Provisions are recognised for liabilities that can be measured by using a substantial degree of estimation, if: (a) the company has a present obligation as a result of a past event; 35

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

(b) a probable outflow of resources embodying economic benefits is expected to settle the obligation; and (c) the amount of the obligation can be reliably estimated (ii) Contingent liability is disclosed in the case of : (a) a present obligation arising from a past event when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or (b) a possible obligation, unless the probability of outflow in settlement is remote (iii) Re-imbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that the re-imbursement will be received. As at As at 31.03.2007 31.03.2006 (Rs. in Lac) (Rs. in Lac) 2. There are contingent liabilities in respect of the following items: No outflow is expected in view of the past history relating to these items: a) Claims not acknowledged as debts 1,362.49 619.06 b) Guarantees given by the Company on behalf of others 37.14 37.14 (The Company has received a legal notice in respect of one guarantee which it is repudating and legal steps are being taken up in this behalf) c) Guarantees given by the Company on behalf of associates to the extent loans availed by such associates 1,020.96 3,547.60 d) Bank Guarantees and Letters of Credit outstanding 22,432.28 5,842.04 e) Bills discounted with banks 6,104.74 6,767.68 3. Estimated amount of contracts remaining to be executed on Capital Account (Net of Advances) 38,094.35 19,327.25

4. The Company has contested the additional demand in respect of Sales Tax and Excise Duty amounting to Rs. 1053.33 Lac (Previous Year Rs. 1685.73 Lac). As against this a sum of Rs. 316.12 Lac (Previous Year Rs. 461.67 Lac) has been deposited under protest and stands included under the head Advances and other recoverables in cash or in kind.The Company has filed an appeal with the Appellate Authorities and is advised that the demand is not in accordance with law. No provision, therefore, has been made in accounts in respect thereof. 5. The Company has executed bonds for an aggregate amount of Rs. 9906.00 Lac (Previous Year Rs. 4757.59 Lac) in favour of the President of India under sections 59(2) and 67 of the Customs Act, 1962 and Central Excise and Salt Act, 1944, for fulfilment of the obligation under the said Acts. 6. The company has contested the additional demand not provided for in the books of accounts in respect of income tax amounting to Rs. 1325 Lac (Previous Year Rs 828.00 Lac). Pending appeal with appellate authorities, no provision has been made in the books of account as the company is hopeful to get the desired relief in appeal. 7. An injuction was obtained against the London Branch of the textile undertaking of Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Limited), preventing disposal of assets upto the value of Pound Sterling 2.99 Lac as a result of a court case pending in London for alleged non-fulfilment of an agreement of cotton purchase. The said matter had been decided against such textile undertaking and accordingly, Pound Sterling 0.48 Lac lying in the bank account at London had been paid to the claimant pursuant to the Order of the Court. The said amount was written off by Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Limited), by way of debit to the Profit and Loss Account. No provision has been made for the balance decree amount in view of the fact that Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Limited), was prevented by force majure in fulfilling its part of contract. The Company having taken over the textile undertaking by a scheme of arrangement and demerger is contesting this matter in Indian Courts and is confident that there would not be any further liability in this regard. 8. Loans and Advances includes Rs. 12.50 Lacs at at 31.03.2007 ( Rs 14.00 Lacs as at 31.03.2006) due from President & Executive Director of the Company granted as Housing Loan. Maximum balance outstanding during the year was Rs. 14.00 Lac (Previous Year Rs. 15.00 Lac ). 9. The erstwhile amalgamating Company i.e. Mohta Industries Limited had entered into an agreement to sell major area of building at Bhikaji Cama Place, New Delhi which had been constructed by the said amalgamated Company. However, the execution of Transfer Deeds and handing-over of possession is pending as the relevant permission from the concerned authorities is yet to be obtained. Further, the Company is likely to incur certain expenses to make some modifications / alterations in the building to get the necessary permission. These expenses will be 36

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

10. 11. 12. 13.

14.

accounted for as the construction cost in the year in which the same are incurred and sale will also be booked thereafter. The building is being carried over as work- in-progress and the amounts realised under the agreement to sell are being shown separately under the head Current Liabilities in the Balance Sheet. The amount has been shown separately under the above head as there is no separate heading as per Schedule VI to the Companies Act, 1956. Loans and advances includes National Saving Certificates amounting to Rs 0.29 Lac ( Previous Year Rs 0.29 Lac) pledged with Sales Tax Department as securities. The Company has provided depreciation on Computers @ 25% on straight line basis as the useful life of the computers has been estimated to be not more than four years. Intangible assets have been amortised @ 25% on straight line basis as the useful life of the software has been estimated to be not more than four years. The company is holding 15,98,741 (Previous year 15,98,741 ) equity shares of Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Limited) through a trust, which were received by it in its capacity as a shareholder of Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Ltd) in accordance with the Scheme of Arrangement and Demerger. The said trust has been exclusively formed for the benefit of the company. As per the provisions of the trust deed, all money received by the trust (including dividend and the proceeds of the sale of shares) shall be forthwith paid by the trust to the company. Accordingly, the company has received a sum of Rs. 63.95 Lacs and Rs. 63.95 Lacs towards final dividend for the year 2005-06 and interim dividend for the year 2006-07 respectively. The detail of the amount recoverable from Mahavir Share Trust is as under :
Cost of 15,98,741 Shares Other Recoverable Rs. in Lac 1,785.40 1.84 1,787.24

15. An amount of Rs. 601.70 Lacs has been paid to Madhya Pradesh Power Transmission Company Limited, Bhopal for

expenditure on power lines. The said amount has been disclosed as Expenditure on power lines in the balance sheet as recommended by ICAI in its guidance note on Expenditure during construction period. As per the said guidance note the aforesaid expenditure has to be written off over a period of five years. Accordingly a sum of Rs. 120.34 Lacs has been charged to the statement of Profit & Loss and is included in the total figure of Depreciation & Amortisation amounting to Rs. 11944.53 Lacs. 16. Segment Information as required by Accounting Standard (AS)-17 on Segment Reporting issued by the Institute of Chartered Accountants of India has been compiled on the basis of the consolidated financial statements and is disclosed in the notes to accounts forming part of the consolidated financial statements in accordance with the above standard. Therefore segment information in respect of separate financial statements of the company is not being disclosed in the stand alone financial statements. 17. In accordance with the Accounting Standard (AS)-28 on Impairment of Assets, the Company has assessed as on the balance sheet date, whether there are any indications (listed in paragraphs 8 to 10 of the Standard) with regard to the impairment of any of the assets. Based on such assessment it has been ascertained that no potential loss is present and therefore, formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account. 18. Project and Pre-operative expenses
Power & Fuel Stores, Oil & Lubricants Machinery Repair Salary, Wages & Bonus Staff Welfare Rent, Rates and Taxes Insurance Miscellaneous Interest Depreciation Total (A) Current Year 203.57 51.89 8.93 486.19 4.30 79.72 113.69 800.61 940.04 30.05 2,718.99

(Rs. in lac) Previous Year 6.54 10.67 0.71 147.07 3.51 7.13 0.52 383.91 155.05 10.44 725.55

37

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

Trial Run Expenses Raw Material Consumed Power & Fuel Stores, Oil, Lubricants, Dyes & Chemicals Machinery Repairs Salary, Wages & Bonus Staff Welfare Rent, Rates and Taxes Insurance Miscellaneous Interest Depreciation Total (B) Total (A+B) Less : Miscellaneous Receipt Less : Allocated to Plant & Machinery Buildings Capital work in progress Less : Sale of Finished Goods Transfer to Profit & Loss Account -Work in Process -Finished Goods Pending Allocation

356.73 178.67 1.74 18.63 0.44 5.15 3.61 69.07 191.39 5.66 831.09 3,550.08 17.58 607.44 222.92 220.46 252.91 96.07 136.54 1,996.16

56.52 20.26 11.75 0.65 19.99 0.85 4.61 1.04 29.73 29.73 0.07 145.47 871.02 3.59 234.83 58.66 29.60 52.03 17.90 474.41

19. Earning Per Share (a) The calculation of Earning Per Share (EPS) as disclosed in the Statement of profit and loss has been made in accordance with Accounting Standard (AS)-20 on Earning Per Share issued by the Institute of Chartered Accountants of India. A statement on calculation of diluted EPS is as under: (Rs. in lac) Current Year Previous Year Profit after tax 17,170.08 19,631.62 Add : Increased earnings on account of interest savings on dilutive potential equity shares (net of taxes) 149.82 198.21 Total (A) 17,319.90 19,829.83 Weighted average number of equity shares (No in lac) 577.70 577.70 Weighted average number of equity shares which would be issued on conversion of dilutive potential equity shares (No in lac)* 467.98 624.40 Total (B) 1,045.68 1,202.10 Earning per share : diluted (A/B) Rs. 16.56 16.50 (b) *The diluted earning per share has been disclosed in accordance with the requirements of the aforesaid Standard. There has been no default on any account during the relevant year which would require the conversion of debt/ loans into equity. Further, there are no outstanding warrants. (c) The conversion price of zero coupon foreign currency convertible bonds is higher than the fair value of the equity share as at the close of the year and is accordingly anti-dilutive. Therefore, the same has not been considered for computing the diluted earnings per share. 20. Deferred Tax Liability (Net) as on 31st March, 2007 is as follows : Timing Difference on account of Depreciation /Amortisation Less : Deferred Tax Asset arising on account of timing difference Due to disallowances u/s 43-B of the Income Tax Act, 1961. Due to provision for doubtful debts Due to deduction u/s 35D of the Income Tax Act, 1961. Due to brought forward capital loss Total 38 Current Year 10,334.29 77.03 60.35 4.86 682.12 9,509.93 (Rs in lac) Previous Year 9,275.06 52.92 6.98 9,215.16

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

21. Any change in the amount of deferred tax liability on account of change in the enacted tax rates and change in the quantum of depreciation allowable under the tax laws, is disclosed in the statement of profit and loss account as Deferred tax adjustment 22. The Interest on Working Capital is net of interest received from Customers & Others amounting to Rs 312.90 lac (Previous Year Rs 273.64 lac). 23. The details of prior period items are as under: Expenses Income Current Year 187.38 152.86 34.52 (Rs. in Lac) Previous Year 122.24 130.82 (8.58)

24. Related Party Disclosure (a) Details of transactions entered into with the related parties during the year as required by Accounting Standard (AS) -18 on Related Party Disclosures issued by the Institute of Chartered Accountants of India are as under : (Rs. in Lac)
Particulars Subsidiary Associates Key Management Personnel (KMP) Current Year Previous Year Relatives of KMP Enterprises over which KMP is able to exercise significant influence Current Year Previous Year TOTAL

Current Year Purchase/processing of goods Purchase of DEPB licences Sale/processing of goods Sale of DEPB licences Purchase of fixed assets Sale of fixed assets Donation Rent Paid Payment against licence agreement (excluding service tax) Interest paid Interest received Rent Received Guarantees given Managerial remuneration Sale of Investments Purchase of Investment Loan Given (Including Opening Balance) Loan Repayment Closing Balance Loan Taken (Including Opening Balance) Loan Repayment Closing Balance 1,607.22 977.59 5.60 0.46 45.05 16.17 4.62 27.41

Previous Year

Current Year

Previous Year

Current Year

Previous Year

Current Year

Previous Year

1,442.92 13,311.80 11,579.38 2.24 1.53 20.13 744.73 1.27 1.98 134.79 146.43 400.00 13.34 7.72 7.60 149.88 27.41 1,020.96 253.00 1,840.00 16,170.00 1,840.00 16,170.00 4,529.50 4,529.50 105.99 9.68 60.34 3,547.60 9,825.00 8,525.00 1,300.00 1,165.00 1,165.00

95.00

82.57

141.38 6.01 37.50 53.34

14,919.02 13,022.30 1.53 22.37 977.59 746.00 140.39 148.41 400.46 502.69 45.05 680.26 75.00 141.38 75.00 5.86 6.01 5.86 27.55 129.13 37.50 77.23 154.50 27.41 1,020.96 617.13 27.55 152.15 67.94 27.41 3,547.60 600.01 1,558.49 253.00 11,680.00 10,366.00 1,314.00 12,089.74 12,088.24 1.50 105.99

617.13

600.01 1,558.49

14.00 1.50 12.50

15.00 1.00 14.00

1,590.50 1,575.50 15.00

16,184.00 16,171.50 12.50 6,395.24 1,590.50 6,393.74 1,575.50 1.50 15.00

(b) Disclosure of Related Parties with whom Business transactions took place during the year. 1. Subsidiary VMT Spinning Co. Limited Vardhman Threads Limited Vardhman Yarns & Threads Limited Vardhman Textile Components Limited Vardhman Acrylics Limited Mr. S.P.Oswal, Mr. D.L.Sharma, Mr. Sachit Jain and Mrs. Suchita Jain Mrs. Shakun Oswal Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Limited) Vardhman Apparels Limited Banarso Devi Oswal Public Charitable Trust Sri Aurobindo Socio Economic and Management Research Institute

2. Associates 3. Key Management Personnel 4. Relatives of KMP 5. Enterprises over which Key Management Personnel and relative of such personnel is able to exercise significant influence

39

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

*Adinath Investment & Trading Co. *Devakar Investment & Trading Co. (P) Limited *Srestha Holdings Limited *Santon Finance & Investment Co. Limited *Flamingo Finance & Investment Co. Limited *Ramaniya Finance & Investment Co. Limited *Marshall Investment & Trading Co. (P) Limited *Pradeep Mercentile Co. (P) Limited *Plaza Trading Co. (P) Limited *Vardhman Textile Processors (P) Limited *Anklesh Investments (P) Limited *Syracuse Investment & Trading Co. (P) Limited Note: *Only Loan Transactions have taken place with these Companies. (c) Disclosure of Related Parties with whom no Business transactions took place during the year. 1. Enterprises over which Key Management Personnel and relative of such personnel is able to exercise significant influence Vardhman Linen Limited 25. Computation of net profit for section 198 read with Section 349 of the Companies Act, 1956, for the purpose of commission payable to the Chairman & Managing Director and Executive Directors. (Rs. in Lac) Current Year Previous Year Profit before tax 22,576.79 25,059.14 Add : Depreciation as per Books of account 11,944.53 10,133.99 Managerial Remuneration 617.13 600.01 Less : Depreciation allowable Profit on sale of Assets as per Section 349(3)(d) of the Companies Act, 1956 Profit on sale of Investment Profit for computation of Commission Maximum permissible i.e. 10% of profits a) Computation of commission payable to Executive Directors : 75% of salary b) Computation of Commission payable to Chairman & Managing Director : Commission @ 2% 11,886.06 137.23 23,115.16 2,311.52 32.97 462.30 495.27 10,033.99 785.19 2,092.94 22,881.02 2,288.10 30.93 457.62 488.55

Remuneration paid/payable to Chairman & Managing Director and Executive Directors a) Chairman & Managing Director Salary 36.75 Commission 462.30 Contribution to Provident & Other Funds 4.41 Others including perquisites* 19.35 b) Executive Directors Salary 43.96 Commission 32.97 Contribution to Provident & Other Funds 6.18 Others including perquisites* 27.95 TOTAL ** 633.87

32.30 457.62 3.88 17.54 41.25 30.93 4.95 31.52 619.99

* Perquisites calculated as per Income Tax Rules, 1962. ** The above excludes contribution to the approved group pension and gratuity fund which are actuarially determined on an overall basis.

40

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

26. Name of Small Scale industrial undertakings to whom the company owes any amount which is outstanding for over a period of more than 30 days. Name of the SSI Undertaking : 1. Perfect Equipments Pvt. Ltd. 2. Rotomag Motors & Controls Pvt. Ltd. 3. J.K. Polyfibres 27. The Company has requested its suppliers to intimate whether they are registered under The Micro, Small and Medium Enterprises Development Act, 2006 . Pending receipt of intimation from suppliers, the amount due to the suppliers under the said Act could not be determined. 28. Previous years figures have been recast/regrouped wherever necessary to make these comparable with current years figures. 29. Fixed Deposits with Scheduled Banks include Rs. 17993.52 Lacs (Previous Year Rs. 23498.01 Lacs) as unutilised monies out of the issue of Zero Coupon Foreign Currency Convertible Bonds. The amount of Rs. 5707.59 Lacs (Previous Year Rs. 2667.80) Lacs has been utilised towards the capital expenditure in connection therewith. 30. Disclosure required by Clause 32 of Listing Agreement: The Company has given inter corporate deposits aggregating to Rs 14870.00 Lacs to M/s Vardhman Acrylics Ltd. during the year. The maximum amount outstanding during the year was Rs. 3440.00 Lacs. The Balance outstanding as on 31.03.07 is Rs Nil. 31. Excise Duty amounting to Rs. 6246.02 Lacs (Previous Year Rs. 6808.54 Lacs) has been reduced from gross turnover as the same is included in the figure of gross turnover. Further the difference of excise duty between the closing stock and opening stock has been disclosed separately in the statement of profit and loss. 32. Figures in bracket indicate deductions. 33. The Foreign Currency exposure of the Company is as under : a) Category wise quantitative data Current Year No. of Amount Contracts - Forward contracts against exports In US Dollar (million) (Equivalent approximate in Rs. Lacs) - Put and Call option contracts against exports * In US Dollar (million) (Equivalent approximate in Rs. Lacs) - Forward contracts against imports In US Dollar (million) (Equivalent approximate in Rs. Lacs) In Euro (million) (Equivalent approximate in Rs. Lacs) In CHF (million) (Equivalent approximate in Rs. Lacs) In Yen (million) (Equivalent approximate in Rs. Lacs) - Put and Call option contracts against imports * In Euro (million) (Equivalent approximate in Rs. Lacs) In CHF (million) (Equivalent approximate in Rs. Lacs) In Yen (million) (Equivalent approximate in Rs. Lacs) 41 18 14.25 6,449.22 27.50 12,091.79 4.46 1,588.48 588.53 2,172.36 25.22 13,936.38 19.83 6,952.55 1,117.18 4,128.64 Previous Year No. of Amount Contracts 20 15.00 6,729.30 2.00 868.00 6.50 3,485.79 7.05 2,425.78 295.44 1,127.62 3.00 1,587.91 15.14 5,352.99 115.60 446.20

17 3 3

10 9 2

6 5 3

2 1 1

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

- Forward contracts against foreign Currency Loans In US Dollar (million) 11 23.08 7 10.67 (Equivalent approximate in Rs. Lacs) 10,553.42 4,853.98 b) All the derivative instruments are for hedging foreign exchange exposures against firm commitments and/or highly probable forecast transactions. c) Foreign currency exposures remaining unhedged at the year end : - Against Debtors & Exports In US Dollar (million) 5.75 3.00 (Equivalent approximate in Rs. Lacs) 2,498.95 1,338.60 - Against Loans In US Dollar (million) 3.70 3.36 (Equivalent approximate in Rs. Lacs) 1,608.02 1,499.23 * Option Contracts are based on the maximum coverage under options. 34. The information required by para 3 & 4 of Part II of Schedule VI to the Companies Act, 1956:Unit Licensed Capacity Current Year Previous Year Installed Capacity Current Year Previous Year

(A) CAPACITY 1. Spindles No. N.A. N.A. 5,43,432 4,77,920 2. Looms No. N.A. N.A. 460 432 3. Rotors No. N.A. N.A. 1,248 1,248 4. Steel Ingots/ Billets MT N.A. N.A. 1,00,000 1,00,000 5. Rolled Products MT N.A. N.A. 80,400 80,400 (Installed capacity has been certified by the Management and not verified by the Auditors, being a technical matter) Unit Current Year Previous Year (B) ACTUAL PRODUCTION Yarn * MT 87,476 77,967 Sewing thread MT 8,783 8,129 Fabric $ MN Mtrs 54.25 41.47 Processed Fabric MN Mtrs 36.53 32.62 Steel Ingots/Billets MT 88,378 79,452 Rolled Products* MT 81,537 73,087 * Including goods processed by/for others on job basis and consumed for captive consumption. $ Including fabric transferred to Process House. Unit (C) PURCHASE OF FINISHED GOODS Yarn MT Sewing thread MT Billets MT Fabric MN Mtrs (D) SALES Yarn * Sewing thread Fabric ** Current Year Quantity Value (Rs. in Lac) 267 3 95 0.97 345.10 14.36 21.58 609.21 990.25 102,873.31 29,634.83 7,660.77 Previous Year Quantity Value (Rs. in Lac) 427 2 110 0.40 540.22 8.89 20.17 240.21 809.49 92,619.62 32,281.52 3,577.08

MT MT MN Mtrs

67,266 8,851 16.53

65,055 8,045 7.75

42

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited) Processed Fabric Garments Raw Material (Yarn & Scrap) Raw Material (Fabric) Billets Rolled Products Processing Charges *** Waste Miscellaneous MN Mtrs Nos MT MN Mtrs MT MT 37.42 1,002 0.02 411 78,816 33,239.58 372.45 8.83 176.68 34,525.51 120.36 5,545.08 851.62 2,15,009.02 32.31 938 1,202 0.08 151 70,152
Vardhman

28,945.39 1.54 460.71 33.24 66.64 31,783.57 164.84 5,084.86 705.73 1,95,724.74

*Excludes 182 MT amounting to Rs. 252.91 lacs (Previous Year Nil) for Trial run period **Excludes Nil (Previous Year 46 MT amounting to Rs. 21.58 lacs) for Trial run period ***Excludes Nil (Previous Year Rs. 8.02 lacs) for Trial run period (E) RAW MATERIAL CONSUMED Cotton * Manmade Fibre Yarn ** Fabric Scrap Others MT MT MT MN Mtrs MT 86,307 22,996 5,030 0.48 93,171 47,626.52 22,894.97 7,248.59 278.97 13,155.90 3,423.53 94,628.48 77,499 23,771 3,108 1.34 85,530 39,251.82 20,901.37 5,754.38 644.75 11,334.36 2,926.16 80,812.84

*Excludes 685 MT amounting to Rs. 356.73 lacs (Previous Year Nil) for Trial run period **Excludes Nil (Previous Year 68 MT amounting to Rs 56.52 lacs) for Trial run period (F) STOCK PARTICULARS OF FINISHED GOODS (I) OPENING STOCKS: Yarn Sewing Thread Fabric Processed Fabric Garments Billets Rolled Products MT MT MN Mtrs MN Mtrs Nos MT MT 5,246 884 2.96 1.59 4,462 7,274 6,057.49 2,159.92 1,386.74 943.48 1,166.96 2,465.27 14,179.86 6,083 815 1.05 1.02 938 3,607 5,795 7,161.08 1,872.50 754.09 690.30 1.88 951.00 2,017.08 13,447.93

43

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited) Current Year Quantity Value (Rs. in Lac) 5,110 833 3.43 1.66 4,329 8,347 6,813.10 2,223.97 1,546.44 1,101.74 1,264.89 3,339.06 16,289.20
Current Year (Rs. in Lac)

Unit (II) CLOSING STOCKS : Yarn Sewing Thread Fabric Processed Fabric Billets Rolled Products MT MT MN Mtrs MN Mtrs MT MT

Previous Year Quantity Value (Rs. in Lac) 5,246 884 2.96 1.59 4,462 7,274 6,057.49 2,159.92 1,386.74 943.48 1,166.96 2,465.27 14,179.86
Previous Year (Rs. in Lac)

(G) CIF VALUE OF IMPORTS Raw Materials Components & Spare Parts Capital Goods (H) EXPENDITURE IN FOREIGN CURRENCY Travelling Commission Technical Knowhow Fee Interest Miscellaneous (I) EARNING IN FOREIGN CURRENCY FOB Value of Exports Interest

9,836.38 2,999.80 33,918.93 46,755.11 56.58 787.40 10.83 229.38 113.25 1,197.44 43,401.84 675.76 44,077.60
Current Year (Rs. in Lac) %

9,812.24 2,401.08 13,061.47 25,274.79 72.49 841.37 1.70 180.75 45.94 1,142.25 36,741.54 0.64 36,742.18
Previous Year (Rs. in Lac) %

(J) VALUE OF RAW MATERIALS, COMPONENTS AND SPARE PARTS CONSUMED (1) Raw Materials: Imported Indigenous (2) Components and Spare Parts : Imported Indigenous

11,227.46 83,401.02 94,628.48 2,662.38 14,486.63 17,149.01

11.86 88.14 100.00 15.52 84.48 100.00

11,262.14 69,550.70 80,812.84 1,834.21 13,199.19 15,033.40

13.94 86.06 100.00 12.20 87.80 100.00

44

Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Information required byPart IV of Schedule-VI to the Companies Act, 1956:
Vardhman

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE


I. REGISTRATION DETAILS Registration No. Balance Sheet Date II. 3 1 3 3 4 5
0 3

State Code 2 0 0 7 Year Rights Issue

1 6

Date

Month Public Issue N I L Bonus Issue N I L

CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand)

N I L Private Placement N I L Total Liabilities 2 9 1 1 3 9 3 3 Reserves & Surplus* 1 1 2 9 3 5 8 8 Unsecured Loans 2 6 3 6 4 6 1 Investments 6 8 7 4 7 6 Miscellaneous Expenditure... N I L

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Assets 2 9 1 1 3 9 3 3 SOURCES OF FUNDS Paid-up Capital 5 7 7 6 9 1 Secured Loans 1 4 6 0 6 1 9 3 APPLICATION OF FUNDS Net Fixed Assets 1 7 1 8 6 2 9 0 Net Current Assets 1 1 2 4 0 1 6 6 Accumulated Losses N I L *including Deferred Tax Liability amounting to Rs. 950993 thousand IV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousand) Turnover (including other income) 2 1 2 1 6 5 8 1
+

Total Expenditure 1 8 9 5 8 9 0 2 Profit/Loss after Tax 1 7 1 7 0 0 8 Dividend Rate (%) 4 0

Profit/Loss before Tax 2 2 5 7 6 7 9 Earnings per Share (in Rs.)

+ BASIC DILUTED

2 9 . 7 2 1 6 . 5 6

45

Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

V.

GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF THE COMPANY (As per Monetary Terms)
Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description

5 2 . 0 5 C O T T O N Y A R N

5 4 . 0 1 P O L Y E S T E R 5 5 . 0 9 Y A R N O F S Y N T H E T I C S E W I N G T H R E A D

5 2 . 0 8 W O V E N F A B R I C 7 2 . 0 6 S T E E L O F C O T T O N

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN Partner M.No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 VIPIN GUPTA Company Secretary NEERAJ JAIN Chief Financial Officer D.L. SHARMA President & Executive Director S.P. OSWAL Chairman & Managing Director

46

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

AUDITORS REPORT ON CONSOLIDATED FINANCIAL STATEMENTS


To The Board of Directors Vardhman Textiles Limited

1. We have examined the attached Consolidated Balance Sheet of Vardhman Textiles limited (formerly known as Mahavir Spinning Mills Ltd.), (the Company), its subsidiaries and associates as at 31st March, 2007 and the Consolidated Profit and Loss Account for the year ended and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of all 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 statements. We believe that our audit provides a reasonable basis for our opinion. 3. We did not audit the financial statements of one consolidated entity, whose financial statements reflect total assets of Rs. 9856.47 lacs as at 31st March, 2007 and total revenue of Rs. 6827.31 lacs. The financial statement and other financial information 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 that entity is based solely on the report of other auditor. 4. We report that the consolidated financial statements have been prepared by the Companys Management in accordance with the requirements of the Accounting Standard (AS) 21, Consolidated Financial Statement and Accounting Standard (AS) 23 Accounting for

Investment in Associates in Consolidated Financial Statements issued by the Institute of Chartered Accountants of the India and on the basis of the separate audited financial statements of the Company, its subsidiaries and associates included in the consolidated financial statement. 5. On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual audited financial statements of the parent Company, its subsidiaries and associates, we are of the opinion that the consolidated financial statements read together with the notes thereon, 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 company, its subsidiaries and associates as at 31st March, 2007; (b) in the case of the consolidated profit and loss account, of the consolidated results of operations of the Company, its subsidiaries and associates for the year then ended; and ( c ) in the case of consolidated cash flow statement, of the consolidated cash flow of the Company, its subsidiaries and associates for the year then ended.
FOR S.C. VASUDEVA & CO., CHARTERED ACCOUNTANTS

PLACE : LUDHIANA DATED : 28th May, 2007

(SANJIV MOHAN) PARTNER MEMBERSHIP NO. 86066

47

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

CONSOLIDATED BALANCE SHEET as at 31st March, 2007


PARTICULARS I. 1. SOURCES OF FUNDS Shareholders funds a) Capital b) Reserves and Surplus Loan Funds a) Secured Loans b) Unsecured Loans Minority Interest a) Capital b) Reserves & Surplus Deferred Tax Liability TOTAL

Schedule No.

As At 31.03.2007 ( Rs in Lac)

As At 31.03.2006 (Rs in Lac)

1 2

5,663.51 1,09,380.82 1,15,044.33 1,50,824.99 26,364.61 1,77,189.60 552.12 1,023.58 1,575.70 9,730.16 3,03,539.79

5,663.51 94,984.08 1,00,647.59 85,105.77 27,114.77 1,12,220.54 552.02 590.61 1,142.63 9,459.52 2,23,470.28 1,84,345.31 87,763.12 96,582.19 9,927.12 1,06,509.31 5,677.51 59,877.17 22,982.71 27,400.77 0.18 20,961.53 1,31,222.36 16,788.04 3,150.86 19,938.90 1,11,283.46 2,23,470.28

2.

3 4

3.

4.

II. APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-Progress 2. 3. Investments Current Assets, Loans and Advances a) Inventories b) Sundry Debtors c) Cash and Bank Balances d) Other Current Assets e) Loans and Advances Less: Current Liabilities and Provisions a) Liabilities b) Provisions Net Current Assets (A-B) TOTAL

6 7 8

2,23,221.44 99,234.54 1,23,986.90 54,148.81 1,78,135.71 5,763.23 73,034.32 26,187.40 22,284.32 0.19 26,085.57 1,47,591.80 28,559.62 (608.67) 27,950.95 1,19,640.85 303,539.79

SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS 18 The Schedules referred to above form an integral part of the Balance Sheet.

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No.86066) PLACE : LUDHIANA DATED : 28.05.2007

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

48

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2007
Particulars
INCOME Sales (Gross) Less: Excise Duty Sales (Net) Other Income Income from Associates Total EXPENDITURE Raw Material Consumed and Purchase of Finished Goods Manufacturing Expenses Personnel Expenses Administrative and Other Expenses Interest and Financial Charges Selling and Distribution Expenses (Increase)/Decrease in Work in Process and Finished Stock Difference of Excise Duty on Stocks Miscellaneous Expenditure Written Off Depreciation & Amortisation Prior Period Items Loss from Associates Total Profit for the year before tax Less: Provision for Current Tax [Including Rs. 20.16 Lacs (Previous Year Rs. 15.00 Lacs) for Wealth Tax] Deferred Tax Deferred Tax Adjustment Fringe Benefit Tax (FBT) Income Tax Adjustment for earlier Years Profit for the year after tax but before Minority Interest Minority Interest Profit after tax and minority Interest Add: Debenture Redemption Reserve Written Back Adjustment on account of dividend received by Subsidiary Company on its investment in Holding Company Less: Accumulated profits reversed on account of sale of shares in Associate Balance brought forward Balance available for appropriation Appropriations: Interim Dividend On Equity Shares Corporate Dividend Tax thereon

Schedule No.

Current Year (Rs. in Lac)


2,21,509.46 6,280.63 2,15,228.83 3,523.17 396.07 2,19,148.07 98,314.22 52,587.62 13,249.02 5,969.58 3,834.47 11,104.22 (2,901.31) 109.07 12,240.65 41.97 1,94,549.51 24,598.56 5,229.71 119.29 151.34

Previous Year (Rs. in Lac)


2,01,693.74 6,882.99 1,94,810.75 4,903.40 1,99,714.15 82,127.96 46,434.63 11,480.95 5,166.77 4,003.92 15,208.38 (1,526.85) (134.58) 0.04 10,663.31 2.63 186.05 1,73,613.21 26,100.94 5,873.20 (28.03) (275.31)

10

11 12 13 14 15 16 17

270.64 105.97 (5.06) 18,997.30 432.97 18,564.33 625.00 5,374.34 24,563.67

(303.34) 113.93 (7.64) 20,424.79 129.06 20,295.73 625.00 34.02 19.31 4,253.60 25,189.04

2,265.42 324.09 49.68 31.66

2,589.51

2,297.89 341.16

Proposed Dividend On Equity Shares Corporate Dividend Tax thereon Transferred to General Reserve Balance carried to Balance Sheet Earning per share of Rs. 10/ each (Refer Note No. 5 of Notes on accounts) Basic Diluted SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS 18 The Schedules referred to above form an integral part of the Profit and Loss Account.

81.34 16,140.82 5,752.00 24,563.67 33.54 18.51

2,639.05 17,175.65 5,374.34 25,189.04 36.06 17.32

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No.86066) PLACE : LUDHIANA DATED : 28.05.2007

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

49

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31st March, 2007
Particulars
CASH FLOW FROM OPERATING ACTIVITIES Net Profit before Tax and Extra-ordinary Items Adjustments for: Depreciation & Amortisation Interest Expense Miscellaneous Expenditure written off (Income) / Loss from Associates Interest/Dividend Income (Profit)/Loss on sale of Assets (Net) (Profit)/Loss on sale of Investments (Net) Provision no longer required written Back (Net) Sundry Balances Written Off (Net) Provision for Doubtful Debts Exchange Rate Fluctuation Operating Profit before Working Capital Changes Adjustments for : (Increase)/Decrease in Trade & other Receivables (Increase)/ Decrease in Inventories Increase/( Decrease) in Trade Payables & other Liabilities Cash Generation from Operation Taxes Paid B. A.

Schedule No.

Current Year (Rs. in Lac)


24,598.56

Previous Year (Rs. in Lac)


26,100.94 10,663.31 3,865.99 0.04 186.05 (558.47) (885.06) (2,100.30) (330.47) 303.48 63.22 86.55 (8,644.67)) (4,623.98) 4,040.04 (5,628.83)

12,240.65 3,972.86 (396.07) (1,912.46) (123.65) (8.30) (336.83) 244.74 (693.00) (8,179.60) (13,157.14) 10,644.83 (6,473.82)

12,987.94 37,586.50

11,294.34 37,395.28

(10,691.91) 26,894.59 (6,473.82) 20,420.77

(9,228.61) 28,166.67 (5,628.83) 22,537.84

C.

Net Cash from Operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Sale of Investments Purchase of Investments Interest/Dividend Received Net Cash used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of Share Capital Proceeds from Long Term Borrowings (Net) Proceeds from Short Term Borrowings (Net) Proceeds from Zero Coupon Foreign Currency Convertible Bonds Proceeds from Unsecured Borrowings Capital Subsidy Received FCCB Issue Expenses Paid Dividend Paid Interest Paid Net Cash from Financing Activities Net Increase in cash & cash equivalents Cash & cash equivalents as on beginning Cash & cash equivalents as on end SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS The Schedules referred to above form an integral part of the Accounts. 18

(84,557.00) 788.02 857.78 (536.82) 1,586.23


(81,861.79)

(32,233.39) 1,061.38 3,310.12 (349.48) 550.93


(27,660.44)

65,069.31 649.99 (55.42) 30.00 (94.74) (5,124.63) (4,149.94)


56,324.57 (5,116.45) 27,400.77 22,284.32

92.00 16,649.04 245.46 26,765.30 (7,469.44) (571.16) (1,986.86) (3,923.78)


29,800.56 24,677.96 2722.81 27,400.77

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary (M.No.86066) PLACE : LUDHIANA DATED : 28.05.2007

NEERAJ JAIN Chief Financial Officer

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

AUDITORS CERTIFICATE We have checked the above Cash Flow Statement of Vardhman Textiles Limited (formerly known as Mahavir Spinning Mills Limited), derived from the audited financial statements for the year ended 31st March, 2007 with the books & records maintained in the ordinary course of business and found the same in accordance therewith. For S.C. Vasudeva & Co., Chartered Accountants Sanjiv Mohan PLACE : LUDHIANA Partner DATED : 28.05.2007 (M.No. 86066)

50

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Vardhman

Schedules 1 to 18 Annexed to and forming part of the Balance Sheet as at 31st March, 2007 and Profit & Loss Account for the year ended 31st March, 2007
As at 31.03.2007 (Rs. in Lac) SCHEDULE 1 SHARE CAPITAL Authorised 9,00,00,000 Equity Shares of Rs. 10/- each (Previous Year 9,00,00,000) 1,00,00,000 Redeemable Cumulative Preference Shares of Rs. 10/- each (Previous Year 1,00,00,000) 9,000.00 1,000.00 10,000.00 Issued, Subscribed & Paid-up 5,66,35,527 Equity Shares (Previous Year 5,66,35,527) of Rs. 10/- each Less: Calls in arrears from others
NOTES:
Of the above: (a) 1,35,916 (previous year 1,35,916) Equity Shares of Rs.10/- each are allotted as fully paid up, pursuant to contract without payment being received in cash. (b) 35,049,580 (previous year 35,049,580) Equity Shares of Rs.10/- each are allotted as fully paid up, by way of bonus shares by capitalisation of Share Premium, Capital Redemption Reserve and General Reserve.

As at 31.03.2006 (Rs. in Lac)

9,000.00 1,000.00 10,000.00 5,663.55 0.04 5,663.51

5,663.55 0.04 5,663.51

SCHEDULE 2 RESERVES AND SURPLUS


Capital Reserve As per last account Less : Goodwill created on consolidation Less : on account of sale of Shares in Associate Company Add : on account of purchase of Shares in Associate Company Capital Redemption Reserve Less: Utilised for issuing fully paid up Bonus Shares Capital Subsidy Reserve As per last account Add: Subsidy for the year Share Premium As per last account Less : Utilised for writing off expenses on issue of Zero Coupon Foreign Currency Convertible Bonds Less : Utilised for providing premium on redemption of Zero Coupon Foreign Currency Convertible Bonds

As at 31.03.2007 (Rs. in Lac)


90.33 2.31 600.00 105.00 90.00 8,542.30 1,589.05 6,953.25 0.43 1,625.00 625.00 78,647.54 16,140.82

As at 31.03.2006 (Rs. in Lac)


405.55 313.98 1.24 1,050.00 450.00 105.00 9,404.77 665.91 196.56 8,542.30 0.43 2,250.00 625.00 62,947.54 1,475.65 17,175.65

92.64 600.00 195.00

90.33 600.00 105.00

Less :

Calls in arrears from others

6,952.82

8,541.87

Debenture Redemption Reserve As per last account Less: Transferred to Profit and Loss Account General Reserve As per last account Less: Utilised for issuing fully paid up Bonus Shares Add: Transferred from Profit and Loss Account Surplus i.e., Balance as per annexed Profit and Loss Account

1,000.00

1,625.00

94,788.36 5,752.00 109,380.82

78,647.54 5,374.34 94,984.08

51

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


As at 31.03.2007 (Rs. in Lac)

As at 31.03.2006 (Rs. in Lac)

SCHEDULE 3 SECURED LOANS 1. Debentures 40 (Previous Year 40), 8.49% Secured Redeemable Non Convertible Debentures of Rs. 25.00 Lacs each (Previous Year Rs. 50.00 Lacs each) Nil (Previous Year 25), 7.90% Secured Redeemable Non Convertible Debentures of Rs. Nil each (Previous Year Rs. 100.00 Lacs each) 2. Loans & Advances from Banks Term Loans Working Capital Interest accrued and due on above 3. Other Loans & Advances Term Loan from Others

1,000.00 126,486.75 23,338.24 1,50,824.99

2,000.00 2,500.00 57,017.44 22,688.25 0.08 900.00 85,105.77

NOTES: 1. The Debentures and Term Loans from Banks and others are secured by mortgage created or to be created on all the immovable assets of the Company, both present and future and hypothecation of all the movable assets including movable machinery, machinery parts, tools and accessories and other movables both present and future (except book debts), subject to charges created or to be created in favour of the Bankers for securing the working capital limits. 2 Working Capital Borrowings from Banks are secured by hypothecation of entire present and future tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the Company. 3 40-8.49% Non Convertible Debentures of Rs. 100 lac each are redeemable at par in four equal yearly instalments of Rs. 25 lac each commencing from the end of the second year from the date of allotment i.e. 7th March, 2003. The third instalment of Rs. 25 lac each, amounting to Rs. 1000 lac has been paid during the year. The earliest date of redemption of the fourth and last instalment is 7th March, 2008. 4 25 - 7.90% Non Convertible Debentures were redeemable at par at the end of 36th month after the deemed date of allotment i.e 3rd June, 2003. The said debentures have been redeemed during the year on due date. 5 Amount due for repayment out of Debentures and Term Loans within one year is Rs. 8,617.25 lacs (Previous Year Rs. 1,1971.78 lacs)

As at 31.03.2007 (Rs. in Lac) SCHEDULE 4 UNSECURED LOANS Fixed Deposits Interest accrued and due on above 266.64 0.97 15.00 26,082.00 26,364.61
NOTE:

As at 31.03.2006 (Rs. in Lac) 335.56 2.71 1.50 26,775.00 27,114.77

Short Term loans and advances a) From Others Other Loans & Advances Zero Coupon Foreign Currency Convertible Bonds

Amount due for repayment out of Fixed Deposits and Short term Loans & Advances within one year is Rs. 115.80 Lacs (Previous Year Rs. 144.43 Lacs).

52

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
SCHEDULE 5 FIXED ASSETS
A) TANGIBLE ASSETS GROSS BLOCK DEPRECIATION
Vardhman

(Rs. in Lac)
NET BLOCK

Sr. Particulars No. 1. Freehold land 2. 3. 4. 5. 6. Leasehold land Buildings Plant & machinery Furniture & fixture Vehicles
Total (A) B) INTANGIBLE ASSETS

As at Additions Sales/ As at As at 01.04.2006 during the year Adjustments 31.03.2007 01.04.2006 3,598.29 1,551.82 67.55 5,082.56 839.88 28,454.99 148,667.64 1,779.67 733.57
1,84,074.04

For the year

Adjustment 7.03 0.23 630.64 144.65 42.79


825.34

Upto As at 31.03.2007 31.03.2007 5,082.56

As at 31.03.2006 3,598.30 832.12 22,631.05 68,196.39 787.85 482.84


96,528.54

8.94 6,377.06 31,298.01 255.55 215.97


39,707.35

2.73 10.90

846.09

7.76

8.35 ** 769.23

9.08 6,592.94 90,994.96 983.74 279.46

837.01 28,228.21 87,913.84 841.45 584.35

34,821.15 # 5,823.94

1,056.85 178,908.80 210.03 85.73 1,825.19 863.81

80,471.24 11,154.36 991.82 250.73 136.57 71.52

1,433.79 222,347.60

87,545.49 12,140.03

98,860.18 123,487.42

GROSS BLOCK

AMORTISATION

NET BLOCK Upto As at 31.03.2007 31.03.2007

Sr. Particulars No. 1. Computer Software


Total (B)

As at Additions Sales/ As at As at 01.04.2006 during the year Adjustments 31.03.2007 01.04.2006 271.27
271.27

For the year 5.86


5.86

Adjustment (30.53)
(30.53)

As at 31.03.2006 53.65
53.65

0.91
0.91

0.04
0.04

272.14
272.14

217.63
217.63

254.02
254.02

18.12
18.12

C) EXPENDITURE ON POWER LINE GROSS BLOCK AMORTISATION NET BLOCK Upto As at 31.03.2007 31.03.2007

Sr. Particulars No. Expenditure on Power Line


Total (C) Grand Total (A+B+C)

As at Additions Sales/ As at As at 01.04.2006 during the year Adjustments 31.03.2007 01.04.2006


1,84,345.31

For the year 120.34


120.34

Adjustment
794.81

As at 31.03.2006
96,582.19

601.70
601.70 40,309.96

601.70
601.70

120.34
120.34

481.36
481.36

1,433.83 2,23,221.44

87,763.12 12,266.23

99,234.54 1,23,986.90

Previous Year

1,56,782.52

28,813.42

1,250.63 1,84,345.31

78,163.62 10,677.07

1,077.57

87,763.12

96,582.19

NOTES: # Includes Rs. 248.20 lac (Previous year Rs. 248.20 lac) cost of Residential flats at Mandideep, the land cost of which has not been excluded from this cost. The depreciation for the year has been taken on the entire cost of Rs. 248.20 lac (Previous Year Rs. 248.20 lac). ** Represents proportionate premium for acquisition of leasehold land being amortised over the period of lease. - Freehold land includes Rs. 113.00 lac (Previous Year Rs. 113.00 lac) for the cost of land at Baddi for which title deeds are yet to be executed in favour of the Company, though the possession thereof has been taken by the company. - Freehold land includes Rs. 396.50 lac (Previous Year Rs Nil) for the cost of land at Ludhiana for which title deeds are yet to be executed in favour of the Company, though the possession thereof has been taken by the company. - Freehold land includes Rs. 339.59 lac (Previous Year Rs Nil) for the cost of land at Baddi for which title deeds are yet to be executed in favour of the Company, though the possession thereof has been taken by the company. - Freehold land includes Rs Nil (Previous Year Rs 498.43 lac) for the cost of land at Budhni (Madhya Pradesh) for which title deeds are yet to be executed in favour of the Company. - Buildings includes Rs. 21.72 Lacs (Previous Year Rs. 21.72 Lacs) for the cost of Leasehold Building at Ludhiana, (Punjab). - Plant & Machinery includes Rs. 607.44 Lacs (Previous Year Rs 234.83 lac) and building includes Rs. 222.92 Lacs( Previous Rs. 58.66 lac) for the amount allocated out of project and pre-operative expenses. - Borrowing cost amounting to Rs. 566.92 lac (Previous Year Rs. 39.85 Lacs) has been capitalised. - Depreciation for the year includes Rs. 25.58 lac (Previous Year Rs. 10.51 Lac) which has been charged to Pre-operative Expenses. - Depreciation for the year includes Rs. (-) 8.91 lac (Previous Year Rs. 18.50 lac) pertaining to earlier years.

53

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


As at 31.03.2007 (Rs. in Lac)

As at 31.03.2006 (Rs. in Lac) 1,536.91 2,691.08 2,128.25 3,093.60 477.28 9,927.12

SCHEDULE 6 CAPITAL WORK-IN-PROGRESS

Building Under Construction Machinery Under Erection Machinery in Transit Capital Advances Project and Pre-operative Expenses (Pending Allocation to fixed Assets)

10,982.31 29,455.81 4,092.80 7,621.73 1,996.16 54,148.81

SCHEDULE 7 INVESTMENTS
I LONG TERM INVESTMENTS (AT COST) In Government Securities 1. TRADE (a) (QUOTED) 4,41,75,413 (Previous Year 4,41,21,673) Equity Shares of Rs. 10/ each fully paidup of Vardhman Acrylics Limited Add: Accumulated profit from Associate Companies Add: Capital Reserve arising on account of carrying value of Investment (b) (UNQUOTED) 3,00,000 (Previous year 3,00,000) Equity Shares of Rs. 10/ each fully paidup of Vardhman Textile Components Limited Less: Goodwill arising on acquisition of shares in associates Add: Accumulated profit from Associate Company 0.10

0.10

3,828.13 1,450.56 112.73

5,391.42

3,824.92 1,059.53 110.42

4,994.87

30.00 0.70 36.17

65.47

30.00 0.70 31.13

60.43

2.

OTHERS a) (QUOTED) 1,89,000 (Previous Year 1,89,000) Equity Shares of Rs. 10/ each fully paidup of Vardhman Holdings Limited (formerly known as Vardhman Spinning & General Mills Limited) (b) (UNQUOTED) 4,495 (Previous year 4,495) Equity shares of Rs. 10/ each fully paid-up of Srestha Holdings Ltd., 80 shares (Previous year 80 Shares) of Rs. 50/- each fully paid-up in the Valencia Co-operative Housing Society Limited, Mumbai and 5 shares (Previous year 5) in the Dalamal House Commercial Complex Society Ltd, Mumbai 8,461 (Previous Year 7,100) Equity-Shares of Perundurai Common Effluent Treatment Plant (Section 25 Company) of Rs. 1000/- each fully paid-up 2,50,000 Equity Shares (Previous year 50,000) of Nimbua Greenfield (Punjab) Limited of Rs. 10/- each fully paid-up.
CURRENT INVESTMENTS (AT LOWER OF COST AND FAIR VALUE) OTHER THAN TRADE (QUOTED) 1,69,120 (Previous year 1,69,120) Equity Shares of Rs.10/ each fully paid-up of Industrial Devolpment Bank of India Limited Nil (Previous year 81,600) Equity Shares of Rs.10/ each fully paid up of Videocon Industries Ltd.

106.85

106.85

0.46 84.61 25.00 5,673.91

0.46 71.00 5.00 5,238.71

II.

89.32 5,763.23 5,587.69 175.54 3,148.08

89.32 349.48 5,677.51 5,540.62 136.89 4,496.73

NOTES: 1. Aggregate value of quoted investments 2. Aggregate value of unquoted investments 3. Market Value of quoted investments 4. 49,98,900 units of PNB Principal Mutual Fund wer purchased and sold during the year

54

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
As at 31.03.2007 (Rs. in Lac) SCHEDULE 8 CURRENT ASSETS, LOANS AND ADVANCES (A) CURRENT ASSETS Inventories Raw Materials Material in Transit Work-in-Process Finished Goods Stores and Spares Work-in-Progress
Vardhman

As at 31.03.2006 (Rs. in Lac)

Less: Unrealised profit on Consolidation Total (A)

44,440.86 1,118.38 5,708.87 16,645.11 5,091.40 270.26 73,274.88 240.56

73,034.32 73,034.32

35,928.96 1,035.07 4,681.93 14,538.13 3,479.89 270.26 59,934.24 57.07

59,877.17 59,877.17

Sundry Debtors (Considered good unless otherwise stated) (a) Secured (i) Debts outstanding for a period exceeding six months (b) Sundry Debtors (Unsecured) a) Debts outstanding for a period exceeding six months 968.55 (i) Considered Good 182.93 (ii) Considered Doubtful 25,218.85 b) Other Debts: Considered Good 182.93 Less : Provision for doubtful debts Total (B) Cash and Bank Balances (a) Cash Balances 276.42 Cash in hand 1,212.42 Cheques in hand 27.10 Remittance in transit (b) Bank Balances with Scheduled Banks: 2,189.84 (i) Current Accounts 9.81 (ii) Saving Bank Accounts (iii) Fixed Deposit Accounts [Including Rs. 3.48 lac (Previous Year Rs. 0.80 lac) 18,568.73 pledged with Government Authorities] Total (C) Interest Accured on Investment Total (D) (B) LOANS AND ADVANCES (Unsecured considered good unless otherwise stated) (a) Advances recoverable in cash or in kind or for value to be received (b) Shares held by Mahavir Share Trust (c) Balances with Government Authorities Total (E) Total (A+B+C+D+E)

26,187.40 26,187.40

1,239.27 223.53 21,743.44 223.53

22,982.71 22,982.71

1,515.94

272.72 1,864.38 47.35 1,486.82 9.38

2,184.45

20,768.38 22,284.32 0.19 0.19

23,720.12

25,216.32 27,400.77 0.18 0.18

17,561.03 1,787.25 6,737.29 26,085.57 1,47,591.80

13,667.14 1,786.79 5,507.60 20,961.53 1,31,222.36

55

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


As at 31.03.2007 (Rs. in Lac)

SCHEDULE 9 CURRENT LIABILITIES AND PROVISIONS


(A) CURRENT LIABILITIES Sundry Creditors Total outstanding dues to Small Scale Undertakings Total outstading dues to entities other than Small Scale Undertakings Trade Deposits & Advances Unclaimed Dividends Other Liabilities Realisations under agreement to sell Interest accrued but not due Total (A) (B) Provisions: Provision for Taxation (Current Tax) Provision for Taxation (Fringe Benefit Tax) Less: Prepaid Taxes Proposed Dividend Corporate Dividend tax thereon Total (B) Total (A+B) 26,724.37 219.90 27,634.28 49.68 31.66

As at 31.03.2006 (Rs. in Lac)

6.93 11,200.76 1,703.07 225.96 15,020.32 229.95 172.63 28,559.62

40.46 4,952.67 1,175.41 122.03 9,952.73 229.95 314.79 16,788.04 21,563.40 113.93 21,165.52 2,297.89 341.16

(690.01) 81.34 (608.67) 27,950.95

511.81 2,639.05 3150.86 19,938.90

Note: Unclaimed Dividends do not include any amount due and outstanding to be credited to Investor Education and Protection Fund.

SCHEDULE 10 OTHER INCOME


Interest received (Gross) [TDS Rs. 29.05 lac (Previous Year Rs. 15.20 lac)] Claims received Provisions no longer required written back Dividend Income from Long Term Investments - Trade - other than trade Dividend Income from Current investments - Other than trade Profit on sale of Investment a) Long Term Investment b) Current Investment Profit on sale of fixed assets Benefit under Duty Entitlement Pass Book Scheme / Duty Drawback Provision for Doubtful Debts written back Exchange rate fluctuation (Net) Unrealised Loss on Consolidation Miscellaneous
1,260.16 173.99 342.68 127.90 9.60 2.68

207.61 126.94 354.54 69.96 4.52 1.28 2,083.72 16.58 1,001.52 452.85 59.45 95.13 429.30 4,903.40

8.29 215.32 984.13 40.60 17.33 340.49 3,523.17

SCHEDULE 11 RAW MATERIAL CONSUMED AND PURCHASE OF FINISHED GOODS


Raw Material Opening Stock Add: Purchases 35,928.96 106,126.93 142,055.89 44,440.86 97,615.03 699.19 98,314.22

Less: Closing Stock Raw Material Consumed Add: Purchase of Finished Goods

33,357.94 84,412.82 117,770.76 35,928.96 81,841.80 286.16 82,127.96

56

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
Current Year (Rs. in Lac) SCHEDULE 12 MANUFACTURING EXPENSES
Power and Fuel Packing Material and Charges Stores & Spares Consumed Dyes & Chemical Consumed Repairs to Plant and Machinery Processing Charges Techinal know-how Miscellaneous
28,063.09 4,623.05 3,805.70 8,609.83 6,643.86 267.28 4.06 570.75 52,587.62
Vardhman

Previous Year (Rs. in Lac)

25,155.97 4,215.47 3,625.76 7,465.14 5,184.53 246.86 1.60 539.30 46,434.63

SCHEDULE 13 PERSONNEL EXPENSES


Salaries, Wages and Bonus Contribution to Provident and other Funds Workmen and Staff Welfare Miscellaneous
11,343.53 1,627.98 228.04 49.47 13,249.02

9,701.95 1,464.91 219.50 94.59


11,480.95

SCHEDULE 14 ADMINISTRATIVE AND OTHER EXPENSES

Rent Fees, Rates and Taxes Building Repairs and Maintenance General Repairs and Maintenance Insurance Legal and Professional Travelling and Conveyance Printing and Stationery Postage and Telegrams Telephone and Telex Vehicle Maintenance Auditors Remuneration: Audit Fee Tax Audit Fee Reimbursement of Expenses In other capacity (certification) Cost Audit Fee Managerial Remuneration Directors Travelling Bad debts written off Provision for Doubtful Debts Loss on sale and Discarded fixed assets Charity and Donation Electricity & Water Unrealised Profit on Consolidation Miscellaneous

214.65 138.73 776.44 351.55 719.40 333.89 436.78 252.06 73.14 291.77 440.82 14.25 2.72 5.04 0.99 3.72 629.21 61.50 338.71 91.67 149.63 141.94 183.50 317.47 5,969.58

170.25 113.02 468.84 319.23 612.16 264.14 430.16 239.05 77.99 341.85 345.64 12.66 2.24 3.73 1.25 3.08 611.40 109.72 422.50 63.22 116.45 81.29 100.77 256.12 5,166.77

57

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


Current Year (Rs. in Lac)

Previous Year (Rs. in Lac)

SCHEDULE 15 INTEREST AND FINANCIAL CHARGES

Commission and Expenses on procuring Deposits Interest: On Debentures On Fixed Deposits On Term Loans On Working Capital Bank & Other charges

0.96 197.53 23.81 2,451.85 787.55 372.77 3,834.47

1.44 461.30 31.93 1,819.92 1,274.16 415.17 4,003.92

SCHEDULE 16 SELLING & DISTRIBUTION EXPENSES

Forwarding Charges and Octroi Commission to Selling Agents Rebate and Discount Cess duty Advertisement Sales promotion Miscellaneous

5,775.85 1,744.69 2,616.32 73.53 183.90 315.11 394.82 11,104.22

4,986.14 1,797.51 7,541.73 63.62 256.01 267.56 295.81 15,208.38

SCHEDULE 17 (INCREASE)/DECREASE IN WORKINPROCESS AND FINISHED STOCK

Opening Stock: Work-in-Process Finished Goods Add: Production during Trial Run Period Work-in-Process Finished Goods Less: Closing Stock: Work-in-Process Finished Goods

4,681.93 14,538.13

19,220.06

3,801.33 13,821.95

17,623.28

96.07 136.54

232.61 19,452.67

52.03 17.90

69.93 17,693.21

5,708.87 16,645.11

22,353.98 (2,901.31)

4,681.93 14,538.13

19,220.06 (1,526.85)

58

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
SCHEDULE 18 SIGNIFICANT ACCOUNTING POLICIES & NOTES ON ACCOUNTS 1. SIGNIFICANT ACCOUNTING POLICIES: (a) Accounting Convention: The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 211(3C) of the Companies Act, 1956 and other relevant provisions of the said Act. (b) Revenue Recognition: (i) Sales Revenue from sale of goods is recognised : (i) When all the significant risks and rewards of ownership are transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership and
Vardhman

(ii) no significant uncertainty exists regarding the amount of the consideration that will be derived from the sale of goods. (ii) Interest Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. (iii) Dividend Dividend is recognised as income when the right to receive the payment is established. (iv) Benefit under Duty Entitlement Pass Book Scheme/Duty Drawback Scheme Revenue in respect of the above benefit is recognised on post export basis. (v) Insurance and Other Claims Revenue in respect of claims is recognised when no significant uncertainty exists with regard to the amount to be realised and the ultimate collection thereof. (c) Retirement Benefits : (i) Gratuity: Provision for gratuity liability to employees is made on the basis of actuarial valuation as on 31.03.2007 and the amount so determined is paid to an approved gratuity fund. (ii) Superannuation: The liability in respect of eligible employees covered under the scheme is provided through a policy taken from Life Insurance Corporation of India by the approved trust formed for the purpose. The premium in respect of such policy is recognised as an expense in the period in which it falls due. (iii) Provident Fund: Contribution to Provident Fund is made in accordance with the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and is charged to the profit and loss account. (iv) Leave Encashment: Provision for leave with wages is made on the basis of actuarial valuation as on 31.03.2007. (d) Fixed Assets: Fixed Assets are stated at historical cost less depreciation. (e) Intangible assets Intangibles are stated at cost less accumulated amount of amortisation. (f) Depreciation: i) Depreciation on all assets except computers is provided on straight line method in accordance with and in the manner specified in Schedule XIV to the Companies Act,1956. In case of computers depreciation is charged on a systematic basis to each accounting period during the estimated useful life thereof. Depreciation on assets costing Rs.5000/ or below is charged @ 100% per annum on proportionate basis.

ii)

(g) Amortisation Intangible assets are amortised on straight line method. These assets are amortised over their estimated useful life. (h) Investments: Long term Investments are carried at cost less provision, if any, for diminution in value which is other than temporary and current investments are carried at lower of cost and fair value.

59

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)


Inventories: Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of the various items of inventory is computed as under: * * * * * In case of raw materials at weighted average cost plus direct expenses. In case of stores and spares at weighted average cost plus direct expenses . In case of work in process at raw material cost plus conversion cost depending upon the stage of completion. In case of finished goods at raw material cost plus conversion costs, packing cost, excise duty and other overheads incurred to bring the goods to their present condition & location. In case of work in progress at the construction cost incurred in respect of the flats.

(i)

(j)

Cenvat Credit : Cenvat credit on excise duty paid inputs, capital assets and input services is taken in accordance with the Cenvat Credit Rules, 2004.

(k)

Expenditure incurred during construction period : In respect of new/major expansion of units, the indirect expenditure incurred during construction period upto the date of the commencement of commercial production which is attributable to the construction of the project is capitalised on various categories of fixed assets on proportionate basis.

(l)

Subsidy : Government grants available to the company are recognised when there is a reasonable assurance of compliance with the conditions attached to such grants and where benefits in respect thereof have been earned and it is reasonably certain that the ultimate collection will be made. Government subsidy in the nature of promoters contribution is credited to Capital Reserve. The Government subsidy received for specific asset is reduced from the cost of the asset.

(m) Borrowing Costs : Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are incurred. (n) Foreign Currency Conversion: (i) Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate at the date of transaction.

(ii) Foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise except in case of liabilities incurred for the purpose of acquiring the fixed assets from outside India in which case such exchange differences are adjusted in the carrying amount of fixed assets. (iii) The premium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract. Exchange differences on such a contracts are recognised in the statement of profit and loss in the reporting period in which the exchange rate change. Profit or loss arising on cancellation or renewal of such contracts is recognised as income or expense in the period in which such profit or loss arises. (o) Accounting for Taxes on Income & Fringe Benefit Tax (i) The accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the aggregate amount of income-tax determined to be payable in respect of taxable income for a period. Deferred tax is the tax effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods.

(ii) Fringe Benefit Tax is provided on the aggregate amount of fringe benefits determined in accordance with the provisions of the relevant enactment at the specified rate of tax. (p) Impairment of Assets At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired . If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of account.

60

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
(q) Provisions and Contingent Liabilities (i) Provisions are recognised for liabilities that can be measured by using a substantial degree of estimation, if : (a) the company has a present obligation as a result of a past event; (b) a probable outflow of resources embodying economic benefits is expected to settle the obligation; and (c) the amount of the obligation can be reliably estimated. (ii) Contingent liability is disclosed in the case of : (a) a present obligation arising from a past event when it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or (b) a possible obligation, unless the probability of outflow in settlement is remote (iii) Re-imbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that the re-imbursement will be received. 2. NOTES ON ACCOUNTS (A) SUBSIDIARIES 1. The Consolidated Financial Statements present the consolidated Accounts of Vardhman Textiles Limited (Formerly known as Mahavir Spinning Mills Limited), Name of Subsidiary a) VMT Spinning Co. Ltd. b) Vardhman Threads Ltd. c) Vardhman Yarns & Threads Ltd. 2. Principles of consolidation i) The consolidated financial statements comprise the financial statements of the parent company and its subsidiaries. Minority interest in the net assets of the subsidiary companies has been disclosed separately. ii) Difference between the cost of investment and the parents portion of equity in the subsidiary companies as on the date of the holding-subsidiary relationship coming into existence and at anytime thereafter is recognised as capital reserve/goodwill as the case may be. iii) Investments made by the parent company in the subsidiary companies subsequent to the holding subsidiary relationship coming into existence are eliminated while preparing the consolidated financial statements. iv) Intra group balances and intra group transactions are eliminated to the extent of share of the parent company in full v) Unrealised profits on account of intra group transactions have been accounted for depending upon whether the transaction is an upstream transaction or a downstream transaction. 3. Consolidated financial statements have been prepared after making the following adjustments: a) The dividend received by the holding company amounting to Rs. 89.28 lac (Previous Year Rs. 88.55 lac) from its subsidiary companies included in the schedule of Other Income in its individual balance sheet has been eliminated on consolidation. Extent of Parent Companys Shareholding 73.33% 100.00% 98.04%
Vardhman

b) The dividend received by the subsidiary company amounting to Rs. 90.72 lac (Previous Year Rs. 34.02 Lac) from its holding company included in the schedule of Other Income in its individual balance sheet has been eliminated on consolidation. c) The Parents portion of the proposed dividend amounting to Rs. 136.62 lac (Previous Year Rs. 89.28 lac) has been reduced from the aggregate of the proposed dividend as reflected in the financial statements of the subsidiary companies, as a result of which the profit carried to the consolidated balance sheet stands increased to that extent. d) The Subsidiarys portion of the proposed dividend amounting to Rs. Nil (Previous Year Rs. 45.36 lac) has been reduced from the aggregate of the proposed dividend as reflected in the financial statements of the holding company, as a result of which the profit carried to the consolidated balance sheet stands increased to that extent. e) The unrealised profit on intra group transactions amounting to Rs. 240.56 lac (Previous Year 57.06 lac) has been reduced from the share of profits of the Parent Company in the Consolidated Profit & Loss Accounts f) Unrealised profit for the previous year amounting to Rs. 57.06 lac (Previous Year Rs. 152.19 lac) has been reversed during the year and has been reduced from the figure of unrealised profit amounting to Rs. 240.56 lac (Previous Year Rs. 57.06 lac) made during the year.

61

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

(B) ASSOCIATES (i) Investment in associates has been accounted for as per the Equity Method of accounting as prescribed by Accounting Standard (AS) - 23 on Accounting for Investments in Associates as issued by the ICAI in the Consolidated Financial Statements. a) Goodwill amounting to Rs. 0.70 lac arising on the investment made by the company in the equity of its associate i.e.Vardhman Textile Components Ltd. has been reduced from the carrying amount of investment in Consolidated Financial statements. The carring amount of investment has also been adjusted thereafter to account for the share in the net assets of the associate after the date of acquisition of such shares.

b) As at 31st March, 2006, the amount of Rs. 110.42 lacs was included in the original cost of investment of Vardhman Acrylic Limited. During the year 53,740 no. of equity shares have been purchased. Accordingly, capital reserve amounting to Rs. 2.31 lac has been added to the carrying amount of investment. (ii) The details of investment in associates made by Vardhman Textiles Limited are given below: (Rs in lacs)
Associate Company Ownership Interest & Voting Power Original cost of Investment Amount of Capital Reserve included in original cost 112.73 ** Amount of Goodwill included in original cost 0.70 Accumulated Carrying amount at profit at the Investment at the year end year end 36.17 1,450.56 65.47 5,391.42

Vardhman Textile Components Ltd Vardhman Acrylics Ltd

21.43% 40.70%

30.00 3,828.13 *

* After adding cost amounting to Rs. 3.21 lac of 53,740 shares purchased during the year. ** After adding capital reserve amounting to Rs. 2.31 lac on account of purchased of 53,740 no of shares during the year. (iii) Companys share of contingencies and capital commitment in its associate for which the Company is also contingently liable is Rs. Nil and (Previous year Rs. Nil.) (C) OTHERS 1. There are contingent liabilities in respect of: a) Claims not acknowledged as debts b) Guarantees given by the Company on behalf of others (The Company has received a legal notice against one Guarantee which it is repudiating and legal steps are being taken up in this behalf) c) Guarantees given by the Company on behalf of Associate Company to the extent utilised d) Bank Guarantees and Letters of Credit outstanding e) Bills discounted with banks 2. Estimated amount of contracts remaining to be executed on Capital Account (Net of Advances) 31.3.2007 (Rs. In Lac) 1,362.49 37.14 31.3.2006 (Rs. In Lac) 619.06 37.14

1,020.96 22,602.58 6,702.95 38,313.76

3,547.60 7,439.52 7,242.14 21,410.56

3.

SEGMENT REPORTING Segment Information as required by Accounting Standard (AS)-17 on Segment Reporting issued by the Institute of Chartered Accountants of India and as compiled on the basis of the consolidated financial statements is disclosed below :The company has identified four segments as reportable segments viz. yarn, sewing thread, steel and fabric. The yarn segment comprises production of various types of yarns (from cotton, man-made fibers and blends thereof) and yarn processing activities.

62

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
The financial information about the business segments is presented in the table below:
(Rs. in Lacs) Yarn Current Year REVENUE External sales Inter-segment sales Other income Total revenue 112,581.02 32,721.96 1,468.37 146,771.35 Previous Year 100,515.25 28,005.67 1,249.57 129,770.49 Fabric Current Year 41,272.91 175.96 41,448.87 Previous Year 32,900.31 177.68 33,077.99 S.Thread Current Year 31,196.94 454.35 31,651.29 Previous Year 33,744.39 228.19 33,972.58 Steel Current Year 30,177.96 26.24 30,204.20 Previous Year 27,650.80 40.56 27,691.36 Current Year 215,228.83 32,721.96 2,124.92 2,50,075.71 Total Previous Year 194,810.75 28,005.67 1,696.00 224,512.42
Vardhman

RESULT Segment results 18,379.00 Unallocated Corporate Expenses (Net) Operating profit Interest expense Income tax - current - deferred - fringe benefit Profit from ordinary activities Extra-ordinary loss / (income) Net profit OTHER INFORMATION Segment assets Unallocated Corporate Assets Total assets Segment Liabilities Unallocated Corporate Liabilities Total liabilities Capital expenditure Depreciation Non-cash expenses other than depreciation

16,872.14

2,228.27

3,301.78

4,460.97

4,274.81

4,366.90

4,840.29

29,435.14 1,002.12 28,433.02 3,834.47 5,224.65 270.63 105.97 18,997.30 18,997.30

29,289.02 (815.84) 30,104.86 4,003.92 5,865.56 (303.34) 113.93 20,424.79 20,424.79

160,985.04 160,985.04 18,656.73 18,656.73 32,817.19 8,242.00 -

130,085.56 130,085.56 9,026.61 9,026.61 11,317.80 7,559.28 0.04

39,635.42 39,635.42 1,560.91 1,560.91 3,206.06 2,634.16 -

37,438.91 37,438.91 2,226.61 2,226.61 15,511.63 1,855.04 -

21,466.38 21,466.38 2,082.19 2,082.19 1,699.44 730.17 -

18,788.00 18,788.00 1,339.55 1,339.55 1,746.81 582.22 -

19,372.35 19,372.35 1,993.79 1,993.79 319.12 370.72 -

16,371.88 16,371.88 2,426.52 2,426.52 148.35 337.07 -

241,459.19 33,404.16 274,863.35 24,293.62 185,224.26 209,517.88 38,041.81 11,977.05 -

202,684.35 36,140.32 238,824.67 15,019.29 126,533.68 141,552.97 28,724.59 10,333.61 0.04

Geographical Segment: There is no reportable segment as none of the conditions as laid down for determining the geographical segments are satisfied. Segment Revenue & Expenses : Segment revenue comprises sales to external customers and inter segment sales. Segment expenses comprises expenses that are directly attributable to the segment and expenses relating to transactions with other segments of the enterprise. Segment Assets & Liabilities Segment assets include all operating assets used by a segment and consist of cash and bank balances, debtors, inventories and fixed assets. Segment liabilities include all operating liabilities and consist of creditors and other liabilities. Segment assets and liabilities do not include current and deferred taxes. For the purpose of Segment Assets & Liabilities, expenditure incurred in respect of its expansion projects viz. Vardhman Yarns at Satlapur and Vardhman Fabrics at Budhni, other than expansion at Satlapur of 34,800 spindles, has not been taken into account, as it is still under Capital work in progress. The said expenditure is Rs. 553.74 Crores as on 31st March 2007, 45.09 Crores as on 31st March 2006, which is inclusive of Captive Power Plant and Common utilities. Inter Segment Transfers : Inter segment transfers are accounted for at prevailing market prices. These transfers are eliminated in consolidation.

63

Consolidated Results of Vardhman Textiles Limited


Vardhman

(Formerly known as Mahavir Spinning Mills Limited)

4.

RELATED PARTY DISCLOSURE (a) Details of transactions entered into with the related parties during the year as required by Accounting Standard (AS) -18 on Related Party Disclosures issued by the Institute of Chartered Accountants of India are as under : (Rs. In Lacs)
Particulars Associates Key Management Personnel (KMP) Relatives of KMP Enterprises over which KMP is able to exercise significant influence Current Year Previous Year TOTAL

Current Year Purchase/processing of goods Purchase of DEPB licences Sale/processing of goods Sale of DEPB licences Purchase of Fixed Assets Sale of Fixed Assets Donation Rent Paid Payment against licence agreement Interest paid Interest received Commission Paid Guarantees given Managerial remuneration Sale of Investments Loan Given(Including Opening Balance) Loan Repayment Closing Balance Loan Taken Loan Repayment Closing Balance

Previous Current Year Year

Previous Current Previous Year Year Year

Current Year 13,311.86 1.53 134.79 400.00 141.38 6.01 37.50 61.06 149.86 1,020.96 629.21 16,184.00 16,171.50 12.50 1,590.50 1,575.50 15.00

Previous Year 11,291.25 20.13 285.34 146.43 680.26 75.00 5.86 38.57 138.81 60.34 4.43 3,547.60 611.40 1,558.49 9,840.00 8,526.00 1,314.00 7,560.24 7,558.74 1.50

13,311.86 11,291.25 1.53 20.13 285.34 134.79 146.43 400.00 95.00 82.57 141.38 6.01 37.50 53.34 502.69 75.00 5.86 38.57 129.13

7.72 149.86 1,020.96

9.68 60.34 4.43 3,547.60 629.21 611.40 15.00 1.00 14.00

16,170.00 16,170.00 -

9,825.00 8,525.00 1,300.00 1,165.00 1,165.00 -

14.00 1.50 12.50

1,590.50 1,575.50 15.00

1,558.49 6,395.24 6,393.74 1.50

(b) Disclosure of Related Parties with whom Business transactions took place during the year. 1. Subsidiary VMT Spinning Co. Ltd Vardhman Threads Ltd. Vardhman Yarns & Threads Ltd 2. Associates Vardhman Textile Components Ltd , Vardhman Acrylics Ltd Marubeni Corporation ,Marubeni Textile Asia Ltd, Toho Tenax Company Ltd 3. Key Management Personnel Mr. S.P.Oswal, Mr. D.L.Sharma ,Mr. Sachit Jain , Mrs. Suchita Jain Mr R K Riwari 4. Relatives of Key Management Personnel Mrs. Shakun Oswal 5. Enterprises over which Key Management Personnel *Vardhman Holdings Ltd. ( formerly known as Vardhman Spinning and relative of such personnel is able to exercise & General Mills Ltd.) significant influence Vardhman Apparels Ltd Banarso Devi Oswal Public Charitable Trust Sri Aurobindo Socio Economic and Management Research Institute *Adinath Investment & Trading Co. *Devakar Investment & Trading Co. (P) Ltd. *Srestha Holdings Ltd. *Santon Finance & Investment Co. Ltd. *Flamingo Finance & Investment Co. Ltd. *Ramaniya Finance & Investment Co. Ltd. *Marshall Investment & Trading Co. (P) Ltd. *Pradeep Mercentile Co. (P) Ltd. *Plaza Trading Co. (P) Ltd. *Vardhman Textile Processors (P) Ltd. *Anklesh Investments (P) Ltd. *Syracuse Investment & Trading Co. (P) Ltd. Note: *Only Loan Transactions have taken place with these Companies. (c) Disclosure of Related Parties with whom no Business transactions took place during the year Enterprises over which Key Management Personnel and Vardhman Linen Ltd relative of such personnel is able to exercise significant influence

64

Consolidated Results of Vardhman Textiles Limited


(Formerly known as Mahavir Spinning Mills Limited)
5.
Vardhman

EARNING PER SHARE (a) The calculation of Earnings Per Share (EPS) as disclosed in the Balance Sheet Abstract has been made in accordance with Accounting Standard (AS)-20 on Earnings Per Share issued by the Institute of Chartered Accountants of India. A statement on calculation of diluted EPS is as under: (Rs. in Lacs) Current Year Previous Year Profit after tax Add : Increased earnings on account of interest savings on dilutive potential equity shares (net of taxes) Total (A) Weighted average number of equity shares (No in lac) Weighted average number of equity shares which would be issued on conversion of dilutive potential equity shares (No in lac)* Total (B) Earnings per share : diluted (A/B) Rs. (b) 18,997.30 149.82 19,147.12 566.35 467.98 1,034.33 18.51 20,424.79 198.21 20,623.00 566.35 624.40 1,190.75 17.32

(c)

The diluted earnings per share has been disclosed in accordance with the requirements of the aforesaid Standard. There has been no default on any account during the relevant year which would required the conversion of debt/loans into equity. Further, there are no outstanding warrants . The conversion price of zero coupon foreign currency convertible bonds is higher than the fair value of the equity share as at the close of the year and is accordingly anti-dilutive. Therefore, the same has not been considered for computing the diluted earnings per share.

6.

Deferred Tax Liability (Net) as on 31st March, 2007 is as follows: As At 31.03.2007 Timing Difference on account of Depreciation Less : Deferred Tax Asset arising on account of timing difference Due to disallownaces u/s 43-B of the Income Tax Act, 1961. Due to Provision for doubtful debts Due to deduction u/s 35-D of the Income Tax Act, 1961. Due to brought forward capital loss Total 10,569.10 91.61 60.35 4.86 682.12 9,730.16 (Rs. in Lac) As At 31.03.2006 9,530.28 63.78 6.98 9,459.52

7.

The change in the amount of deferred tax liability on account of any change in the enacted tax rates and change in the quantum of depreciation allowable under the tax laws, is disclosed in the statement of profit and loss account as Deferred tax adjustment Previous years figures have been recast/regrouped wherever necessary to make these comparable with current Years figures. Figures in brackets indicate deductions.

8. 9.

10. Figures pertaining to the subsidiary company have been regrouped/recast wherever necessary to bring them in line with the parent Companys financial statements.

65

Vardhman

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES:
Financial Year ending of the Subsidiary Profit/(Losses) so far it concerns the members of the Holding Company and not dealt with the books of Accounts of the Holding Company (Except to the extent dealt within Col.6) (4) (Rs. in lac) (Rs. in lac) (5) (6) (7) (Rs. in lac) (8) (Rs. in lac) Profit/(Losses) so far it concerns the members of the Holding Company and dealt within the books of Accounts of the Holding Company. Profit/(Losses) so far it concerns the members of the Holding Company and not dealt within the books of accounts of the Holding Company (Except to the extent dealt within Col. 8) Profit/(Losses) so far it concerns the members of the H o l d i n g Company and dealt within the books of accounts of the Holding Company. Number of Shares held & Face Value Extent of Holding For Financial Year of the Subsidiary For the Previous Financial Years since it became a Subsidiary

Name of Subsidiary Company

(1)

(2)

(3)

VMT Spg. Co. Ltd. 31.03.07 31.03.07 98.04% 0.09 100% 655.04 Nil N.A

31.03.07

73.33%

835.61

89.28

1433.08 2691.07 0.00

554.43 200.00 N.A

Vardhman Threads Limited

Consolidated Results of Vardhman Textiles Limited

66
NEERAJ JAIN Chief Financial Officer

Vardhman Yarns & Threads Limited

1,51,80,060 of Rs.10/- each 80,00,000 of Rs.10/- each 50,000 of Rs 10/- each

Note : There is no material change between the end of the financial year of the Subsidiaries and that of the Company.

As per our report of even date attached For S.C. Vasudeva & Co., Chartered Accountants SANJIV MOHAN VIPIN GUPTA Partner Company Secretary Membership No. 86066

D.L. SHARMA President & Executive Director

S.P. OSWAL Chairman & Managing Director

(Formerly known as Mahavir Spinning Mills Limited)

PLACE : LUDHIANA DATED : 28th May, 2007

VMT Spinning Company Limited


DIRECTORS REPORT
Dear Members, The Directors of your Company have pleasure in presenting the Seventeenth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2007. 1. FINANCIAL RESULTS : The Financial Results for the year under review vis-a-vis the financial results for the previous year are as under :(Rs.) Particulars 2006-07 2005-06 59,39,54,777 11,52,67,846 63,11,790 4,42,53,445 6,47,02,611 1,25,00,000 38,63,339 2,53,000 20,000 4,80,66,272 3,24,998 91,32,307 5,75,23,577 4. Sales (Gross) 67,87,48,844 Profit before Depreciation, Interest & Tax (PBDIT) 14,85,67,219 Interest and Financial expenses 50,10,030 Depreciation 1,89,95,716 Profit before Tax (PBT) 12,45,61,473 Provision for Tax -Current Tax 1,40,00,000 -Deferred Tax (37,75,972) - Fringe Benefit Tax (FBT) 3,70,000 -Wealth Tax 16,000 Profit after Tax (PAT) 11,39,51,445 Add: Depreciation Adjustments Add: Balance brought forward 2,36,41,732 Profits available for 13,75,93,177 appropriation Appropriations: Proposed Dividend on 1,86,30,216 Equity Share Capital Corporate Tax on Proposed Dividend 31,66,205 Transfer to General Reserve 8,40,82,035 Balance carried to Balance Sheet 3,17,14,721 3. 2. EXPANSION :

Vardhman

During the year, the Company undertook expansion in its spindlage capacity by addition of 16800 spindles. The expanded capacity has been commissioned during the year. The expenses on some of the auxiliaries is yet to be incurred. DIRECTORS : Dr. D.R. Singh and Mr. S.P. Oswal, Directors of your Company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment.

M/s Marubeni Corporation appointed Mr. Kenichi Yamaguchi as a Director on the Board of the Company in place of Mr. Haruyasu Chihaya. The Board places on record its appreciation for the services rendered by Mr. Haruyasu Chihaya during his tenure as a Director of the Company.
DIVIDEND : The Board of Directors of your Company is pleased to recommend a dividend @ 9% on the paid-up Equity Share Capital of the Company. 5. AUDITORS : M/s S.S. Kothari and Company, Chartered Accountants, Chandigarh, retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. 6. AUDITORS REPORT : The Auditors Report on the Accounts is self-explanatory and requires no comments. 7. COST AUDITORS : The Board of Directors have re-appointed M/s. J.L. Chawla & Company, Cost Accountants, as Cost Auditors of the Company under Section 233-B of the Companies Act, 1956 subject to the approval of the Central Government for the financial year 2007-08. The Cost Auditors report for the financial year 2006-07 will be forwarded to the Central Government as required under law. 8. AUDIT COMMITTEE : The Company has an Audit Committee of its Board of Directors. The constituent members of the Audit Committee are Mr. Sachit Jain, Mr. Kenichi Yamaguchi and Mr. D.L. Sharma. The Committee met thrice during the year. 9. PERSONNEL & HUMAN RESOURCES : Your Company continues to lay emphasis on continued qualitative growth of its human resources by providing a congenial and conducive work environment in consonance with its belief that the real strength of its organisation lies in its employees. 10. INDUSTRIAL RELATIONS : The Company follows a policy of creating a healthy

1,21,74,388 17,07,458 2,00,00,000 2,36,41,732

13,75,93,177 57,52,35,777 Earnings per Share (Rs.) a) 5.50 2.76

Turnover and Profits : During the year under review, the gross sales of the Company were Rs. 67,87,48,844 as compared to Rs. 59,39,54,777 during the previous year registering an increase of 14.28%. The net profit, however, increased from Rs. 4,80,66,272 in the previous year to Rs. 11,39,51,445 during the year under review, registering an increase of 137.07 per cent. Production : The production of Yarn increased from 3,708 M.T. in the previous year to 3,788 M.T. during the year under review, showing an increase of 2.16 per cent. Exports : The FOB value of exports of the Company increased from Rs.33,35,37,482 in the previous year to Rs.40,08,86,957 during the year under review, registering an increase of 20.19 per .cent.

b)

c)

67

Vardhman

VMT Spinning Company Limited


concern basis. 12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO : Energy conservation continues to be an area of major emphasis in your Company. The Company has adopted the strategy of bringing about a general awareness amongst all regarding energy conservation. Particulars with respect to conservation of energy and other areas as per Section-217 (1)(e) of the Companies Act- 1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are annexed hereto and form part of this report. 13. ACKNOWLEDGEMENT : Your Directors are pleased to place on record their sincere gratitude to Government, Bankers and Business Constituents for their continued valuable co-operation and support to the Company. Your Directors also express their deep appreciation for the devoted and sincere services rendered by workers, staff and executives at all levels of operations of the Company during the year and we are confident that your Company will continue to receive such co-operation from them in future also. FOR AND ON BEHALF OF THE BOARD PLACE: LUDHIANA DATED: 14th MAY, 2007 (S.P. OSWAL) CHAIRMAN

environment and work culture resulting in harmonious interpersonal relations. The industrial relations remained peaceful in the unit of the Company at Baddi during the year. During the year, no employee of the company received a salary of more than Rs.24.00 lac per annum or Rs.2.00 lac per month. Accordingly, no particulars of employees are to be given pursuant to the provisions of Section 217(2A) of the Companies Act, 1956. 11. DIRECTORS RESPONSIBILITY STATEMENT : Pursuant to Section-217(2AA) of the Companies Act, 1956, the Directors confirm that i) II) in the preparation of the annual accounts, the applicable accounting standards have been followed; appropriate accounting policies have been selected and applied consistently, and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March, 2007 and of the profit of the Company for the year ended on 31st March, 2007; proper and sufficient care has been taken 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: the annual accounts have been prepared on a going

III)

IV)

ANNEXURE TO THE DIRECTORS REPORT


INFORMATION AS PER SECTION 217 (1) (e) READ WITH COMPANIES ( DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OFDIRECTORS RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007. 1. CONSERVATION OF ENERGY : The Company has initiated several steps to conserve energy wherever possible. This has been earmarked as a thrust area with studies, discussions and analysis being undertaken regularly for further improvement. FORM-A: PARTICULARS UNIT 2006-07 2005-06 A) POWER AND FUEL CONSUMPTION : Electricity: a) Purchased Units KWH 1,69,99,314 1,66,26,000 Total amount Rs. 5,31,83,326 5,41,75,628 Rate per unit Rs. 3.13 3.26 b) Own Generation through Diesel Generator KWM 26,46,470 12,42,900 Units per litre of Diesel KWM 3.69 3.69 Cost per Unit Rs. 7.28 5.88 B) CONSUMPTION PER UNIT OF PRODUCTION : Cotton Yarn: Electricity (KWH/KG) 5.10 5.01 2. TECHNOLOGY ABSORPTION : Efforts made in Technology Absorption are furnished in Form-B as under:FORM-B: A. RESEARCH AND DEVELOPMENT (R&D) : The R&D efforts in the Company are focused on productivity improvement and better control parameters, quality improvement and higher efficiencies. Expenditure on R&D equipment (Rs.) 2006-07 2005-06 Capital 19,39,616 12,91,990 Recurring 1,14,345 1,75,504 Total 20,53,961 14,67,494 Total R&D expenditure as percentage of turnover 0.30 0.25 B. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION : The Company has machinery of latest technology and is continuously adapting the process of production to the Stateof-the-Art Technology. As a result, the Company has been able to further strengthen its position in the international market. 3. FOREIGN EXCHANGE EARNINGS AND OUTGO : (Rs.) 2006-07 2005-06 Foreign Exchange earned (FOB Value of exports) 40,08,86,957 33,35,37,482 Foreign Exchange used (CIF value of imports and 23,25,76,838 2,28,34,959 Expenditure in foreign cuuuency

68

VMT Spinning Company Limited


AUDITORS REPORT
To The Members, VMT Spinning Company Limited 1. We have audited the attached balance sheet of VMT SPINNING COMPANY LIMITED, Ludhiana as at 31st March, 2007, and also the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys 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 (Auditors 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, we enclose in the enclosed Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. 4. Further to our comments in the Annexure referred to in Para 3 above, we report that: (i) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; (ii) In our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books; (iii) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account; (iv) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956; (v) On the basis of written representations received from the directors, as on 31st March, 2007 and taken on record by the Board of Directors, we report that none of the directors are disqualified as on 31st March, 2007 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; (vi) In our opinion and to the best of our information and according to the explanations given to us, the said Balance 3.

Vardhman

Sheet and Profit & Loss Account, and read together with significant Accounting Policies and other notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (a) in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2007; (b) in the case of the profit and loss account, of the profit for the year ended on that date; and (c) in the case of the cash flow statement, of the cash flows for the year ended on that date.

For S.S. KOTHARI & CO., CHARTERED ACCOUNTANTS PLACE : New Delhi DATED : 14TH MAY, 2007 (CA DINESH K. ABROL ) PARTNER Membership No. 87899

ANNEXURE TO THE AUDITORS REPORT


(Referred to in paragraph 3 of our report of even date) 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. During the financial year all the Fixed Assets were physically verified and the discrepancies observed have been properly adjusted in the books of accounts. During the year, the company has not disposed off substantial portion of fixed assets. Therefore, it has not affected the ability of Company to continue as going concern. The inventory of the Company has been physically verified during the year by the management. In our opinion, the frequency of verification is reasonable. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management are reasonable and adequate in relation to the size of the company and the nature of its business. On the basis of our examination of the records of inventory, we are of the opinion that the company is maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and the book records were not material and have been adequately dealt with in books of accounts. The Company has not granted any loans to companies, firms and other parties covered in the register maintained under section 301 of the Companies Act, 1956.

2.

4.

5.

6.

7.

69

Vardhman

VMT Spinning Company Limited


cess and other statutory dues were outstanding, as at 31.03.2007 for a period of more than six months from the date they became payable. 17. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, there are no dues of sale tax, income-tax, wealth tax, service tax, customs duty, excise duty, cess which have not been deposited on account of any dispute, except the following:

8.

The Company has not taken any loans from companies, firms and other parties covered in the Register maintained under Section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business with regard to purchases of inventory, fixed assets and with regard to the sale of goods and services. Further, on the basis of our examination of the books and records of the Company, carried out in accordance with the generally accepted auditing practices in India, we have neither come across nor have we been informed of any instance of major weaknesses in the aforesaid internal control procedures.

9.

Sl. Nature of dues No. 1. 2. Income Tax (AY 2003-04)

Amount due (Rs.) Basic 9,26,818 Interest 1,63,218

Forum where pending Commissioner of Income Tax (Appeals). Assistant Commissioner Central Excise, Shimla.

10. Based on the audit procedures applied by us and according to the information and explanations provided by the management, we are of the opinion that the transactions that need to be entered into the register maintained under section 301 have been so entered. 11. In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the registers maintained under Section 301 have been made at prices which are reasonable having regard to prevailing market prices at the relevant time. 12. In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits within the meaning of section 58A, 58AA or any other relevant provisions of the Companies Act, 1956 and rules framed thereunder. We have been explained that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any other tribunal against the Company during the year. 13. In our opinion, the company has an internal audit system commensurate with the size and nature of its business. 14. We have broadly reviewed the books of account maintained by the company pursuant to the Rules made by the Central Government for the maintenance of cost records under Section 209 (1) (d) of the Companies Act, 1956 and we are of the opinion that prima facie the prescribed accounts and records have been made and maintained. However, we have not made a detailed examination of the said records with a view to determine whether they are accurate or complete. 15. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the company is generally regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty, cess and other statutory dues applicable to it. 16. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, no undisputed amounts payable in respect of provident fund, employees state insurance, income-tax, wealth tax, service tax, sales tax, custom duty, excise duty,

Utilised Cenvat 1,60,984 Credit for payment of Service tax on GTA (01.01.2005 to 30.09.05) Utilised Cenvat 1,05,211 Credit for payment of Service tax on GTA (01.06.2005 to 30.09.05) Non Payment of Basic 10,07,859 Service Tax on Interest 36,614 Export Commission Penalty 10,29,759 (09.07.2004 to 30.06.05) Utilised Cenvat 2,14,174 Credit for payment of Service tax on GTA (01.10.2005 to 31.03.06)

3.

Assistant Commissioner Central Excise, Shimla.

4.

Commissioner Central Excise (Appeals), Chandigarh

5.

Assistant Commissioner Central Excise, Shimla.

18. The Company does not have accumulated losses as at the end of the financial year. The company has not incurred any cash losses during the financial year covered by our audit and the immediately preceding financial year. 19. Based on our audit procedures and on the information and explanations given by the management, we are of the opinion that the company has not defaulted in repayment of dues to any financial institution or bank during the year. 20. According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions. 21. According to the records of the Company examined by us and the information and explanations given to us, in our opinion, the term loans taken by the Company have been applied for the purpose for which they were obtained. 22. According to the information and explanations given to us and on the basis of an overall examination of the balance sheet of the Company, in our opinion, generally, there are no funds raised by the Company on short-term basis, which have been used for long-term investment. 23. The Company has not made any preferential allotment of shares during the year. 24. The Company has not issued any debentures during the period covered by our audit report.

70

VMT Spinning Company Limited


25. The Company has not raised any money by way of public issue during the period covered by our audit report. 26. During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, 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.

Vardhman

27. The other provisions of the Order do not appear to be applicable for the year under report. For S.S. KOTHARI & CO. CHARTERED ACCOUNTANTS PLACE : NEW DELHI DATED : 14TH MAY, 2007 (CA DINESH K. ABROL) PARTNER Membership No. 87899

71

Vardhman

VMT Spinning Company Limited


Schedule No. As at 31.03.2007 (Rs.) As at 31.03.2006 (Rs.)

BALANCE SHEET as at 31st March, 2007


Particulars

I.

SOURCES OF FUNDS 1. Shareholders' Funds 1 2 3 20,70,02,400 29,17,14,721 40,39,42,010 1,73,73,563 92,00,32,694 20,70,02,400 19,95,59,697 19,11,44,878 2,11,49,535 61,88,56,510

a) Share Capital b) Reserves & Surplus 2. Loan Funds Secured Loans 3. Deferred Tax TOTAL II. APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-Progress 2. Current Assets, Loans & Advances a) Inventories b) Sundry Debtors c) Cash & Bank Balances d) Loans & Advances Less: Current Liabilities & Provisions a) Liabilities b) Provisions Net Current Assets ( A-B ) TOTAL

4 1,03,79,66,442 51,92,56,043 51,87,10,399 58,55,778 52,45,66,177 30,34,27,640 4,55,40,008 1,27,26,929 9,93,86,471 46,10,81,048 4,32,80,110 2,23,34,421 6,56,14,531 39,54,66,517 92,00,32,694 66,35,02,354 50,20,46,675 16,14,55,679 2,59,81,997 18,74,37,676 25,09,48,622 3,59,05,146 99,56,497 17,89,02,695 47,57,12,960 3,07,98,280 1,34,95,846 4,42,94,126 43,14,18,834 61,88,56,510

5 6

(A) 7

(B)

NOTES ON ACCOUNTS 16 The Schedules referred to above form an integral part of the Balance Sheet

As per our report of even date attached For S.S. Kothari & Co. Chartered Accountants CA DINESH K. ABROL G.K. SHARMA Partner Company Secretary
Membership No. 87899

ALOK AGGARWAL Chief Manager (Comm. & Admn.)

SACHIT JAIN Executive Director

S.P. OSWAL Chairman

PLACE : NEW DELHI DATED : 14th May, 2007

72

VMT Spinning Company Limited


PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2007
Particulars INCOME Sales (Gross) Less: Excise Duty Sales (Net) Other Income TOTAL EXPENDITURE Raw Material Consumed & Purchase of Finished Goods Manufacturing Expenses Personnel Expenses Administrative & Other Expenses Interest & Financial Charges Selling & Distribution Expenses (Increase) / Decrease in Work-in-process & Finished Stock Difference of Excise Duty on Stocks Miscellaneous Expenditure Written off Depreciation TOTAL Profit before Tax Less : Provision for - Current Tax - Deferred Tax - Fringe Benefits Tax (FBT) - Wealth Tax Profit after Tax Add : Depreciation Adjustments Add : Balance brought forward Balance available for appropriation Appropriations : Proposed Dividend on Equity Capital Corporate Tax on Proposed Dividend Transfer to General Reserve Balance carried to Balance Sheet Earnings per share ( Basic & Diluted) (Face Value of Rs.10 per share) NOTES ON ACCOUNTS 16 The Schedules referred to above form an integral part of the Profit and Loss Account
As per our report of even date attached For S.S. Kothari & Co. Chartered Accountants CA DINESH K. ABROL G.K. SHARMA Partner Company Secretary
Membership No. 87899

Vardhman

Schedule No.

Current Year (Rs.) 67,87,48,844 46,18,994 67,41,29,850 86,01,633 68,27,31,483 33,82,28,330 11,41,06,190 3,14,78,251 1,51,18,230 50,10,030 4,56,88,127 (99,69,336) (4,85,528) 1,89,95,716 55,81,70,010 12,45,61,473 1,40,00,000 (37,75,972) 3,70,000 16,000 11,39,51,445 2,36,41,732 13,75,93,177 1,86,30,216 31,66,205 8,40,82,035 3,17,14,721 13,75,93,177 5.50

Previous Year (Rs.) 59,39,54,777 74,45,506 58,65,09,271 24,56,011 58,89,65,282 29,85,72,893 9,76,99,655 2,75,89,074 1,12,53,509 63,11,790 3,59,38,294 28,84,172 (2,44,365) 4,204 4,42,53,445 52,42,62,671 6,47,02,611 1,25,00,000 38,63,339 2,53,000 20,000 4,80,66,272 3,24,998 91,32,307 5,75,23,577 1,21,74,388 17,07,458 2,00,00,000 2,36,41,732 5,75,23,577 2.76

9 10 11 12 13 14 15

ALOK AGGARWAL Chief Manager (Comm. & Admn.)

SACHIT JAIN Executive Director

S.P. OSWAL Chairman

PLACE : NEW DELHI DATED : 14th May, 2007

73

Vardhman

VMT Spinning Company Limited


Current Year (Rs.) Previous Year (Rs.)

CASH FLOW STATEMENT for the period 1st April, 2006 to 31st March, 2007
Particulars

A.

CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before Tax and Extraordinary items Adjustments for : Depreciation Interest charged Miscellaneous expenses written off Interest/Dividend Received Excess Provision written Back Sundry Balances Written Off Loss on sale of fixed asset Operating Profit before Working Capital Changes Adjustments for : Decrease/(Increase) in Trade & other Receivables Decrease/( Increase) in Inventories (Decrease)/Increase in liabilities Cash Generation from Operations Taxes Paid Net Cash from Operating activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets Sale of Fixed Assets Interest/Dividend Received Net Cash used in investing activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from Issue of Capital Proceeds from Secured Borrowings(Net) Interest Paid Dividend Paid Net Cash from Financing Activities Net Increase in cash & cash equivalents Cash & cash equivalents (Opening) Cash & cash equivalents (Closing)

12,45,61,473 1,89,95,716 24,24,741 (1,84,523) (7,32,517) 4,68,744 2,08,364 2,11,80,525 14,57,41,998 6,79,96,271 (5,24,79,018) 1,32,30,347 4,42,53,445 42,45,970 4,204 (1,54,295) (10,84,092) 2,38,717

6,47,02,611

4,75,03,949 11,22,06,561

(15,37,20,933) (2,56,98,770) 28,96,494 (17,65,23,209) 2,87,47,600 17,44,89,598 (6,43,16,649) (1,55,55,458) (1,48,52,538) (1,55,55,458) (1,48,52,538) 15,89,34,140 (7,91,69,187) (35,46,45,034) 98,800 1,84,523 (2,50,15,183) 1,54,295 (35,43,61,711) (2,48,60,888) 3,45,00,400 9,20,15,354 (42,45,970) (1,20,75,140) 19,81,98,003 27,70,432 99,56,497 1,27,26,929 11,01,94,644 61,64,570 37,91,927 99,56,497

21,27,97,132 (24,24,741) (1,21,74,388)

As per our report of even date attached For S.S. Kothari & Co. Chartered Accountants CA DINESH K. ABROL G.K. SHARMA Partner Company Secretary
Membership No. 87899

ALOK AGGARWAL Chief Manager (Comm. & Admn.)

SACHIT JAIN Executive Director

S.P. OSWAL Chairman

PLACE : NEW DELHI DATED : 14th May, 2007

74

VMT Spinning Company Limited

Vardhman

Schedule 1 to 16 Annexed to and forming part of the Balance Sheet as at 31st March, 2007 and Profit and Loss Account for the year ended 31st March, 2007
As at 31.03.2007 (Rs.) SCHEDULE 1 SHARE CAPITAL Authorised: 2,50,00,000 Equity Shares (Previous Year 2,50,00,000) of Rs. 10/- each 1,00,00,000 Redeemable Cumulative Preference Shares (Previous Year 1,00,00,000) of Rs.10/-each ISSUED : 2,07,00,690 60,00,000 As at 31.03.2006 (Rs.)

25,00,00,000

25,00,00,000

10,00,00,000 35,00,00,000

10,00,00,000 35,00,00,000

Equity Shares (Previous Year 2,07,00,690) of Rs. 10/- each 12% Redeemable Cumulative Preference Shares (Previous Year 60,00,000) of Rs.10/-each

20,70,06,900 6,00,00,000 26,70,06,900

20,70,06,900 6,00,00,000 26,70,06,900

SUBSCRIBED & PAID-UP : 2,07,00,240 Equity Shares (Previous Year 2,07,00,240) of Rs. 10/- each fully paid up TOTAL

20,70,02,400 20,70,02,400

20,70,02,400 20,70,02,400

NOTE:Out of the above 1,51,80,060 Equity shares (Previous Year 1,51,80,060 equity shares,) of Rs.10/- each fully paid up are

held by Vardhman Textiles Limited (formerly Mahavir Spinning Mills Ltd.) i.e. the Holding Company.

SCHEDULE 2 RESERVES AND SURPLUS Capital Redemption Reserve General Reserve As per last Account Add : Transferred from Profit & Loss Account Surplus i.e. Balance as per annexed Profit & Loss Account TOTAL 6,00,00,000 11,59,17,965 8,40,82,035 20,00,00,000 3,17,14,721 29,17,14,721 6,00,00,000 9,59,17,965 2,00,00,000 11,59,17,965 2,36,41,732 19,95,59,697

SCHEDULE 3 SECURED LOANS Loans and Advances from Banks : - Term Loans - Working Capital Borrowings TOTAL

33,00,00,000 7,39,42,010 40,39,42,010

10,00,00,000 9,11,44,878 19,11,44,878

NOTE : 1. Term Loans from Banks are secured by hypothecation of indigenous and imported fixed assets, both present and future and by equitable mortgage created or to be created on all immovable assets both present and future. 2 Working Capital Borrowings from Banks are secured by hypothecation of inventories, confirmed and irrevocable letters of credit and export bills and collaterally secured by way of equitable mortgage created or to be created on all immovable assets both present and future and hypothecation of plant and machinery and other miscellanous fixed assets . 3 Amount due for repayment out of term loan within one year is Rs. 24,00,000/- ( Previous Year Nil)

75

Vardhman

VMT Spinning Company Limited


(Amount in Rs.)
GROSS BLOCK As at 01.04.2006 63,40,061 10,65,45,989 54,30,66,647 30,55,599 44,94,058 66,35,02,354 65,91,56,171 Additions Sales/ Adjustments 17,15,063 13,012 3,56,954 As at 31.03.2007 63,40,061 15,61,04,763 86,74,63,069 32,94,936 47,63,613 66,35,02,354 As at 01.04.2006 2,53,87,362 47,32,90,383 18,86,013 14,82,917 50,20,46,675 45,81,18,228 DEPRECIATION For the year 29,29,379 1,55,33,360 1,27,716 4,05,261 1,89,95,716 4,42,53,445 Sales/ Adjustments 16,29,310 12,754 1,44,283 17,86,347 3,24,998 As at 31.03.2007 2,83,16,741 48,71,94,433 20,00,975 17,43,895 51,92,56,043 50,20,46,675 NET BLOCK As at 31.03.2007 63,40,061 As at 31.03.2006 63,40,061

SCHEDULE 4 FIXED ASSETS


Sr. Particulars No.

1. LAND 2. BUILDINGS 3. PLANT & MACHINERY 4. FURNITURE & FIXTURES 5. VEHICLES CURRENT YEAR PREVIOUS YEAR

4,95,58,774 32,61,11,486 2,52,350 6,26,509 37,65,49,119 43,46,183

12,77,88,023 8,11,58,627 38,02,68,636 6,97,76,264 12,93,962 30,19,718 16,14,55,679 11,69,586 30,11,141

20,85,029 103,79,66,442

51,87,10,399 16,14,55,679

* Adjustment relating to earlier year.

As at 31.03.2007 (Rs.) SCHEDULE 5 CAPITAL WORK-IN-PROGRESS Machinery under erection Building under construction Capital Advance Project and Pre-operative Expenses TOTAL SCHEDULE 6 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS 1. Inventories (Valued at cost or net realisable value, whichever is lower, as certified by the Executive Director of the Company) Raw Materials Work-in-Process Finished Goods Stores & Spares Material in transit Sub-Total 2. Sundry Debtors (Unsecured) (considered good, unless otherwise stated) i) Debts outstanding for a period exceeding six months ii) Other debts Sub-Total 3. Cash and Bank Balances i) Cash Balances Cash, Cheques in hand and remittances in transit ii) Bank Balances With scheduled banks: In current accounts Sub-Total B. LOANS AND ADVANCES (Unsecured) (considered good, unless otherwise stated) i) Advances recoverable in cash or in kind or for value to be received ii) Balance with Government Authorities Sub-Total TOTAL 26,40,695 25,57,023 6,58,060 58,55,778

As at 31.03.2006 (Rs.) 8,34,038 1,42,28,597 1,06,33,061 2,86,301 2,59,81,997

25,35,96,143 1,95,13,337 1,59,93,540 58,04,296 85,20,324 30,34,27,640 3,47,417 4,51,92,591 4,55,40,008

21,70,27,973 1,27,22,848 1,28,14,693 27,18,616 56,64,492 25,09,48,622 1,47,224 3,57,57,922 3,59,05,146

1,08,82,224

16,66,123

18,44,705 1,27,26,929

82,90,374 99,56,497

8,65,70,874 1,28,15,597 9,93,86,471 46,10,81,048

15,54,43,988 2,34,58,708 17,89,02,695 47,57,12,961

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VMT Spinning Company Limited


SCHEDULE 7 CURRENT LIABILITIES AND PROVISIONS A. As at 31.03.2007 (Rs.)

Vardhman

As at 31.03.2006 (Rs.)

CURRENT LIABILITIES Sundry Creditors Total outstanding dues to Small Scale Industrial Undertakings 1,80,845 Total outstanding dues of creditors other than Small Scale Industrial Undertakings 95,81,687 Trade Deposits & Advances 11,29,758 Other Liabilities 3,23,87,820 Sub-Total PROVISIONS Provision for Taxation Less : Prepaid Tax Provision for Wealth Tax Provision for Fringe Benefits Tax Less : Prepaid Tax Proposed Dividend Corporate Dividend Tax thereon Sub-Total TOTAL 4,32,80,110 1,40,00,000 1,34,00,000 3,70,000 4,48,000

1,16,554 61,16,795 17,46,495 2,28,18,436 3,07,98,280

B.

6,00,000 16,000 (78,000) 1,86,30,216 31,66,205 2,23,34,421 6,56,14,531

(4,00,000) 20,000 (6,000) 1,21,74,388 17,07,458 1,34,95,846 4,42,94,126 Previous Year (Rs.)

Current Year (Rs.) SCHEDULE 8 - OTHER INCOME Interest Received (Gross) (TDS Rs. 29,435/Previous Year Rs. 20,565/-) Profit on Sale of Assets Provisions no Longer Required Written Back Prior Period Income Claims Received Sundry Balances Written Back Duty Draw Back Received Miscellaneous Receipts Total 1,84,523 8,621 7,32,517 3,69,803 2,50,125 17,968 69,26,088 1,11,988 86,01,633

1,54,295 10,84,092 2,99,152 7,87,608 12,330 1,18,534 24,56,011

SCHEDULE 9 RAW MATERIAL CONSUMED & PURCHASE OF FINISHED GOODS Opening Stock Add: Purchases Less: Closing Stock Raw Material consumed Add : Purchase of Finished Goods Total 21,70,27,973 33,29,92,729 55,00,20,702 25,35,96,143 29,64,24,559 4,18,03,771 33,82,28,330 18,82,47,357 29,21,37,676 48,03,85,033 21,70,27,973 26,33,57,060 3,52,15,833 29,85,72,893

77

Vardhman

VMT Spinning Company Limited


Current Year (Rs.) Previous Year (Rs.) 6,14,77,810 30,22,429 83,75,607 1,09,99,766 7,27,448 1,30,96,595 9,76,99,655

SCHEDULE 10 MANUFACTURING EXPENSES Power & Fuel Stores and Spares Consumed Packing Charges Machinery Repairs Electric Repair Processing Charges Total 7,24,56,336 32,82,365 1,04,79,384 1,55,22,233 5,81,049 1,17,84,823 11,41,06,190

SCHEDULE 11 PERSONNEL EXPENSES Salaries , Wages & other Allowances Contribution to Provident and other Funds Workmen and Staff Welfare Total 2,75,18,279 29,22,919 10,37,053 3,14,78,251 2,43,90,369 26,55,733 5,42,972 2,75,89,074

SCHEDULE 12 ADMINISTRATIVE AND OTHER EXPENSES Managerial Remuneration Rates & taxes Insurance Auditors Remuneration - As Audit Fee - As Tax Audit Fee - Out of Pocket Expenses Cost Auditors Remuneration - As Audit Fee - Out Of Pocket Expenses Legal & Professional Travelling & Conveyance : - Directors - Others Printing & Stationery Communication & ERP Expenses General Repair & Office Maintenance Building Repair & Maintenance Vehicle Expenses Previous Year Expenses Sundry Balances Written Off Exchange Rate Fluctuation Loss on Sale of Fixed Asset Miscellaneous Expenses Total 11,57,613 3,16,679 27,81,815 89,792 22,448 68,842 20,000 6,939 3,13,878 5,040 9,28,842 2,99,211 4,58,576 4,49,599 14,90,492 43,62,968 11,26,193 3,04,538 1,64,206 2,08,364 5,42,195 1,51,18,230 10,89,178 1,14,633 27,54,618 60,000 15,000 17,850 10,000 2,752 3,23,029 1,000 2,66,008 2,86,683 5,75,374 3,91,097 4,57,217 33,43,391 7,76,096 2,33,572 5,145 5,30,866 1,12,53,509

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VMT Spinning Company Limited


Current Year (Rs.) SCHEDULE 13 FINANCIAL EXPENSES Interest on : - Term Loans - Working Capital : Less :Interest Received (TDS Rs.12,22,475/- Previous Year Rs. 3,40,082/-) Bank and other Charges Total 16,81,362 62,31,487 54,88,109 25,85,290 50,10,030

Vardhman

Previous Year (Rs.)

58,05,937 15,59,967 20,65,820 63,11,790

SCHEDULE 14 SELLING EXPENSES Forwarding Charges & Octroi Business Promotion Commission Rebate and Discount Cess on Yarn Service Tax Miscellaneous Expeneses Total 3,08,73,420 78,280 1,17,59,247 96,103 2,91,234 18,16,716 7,73,127 4,56,88,127 2,37,72,479 84,880 1,03,12,014 1,26,604 2,61,034 1,31,749 12,49,534 3,59,38,294

SCHEDULE 15 (INCREASE)/DECREASE IN WORK-IN-PROCESS & FINISHED STOCK Opening Stock Work-in-Process Finished Goods Less : Closing Stock Work-in-Process Finished Goods Total 1,27,22,848 1,28,14,693 2,55,37,541 86,25,751 1,97,95,962 2,84,21,713

1,95,13,337 1,59,93,540 (99,69,336)

1,27,22,848 1,28,14,693 28,84,172

79

Vardhman

VMT Spinning Company Limited

SCHEDULE 16 - NOTES ON ACCOUNTS 1. Significant Accounting Policies : a) Accounting Convention : The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in sub - section (3C) of section 211 of The Companies Act, 1956 and other relevant provisions of the said Act. b) Revenue Recognition : i) Sales : a) Export sales are converted at negotiated rate, that approximates the actual rate prevailing on the date of the transaction and / or at the forward contract rate, if so applicable. The unnegotiated export sale at the end of the year has been recognised at the closing conversion rate, as previously followed. b) Domestic Sales (Gross) include excise duty and freight and is recognised on despatch of goods to customers. ii) Insurance and Other Claims : The revenue in respect of claims is recognised when no significant uncertainty exists with regard to the amount to be realised and the ultimate collection thereof. iii) Benefit under Duty Entitlement Pass Book / Duty Drawback Scheme : Revenue in respect of the above benefits is recognised on post export basis. c) Retirement Benefits : i) Gratuity : Provision for gratuity liability to employees is made on the basis of actuarial valuation. ii) Leave Encashment : Provision for leave encashment is made on the basis of leave accrued to the employees during the calendar year and has been determined on actuarial valuation. iii) Provident Fund : Contribution to Provident Fund is made in accordance with the provisions of the Provident Fund Act, 1952 and is treated as revenue expenditure. iv) Superannuation: The liability in respect of eligible employees covered under the scheme is provided as per the Companys policy on an accrual basis. d) Fixed Assets : Fixed Assets are stated at historical cost less depreciation. e) Depreciation : i) Depreciation is provided on straight line method in accordance with and in the manner specified in Schedule XIV to the Companies Act, 1956 , except in case of computers on which depreciation has been provided @ 25 % on straight line basis. ii) Depreciation on assets costing Rs.5,000/- or below acquired during the year is charged @ 100%. f) Inventories : Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of various items of inventories is computed as under: * In case of raw materials at weighted average cost plus direct expenses. * In case of stores & spares at weighted average cost plus direct expenses. * In case of work-in-process at raw material cost plus conversion cost depending upon the stage of completion. * In case of finished goods at raw material cost plus conversion cost, packing cost, excise duty and other overheads incurred to bring the goods to their present condition and location. g) Foreign Currency Conversion/Translation : - Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate at the date of the transaction. - Foreign Currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise except in case of liabilities incurred for the purpose of acquiring the fixed assets from outside India in which case such exchange differences are adjusted in the carrying amount of fixed assets. - The premium or discount arising at the inception of forward exchange contracts is amortised as an expense or income over the life of the contract. - Exchange differences on the aforesaid forward exchange contract are recognised in the statement of profit & loss in the reporting period in which the exchange rates change. Profit or loss arising on cancellation or renewal of such contracts is recognised as income or as expense in the period in which such profit or loss arises. h) Borrowing Costs : Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as expense in the period in which they are incurred. i) Expenditure incurred during construction period : In respect of major expansion, the indirect expenses incurred during construction period upto the date of commercial production is capitalised on various categories of fixed assets on proportionate basis. j) Accounting for Tax on Income : The accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the amount of income-tax determined to be payable in respect of taxable income for a period. Deferred Tax is the tax effect of all timing differences. k) Impairment of Assets At each balance sheet date, an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of accounts.

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VMT Spinning Company Limited


2. There are contingent liabilities in respect of : As at 31.03.2007 (Rs.) a) b) c) 3. Bank Guarantees and Letters of Credit outstanding Export Bills discounted with banks against irrevocable letters of credit Other contingent liabilities 1,34,33,995 5,87,77,059 39,28,857 2,12,69,304

Vardhman

As at 31.03.2006 (Rs.) 15,31,88,148 4,74,45,489 10,90,036 20,40,39,368

Estimated amount of contracts remaining to be executed on Capital Account (Net of Advances)

4.

The Company has executed bond for aggregate amount of Rs.3,000 lacs (Previous Year Rs.3,000 lac) in favour of the President of India under Sections 59 (2) and 67 of the Customs Act, 1962 and Central Excise Act, 1944 for fulfilment of obligations under the said Acts. The Company has contested the additional demand in respect of Excise Duty/Custom Duty/Income Tax amounting to Rs. 3,928,857/- (Previous Year Rs.1,090,036/-) in different cases.The Company has filed an appeal with the Appellate Authorities. No provision has been made in the books of accounts in respect thereof. The company has de-bonded its unit during the current financial year and has converted it to Domestic Tariff Area (DTA) unit from Export Oriented Unit (EOU). All the legal formalities/obligations for this conversion have been adhered to. Computation of net profit under Section 198 read with Section 349 of the Companies Act,1956,for the purpose of commission payable to the Executive Director: Current Year Previous Year (Rs.) (Rs.) Profit before tax Add: Depreciation for the year Executive Directors Remuneration Less : Depreciation for the year Profit for computation of commission Maximum permissible i.e. 5% of profits Commission payable to Executive Director @ 75 % of Salary Remuneration has been given to the Executive Director as per terms of appointment. 12,45,61,473 1,89,95,716 11,57,613 1,89,95,716 12,57,19,085 62,85,954 3,80,625 6,47,02,611 4,42,53,445 10,89,178 4,42,53,445 6,57,91,789 32,89,589 3,58,125

5.

6. 7.

8.

Remuneration paid/payable to the Executive Director:Current Year (Rs.) Salary House Rent Allowance Commission ( 75% of salary) Contribution to Provident & Other Funds 5,07,500 2,03,000 3,80,625 66,488 Previous Year (Rs.) 4,77,500 1,91,000 3,58,125 62,553

9.

Previous years figures have been recast/regrouped wherever necessary, to make these comparable with current years figures.

10. The Company owes Rs. 70,510/- (Previous Year Rs. 101,676/-) to Bhandari Deepak Industries, Rs. 58,545/- (Previous Year Rs. Nil) to Essel Industries, Rs. 20,865/- (Previous Year Rs. 4,556/-) to Dinesh Printing Press, Rs. 275/- (Previous Year Rs.Nil) to Jyoti Rubber & Plastic Co., Rs.716/- (Previous Year Rs.Nil), to Shailja Graphic Art, Rs. Nil (Previous Year Rs. 6,874/-) to Jayanti Polymers Industries, Rs. Nil (Previous Year Rs.1,500/-) to Usha Engineering Services, Rs.8,449/- (Previous Year Nil) to Packwell Products India, Rs. 20,046/- (Previous Year Nil) to Vir Engineering Works, Rs.1,439/- (Previous Year Rs. Nil) to Manya Engg. & Services, Rs. Nil (Previous Year Rs. 1,948/-) to Alfa Electronics, being total amounting to Rs. 1,80,845/- (Previous Year Rs. 1,16,554/-) to Small Scale Industrial Undertakings as at March 31st, 2007. 11. Segment Reporting : The Company operates only in one business segment viz. Yarn which is the reportable segment in accordance with the requirements of Accounting Standard (AS ) - 17 on Segment Reporting issued by The Institute of Chartered Accountants of India.

81

Vardhman

VMT Spinning Company Limited

12. Related Party Disclosure: Details of transactions entered into with related parties during the year as required by Accounting Standard (AS) - 18 on Related Party Disclosures issued by The Institute of Chartered Accountants of India are as under : (Amount in Rs.) Particulars Holding Company Fellow Subsidiary Company Associates Key Management Personnel (KMP) Enterprises over which KMP is able to exercise significant influence Total

Purchase/Processing of goods Purchase of DEPB licences Sale/Processing of goods Sale of Fixed Assets Commission Paid Interest paid Interest received Payment against licence agreement Managerial Remuneration

7,01,27,572 3,04,575 9,66,22,414 98,008

94,71,654 17,29,145

7,01,27,572 3,04,575 10,60,94,068 98,008 17,29,145 82,200 5,61,200 11,57,613

82,200 5,61,200 11,57,613 : : : Vardhman Textiles Limited Vardhman Threads Limited Marubeni Corporation, Japan Marubeni Textiles Asia Limited, Japan Toho Tenax Company Limited, Japan Mr Sachit Jain Vardhman Holdings Limited

Note: 1. (a) Holding Company (b) Fellow Subsidiary Company 2. Associates

3. 4.

Key Management Personnel : Enterprises over which Key Management Personnel : (KMP) is able to exercise significant influence

13. Earnings Per Share: The calculation of Earnings Per Share (EPS) as disclosed in the Profit & Loss Account has been made in accordance with the requirements of Accounting Standard(AS) - 20 on Earnings Per Share issued by the Institute of Chartered Accountants of India. (Previous Year 34,50,040 shares issued in terms of the Rights Issue of the Company were considered in the calculation of Earnings Per Share and weighted average of these shares have been taken considering the allotment date of 17th March, 2006 as these new shares were entitled to pro-rata dividend for the F.Y. 2005-06). 14. Deferred Tax Accounting entries for deferred tax have been passed in accordance with the provisions of Accounting Standard (AS )-22 on Accounting for Taxes on Income read with Accounting Standard Interpretation (ASI ) 5 on Accounting for Taxes on Income in the situation of Tax Holiday under section 10 A and 10 B of the Income Tax Act ,1961 issued by the Institute of Chartered Accountants of India. Deferred Tax Asset /(Liability) Net as on 31st March, 2007 is as follows : (Amount in Rs.) 31.03.2007 31.03.2006 Difference between Depreciation as per Companies Act,1956 and (1,84,63,921) (2,22,35,926) Income Tax Act, 1961 Less Deferred Tax Asset arising on account of expenses allowable for 10,90,358 10,86,391 tax purposes when paid Net Deferred Tax Asset/(Liability) (1,73,73,563) (2,11,49,535) Deferred Tax Liability provided during the year (37,75,972) 38,63,339 Deferred tax asset in respect of unabsorbed depreciation has been recognised on the basis that the Company will have sufficient future taxable income. There is a virtual certainty that the said asset will be realizable on account of the fact that there has been a reduction in the interest costs and depreciation as per tax laws, the combined effect of which would result in higher taxable profits. 15. No asset qualifies for impairment for the current year according to AS-28 issued by Institute of Chartered Accountants of India. 16. Figures in brackets indicate deductions.

82

VMT Spinning Company Limited


17. The information required by para 3 & 4 of Part II of Schedule VI to the The Companies Act, 1956.
Licensed Capacity As at As at 31.03.2007 31.03.2006 (A) Capacity Spindles 50,000 50,000

Vardhman

Installed Capacity As at As at 31.03.2007 31.03.2006 45,120 28,320

Installed capacity has been certified by the management and not verified by the auditors being a technical matter. (B) Actual Production Yarn Unit Kgs. Current Year 37,87,682 * Previous Year 37,08,318 *

Note : * Including a quantity of 59,940 kgs (Previous Year 1,39,532 kgs) processed by others on job basis and another quantity of 121,624 kgs (Previous Year Nil) processed for others on job basis. Quantity Value QUANTITY VALUE (C) Purchase Of Finished Goods : ( Rs.) ( Rs.) Yarn Kgs. 3,86,911 4,18,03,772 3,22,151 3,52,15,833 (D) Sales Yarn Kgs. 40,43,252 63,23,79,176 40,76,531 56,12,44,704 Raw Material Kgs. 1,170 96,804 9,878 9,29,458 Waste 3,37,47,131 3,11,64,275 Processing Charges 1,06,96,508 0 Miscellaneous 18,29,225 6,16,340 67,87,48,844 59,39,54,777 (E) Raw Material Consumed Cotton Kgs. 46,78,038 26,74,59,920 49,13,316 26,09,54,611 Man Made Fibre Kgs. 2,09,301 2,89,64,639 10,390 24,02,449 48,87,339 29,64,24,559 49,23,706 26,33,57,060 (F) Stock Particulars of Finished Goods Opening Stock: Yarn Kgs. 113,605 1,22,42,397 1,66,339 1,90,12,804 Others 5,72,296 7,83,158 Closing Stock: Yarn Kgs. 1,19,602 1,44,45,631 1,13,605 1,22,42,397 Others 15,47,909 5,72,296 (G) CIF Value Of Imports : Components & Spare Parts Capital Goods Raw Material (H) Expenditure In Foreign Currency Commission Others (I) Fob Value Of Exports Current Year Value (Rs.) (J) Value of Raw Materials, Components And Spare Parts Consumed 1 Raw Materials: Imported Indigeneous 2 Components & Spare Parts: Imported Indigeneous Current Year (Rs.) 69,25,631 16,72,13,228 4,41,33,378 21,82,72,237 1,02,44,445 40,60,156 1,43,04,601 40,08,86,957 % Previous Year Value (Rs.) Previous Year (Rs.) 69,72,555 19,87,899 42,97,373 1,32,57,827 62,91,507 32,85,625 95,77,132 33,35,37,482 %

4,36,07,867 25,28,16,692 29,64,24,559 87,31,304 3,67,22,028 4,54,53,332

14.71 85.29 100.00 19.21 80.79 100.00

4,05,36,438 22,28,20,622 26,33,57,060 57,21,288 2,38,13,940 2,95,35,228

15.39 84.61 100.00 19.37 80.63 100.00

83

Vardhman

VMT Spinning Company Limited


Information Pursuant to Part IV of Schedule-VI attached to the Companies Act, 1956 :

17.

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE


I. REGISTRATION DETAILS Registration No. Balance Sheet Date 3 1 1 4 0 7 0 0 3 2 0 0 7 State Code 1 6

II.

Date Month Year CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue N I L Bonus Issue

Right Issue N I L Private Placement N I L Total Liabilities 9 2 0 0 3 3 Reserves and Surplus* 3 0 9 0 8 9 Unsecured Loans N I L Investments N I L Miscellaneous Expenditure... N I L

N I L III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Assets 9 2 0 0 3 3 SOURCES OF FUNDS Paid-up Capital 2 0 7 0 0 2 Secured Loans 4 0 3 9 4 2 Net Fixed Assets 5 2 4 5 6 6 Net Current Assets 3 9 5 4 6 7 Accumulated Losses N I L * Including Deferred Tax Liability amounting to Rs. 17,374 thousand. IV. PERFORMANCE OF THE COMPANY (Amount in Rs. Thousand) Turnover (including other Income) + +

APPLICATION OF FUNDS

Total Expenditure +

6 8 2 7 3 1 Profit/Loss before Tax

5 5 8 1 7 0 Profit/Loss after Tax

V.

1 2 4 5 6 1 1 1 3 9 5 1 + Earnings per Share (in Rs.) Dividend Rate % 5 . 5 0 9 . 0 0 GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF THE COMPANY (As per Monetary Terms) Item Code No. (ITC Code) 5 2 . 0 5 Product Description Item Code No. (ITC Code) Product Description Item code No. (ITC Code) Product Description C O T T O N Y A R N N I L N I L N I L N I L

As per our report of even date attached For S.S. Kothari & Co. Chartered Accountants CA DINESH K. ABROL Partner Membership No. 87899 PLACE : NEW DELHI DATED : 14th May, 2007 G.K. SHARMA Company Secretary ALOK AGGARWAL Chief Manager (Comm. & Admn.) SACHIT JAIN Executive Director S.P. OSWAL Chairman

84

Vardhman Threads Limited


DIRECTORS REPORT
Dear Members, The Directors of your Company have pleasure in presenting the Thirteenth Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2007. 2. 1. FINANCIAL RESULTS : The financial results are as follows: (Rs. in lac) Particulars Turnover Profit before depreciation, interest & Tax (PBDIT) Interest & Financial charges Profit before depreciation & Tax (PBDT) Depreciation Profit before Tax (PBT) Provision for Tax Current Tax Fringe Benefit Tax Deferred Tax Deferred Tax Adjustment 2006-07 2005-06 2,228.97 2,137.67 870.88 21.29 849.59 106.16 743.43 72.50 2.27 13.30 0.32 700.23 5.09 695.14 90.04 605.10 48.00 1.40 3.12 29.75 522.83 272.99 795.82 500.00 295.82 6.54 6. 4. 3.

Vardhman

charges of Rs. 21.29 Lac (Previous Year Rs. 5.09 Lac) and taxes of Rs. 88.39 Lac (Previous Year Rs. 82.27 Lac), the Company earned a net profit of Rs. 655.04 Lac (Previous year Rs. 522.83 Lac). DIRECTORS : Mr. D.L Sharma, Director of your Company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer Himself for re-appointment. AUDITORS : M/s. S.C Vasudeva and Company, Chartered Accountants, New Delhi, retire at the conclusion of the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. AUDITORS REPORT : The Auditors' Report on the Accounts is self-explanatory and requires no comments. AUDIT COMMITTEE: The Company has an Audit Committee of its Board of Directors pursuant to the provisions of section 292A of the Companies Act, 1956, with Mr. S.P Oswal, Mr. D.L. Sharma and Mr R.K Rewari as its members. PERSONNEL: During the year, no employee of the company received a salary of more than Rs.24.00 lac per annum or Rs.2.00 lac per month. Accordingly, no particulars of employees are to be given pursuant to the provisions of Section 217(2A) of the Companies Act, 1956 INDUSTRIAL RELATIONS: The industrial relations remained peaceful and harmonious in the unit of the Company at Baddi during the year. The Company continue to pursue its efforts for creating a healthy work environment and positive work culture. DIRECTORS RESPONSIBILITY STATEMENT : Pursuant to Section-217(2AA) of the Companies Act, 1956, the Directors confirm that : i) in the preparation of the annual accounts, the applicable accounting standards have been followed; ii) appropriate accounting policies have been selected and applied consistently, and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31 st March, 2007 and of the profit of the Company for the year ended on 31st March, 2007; iii) proper and sufficient care has been taken 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:

5.

Profit after Tax (PAT) 655.04 Balance brought forward from last year 295.82 Profit available for appropriation Appropriations: Transfer to General Reserve Balance carried to Balance Sheet Earnings per share (Basic & Diluted (in Rs.) a) 950.86 300.00 650.86 8.19

7.

The detailed performance is given below: Turnover : During the year under review, the gross sales of the Company were Rs.2228.97 Lacs as compared to Rs.2137.67 Lac in the previous year registering an increase of 4.27 %. Production : The production of Sewing Thread increased from 4,89,463 Kgs. in the previous year to 5,45,488 Kgs. during the year under review, showing an increase of 11.45 per cent. Exports : The FOB value of exports of the Company increased from Rs. 189.61 Lacs during the previous year to Rs.207.11 Lacs during the year under review. Profitability : The profit before depreciation interest and tax (PBDIT) is Rs. 870.88 Lacs (Previous Year Rs. 700.23 Lac). However, after providing for depreciation of Rs. 106.16 Lac (Previous Year Rs. 90.04 Lac), Interest and financial

8.

b)

c)

c)

85

Vardhman

Vardhman Threads Limited


10. ACKNOWLEDGEMENT : Your Directors are pleased to place on record their sincere gratitude to Government, Bankers and Business Constituents for their continued valuable co-operation and support to the Company. Your Directors also express their deep appreciation for the devoted and sincere services rendered by workers, staff and executives at all levels of operations of the Company during the year and we are confident that your Company will continue to receive such co-operation from them in future also. FOR AND ON BEHALF OF THE BOARD PLACE : LUDHIANA DATED : May 28, 2007 (S.P. OSWAL) CHAIRMAN

iv) annual accounts have been prepared on a going concern basis. 9. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: Energy conservation continues to be an area of major emphasis in your Company. The Company has adopted the strategy of bringing about a general awareness amongst all regarding energy conservation. Particulars with respect to conservation of energy and other areas as per Section217 (1)(e) of the Companies Act-1956, read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, are annexed hereto and form part of this report.

ANNEXURE TO THE DIRECTORS REPORT


INFORMATION AS PER SECTION 217(1)(e) READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED 31ST MARCH, 2007 : 1. CONSERVATION OF ENERGY: FORMA: PARTICULARS A) 1. UNIT 2006-07 2005-06 Capital Recurring 23.69 69.89 2.95 22.73 68.41 3.01 B. 32.32 3.73 7.78 Nil 5.13 3.95 6.79 Nil 1. Total Total R&D expenditure as a percentage of turnover FORMB: A. RESEARCH AND DEVELOPMENT (R&D): 2006-07 9.62 9.22 18.84 0.84% (Rs in lac) 2005-06 3.30 0.55 3.85 0.18%

POWER AND FUEL CONSUMPTION: ELECTRICITY: a) Purchased Units Total amount Rate per unit b) Own generation: i) Through diesel generator (KWH in lac) Units/Litre of Diesel (KWH) Cost per unit (Rs./KWH) ii) Through Steam Turbine/Generator (KWH in lac) (Rs. in lac) (Rs./KWH)

TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION : The Management has created a work culture in the Organisation to foster innovation in all functions including production. The Company has machinery of latest technology and is continuously adapting the process of production to the State-of-the-art technology. a) b) c) Technology Imported Year of Import Has technology been fully absorbed? : : : Nil N.A. N.A.

2. Particulars of technology imported in the last five years:

B) CONSUMPTION PER UNIT OF PRODUCTION: Sewing Thread: Electricity 2. (KWH/KG) 5.10 5.69 3.

TECHNOLOGY ABSORPTION: Efforts made in Technology Absorption are furnished in Form-B as under:-

FOREIGN EXCHANGE EARNINGS AND OUTGO : (Rs in lac) 2006-07 2005-06 Foreign Exchange earned : 207.11 189.61 (FOB Value of Exports) Foreign Exchange used : 225.63 235.19 (CIF value of imports and expenditure in foreign currency)

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AUDITORS REPORT
To The Shareholders, Vardhman Threads Limited
1.

Vardhman

We have audited the attached balance sheet of Vardhman Threads Limited as at 31st March, 2007, the profit and loss account and the cash flow statement for the year ended on that date annexed thereto. These financial statements are responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclosed in the annexure a statement on the matters specified in paragraph 4 of the said order. Further to our comments in the annexure referred to in paragraph 3 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 purpose of our audit; 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; the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of accounts; in our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act,1956; on the basis of the written representations received from the directors as on 31st March,2007 and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause(g) of sub-section (1) of Section 274 of the Companies Act,1956;

f)

2.

in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) ii) in the case of balance sheet, of the state of affairs of the company as at 31st March, 2007; in the case of profit and loss account, of the profit for the year ended on that date; and

iii) in the case of cash flow statement, of the cash flows for the year ended on that date.

For S.C. VASUDEVA & CO., Chartered Accountants (SANJIV MOHAN) Partner Membership No. 86066

3.

PLACE : LUDHIANA DATED : 28th May, 2007

4.

ANNEXURE TO THE AUDITORS REPORT


(Referred to in paragraph 3) (i). a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets. b) According to the information and explanations given to us, the fixed assets have been physically verified by the management during the year. No material discrepancies were noticed on such physical verification. In our opinion the frequency of physical verification of fixed assets is reasonable having regard to the size of the company and nature of its business. c) According to the information and explanations given to us, the company has not disposed off substantial part of its fixed assets during the year and the going concern status of the company is not affected. (ii) a) According to the information and explanations given to us, inventories have been physically verified by the management at the close of the year. In our opinion the frequency of verification is reasonable. b) In our opinion and according to the information and explanations given to us, the procedures of physical

b)

c)

d)

e)

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verification of inventories followed by the management as evidenced by the written procedures and instructions are reasonable and adequate in relation to the size of the company and nature of its business. (v) (a) In our opinion and according to the information and explanations given to us, the particulars of contracts or arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register maintained under that section. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of contracts or arrangements entered in the register maintained under section 301 of the Companies Act, 1956 and exceeding Rupees five lacs or more in respect of each party during the year, have been made at prices which are reasonable having regard to the prevalent market prices at the relevant time. (vi) According to the information and explanations given to us, the company has not accepted deposits from public during the year as covered under the provisions of section 58A or 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975. (vii) In our opinion the company has an internal audit system commensurate with its size and nature of its business. (viii) We have broadly reviewed the books of account relating to materials, labour and other items of cost maintained by the company pursuant to the rules made by the Central Government for the maintenance of cost records under section 209(1)(d) of the Companies Act, 1956, and we are of the opinion that prima facie, the prescribed accounts and records have been made and maintained. (ix) (a) According to the records of the company, undisputed statutory dues including provident fund, investor education and protection fund, employees state insurance, income tax, sales tax, wealth tax, service tax, custom duty, excise duty, cess and other material statutory dues applicable to the company, if any, have been regularly deposited with appropriate authorities. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were outstanding as at 31st March 2007, for a period of more than six months from the date they became payable. (b) According to the records of the company, the disputed statutory dues aggregating to Rs 17,81,382/-. that have not been deposited on account of matters pending before the appellate authorities in respect of sales tax is given below :
Forum where Dispute is pending Joint Commissioner of Commercial Taxes, Bangalore Deputy Commissioner Zone-5 Delhi Deputy Commissioner Zone-5 Delhi Commissioner of Income-tax (Appeals), Chandigarh

c) On the basis of our examination of the records of inventories, we are of the opinion that the company is maintaining proper records of inventories. As explained to us, no material discrepancies were noticed on physical verification between physical stocks and book records. (iii) (a) The Company has during the year granted unsecured loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The aggregate amount involved in the transaction together with the opening balance of Rs 250 lacs is Rs. 1,785 lacs. The amount due as at the close of the year is Rs. 1,395 lacs. (b) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loans given by the company, are not prima-facie prejudicial to the interest of the company. (c) In our opinion and according to the information and explanations given to us, the receipt of principal amount and interest in respect of the aforesaid loans is regular. (d) In our opinion and according to the information and explanations given to us, there are no overdue amounts in respect of the unsecured loans given by the company. (e) According to the information and explanations given to us, the company has not taken secured or unsecured loans from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore the provision of clause 4(iii) (f) and (g) of the order are not applicable to the company. (iv) 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 nature of its business, for the purchase of inventory and fixed assets and sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in internal control.
Name of the Statute Karnataka Sales Tax Act, 1957 Central Sales Tax, 1956 Delhi Sales Tax, 1975 Income-tax Act, 1961 Nature of Dues Local Sales Tax Central Sales Tax Local Sales Tax Income Tax

Disputed Amount (Rs.) 13,233 90,577 3,862 16,73,710

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According to the information and explanations given to us there are no disputed statutory dues pending in respect of custom duty, excise duty, service tax, wealth tax, and cess. (x) The Company does not have accumulated losses and has not incurred cash losses during the financial year covered under audit and in the immediately preceding financial year. In our opinion and according to the information and explanations given to us, the company has not defaulted in repayment of dues to banks.

Vardhman

(xvi) In our opinion and according to the information and explanations given to us, the term loans taken during the year have been applied for the purpose for which they were obtained. (xvii) According to information and explanations given to us and on an overall examination of the balance sheet of the company, we report that funds raised on short-term basis have not been used for long term investment. (xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) According to the information and explanations given to us, the company has not issued debentures during the year. Accordingly the provisions of clause 4(xix) of the above said order are not applicable to the company. (xx) According to the information and explanations given to us, the company has not raised any money by way of a public issue during the year. Accordingly the provisions of clause 4(xx) of the above said order are not applicable to the company.

(xi)

(xii) According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the above said order are not applicable to the company. (xiii) The Company is not a chit fund or a nidhi mutual benefit fund/society. Accordingly, the provisions of clause 4(xiii) of the above said order are not applicable to the company. (xiv) According to the information and explanations given to us, the company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the above said order are not applicable to the company. (xv) According to the information and explanations given to us, the company has not given any guarantee for loans taken by others from bank or financial institutions. Accordingly, the provisions of paragraph 4(xv) of the order are not applicable to the company.

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year. For S.C. VASUDEVA & CO., Chartered Accountants (SANJIV MOHAN) Partner Membership No. 86066

PLACE : LUDHIANA DATED : 28th May, 2007

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Schedule No. As at 31.03.2007 (Rs.) As at 31.03.2006 (Rs.)

BALANCE SHEET as at 31st March, 2007


Particulars

SOURCES OF FUNDS 1. Shareholders Funds a) Share Capital b) Reserves & Surplus 2. Loan Funds Secured Loans 3. Deferred Tax Liability TOTAL APPLICATION OF FUNDS 1. Fixed Assets a) Gross Block b) Less: Depreciation c) Net Block d) Capital Work-in-Progress 2. Investments 3. Current Assets, Loans & Advances a) Inventories b) Sundry Debtors c) Cash & Bank Balances d) Other Current Assets e) Loans & Advances 1 2 3 8,00,00,000 33,80,85,888 7,23,66,837 46,49,266 49,51,01,991 8,00,00,000 27,25,81,888 86,68,838 32,86,899 36,45,37,625

4 19,75,99,080 9,67,26,262 10,08,72,818 21,48,422 10,30,21,240 5,34,33,000 6,52,71,404 4,90,90,741 4,82,76,750 19,161 18,13,92,631 34,40,50,687 17,24,79,118 8,65,67,582 8,59,11,536 19,55,116 8,78,66,652 8,83,81,234 5,25,16,850 4,19,48,198 1,43,09,478 17,988 9,74,06,468 20,61,98,982

5 6

(A) Less: Current Liabilities & Provisions a) Liabilities b) Provisions Net Current Assets (A-B ) TOTAL NOTES ON ACCOUNTS 16 The Schedules referred to above form an integral part of the Balance Sheet. 7

(B)

1,44,07,880 (90,04,944) 54,02,936 33,86,47,751 49,51,01,991

2,29,45,953 (50,36,711) 1,79,09,242 18,82,89,739 36,45,37,625

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants SANJIV MOHAN Partner M. No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 MUKESH BANSAL Company Secretary SURESH GADODIA Vice-President (Operations) D.L. SHARMA Director R.K. REWARI Director-in-charge

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PROFIT & LOSS ACCOUNT for the year ended 31st March, 2007
Particulars Schedule No. Current Year (Rs.)

Vardhman

Previous Year (Rs.)

INCOME Turnover Other Income TOTAL EXPENDITURE Raw Material Consumed and Purchase of Finished goods Manufacturing Expenses Personnel Expenses Administrative & Other Expenses Interest & Financial Charges Selling & Distribution Expenses (Increase) /Decrease in Work -in -Process and Finished Goods Depreciation Prior Period item TOTAL Profit for the year before tax Less :Provision for -Current Tax - Fringe Benefit Tax - Deferred Tax - Deferred Tax Adjustment Profit for the year after tax Balance brought forward Balance available for appropriation Appropriations: Transfer to General Reserve Balance carried to Balance Sheet Earnings per share (Basic & diluted)

22,28,96,919 2,49,44,121 24,78,41,040

21,37,67,311 1,08,34,487 22,46,01,798 4,73,70,790 4,69,16,535 1,88,16,031 1,23,86,234 5,09,608 3,18,00,211 (33,55,033) 90,03,803 6,43,775 16,40,91,954 6,05,09,844 48,00,000 1,40,000 3,12,365 29,74,534 5,22,82,945 2,72,98,943 7,95,81,888 5,00,00,000 2,95,81,888 7,95,81,888 6.54

9 10 11 12 13 14 15

6,07,22,214 5,34,07,451 2,24,04,609 1,08,39,045 21,29,211 1,07,47,139 26,40,393 1,06,15,968 (8,357) 17,34,97,673 7,43,43,367 72,50,000 2,27,000 13,30,142 32,225 6,55,04,000 2,95,81,888 9,50,85,888 3,00,00,000 6,50,85,888 9,50,85,888 8.19

NOTES ON ACCOUNT 16 The Schedules referred to above form an integral part of the Profit and Loss Account.
As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants SANJIV MOHAN Partner M. No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 MUKESH BANSAL Company Secretary SURESH GADODIA Vice-President (Operations) D.L. SHARMA Director R.K. REWARI Director-in-charge

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Vardhman Threads Limited


Current Year (Rs.) Previous Year (Rs.)

CASH FLOW STATEMENT for the period 1st April, 2006 to 31st March, 2007
Particulars

CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax & extraordinary items Adjustments for: Depreciation Sundry balances written off Interest paid Interest received Dividend received Profit on sale of Investments Excess provision written back Sundry balances written back Difference in exchange rate Loss on fixed assets discarded Provision for doubtful debts Operating profit before working capital changes Adjustments for: Decrease/(Increase) in trade & other receivables Decrease/(Increase) in inventories (Decrease)/Increase in trade payables & other liabilities Cash generation from operations Taxes Paid Net Cash from Operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed asset Sale of fixed assets Interest received Dividend received Sale of Investments Net cash used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Proceeds from long term borrowings Proceeds from short term borrowings interest paid Net cash flow from financing activities Net increase in cash & cash equivalents Cash & cash equivalents (Openings) Cash & cash equivalents (Closings) 6,25,00,000 11,97,999 (16,92,679) (2,61,72,578) 3,98,965 1,17,95,888 1,00,32,000 3,57,77,770 1,06,15,968 12,10,077 16,92,679 (1,17,95,888) (1,00,32,000) (8,29,536) (12,11,114) (905) 3,379 3,058

7,43,43,367

6,05,09,844

90,03,803 8,46,362 504,366 (55,68,738) (38,54,427) (7,36,143) (29,605) (1,033) 57,913 23,667 4,99,782 (1,03,44,282) 6,39,99,085 7,45,947 6,12,55,790 (5,46,99,320) (65,56,926) 1,25,81,847 (11,24,23,945) (4,84,24,860) (4,86,74,399) 1,25,81,391 (88,76,234) (88,76,234) 37,05,157 (1,13,81,163) 50,57,119 38,54,427 (3,32,87,011) 3,18,32,045 61,19,200 (5,04,366) 6,20,05,320 3,39,67,272 1,43,09,478 4,82,76,750 56,14,834 (2,64,36,637) 4,07,46,115 1,43,09,478 (3,57,56,628)

(9,23,43,337) (1,27,54,554) (73,26,054)

(1,14,45,233) (1,14,45,233) (5,98,70,093)

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants SANJIV MOHAN Partner M. No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 MUKESH BANSAL Company Secretary SURESH GADODIA Vice-President (Operations) D.L. SHARMA Director R.K. REWARI Director-in-charge

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Vardhman

Schedules Annexed to and forming part of the Balance Sheet as at 31st March, 2007 and Profit and Loss Account for the year ended 31st March, 2007
As at 31.03.2007 (Rs.) SCHEDULE 1 SHARE CAPITAL As at 31.03.2006 (Rs.)

Authorised: 1,00,00,000 (Previous Year 1,00,00,000) Equity Shares of Rs.10/- each ISSUED, SUBSCRIBED & PAID UP : 80,00,000 (Previous year 80,00,000) Equity Shares of Rs.10/- each

10,00,00,000

10,00,00,000

8,00,00,000 8,00,00,000

8,00,00,000 8,00,00,000

NOTE : All the above Equity Shares are held by Vardhman Textiles Limited (formerly Mahavir Spinning Mills Ltd), the Holding Company
SCHEDULE 2 RESERVES & SURPLUS

Capital Reserve General Reserve As per last Account Add : Transferred from Profit & Loss account Surplus i.e. Balance as per annexed Profit and Loss account
SCHEDULE 3 SECURED LOANS

30,00,000 24,00,00,000 3,00,00,000 27,30,00,000 6,50,85,888 33,80,85,888

30,00,000 19,00,00,000 5,00,00,000 24,30,00,000 2,95,81,888 27,25,81,888

Loans and Advances from Banks - Term Loans - Working Capital Borrowings

6,25,00,000 98,66,837 7,23,66,837

86,68,838 86,68,838

NOTES :1. Term Loans from banks are secured by mortgage created or to be created on all immovable and movable assets of the company, both present and future. 2. Working Capital limits from banks are secured by hypothecation of all movable assets, present and future belonging to the company.
SCHEDULE 4 FIXED ASSETS
Sr. Particulars No. GROSS BLOCK As at 01.04.2006 Additions Sales/ Adjustments
3,79,311 4,80,000 8,59,311 (3,67,067)

(Rs.) DEPRECIATION As at 31.03.2007 As at 01.04.2006 Depreciation for the year


8,46,735 92,66,663 1,99,769 2,96,665 6,135 1,06,15,968 90,03,803

NET BLOCK As at 31.03.2007 As at As at 31.03.2007 31.03.2006

Sales/ Adjustments
3,60,346 96,942 4,57,288 (3,48,713)

1. Freehold Land & Site Development 2 3 4 5 6 Buildings Plant & Machinery Furniture & Fixture Office Equipment Vehicles Current Year Previous Year 42,75,514 2,86,80,721 13,32,88,655 18,40,039 38,90,374 5,03,815 17,24,79,118 16,23,40,435 97,57,136 1,56,87,140 2,82,158 2,52,838 2,59,79,272 97,71,617 42,75,514 3,84,37,858 14,85,96,484 21,22,197 41,43,212 23,815 19,75,99,080 17,24,79,118 79,21,897 7,44,47,434 12,49,695 28,36,130 1,12,427 8,65,67,582 7,72,15,067 87,68,633 8,33,53,751 14,49,464 31,32,795 21,620 9,67,26,262 8,65,67,582 42,75,514 42,75,514 2,96,69,225 2,07,58,824 6,52,42,733 5,88,41,222 6,72,733 10,10,417 2,195 8,59,11,536 5,90,345 10,54,244 3,91,388

10,08,72,818 8,59,11,536

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As at 31.03.2007 (Rs.) As at 31.03.2006 (Rs.)

SCHEDULE 5 INVESTMENTS I Long Term Investments (At Cost) (a) Other than trade, (Quoted) 1,89,000 (Previous year 1,89,000) Equity Shares of Rs. 10.00 each fully paid -up of Vardhman Holdings Ltd 11,34,000 (Previous year 11,34,000) Equity Shares of Rs. 10.00 each fully paid -up of Vardhman Textiles Ltd (formerly Mahavir Spinning Mills Limited) (b) Government securities, (Unquoted) : In National Saving Certificates (Pledged with Government Authorities) II Current Investments (At lower of cost or fair value) (Quoted) NIL (Previous year 81,600 ) Equity Shares of Rs. 10.00 each fully paid up of Videocon Industries Limited

1,06,84,600 4,27,38,400

1,06,84,600 4,27,38,400

10,000

10,000

5,34,33,000

3,49,48,234 8,83,81,234

Notes : 1. Aggregate amount of quoted investments 2. Aggregate amount of unquoted investments 3. Market Value of quoted investments

Rs. 5,34,23,000 10,000 27,91,81,350

Rs. 8,83,71,234 10,000 52,26,18,780

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As at 31.03.2007 (Rs.) SCHEDULE 6 CURRENT ASSETS, LOANS AND ADVANCES (A) CURRENT ASSETS 1. Inventories (valued at cost or net realisable value whichever is lower) - Raw Materials - Work-in-Process - Finished Goods - Stores & Spares - Goods-in-Transit

Vardhman

As at 31.03.2006 (Rs.)

2,86,36,527 56,32,149 1,95,97,625 89,53,921 24,51,182 6,52,71,404

1,38,65,414 48,57,755 2,30,12,412 93,50,076 14,31,192 5,25,16,849

2. Sundry Debtors(Considered good unless otherwise stated) Unsecured (i) Debts outstanding for a period exceeding six months - Considered Good - Considered Doubtful (ii) Other Debts : Considered Good Less : Provision for doubtful debts 3. Cash and Bank Balances a) Cash Balances : Cash in Hand Cheques in Hand b) Bank Balances : With Scheduled Banks : in Current Accounts 4. Interest accrued on investments (B) LOANS AND ADVANCES (Unsecured, considered good unless otherwise stated) i) Advances recoverable in cash or in kind or for value to be received ii) Deposits with Government Authorities

84,32,933 5,38,167 4,06,57,808 4,96,28,908 5,38,167 4,90,90,741

63,25,751 5,38,167 3,56,22,447 4,24,86,365 5,38,167 4,19,48,198

6,57,274 30,66,254

4,92,069 72,85,033

4,45,53,222 4,82,76,750 19,161

65,32,376 1,43,09,478 17,988

18,10,47,064 3,45,567 18,13,92,631

9,73,73,005 33,463 9,74,06,468

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As at 31.03.2007 (Rs.) As at 31.03.2006 (Rs.)

SCHEDULE 7 CURRENT LIABILITIES AND PROVISIONS A. CURRENT LIABILITIES Sundry Creditors Total outstanding dues to Small Scale Industrial Undertakings Total outstanding dues of creditors otherthan Small Scale Industrial Undertakings Trade Deposits and Advances Other liabilities Due to holding company

32,49,281 16,05,268 95,53,331 1,44,07,880

16,58,649 18,69,412 88,18,885 1,05,99,007 2,29,45,953

(B) PROVISIONS Provision for Taxation Current Tax Less: Prepaid Tax Fringe Benefit Tax Less: Prepaid Tax

5,66,26,000 6,55,89,944 3,67,000 4,08,000

(89,63,944) (41,000) (90,04,944) Current Year (Rs.)

4,93,76,000 5,45,18,711 1,40,000 34,000

(51,42,711) 1,06,000 (50,36,711) Previous Year (Rs.) 54,21,278 29,605 38,54,427 1,817 7,36,143 1,033 43,762 7,46,422 1,08,34,487

SCHEDULE 8 OTHER INCOME Interest Received ( Gross) [TDS Rs. 26,46,998 (Previous Year Rs. 13,29,831)] Provision No Longer Required Written Back Dividend Income on Long Term Investment Other than trade Income from Investments (Gross) Long term investments other than trade Profit on sale of Investments Current investments Sundry Balances Written Back Benefit under DEPB Scheme Miscellaneous Receipts

1,13,66,024 12,11,114 1,00,32,000 1,173 8,29,536 905 14,278 14,89,091 2,49,44,121

SCHEDULE 9 RAW MATERIAL CONSUMED AND PURCHASE OF FINISHED GOODS Opening Stock 1,38,65,414 Add: Purchases 7,54,93,327 Less: Closing Stock Raw Material Consumed Purchase of Finished Goods 8,93,58,741 2,86,36,527 6,07,22,214 6,07,22,214 SCHEDULE 10 MANUFACTURING EXPENSES Power & Fuel Packing Material & Charges Stores & Spares Consumed Dyes & Chemicals Repairs to Plant & Machinery Processing Charges Miscellaneous

94,14,542 5,14,75,308 6,08,89,850 1,38,65,414 4,70,24,436 3,46,354 4,73,70,790

1,33,31,846 93,70,195 20,64,429 1,74,03,019 97,08,738 50,115 14,79,109 5,34,07,451

1,35,83,776 95,75,578 17,40,509 1,78,10,666 39,85,447 97,672 1,22,887 4,69,16,535

96

Vardhman Threads Limited


Current Year (Rs.) SCHEDULE 11 PERSONNEL EXPENSES Salaries, Wages and Other Allowances Contribution to Provident & Other Funds Workmen & Staff Welfare SCHEDULE 12 ADMINISTRATIVE & OTHER EXPENSES Rent Rates & Taxes Building Repairs Other Repairs Insurance Legal & Professional Travelling & Conveyance Printing & Stationary Postage & Telegram Telephone & Telex Vehicle Maintenance Auditors Remuneration : - As Audit Fee - As Tax Audit Fee - In Other Capacity - Out of Pocket Expenses Managerial Remuneration Sundry Balances written off Provision for Doubtful Debts Loss on Fixed Assets discarded/sold Exchange Rate Fluctuation Miscellaneous Expenses SCHEDULE 13 INTEREST AND FINANCIAL CHARGES Interest On : - Term Loans - Working Capital Borrowings from Banks & Others (Net) Bank & Other Charges SCHEDULE 14 SELLING & DISTRIBUTION EXPENSES Forwarding Charges & Octroi Commission to Selling Agents Rebate & Discount Advertisement Sales Promotion Cess Duty Royalty Miscellaneous 1,96,02,775 23,47,577 4,54,257 2,24,04,609 28,01,704 21,833 7,82,128 2,13,915 9,74,488 9,55,725 6,87,978 5,84,378 38,805 3,59,999 9,28,863 1,40,300 7,857 11,734 26,030 50,000 12,10,077 3,058 3,379 10,36,794 1,08,39,045

Vardhman

Previous Year (Rs.) 1,59,30,645 22,30,870 6,54,516 1,88,16,031 27,41,304 49,672 4,99,254 83,804 9,92,905 6,52,556 6,47,166 4,51,623 80,565 8,74,746 6,62,339 1,40,300 7,857 62,235 25,095 50,000 8,46,362 4,99,782 23,667 57,913 29,37,089 1,23,86,234

12,62,815 8,66,396 21,29,211 64,54,711 8,87,101 19,59,253 2,20,281 28,254 82,841 8,41,800 2,72,898 1,07,47,139

5,09,608 5,09,608 67,78,635 15,82,866 2,18,26,074 91,250 21,005 79,488 5,51,000 8,69,893 3,18,00,211

SCHEDULE 15 (INCREASE)/DECREASE IN WORK-INPROCESS AND FINISHED GOODS Opening Stock : Work-in-process Finished Goods Less : Closing Stock: Work-in-process Finished Goods 48,57,755 2,30,12,412 2,78,70,167 56,32,149 1,95,97,625 26,40,393 69,09,737 1,76,05,397 2,45,15,134 48,57,755 2,30,12,412 (33,55,033)

97

Vardhman

Vardhman Threads Limited

SCHEDULE 16 NOTES ON ACCOUNT


1. Significant Accounting Policies :
(a) Accounting Convention : The accounts are prepared on accrual basis under the historical cost convention in accordance with the accounting standards referred to in section 211(3C) of the Companies Act, 1956 and other relevant provisions of the said Act. Revenue Recognition (i) Sales : Revenue from sale of goods is recognised : when all the significant risks and rewards of ownership are transferred to the buyer and the Company retains no effective control of the goods transferred to a degree usually associated with ownership and no significant uncertainity exists regarding the amount of the consideration that will be derived from the sale of goods. (ii) Interest: Interest is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. (iii) Dividend: Dividend is recognised as income when the right to receive the payment is established. (iv) Other Claims: The revenue in respect of claims is recognised when no significant uncertainity exists with regard to the amount to be realised and ultimate collection thereof. (v) Benefit under Duty Entitlement Pass Book / Duty Draw Back Scheme: The revenue in respect of above benefit is recognised on post export basis

(b)

(c) Retirement Benefits : (i) Gratuity : Provision for gratuity liability to employees is made on the basis of actuarial valuation as at 31st March.2007. (ii) Provident Fund : Contribution to provident fund is made in accordance with the provisions of the Employees Provident Fund and Miscellaneous Provisions Act,1952 and is charged to profit and loss account. (iii) Leave with Wages : Provision for leave with wages is made on the basis of actuarial valuation as at 31st March, 2007. (iv) Superannuation : The liability in respect of eligible employees covered under the scheme is provided as per the Companys policy on accrual basis. (d) (e) Fixed Assets : The fixed assets are stated at historical cost less depreciation. Depreciation : (i) Depreciation is provided on straight line method in accordance with and in the manner specified in schedule XIV to the Companies Act,1956 ,except in case of computers on which depreciation has been provided @ 25 % on straight line basis. (ii) Depreciation on assets costing Rs.5000/- or below is charged @100% per annum on proportionate basis. Inventories : Inventories are valued at cost or net realisable value, whichever is lower. The cost in respect of the various items of inventory is computed as under: (i) In case of raw material at weighted average cost plus direct expenses. (ii) In case of stores and spares at weighted average cost plus direct expenses. (iii) In case of work-in-process at raw material cost plus conversion cost depending upon the stage of completion. (iv) In case of finished goods at raw material cost plus conversion costs, packing cost and other overheads incurred to bring the inventories to their present condition and location. Investments : Long term investments are carried at cost less provision,if any ,for dimunition in value which is other than temporary and current investments are carried at lower of cost and fair value. (h ) Foreign currency conversion : i) Foreign currency transactions are recorded on initial recognition at the rate prevailing on the date of the transaction. Where export bills are negotiated with the bank, the export sales are recorded at the rate on the date of negotiation as the said rate approximates the actual rate at the date of the transaction. (ii) Foreign currency monetary items are reported using the closing rate. Exchange differences arising on the settlement of monetary items or on reporting the same at the closing rate as at the balance sheet date are recognised as income or expense in the period in which they arise except in case of liabilities incurred for the purpose of acquiring the fixed assets from outside India in which case such exchange differences are adjusted in the carrying amount of fixed assets. (i) Subsidy : Government subsidy in the nature of promoters contribution is credited to capital reserve. The government subsidy received for specific asset is reduced from the cost of the asset. Borrowing Costs : Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised as part of the cost of the asset. Other borrowing costs are recognised as an expense in the period in which they are incurred.

(f)

(g)

(j)

98

Vardhman Threads Limited


(k)

Vardhman

Accounting for Taxes on Income and Fringe Benefit Tax : i) The Accounting treatment followed for taxes on income is to provide for Current Tax and Deferred Tax. Current Tax is the amount of income tax determined to be payable in respect of taxable income for a period. Deferred tax is the tax effect of timing differences between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. (ii) Fringe Benefit Tax is provided on the aggregate amount of fringe benefits determined in accordance with the provisions of the relevant enactments at the specified rate of tax. Expenditure incurred during construction period : In respect of new/major Expansion ,the indirect expenditure incurred during construction period upto the date of the commencement of commercial production is capitalized on various categories of fixed assets on proportionate basis.

(l)

(m) Impairment of Assets : At each balance sheet date an assessment is made whether any indication exists that an asset has been impaired. If any such indication exists, an impairment loss i.e. the amount by which the carrying amount of an asset exceeds its recoverable amount is provided in the books of account. (n) Provisions and Contingent Liabilities : (i) Provisions are recognised for liabilities that can be measured by using a substantial degree of estimation, if : (a) the company has a present obligation as a result of a past event ; (b) a probable outflow of resources embodying economic benefits is expected to settle the obligation; and (c) the amount of the obligation can be reliably estimated (ii) Contingent liability is disclosed in the case of : (a) a present obligation arising from a past event when it is not probable that an outflow of resources will be required to settle the obligation (b) a possible obligation, unless the probability of outflow of resources is remote (iii) Re-imbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that the re-imbursement will be received As at 31.03.2007 (Rs.) Bank Guarantees and Letters of credit outstanding Estimated amount of Contracts remaining to be executed on capital Account. (Net of Advances ) 3. 4. 5. 6. 35,96,000 6,72,000 As at 31.03.2006 (Rs.) 65,60,300 42,92,300

2.

There are Contingent Liability in respect of:

The Company does not owe any amount to any small scale industrial undertaking as at the close of the year. The Company has requested its suppliers to intimate whether they are registered under The Micro, Small and Medium Enterprises Development Act, 2006 . Pending receipt of intimation from suppliers, the amount due to the suppliers under the said Act, could not be determined. The Company has executed bonds for aggregate amount of Rs.17,59,250/- (Previous year Rs. 64,15,574/-) in favour of the President of India under Section59(2) and 67 of the Customs Act, 1962 and Central Excise and Salt Act, 1944 for fulfillment of obligation under the said Acts. The Company has contested the additional demand in respect of sales tax amounting to Rs.2,22,981/- (Previous Year Rs.2,22,981/-) pending appeal with Appellate Authorities. As against this a sum of Rs.1,15,309/- (Previous Year Rs.1,15,309/-) has been deposited under protest and stands included under the head Advances and other recoverable in cash or in kind . The Company has filed an appeal with the appellate authorities and is advised that the demand raised is not in accordance with law . No provision , therefore , has been made in accounts in respect thereof. The Company has contested the additional demand in respect of Income tax amounting to Rs. 21,61,321/- (Previous Year Rs.77,18,155/- ) pending appeal with appellate authorities. No provision has been made in the books of account as company is hopeful to get desired relief in appeal. The Company is not availing cenvat credit on excise duty paid on purchase of capital goods and the other inputs and the same is recognised as an expense or added to the cost of the fixed asset as the case may be. Computation of Net Profit for Section 198 read with Section 349 of the Companies Act, 1956, for the purpose of commission payable to the whole time director. As at 31.03.2007 As at 31.03.2006 (Rs.) (Rs.) Profit before tax Add: Managerial Remuneration Depreciation for the year as per books of accounts Less : Depreciation allowable Profit for computation of Managerial Remuneration Commission payable to Whole time Director restricted to 1% of net profits, further restricted to Rs 50000/-p.a. 7,43,43,367 50,000 1,06,15,968 8,50,09,335 1,05,25,124 7,44,84,211 6,05,09,844 50,000 90,03,803 6,95,63,647 88,69,846 6,06,93,801

7.

8. 9.

50,000

50,000

99

Vardhman

Vardhman Threads Limited

10. Segment Reporting : The Company is a single segment Company manufacturing Industrial Sewing Thread. Accordingly, the disclosure requirements as prescribed in the Accounting Standard (AS) 17 on Segment Reporting issued by the Institute of Chartered Accountants of India are not applicable. 11. Related Parties Disclosure : A. Details of transactions entered into with related parties during the year as required by Accounting Standard (AS) 18 on Related Party Disclosures issued by the Institute of Chartered Accountants of India are as under :

(Rs.)
Particulars Holding Company Current Year
Purchase/processing of goods Purchase of DEPB licences Sale/processing of goods Sale of DEPB licences Rent Paid Interest paid Interest received Managerial remuneration Given (Including Opening Balance) Loan Repayment Closing Balance of Loan Loan Taken (Including Opening Balance) Loan Repayment Closing Balance of Loan 3,21,39,510 2,55,174 6,41,13,620 27,41,304 14,159 10,87,068 -

Fellow Subsidiary Current Year Previous Year

Previous Year
1,93,08,552 1,98,273 4,81,80,180 2,24,462 27,41,304 13,34,140 20,89,50,000 20,89,50,000 2,75,00,000 2,75,00,000 -

Key Management Personnel (KMP) Current Previous Year Year

TOTAL Current Year


3,21,39,510 2,55,174 6,41,13,620 27,41,304 10,87,068 50,000 -

Previous Year
1,93,08,552 1,98,273 4,81,80,180 2,24,462 27,41,304 14,159 17,41,503 50,000Loan 421,950,000 421,950,000 3,85,00,000 3,85,00,000 -

4,07,363 50,000 21,30,00,000 21,30,00,000 1,10,00,000 1,10,00,000 50,000

Notes: 1. (a) Holding Company (b) Fellow Subsidiary Company Key Management Personnel

: : :

2.

Vardhman Textiles Limited (formerly Mahavir Spinning Mills Limited) VMT Spinning Company Limited Mr. R.K. Rewari

12. Earnings Per Share : The Calculation of Earnings Per Share (EPS) as disclosed in the profit & loss account has been made in accordance with the requirements of Accounting Standard (AS)-20 on Earnings Per Share issued by the Institute of Chartered Accountants of India. 13. Deferred tax liability as on 31st March, 2007 is as follows: Current Year (Rs.) Timing Difference on account of depriciation Less Deferred Tax Asset arising on account of timing difference Due to Provision for gratuity & superannuation Total 50,17,590 3,68,324 46,49,266 Previous Year (Rs.) 32,86,899 32,86,899

14. Any change in the amount of deferred tax liability on account of change in the enacted tax rates and change in the quantum of depriciation allowable under the Tax laws , is disclosed in the Statement of Profit and Loss Account as Deferred tax adjustment. 15. The Company has assessed as on the date of applicability of Accounting Standard (AS 28) on Impairment of Assets as well as on the date of balance sheet date, whether there are any indications(listed in paragraph 8 to 10 thereof)with regard to the impairment of any of the assets.Based on such assessment it has been ascertained that no potential loss is present and therefore formal estimate of recoverable amount has not been made. Accordingly no impairment loss has been provided in the books of account. 16. In accordance with the provisions of Section 42 of the Companies Act, 1956 the Company does not have any voting right in respect of investment in shares of the Holding Company i.e. Vardhman Textiles Limited (formerly Mahavir Spinning Mills Limited). 17. The Company has provided depreciation on Computers @ 25% on Straight Line Basis. 18. The interest on working capital is net of interest received from customers and others amounting to Rs. 4,29,864/- (Previous Year Rs.5,04,366/-). 19. The detail of prior period items is as under: Expenses Income Current Year (Rs.) 3,57,565 3,65,922 (8,357) Previous Year (Rs.) 8,00,274 1,56,499 6,43,775

20. Previous years figures have been recast/regrouped ,wherever necessary,to make these comparable with current years figures. 21. Figures in brackets indicate deductions. 22. Information pursuant to the provisions of the paragraph 3 & 4 of Part II of Schedule VI to the Companies Act, 1956:-

100

Vardhman Threads Limited


(A) Licensed and Installed Capacity
Particulars Sewing Thread Unit Kgs Licensed Capacity 31.03.2007 31.03.2006 NA NA

Vardhman

Installed Capacity 31.03.2007 31.03.2006 6,89,700 4,62,000

Note: Installed capacity has been certified by the Management and not verified by the auditors, being a technical matter. (B) Actual Production * Sewing Thread * Includes goods processed by/for others on job basis. (C) Purchase of finished goods Particulars Unit Qty Sewing Thread (D) Opening Stock of Finished Goods Sewing Thread (E) (F) Closing Stock of Finished Goods Sewing Thread Turnover Sewing Thread Raw Material Waste Miscellaneous Processing charges Total (G) Raw Material Consumed Yarn Cotton Total (H) CIF Value of Imports Raw Material Components ,Stores and Spares Capital Goods Total (I) Expenditure in Foreign Currency Commission Travelling Total (J) FOB Value of Exports 1,62,44,367 13,89,719 44,74,304 2,21,08,390 4,34,057 20,242 4,54,299 2,07,10,776 Previous Year Value (Rs.) 1,76,16,348 2,92,47,096 4,68,63,444 16,25,642 2,66,63,275 2,82,88,917 1,77,69,516 13,35,254 39,49,666 2,30,54,436 4,65,207 4,65,207 1,89,61,498 % Kgs Kgs 2,33,407 1,157 Kgs Current Year Value (Rs.) Qty 525 Previous Year Value (Rs.) 3,46,354 Kgs 5,45,488 4,89,463

Kgs Kgs Kgs Kgs

81,883 62,763 2,57,420 14,397

2,30,12,412 1,95,97,625 16,52,28,377 27,84,591 2,61,804 13,22,245 5,32,99,902 22,28,96,919 5,78,42,319 1,57,013 5,79,99,332

45,633 81,883 2,07,848 1,955

1,76,05,397 2,30,12,412 16,91,20,960 2,43,524 1,49,240 6,80,258 4,35,73,329 21,37,67,311

2,17,215 660

4,68,03,041 60,403 4,68,63,444

(K) Value of Raw Material, Components and Spare Parts Consumed Current Year Value (Rs.) 1 Raw Materials: Imported Indigenous TOTAL 2 Components & Spare Parts : Imported Indigenous Total 1,65,68,407 4,14,30,925 5,79,99,332 32,13,585 2,27,20,352 2,59,33,937 %

28.57 71.43 100.00 12.39 87.61 100.00

37.59 62.41 100.00 05.75 94.25 100.00

101

Vardhman

Vardhman Threads Limited


Information required by part IV of Schedule-VI attached to the Companies Act, 1956:

23.

Balance Sheet Abstract and Companys General Business Profile


I. Registration Details Registration No. Balance Sheet Date 3 1 1 4 2 5 6 0 3 2 0 Year Rights Issue N I L Private Placement N I L Total Liabilities 4 9 5 1 0 2 Reserves & Surplus* 3 4 2 7 3 5 Unsecured Loans N I L Investments 5 3 4 3 3 Miscellaneous Expenditure N I L 0 7 State Code 1 6

II.

Date Month Capital Raised during the Year (Amount in Rs. Thousand) Public Issue N I L Bonus Issue

N I L III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand) Total Assets 4 9 5 1 0 2 Sources of Funds Paid-up Capital 8 0 0 0 0 Secured Loans 7 2 3 6 7 Application of Funds Net Fixed Assets 1 0 3 0 2 1 Net Current Assets 3 3 8 6 4 8 Accumulated Losses N I L * Including Deferred Tax Liability amounting to Rs. 4649 thousand. IV. Performance of the Company (Amount in Rs. Thousand) Turnover (including other Income) + +

Total Expenditure + +

2 4 7 8 4 1 Profit/Loss before Tax 7 4 3 4 3 Earnings per Share (in Rs.) 8 . 1 9

1 7 3 4 9 8 Profit/Loss after Tax 6 5 5 0 4 Dividend Rate % N I L

V.

Generic Names of Three Principal Products / Services of the Company (As per Monetary Terms) Item Code No. (ITC Code) 5 4 . 0 1 1 0 Product Description S E W I N G T H R E A D O F M A N M A D E
S Y N T H E T I C F I L A M E N T

Item Code No. (ITC Code) Product Description Item Code No. (ITC Code) Product Description P O L Y E S T E R N Y L O N F

5 4 . 0 2 6 1 I L A M E N T Y A R N

5 4 . 0 2 6 2 F I L A M E N T Y A R N

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants SANJIV MOHAN MUKESH BANSAL Partner Company Secretary M. No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007

SURESH GADODIA Vice-President (Operations)

D.L. SHARMA Director

R.K. REWARI Director-in-charge

102

Vardhman Yarns & Threads Limited


DIRECTORS REPORT
Dear Members, The Directors of your Company have pleasure in presenting their Third Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2007. 1. FINANCIAL RESULTS : During the year, your Company has earned interest of Rs. 17,877 (Previous Year, Nil) and has incurred an expenditure of Rs. 3,563/- (Previous Year Rs. 8,743/-) on account of Development. 2. DIRECTORS : Mr. Sachit Jain, Director of your Company, retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. 3. AUDITORS : M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi, retire at the conclusion of the forthcoming Annual General Meeting of the Company and being eligible, offer themselves for re-appointment. 4. AUDITORS REPORT : The Auditors Report on the Accounts is self-explanatory and requires no comments. 5. DIRECTORS RESPONSIBILITY STATEMENT : Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors confirm that i) in the preparation of the annual accounts, the applicable Accounting Standards have been followed; appropriate accounting policies have been selected and applied consistently, and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of 6. iv)

Vardhman

the Company as at 31st March 2007 and of the profit/loss of the Company for the year ended 31st March 2007; iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safe guarding the assets of the Company and for preventing and detecting fraud and other irregularities; and the annual accounts have been prepared on a going concern basis.

PERSONNEL : During the year under review, the Company has not employed any person who received a remuneration of more than Rs. 2,00,000/- per month or Rs. 24,00,000/- per annum. Hence, the Statement of Particulars of Employees pursuant to the provisions of Section 217(2A) of the Companies Act, 1956, is not applicable.

7.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO : As the Company has yet to start any activity, the information required under Section 217(1) (e) of the Companies Act, 1956, read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 with respect to these matter is not applicable to the Company.

FOR AND ON BEHALF OF THE BOARD

ii)

PLACE: LUDHIANA DATED: 28th May, 2007

(S.P. OSWAL) CHAIRMAN

103

Vardhman

Vardhman Yarns & Threads Limited

AUDITORS REPORT
To The Members, Vardhman Yarns & Threads Limited 1. We have audited the attached balance sheet of Vardhman Yarns & Threads Limited as at 31st March, 2007 and the profit and loss account for the year ended on that date annexed thereto. These financial statements are the responsibility of the companys management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with 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 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. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclosed in the annexure a statement on the matters specified in paragraph 4 of the said order. Further to our comments in the annexure referred to in paragraph 3 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 purpose of our audit; 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; the balance sheet and profit and loss account dealt with by this report are in agreement with the books of account; in our opinion, the balance sheet and profit and loss account dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956; on the basis of the written representations received from the directors as on 31st March,2007 and taken on record by the Board of Directors, we report that none of the director is disqualified as on 31st March, 2007 from being appointed as a director in terms of clause(g) of sub-section (1) of Section 274 of the Companies Act,1956; f) in our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with the significant accounting policies and other notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of balance sheet, of the state of affairs of the company as at 31st March, 2007; and ii) in the case of profit and loss account, of the profit for the year ended on that date.

For S.C. VASUDEVA & Co. CHARTERED ACCOUNTANTS SANJIV MOHAN PARTNER Membership No. 86066

PLACE : LUDHIANA DATED : 28th May, 2007

3.

ANNEXURE TO THE AUDITORS REPORT


(Referred to in paragraph 3) (i) The company has not purchased fixed assets during the year, therefore, the provisions of clause 4(i) of the order are not applicable. There is no inventory during and at the close of the year, therefore, the provision of clause 4(ii) of the order are not applicable to the company. The company has during the year granted unsecured loan to one company covered in the register maintained under section 301 of the Companies Act, 1956. The aggregate amount involved in the transaction is Rs 3 lacs. No amount is outstanding as at the close of the year.

4.

(ii)

b)

(iii) (a)

c)

d)

e)

(b) According to the information and explanations given to us, the rate of interest and other terms and conditions in respect of unsecured loans given by the company, are not prima-facie prejudicial to the interest of the company. (c) In our opinion and according to the information and explanations given to us, the receipt of principal amount and interest in respect of the aforesaid loans is regular.

104

Vardhman Yarns & Threads Limited


(e) The company has not taken any loan secured or unsecured from any companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Therefore the provision of clause 4(iii) (f) and (g) of the order are not applicable to the company. (iv) The provisions of clause 4(iv) of the order are not applicable to the company. In our opinion and according to the information and explanations given to us, we are of the opinion that there are no contracts or arrangements the particulars of which need to be entered in the register maintained under that section 301 of the Companies Act, 1956. According to the information and explanations given to us the company has not accepted deposits covered under the provisions of section 58A and 58AA or any other relevant provisions of the Companies Act, 1956 and the Companies ( Acceptance of Deposits) Rules 1975. The provisions of clause 4(vii) of the order are not applicable to the company.

Vardhman

(xiv) According to the information and explanations given to us, the company has not dealt or traded in share, securities, debentures and other investments. Therefore, the provisions of clause 4(xiv) of the order are not applicable to the company. (xv) According to the information and explanations given to us, the company has not given any guarantees for loans taken by others. Therefore, the provisions of clause 4(xv) of the order are not applicable to the company.

(v)

(vi)

(xvi) In our opinion and according to the information and explanations given to us, the company has not taken term loans during the year. . (xvii) According to the information and explanations given to us, and on an overall examination of the balance sheet, the company has not raised any short-term funds during the year. Therefore, the provisions of clause 4(xvii) of the order are not applicable to the company. (xviii) According to the information and explanations given to us, the company has not made any preferential allotment of shares during the year to parties and companies covered in the register maintained under section 301 of the Companies Act, 1956. (xix) According to the information and explanations given to us, the company has not issued debentures during the year. Accordingly the provisions of clause 4 (xix) of the order are not applicable to the company. (xx) According to the information and explanations given to us, the company has not raised any money by way of public issue during the year. Accordingly the provisions of clause 4 (xx) of the order are not applicable to the company.

(vii)

(viii) The provisions of clause 4(viii) of the order are not applicable to the company. (ix) The provisions of clause 4(ix) of the order are not applicable to the company. The provisions of clause 4(x) of the order are not applicable to the company. In our opinion and according to the information and explanations given to us, the company has not borrowed from banks, financial Institutions or debentureholders. Therefore, the provisions of clause 4(xi) of the order are not applicable to the company. According to the information and explanations given to us, the company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Therefore, the provisions of clause 4(xii) of the order are not applicable to the company.

(x)

(xi)

(xxi) According to the information and explanations given to us, no fraud on or by the company has been noticed or reported during the year.

(xii)

For S.C. VASUDEVA & Co. CHARTERED ACCOUNTANTS

(xiii) The company is not a chit fund or a nidhi mutual benefit fund/society. Accordingly, the provisions of clause 4 (xiii) of the order are not applicable to the company.

PLACE : LUDHIANA DATED : 28th May, 2007

SANJIV MOHAN PARTNER Membership No. 86066

105

Vardhman

Vardhman Yarns & Threads Limited


Schedule No. As at 31.03.2007 (Rs.) As at 31.03.2006 (Rs.)

BALANCE SHEET as at 31st March, 2007


Particulars

I.

SOURCES OF FUNDS Shareholders' Funds Share Capital

5,10,000 5,10,000

5,00,000 5,00,000 3,29,597 3,29,597

TOTAL II. APPLICATION OF FUNDS Current Assets, Loans & Advances (A) Less: Current Liabilities & Provisions (a) Liabilities (b) Provisions (B) Net Current Assets Profit and Loss Account TOTAL NOTES ON ACCOUNTS (A-B)

3,54,211 3,54,211

3 1,422 5,000 6,422 3,47,789 1,62,211 5,10,000 4 1,122 1,122 3,28,475 1,71,525 5,00,000

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

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants
SANJIV MOHAN Partner Membership No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 D.L. SHARMA Director SACHIT JAIN Director

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Vardhman Yarns & Threads Limited


PROFIT AND LOSS ACCOUNT for the year ended 31st March, 2007
Particulars INCOME Interest Received (Gross) [TDS Rs. 4,013] TOTAL EXPENDITURE Audit Fees Printing & Stationery Filing Fee Bank Charges Miscellaneous Expenses TOTAL Profit / (Loss) before Tax Less: Provision for - Current Tax - Deferred Tax - Fringe Benefit Tax Profit / (Loss) After Tax Add: Profit / (Loss) brought forward Balance carried to the Balance Sheet Earning per share of Rs. 10/- each (Rs.) (Refer Note No 4 of Notes on Accounts) - Basic & Diluted Schedule No. Current Year (Rs.) 17,877 17,877

Vardhman

Previous Year (Rs.)

1,122 2,000 441 3,563 14,314 5,000 9,314 (1,71,525) (1,62,211)

1,122 5,349 1,500 622 150 8,743 (8,743) (8,743) (1,62,782) (1,71,525)

0.19

(0.17)

NOTES ON ACCOUNTS 4 The Schedules referred to above form an integral part of the Profit and Loss Account

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants
SANJIV MOHAN Partner Membership No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 D.L. SHARMA Director SACHIT JAIN Director

107

Vardhman

Vardhman Yarns & Threads Limited

Schedules 1 to 4 Annexed to and forming part of the Balance Sheet as at 31st March, 2007 and Profit and Loss Account for the year ended 31st March, 2007
As at 31.03.2007 (Rs.) SCHEDULE 1 SHARE CAPITAL Authorised: 10,00,000 (Previous year 10,00,000) Equity shares of Rs. 10/- each Issued, Subscribed & Paid-up 51,000 (Previous year 50,000) Equity Shares of Rs. 10/- each Total
NOTE: Out of the above, 50,000 (Previous Year 50,000) Equity Shares are held by Vardhman Textiles Limited (Formerly known as Mahavir Spinning Mills Limited), the Holding Company.

As at 31.03.2006

(Rs.)
1,00,00,000 1,00,00,000 5,00,000 5,00,000

1,00,00,000 1,00,00,000 5,10,000 5,10,000

SCHEDULE 2 CURRENT ASSETS, LOANS AND ADVANCES Current Assets Cash and Bank Balances : Balances with Scheduled Bank in Current Account Loans and Advances (Unsecured considered good unless otherwise stated) Advances recoverable in cash or in kind or for value to be received

3,36,334

3,29,597

17,877 3,54,211

3,29,597

SCHEDULE 3 CURRENT LIABILITIES AND PROVISIONS A. Current Liabilities : Other Liabilities Total (A) B. PROVISIONS : Provision for Taxation (Current Tax) Total (B) Total (A+B) SCHEDULE 4 - NOTES ON ACCOUNTS
1. (a) Significant Accounting Policies : Accounting Convention : The accounts are prepared on accrual basis under the historical cost convention in accordance with the applicable accounting standards referred to in section 211(3C) and other relevant provisions of the Companies Act, 1956. Revenue Recognition : Interest Income Interest Income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Accounting for Taxes on Income : The accounting treatment followed for taxes on income is to provide for Current Tax, Deferred Tax and Fringe Benefit Tax. Current Tax is the amount of income-tax determined to be payable in respect of taxable income for a period. Deferred tax is the tax effect of timing differences. Fringe Benefit Tax has been determined in accordance with the provision of Income tax Act. 1961. Deferred tax asset in respect of brought forward business loss has not been created as there is no virtual certainty that there will be sufficient profits against which such asset will be realised. The Company did not have any employee till 31st March 2007. Earning Per Share The calculation of Earning Per Share (EPS) as disclosed in the Profit & Loss Account has been made in accordance with Accounting Standard (AS)-20 on Earning Per Share issued by the Institute of Chartered Accountants of India. The company has not started its Commercial activities, accordingly the information pursuant to the paragraphs 3, 4C, 4D of Part II of Schedule VI to the Companies Act, 1956 are not applicable.

1,422 1,422 5,000 5,000 6,422

1,122 1,122 1,122

(b)

(c)

2. 3. 4. 5.

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Vardhman Yarns & Threads Limited


6. (A)

Vardhman

Related Party Disclosure Details of transactions entered into with related parties during the year ended on 31.03.2007 as required by Accounting Standard (AS)-18 on Related Party Disclosures issued by the Institute of Chartered Accountants of India are as under: (Amount in Rs.) Particulars Holding Company Fellow Subsidiary Key Management Enterprises over Total Company Personnel (KMP) which KMP is able to exercise significant influence Current Pevious Current Pevious Current Pevious Current Pevious Current Pevious Year Year Year Year Year Year Year Year Year Year Interest received on Inter Corporate Deposits 17,877 17,877 Loans given (including opening balance) 3,00,000 3,00,000 Loans repaid 3,00,000 3,00,000 Closing Balance Disclosure of related parties with whom Business transactions took place during the year. (a) Holding Company Vardhman Textiles Limited (Formerly known as Mahavir Spinning Mills Limited ) (b) Fellow Subsidiary Companies VMT Spinning Company Limited Vardhman Threads Limited Key Menagement Personnel Mr. Shri Paul Oswal Enterprises over which Key Management Personnel and relative of such personnel is able to exercise significant influence Vardhman Acrylics Limited Disclosure of Related Parties with whom no business transactions took place during the year. Enterprises over which Key Management Personnel and relatives of such personnel are able to exercise significant influence Adinath Investment and Trading Company Anklesh Investments Private Limited Banarso Devi Oswal Public Charitable Trust Devakar Investment and Trading Company Private Limited Flamingo Finance and Investment Company Limited Marshall Investment and Trading Company Private Limited Plaza Trading Company Private Limited Pradeep Mercentile Company Private Limited Ramaniya Finance and Investment Company Limited Santon Finance and Investment Company Limited Srestha Holdings Limited Sri Aurobindo Socio Economic and Management Research Institute Syracuse Investment and Trading Company Private Limited Vardhman Apparels Limited Vardhman Textile Processors Private Limited Vardhman Linen Limited

(B) 1.

2. 3. (C)

109

Vardhman

Vardhman Yarns & Threads Limited


Information Pursuant to Part IV of Schedule-VI to the Companies Act, 1956 :

7.

BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE


I. REGISTRATION DETAILS Registration No. Balance Sheet Date 3 1 2 7 9 3 6 0 3 2 0 0 7 State Code 1 6

II.

Date Month Year CAPITAL RAISED DURING THE YEAR (Amount in Rs. Thousand) Public Issue N I L Bonus Issue

Rights Issue N I L Private Placement 1 0 Total Assets 5 1 0 Reserves and Surplus N I L Unsecured Loans N I L Investments N I L Miscellaneous Expenditure... N I L

N I L III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (Amount in Rs. Thousand) Total Liabilities 5 1 0 SOURCES OF FUNDS Paid-up Capital 5 1 0 Secured Loans N I L Net Fixed Assets N I L Net Current Assets 3 4 8 Accumulated Losses (including deferred tax asset) 1 6 2 IV. PERFORMANCE OF COMPANY (Amount in Rs. Thousand) Turnover (including other income) + + B A S I C V.

APPLICATION OF FUNDS

Total Expenditure 4 + + Dividend Rate % N I L

1 8 Profit/Loss before Tax 1 4 Earnings per Share (in Rs.) 0 . 1 9

Profit/Loss after Tax 9

GENERIC NAMES OF THREE PRINCIPAL PRODUCTS / SERVICES OF THE COMPANY (As per Monetary Terms) The company has not started commercial production as yet. Item Code No. (ITC Code) : Product Description : NOT APPLICABLE NOT APPLICABLE

As per our report of even date attached For S.C. Vasudeva & Co. Chartered Accountants
SANJIV MOHAN Partner Membership No. 86066 PLACE : LUDHIANA DATED : 28th May, 2007 D.L. SHARMA Director SACHIT JAIN Director

110

------------------------------------------------------------------------------------------------------------ (TEAR HERE) ----------------------------------------------------------------------------------------------------------------

VARDHMAN TEXTILES LIMITED


Mahavir SpinningREGD. OFFICE: CHANDIGARH ROAD, LUDHIANA - 141 010 Mills Ltd.
PROXY FORM
I/We............................................................................................................................................................................................................................ of.................................................................................................................................................................................................................... in the District .............................................................................................................................................................being a Member/Members of Vardhman Textiles Limited hereby appoint.................................................................................................................................................. of................................................................................................................................................................................................................in the District of.......................................................................................................................................................................................failing him/her ..................................................................................... .....................of................................................................................................................ ......................................................................................................in the District of............................................................................................... as my/our proxy to vote for me/us on my/our behalf at the 34th Annual General Meeting of the Company to be held at Registered Office of the Company situated at Chandigarh Road, Ludhiana, at 3.30 P.M., on Saturday, the 18th day of August, 2007 and at any adjournment thereof. Signed this...........................................................................................day of........................................................................................2007. Affix Revenue Stamp here Signature.................................................................................................................................... Address...................................................................................................................................... Folio No./ Client-Id ...................................................................................................................... (Formerly known as Mahavir Spinning Mills Limited)
Vardhman Vardhman

NOTES : 1. A Member entitled to attend and vote is entitled to appoint a proxy to attend and vote on poll instead of himself/herself. 2. The Proxy form duly signed across Revenue Stamp should reach the Companys Registered Office at least 48 hours before the time of meeting. (TEAR HERE) ----------------------------------------------------------------------------------

---------------------- --------------------------------------------------------

VARDHMAN TEXTILES LIMITED


(Formerly known as Mahavir Spinning Mills Limited)

REGD. OFFICE: CHANDIGARH ROAD, LUDHIANA - 141 010 SUGGESTIONS


In case you have any suggestion for the betterment of your Company, please do write to us.

Vardhman

Suggestion............................................................................................................................................................................................................. ........................................................................................................................................................................................................................... ................................................................................................................................................................................................................................ Name...............................................................................................Folio No./ Client-Id .......................................................................................... Address................................................................................................................................................................................................................

..............................................................................................................................................................Pin Code ---------------------- -------------------------------------------------------(TEAR HERE) ----------------------------------------------------------------------------------

VARDHMAN TEXTILES LIMITED


(Formerly known as Mahavir Spinning Mills Limited)

REGD. OFFICE: CHANDIGARH ROAD, LUDHIANA - 141 010 ATTENDANCE SLIP

Vardhman

I hereby record my presence at the 34th Annual General Meeting of the above named Company being held at Registered Office of the Company situated at Chandigarh Road, Ludhiana, at 3.30 P.M., on Saturday, the 18th day of August, 2007. ...................................................................................... Full Name of the Member (IN BLOCK LETTERS) Folio No./ Client-Id ....................................................... ...................................................................................... Full Name of the Proxy (IN BLOCK LETTERS) No. of Shares held...................................................... .................................................................................. Signature .................................................................................... Signature

NOTE: Members attending the meeting in person or by proxy are requested to complete the attendance slip and hand it over at the entrance of the meeting hall.

111