Raymond - 2008-2009 - Annual Report

RAYMOND LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

DEAR MEMBERS,

Your Directors are pleased to present their 84th report on the business and
operations of your Company together with the Audited Statement of Accounts
for the year ended March 31, 2009.

1. CORPORATE OVERVIEW:

Raymond Limited (hereinafter referred to as your Company/the Company) is
India's leading multi-product conglomerate with interests in textiles,
apparels, retail, brands and engineering (files & tools) having its
corporate headquarters in Mumbai. The Company prepares its financial
statements in compliance with the requirements of the Companies Act, 1956,
and the Generally Accepted Accounting Principles (GAAP) in India. Overall
the financial statements have been prepared on the historical cost basis.

2. FINANCIAL HIGHLIGHTS:

While the first half operating performance of your Company was generally in
line with expectations, the mainstay textile business was adversely
impacted by the drop in consumer sentiment as fallout of the economic
downturn. The second half of the year generally is the main season for
textiles. In addition, due to the restricted credit availability to the
trade, the Company had to carefully monitor despatches.

Consequently your Company has registered only nominal growth in turnover.
During the year, the gross turnover of the Company was Rs.1393.25 crores as
compared to Rs.1337.56 crores in the previous year.

Profit before tax, prior period adjustments, exceptional items and foreign
exchange loss/gain was Rs.30.35 crores as against Rs.69.31 crores in the
previous year. The performance was affected by foreign exchange loss of Rs
89.10 crores.

After factoring in the foreign exchange loss, the loss before tax, prior
period adjustments and exceptional items was Rs.58.75 crores as against the
profit of Rs.86.15 crores in the previous year.

The operations of your Company's denim joint venture - Raymond UCO Denim
Private Limited were restructured by closing down two of its heavily loss
making subsidiaries in Belgium and USA. The Company has assessed the
situation considering the prevailing economic uncertainties and based on a
valuation report of an independent valuer, provided for diminution of
Rs.230.13 crores, in the value of the Company's investments in the joint
venture, as an exceptional item. Your Company has also impaired its
investment in its overseas subsidiary - Regency Texteis Portuguesa Limitada
by Rs. 5.12 crores, as an exceptional item.

Thus, the net loss, after exceptional items, prior year adjustments and
provision for taxes was Rs. 271.55 crores as against a net profit of
Rs.72.42 crores last year.

In order to conserve the resources of the Company and taking into account
the prevailing uncertain economic situation the Board of Directors of the
Company have decided not to recommend dividend for the financial year ended
March 31, 2009.

However, your Company looks beyond immediate challenges to build business
with long-term goals based on your Company's intrinsic strength both in
terms of product quality and also brands and distribution strength, thereby
sustaining growth despite the current turbulent business environment. Your
Company is also focused on bringing down costs and streamlining operations
to improve future profitability.

3. OVERVIEW OF THE ECONOMY:

In the past year, markedly during the second half, the Indian as well as
the global economy witnessed a high degree of uncertainty and rapid
slowdown. The global recession impacted the fortunes of corporates across
geographies. The IMF has estimated that world economic growth will fall its
lowest since World War II. Although the jury is still out on whether the
global recession could potentially turn out to be another great depression
like in the 1930s, there is a strong school of thought which is expecting a
slow and gradual recovery in the year 2010, once there is some stability
achieved during the year 2009.

The Indian economy too has not been isolated from what has been happening
in the global economy; in fact, it only became abundantly clear that the
fortunes of the Indian economy are not decoupled from the rest of the
world. As export demand continued to shrink during the year and external
financing became progressively constrained, the pace of growth in the
Indian economy slowed down.

The good thing though is that the Indian economy is not entirely export
dependent, which has worked to its advantage and its large domestic
consumption demand has helped prop up the GDP growth rates and has
prevented it from slipping into negative territory.

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

4. SEGMENT ANALYSIS AND REVIEW:

The key business segments of the Company are Textile and Files & Tools
Divisions.

A. TEXTILE DIVISION:

Industry Conditions:

The Indian textiles and apparels sector is a major contributor to the
Indian economy in terms of gross domestic product (GDP), industrial
production and the country's total export earnings. This sector provides
employment to over 35 million people and has direct linkages to the rural
economy and the agricultural sector.

The Indian textile industry is currently passing through a turbulent phase.
With the global downturn ravaging economies, the textile sector is one of
the worst hit. The effect of demand contraction and credit squeeze resulted
in over 7 lac textile workers losing their jobs (by November 2008).

The drop in the levels of discretionary spending along with the credit
squeeze spreading to the trade also contributed in no small measure.

However there is a slight thaw in the negative trend and it is expected
that the economy may improve from the second half of the Financial Year
2009-10, when the pent up demand of the Indian consumers would come to the
fore and provide further traction to facilitate investment demand.

Opportunities and Challenges:

The present global economic scenario throws up opportunities for
fundamentally strong companies such as your Company. The inherent
strengths, in the form of strong domain expertise, powerful brand
positioning, strength and resilience of the brands, fully integrated state
of the art production facilities, cutting-edge technology and unparalleled
product innovation capabilities combined with the deep retail market
penetration, provide a highly potent platform to seize the opportunities
that are bound to arise during cyclical downturns in the form of newer
markets, new segments of customers, new channels of distribution, etc.

On the other hand, during the Financial Year 2008-09, the volatility
witnessed in the forex markets, credit squeeze, high costs of borrowings,
drop in discretionary spending especially in export markets, disbursements
of Technology Upgradation Fund (TUF) loan subsidies are some of the
challenges facing the textile industry at large.

Overview:

The Company is the market leader in the textiles sector in India, has a
powerful brand Raymond', state of the art manufacturing facilities and a
strong all India retail presence in the form of The Raymond Shop' (TRS').
While focusing on its vision of being the global leader in fashion and
lifestyle segment, your Company is now also establishing itself as a
preferred supplier of value-added premium fabric in the international
markets. The Company is on the path to becoming a lifestyle solution for
discerning customers with an offering of a range of fabrics, garments and
accessories in a premium shopping environment.

During the year 2008-09, the phase III of the Company's textile Division at
Vapi commenced commercial production.

Performance Highlights:

Despite the severe downturn faced in the year 2008-09, poor consumer
sentiments and the credit squeeze, the Company's net sales from the textile
division registered a nominal growth. Net sales for the year was Rs.1137.85
crores as compared to Rs.1133.85 crores in the previous year.

Market Share and Retail Network:

The Company is the undisputable market leader in India and is considered as
one of the more formidable players in the global market for worsted
suitings.

The Company continues to focus on the retail sector in a big way and is now
concentrating on penetrating further into the Tier 3, 4 and 5 towns of the
country. Even in existing malls and other locations, the rent
renegotiations are being aggressively pursued by the Company which is
resulting in rental cost savings. The Company's like-to-like own store
sales growth was to the order of 4% which augurs well for the future. The
Company continues to be judicious in its selection of store locations with
profitability as the key criterion.

Export:

Textile exports for the Financial Year 2008-09 were Rs.110 crores, as
against Rs.114 crores in the previous year. Quality, design, service to mid
premium and premium customers has resulted in stability of customers
internationally and new customers being attracted to provide an integrated
offering.

Raw Material:

Wool prices were lower during the Financial Year 2008-09. Further,
alternate vendors have been developed in other countries like South Africa
to reduce the Company's dependence on traditional sources from Australia.
Polyester fibre prices are presently stable.

B. FILES & TOOLS DIVISION:

The Division is engaged in manufacture and marketing of Steel Files, HSS
Cutting Tools (mainly drills) and Merchandising activities mainly in Hand
Tools. During the year, the Division further consolidated its position in
Cutting Tools and Hand Tools segments.

Industry Outlook:

Globally, the Steel Files business has stagnated and has not registered
growth in demand. However, your Company's Division has been in a position
to improve its market share in the international market with sustained
marketing and business development efforts. Timely action on market
segmentation, price hikes, tight control on liquidity, cost-control, etc.
also contributed. The Cutting Tools business recorded growth in the year
despite stiff competition in the domestic as well as in export market.

Opportunities and Threats:

The challenge before this Division is to sustain growth and profitability
in the background of the recessionary climate. The weakening of currencies
in some of the major markets like Latin America, Africa etc., is leading to
price pressure by buyers. All these factors are going to make the current
financial year very challenging for this Division.

Overview:

This Division is planning to counter its challenges through focused
marketing, tight control on liquidity and margins, cost effective sourcing
of materials and services, improved productivity through process automation
& up-gradation, shorter leadtime with focus on time in full delivery.

The Division continues to expand and consolidate its presence in
International market continues. The Division has also strengthened its
presence in USA and Latin America.

Performance and Review of Operations:

The Division continues to remain the market leader in the files segment in
the domestic market and is amongst the largest producer of Steel Files in
the world. For the first time, the Export Sales of the Division have
crossed the milestone of Rs.100 crores and recorded all time high export
sales of Rs.108 crores. The Division reported net sales of Rs. 222 crores
(Previous Year: Rs. 177 crores).

5. FINANCE AND ACCOUNTS:

The observations made by the Auditors in their Report have been clarified
in the relevant notes forming part of the Accounts, which are self
explanatory.

6. PERFORMANCE OF SUBSIDIARY COMPANIES:

Domestic:

Raymond Apparel Limited:

The gross turnover of the Company was higher by 20.31% at Rs. 421.02 crores
(Previous Year: Rs. 349.96 crores). Profit after tax was lower at Rs. 4.67
crores (Previous Year: Rs. 7.84 crores).

The second half of the Financial Year 2008-09 was challenging due to fall
in consumer sentiments. Though the Company's performance was impacted, the
strength of its brands enabled it to maintain a leading position in the
apparel industry. The 'Park Avenue' brand of the Company was adjudged the
'Most Admired Menswear Brand' of the year in Images Fashion Forum. In the
coming years, the Company is gearing to consolidate and retain the
leadership position of its various brands and improve profitability,
through continued focus on product innovation, appropriate product-price
matrix and operating efficiencies, especially in retail.

The Company is in the process of implementing an ERP system which will help
it to improve its service levels further.

Colorplus Fashions Limited:

The gross turnover of the Company for the year ended March 31, 2009 was
marginally higher at Rs.148.32 crores (Previous Year: Rs.147.89 crores).
Profit before tax and exceptional items was lower at Rs.5.72 crores
(Previous Year: Rs.14.68 crores). During the year, the Company has provided
for diminution in respect of its long term investments in Gas Apparel Ltd.
The net loss for the year, after providing for diminution and after taxes,
was Rs. 15.05 crores (Previous Year: net profit Rs. 6.71 crores).

The performance of the Company was affected by adverse consumer sentiments.
The Company is focusing its efforts on quality collections, operational
efficiencies and market serviceability and will continue its focus on
offering more innovative products and styles to retain its market
leadership in the premium casual segment.

Silver Spark Apparel Limited:

The gross turnover of the Company was Rs. 86.83 crores (Previous Year:
Rs.88.07 crores).

The Company had a profit after tax of Rs.1.81 crores (Previous Year:
Rs.7.39 crores) during the Financial Year 2008-09, after foreign exchange
loss of Rs 9.07 crores.

The Company continues to export its products to reputed international
brands, who have shown their acceptance of quality and service levels by
placing repeat orders. The Company has been imparting continuous training
to the operators to improve the efficiencies as well as standards of
quality.

Celebrations Apparel Limited:

The gross turnover of the Company was Rs.14.29 crores (Previous Year: Rs.
8.97 crores). The Company incurred a loss of Rs. 0.04 crores (Previous
Year: loss of Rs. 0.10 crores).

During the year, the Company focused on imparting training to operators,
obtaining manufacturing consistency and operational efficiencies. The
Company has met the quality standards set by reputed national brands.
During the year, the Company has increased its shirts manufacturing
capacity from 4000 shirts to 5000 shirts per day. The Company is receiving
encouraging inquiries for export of high quality shirts.

Everblue Apparel Limited:

The Company earned a profit after tax of Rs 1.32 crores (Previous Year: Rs
1.50 crores).

Raymond Woollen Outerwear Limited (formerly known as Raymond Fedora Private
Limited):

The gross turnover of the Company, net of returns and discounts was Rs
45.72 crores (Previous Year: Rs. 35.33 crores). The Company incurred a loss
before prior period adjustments of Rs.1.45 crores (Previous Year: loss of
Rs. 11.85 crores).

During the year, the shares of Lanificio Fedora S.p.A., were forfeited by
the Company due to non payment of call money and the Joint Venture
agreement between Raymond Limited and Lanificio Fedora S.p.A., was
terminated. Hence, the Company subsequently became a subsidiary of Raymond
Limited and a Public Company pursuant to Section 3(1)(iv)(c) of the
Companies Act, 1956. The Company's name has since been changed as above.

Inspite of the global economic downturn severely impacting apparel business
worldwide, the Company managed to increase its fabric exports during the
year by 75% to Rs. 33.40 crores through sustained efforts of its Marketing
and Operations team.

With continued focus on product and design development and exploring
opportunities in new markets and customers, the Company expects to sustain
its performance in the face of continuing challenging conditions in the
global market place.

Hindustan Files Limited:

The gross turnover of the Company (including sales & services) was higher
at Rs.45.01 crores (Previous Year: Rs. 37.98 crores). Profit after Tax was
at Rs.1.31 crores (Previous Year: Rs. 2.15 crores). The control measures,
monitoring and process improvement strategy applied has helped the Company
to remain profitable during the Financial Year 2008-09.

JK Talabot Limited:

The Company manufactures files and rasps at its plant located at Chiplun in
Ratnagiri District, in the State of Maharashtra. During the year gross
turnover of the Company was at Rs.18.85 crores (Previous Year: Rs. 13.94
crores). The Company recorded profit after tax of Rs.2.74 crores (Previous
Year: Rs.0.09 crores) during the Financial Year 2008-09.

The performance of the Company during the year was good, due to improved
capacity utilisation, initiatives on improvement in productivity and
quality in addition to effective management of working capital.

Scissors Engineering Products Limited:

The Company incurred a loss of Rs.26,000/- (Previous Year: loss of
Rs.36,000/-) during the Financial Year 2008-09.

Ring Plus Aqua Limited:

The gross turnover of the Company was at Rs.84.56 crores (Previous Year:
Rs. 83.39 crores). Profit after tax was at Rs. 2.94 crores (Previous Year:
Rs. 7.27 crores).

Gear sales during the year were Rs. 54.74 crores as compared to Rs.49.30
crores in the previous year. Despite recessionary trend in the market,
export sale of gears grew by more than 17% and was at Rs. 32.24 crores as
against Rs.27.51 crores in the previous year. The Company continued making
major in-roads into European market during the year. The sales of gears in
Domestic OEM market is increasing steadily. The Gear capacity expansion is
in process and enhancement in capacity and capability will help the Company
to extend its OEM customer base, particularly in Western Europe.

Shaft Bearings sales were lower during the year at Rs.18.56 crores as
against Rs.20.53 crores in the previous year. USA continued to be the major
market for Bearing exports.

Pashmina Holdings Limited:

The Company made a loss of Rs 0.08 crores in the Financial Year ended March
31, 2009 as compared to a loss of Rs.0.09 crores in the previous year.

Overseas Companies:

Jaykayorg AG incurred a loss of CHF 883,975 (equivalent to Rs.3.70 crores)
[Previous Year: loss CHF 394,277 (equivalent to Rs.1.65 crores)] for the
year ended December 31, 2008.

J.K. (England) Limited recorded a profit of Pound Sterling 4,084
(equivalent to Rs.0.03 crores) [Previous Year: profit Pound Sterling 21,648
(equivalent to Rs.0.17 crores)] for the year ended December 31, 2008.

Regency Texteis Portuguesa Limitada, Portugal incurred a loss of Euros
366,953.95 (equivalent to Rs.2.40 crores) [Previous Year: profit Euros
44,897.98 (equivalent to Rs.0.29 crores)] for the year ended December 31,
2008.

Raymond Europe S.R.L., incurred a loss of Euro 28,486 (equivalent to
Rs.0.19 crores) [Previous Year: profit Euro 4,258 (equivalent to Rs.0.03
crores)] for the year ended December 31, 2008. The operations of the
Company, which ran a design studio in Italy, has been closed down.

R & A Logistics INC., USA, a subsidiary of Ring Plus Aqua Limited set up in
the USA to provide better service to US based customers, earned a profit US
$ 1,430 (equivalent to Rs.0.01 crores) (Previous Year: profit US $ 10,787
(equivalent to Rs.0.05 crores)] for the year ended March 31, 2009.

7. PERFORMANCE OF JOINT VENTURES:

Raymond UCO Denim Private Limited:

During the year, the consolidated sales (including services and export
incentives) is Rs.713.13 crores (unaudited) as compared to Rs.784.71 crores
for the previous year ended March 31, 2008. The loss for the year after tax
and exceptional items is Rs. 330.74 crores (unaudited) as compared to
Rs.120.93 crores for the previous year ended March 31, 2008.

Foreign exchange loss during the year is Rs.45.72 crores as against the
gain of Rs.11.54 crores in the previous year ended March 31, 2008.

In view of the restructuring exercise including closure of unviable
operations carried out in the Company's overseas subsidiaries (in Belgium
and USA), the Company based on its assessment and independent valuation
report, has provided for diminution in the value of its investments and
outstanding from its overseas subsidiaries, resulting in an exceptional
charge of Rs.349.16 crores.

The figures for the year are subject to audit.

In the domestic market, with continuous focus on differentiated products,
wider and better product range, the Company continues to maintain
significant share of the premium brands operating in India.

The Company has been constantly developing new and innovative products
catering to the higher end of the European and US markets.

The Romanian operation which was operating as a manufacturing support to
the operations in Belgium for most of the year, has now been ramped up to
cater to the European market directly and take advantage of being present
in a low cost environment while catering to the European market.

As a result of the above restructuring, the pressures on the bottom line
are expected to ease with low cost operations (India and Romania) and
strong equity on product differentiation, value addition and customer
service.

Raymond Zambaiti Private Limited:

The gross turnover of the Company was Rs.131.45 crores (Previous Year: Rs.
103.58 crores). The Company had a profit after tax of Rs. 8.58 crores
(Previous Year: Rs. 6.04 crore) during the year.

The Company during the year has reached benchmark levels in weaving
efficiency and warping productivity; grade realisation has also increased
during the year.

Gas Apparel Limited:

The turnover of the Company for the current financial year March 31, 2009
is Rs. 11.98 crores (unaudited) as against the turnover of the previous
year ended March 31, 2008 which was at Rs. 15.67 crores.

The Company launched the GAS' fashion brand of premium apparel in April
2007. Though the brand was well received among its target youth audience
the Company has been incurring steep loss due to brand building expenses,
high cost of imported merchandise and very high rentals and other operating
costs for its stores. During the year, with a view to stop the continuing
cash drain, a number of actions were taken to close down stores, clear off
inventory and reduce overheads. As a consequence of the costs incurred to
restructure as above, the Company's loss is Rs. 50.46 crores (unaudited) as
compared to previous year's loss of Rs.19.33 crores and its networth is
fully eroded.

The figures for the year are subject to audit.

Discussions are ongoing with Grotto S.p.A., Italy, the joint venture
partner regarding the way forward. In the meantime the Company was
converted into Public Company' with effect from March 27, 2009, and
Company will be henceforth known as Gas Apparel Limited'. Further, your
Company has acquired the entire share holding held by Colorplus Fashions
Limited in Gas Apparel Limited on April 1, 2009.

8. QUALITY & ACCOLADES:

At Raymond there is an on-going quest for Excellence, Quality, Leadership
and Trust in the products and services provided to its customers and is a
continuous journey that is undertaken with a commitment to improve
processes, and deliver superior products. Every effort is made to provide
products and services that consistently meet or exceed customers'
expectations. Your Company continues to win awards year-on-year, some
notable awards during the Financial Year 2008-09 are;

* The Readers Digest Platinum Award for the most Trusted Brand;

* The Ninth Annual Images Fashion Awards 2009 for 'The Most Admired
Menswear Brand of the Year';

* JK Files & Tools has for 28 consecutive years been awarded the All India
Export Award by Engineering Export Promotion Council (EEPC) of India for
being the Star Performer Award as Large Enterprise' of 2006-07 in the Hand
Tools Category;

* Your Company's Jalgaon Plant has been certified OHSAS 18001:2007 for the
conformance of Occupational Health & Safety Management System.

9. CONSOLIDATED ACCOUNTS:

In accordance with the requirements of Accounting Standard AS-21 prescribed
by The Institute of Chartered Accountants of India, the Consolidated
Accounts of the Company and its subsidiaries (including the Joint Ventures)
is annexed to this Report.

10. CORPORATE GOVERNANCE:

Your Company continues to be committed to good Corporate Governance aligned
with the best-of-breed practices. Your Company complies with the standards
set out by Clause 49 of the Listing Agreement with the Stock Exchanges. A
separate Report on Corporate Governance along with the Auditors'
certificate on compliance with the Corporate Governance as stipulated in
Clause 49 is provided in this Annual Report.

11. DIRECTORS:

Shri B.K. Kedia, resigned from the Board of Directors of the Company with
effect from May 22, 2008. The Board places on record the great zeal and
dedication with which Shri Kedia served the Company during his long
association of over five decades. The Board is deeply grateful for the
mature and professional advise and guidance of Shri Kedia, from which the
Company had immensely benefited. The Board gratefully acknowledges the
stellar role of Shri B.K. Kedia in building up Raymond Group to its present
enviable stature.

Shri B.V. Bhargava and Shri Nana Chudasama retire by rotation at this
Annual General Meeting and are eligible for reappointment. However, they
have informed the Board that they do not seek re-appointment. The Board
does not propose to fill the vacancies at this meeting or any adjournment
thereof. Hence, as required under Section 256 of the Companies Act, 1956,
resolution at item Nos. 2 and 3 are proposed not to fill up the vacancies
caused by the retirement of Shri B.V. Bhargava and Shri Nana Chudasama.

Shri Bhargava is a Director of the Company since August 16, 1996, and is
also Member of the Audit Committee, Member of the Finance Committee and the
Chairman of the Remuneration Committee of the Board of Directors. The Board
places on record its deep gratitude and appreciation for the precious time
and very valuable guidance provided to the Raymond Group by Shri B. V.
Bhargava during his tenure.

Shri Nana Chudasama is a Director of the Company since August 1, 1986, and
is also the Chairman of the Committee of Directors and a Member of the
Remuneration Committee of the Board of Directors. The Board places on
record its deep gratitude and appreciation for the precious time and very
valuable guidance provided to the Raymond Group by Shri Nana Chudasama
during his tenure.

At the 84th Annual General Meeting two special resolutions are commended
for your approval. The resolution at item No. 5 is for the payment of the
remuneration to the Chairman and Managing Director of the Company for the
period April 1, 2008 to June 30, 2009 as earlier approved by the
remuneration committee and the shareholders at the Annual General Meeting
of the Company held on June 23, 2006 and the resolution at item No. 6 is
for the payment of the remuneration to Shri P. K.Bhandari for the period
April 1, 2008 to April 23, 2008, as earlier approved by the remuneration
committee and the shareholders of the Company at the Annual General Meeting
of the Company held on June 23, 2006.

12. DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956,
the Board of Directors of the Company hereby state and confirm that:

(i) in the preparation of the Annual Accounts, the applicable accounting
standards have been followed along with proper explanation relating to
material departures;

(ii) the Directors have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the loss of the Company for
that period;

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

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

13. AUDIT:

Messrs. Dalal & Shah, Chartered Accountants, who are Statutory Auditors of
the Company hold office up to the forthcoming Annual General Meeting and
are recommended for re-appointment to audit the accounts of the Company for
the Financial Year 2009-10. As required under the provisions of the Section
224(1B) of the Companies Act, 1956, the Company has obtained written
confirmation from Messrs. Dalal & Shah that their appointment, if made,
would be in conformity with the limits specified in the Section.

As per the requirement of Central Government and pursuant to Section 233B
of the Companies Act, 1956 your Company carries out an audit of cost
records relating to textile division every year. Subject to the approval of
the Central Government, the Company has appointed Messrs. Nanabhoy & Co.,
cost accountants, as auditors to audit the cost accounts of the Company for
the Financial Year 2009-10.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Your Company believes in formulating adequate and effective internal
control systems and implementing the same strictly to ensure that assets
and interest of the Company are safeguarded and reliability of accounting
data and accuracy are ensured with proper checks and balances. The Internal
control system is improved and modified continuously to meet the changes in
business conditions, statutory and accounting requirements.

The Company has engaged a competent firm of Chartered Accountants to
conduct internal audit, examine and evaluate the adequacy and effectiveness
of the Internal Control System. The internal audit ensures that the systems
designed and implemented, provides adequate internal control commensurate
with the size and operations of the Company.

The Audit Committee of the Board of Directors, Statutory Auditors and the
Business Heads are periodically apprised of the internal audit findings and
the corrective actions taken.

The Audit Committee of the Board of Directors actively reviews the adequacy
and effectiveness of internal controls systems and suggests improvements
for strengthening them. The Company has a strong Management Information
System which is an integral part of the control mechanism.

15. RISK MANAGEMENT:

The Company is exposed to risks from market fluctuations of foreign
exchange, interest rates and commodity prices and business risk.

Foreign Exchange Risk:

The Company's policy is to systematically hedge its long term foreign
exchange risk as well as short term exposures risk considering prevalent
conditions. Your Company has opted not to follow notification number GSR
225(E) dated March 31, 2009 issued by Government of India in relation to
accounting of exchange differences arising on reporting of long term
foreign currency items due to currency rate fluctuations, in order to be
consistent in application of accounting policies both current and in
future.

Interest rate risk:

Given the interest rate fluctuations, the Company has adopted a prudent and
conservative risk mitigating strategy to minimise the interest costs.

Commodity Price Risk:

The Company is exposed to the risk of price fluctuation on raw materials as
well as finished goods in all its products. The Company proactively manages
these risks in inputs through forward booking, inventory management,
proactive management of vendor development and relationships. The Company's
strong reputation for quality, product differentiation and service the
existence of a strong brand image and a strong marketing network mitigates
the impact of price risk on finished goods.

Risk Element in Individual Businesses:

Apart from the risks on account of interest rate, foreign exchange and
regulatory changes, various businesses of the Company are exposed to
certain operating business risks, which are managed by regular monitoring
and corrective actions.

16. ENVIRONMENT AND SAFETY:

The Company is conscious of the importance of environmentally clean and
safe operations. The Company's policy requires the conduct of all
operations in such manner so as to ensure safety of all concerned,
compliance of statutory and industrial requirements for environment
protection and conservation of natural resources to the extent possible.

17. HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

The Company takes pride in the commitment, competence and dedication shown
by its employees in all areas of business. Various HR initiatives are taken
to align the HR Policies to the growing requirements of the business.

The Company has a structured induction process at all locations and
management development programmes to upgrade skills of managers. Objective
appraisal systems based on KRAs are in place for senior management staff.

Technical and safety training programmes are given periodically to workers.
Industrial relations remained generally cordial.

18. STATUTORY INFORMATION:

Information pursuant to sub-section 1 (e) of Section 217 of the Companies
Act, 1956, read with the Companies (Disclosure of Particulars in the Report
of the Board of Directors) Rules, 1988 is given in Annexure 1 to this
Report. During the Financial Year 2008-09, 38 employees employed throughout
the year, were in receipt of remuneration of Rs.24 lakhs per annum or more
and 56 employees employed for part of the Financial Year 2008-09 were in
receipt of remuneration of Rs. 2 lakhs per month or more. The particulars
of employees, as required under Section 217 (2A) of the Companies Act,
1956, are given in a separate Annexure to this Report. This Annexure is not
being sent along with this Report to the members of the Company in line
with the provisions of Section 219 (1) (b) (iv) of the said Act. Members
who are interested in obtaining these particulars may write to the Company
Secretary at the Registered Office of the Company. None of the employees
listed in the said Annexure is a relative of any Director of the Company
except for Shri Gautam Hari Singhania who is related to Dr. Vijaypat
Singhania. None of the employees hold (by himself or along with his spouse
and dependent children) more than two percent of the equity shares of the
Company.

The Company has been exempted by the Central Government vide their letter
No. 47/68/2009-CL-III dated March 20, 2009 under Section 212 (8) of the
Companies Act, 1956 from attaching a copy of the Balance Sheet, Profit and
Loss Account, Report of the Board of Directors and the Report of the
Auditors of the subsidiary companies. However, pursuant to Accounting
Standard AS-21 issued by The Institute of Chartered Accountants of India,
Consolidated Financial Statements presented by the Company includes the
financial information of the subsidiaries. A statement containing brief
details of the subsidiaries is included in this Annual Report.

The Company will make available these documents/details upon request by any
member of the Company and members of its subsidiaries interested in
obtaining the same. The annual accounts of the subsidiary companies will
also be kept for inspection by any member at the registered offices of the
Company.

The Company has also been exempted by the Central Government vide their
letter No.46/11/2009-CL-III dated April 9, 2009 under sub-section (4) of
Section 211 of the Companies Act, 1956, from disclosing quantitative
details in compliance of para 3(i) (a) of Part II of Schedule VI of the
Companies Act, 1956. However, the Company is disclosing these details in
the enclosed Annual Report.

Fixed Deposits amounting to Rs. 3,46,000/- (Rupees Three Lakhs Forty Six
Thousand only) from 35 depositors, which remained unclaimed by the
depositors as on March 31, 2009 have remained unclaimed upto the date of
this Report.

19. CAUTIONARY STATEMENT:

Statement in this Directors Report & Management Discussion and Analysis
describing the Company's objectives, projections, estimates, expectations
or predictions may be 'forward-looking statements' within the meaning of
applicable securities laws and regulations. Actual results could differ
materially from those expressed or implied. Important factors that could
make a difference to the Company's operations include raw material
availability and prices, cyclical demand and pricing in the Company's
principal markets, changes in Government regulations, tax regimes, economic
developments within India and the countries in which the Company conducts
business and other incidental factors.

20. APPRECIATION:

Your Directors express their warm appreciation to all the employees at
various Units for their diligence and contribution. Your Directors also
wish to record their appreciation for the support and co-operation received
from the joint venture partners, dealers, agents, suppliers, bankers and
all other stakeholders.

For and on behalf of the Board
Gautam Hari Singhania
Chairman and Managing Director
Place: Mumbai,
Date : April 24, 2009.

Annexure (1) to the Directors' Report:

Information pursuant to Section 217(1)(e) of the Companies Act, 1956 read
with Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988.

A. Conservation of Energy:

Energy conservation continued to have high prominence as in previous years.
Some of the initiatives taken in the year 2008-09 were as follows:

In Textile Division

At Thane Unit:

1) Utilizing Backwash exit heat for drying of Polyester tops.

2) Installation of electronic chokes and energy efficient light fittings.

3) Rain water harvesting.

At Chhindwara Unit:

1) Conversion from DC to AC system in various machines in Dyeing, Warping
and Finishing.

2) Installation of time lag switch in industrial fans in Dyeing and ETP.

3) Installation of electronic chokes and energy efficient light fittings

At Jalgaon Unit:

1) Installation of electronic chokes and energy efficient light fittings.

2) Use of renewable energy resources by installation of turbo ventilators &
solar water heaters.

At Vapi Unit:

1) Installation of Solenoid Valves in looms for arresting Compressed air
when machine is not running.

In Files & Tools Division

At Chiplun Unit:

1) Introduction of Thyristorised PID Controllers for Annealing Furnaces.

2) Conversion of LDO Annealing furnace to Electrical furnace.

B. Technology Absorption

(a) Research and Development (R&D)

Textile Division

The R&D Department of Textile Division strives to develop and provide
exclusive and innovative products under its brand.

Some of the products developed and introduced during the year under review
were:

1) Super 240s - Finest fabric in the world, made from 11.6 micron wool

2) Saxxon Wool - Jacketing fabrics and Suiting fabrics with properties like
superior comfort and good crease recovery

3) Lamere - Range of fabrics with Luster and softness using Lamere fibres

4) World class jacketing fabric using coarser wool

5) A Range of wool rich fabrics using Chintz finish

Files & Tools Division

In order to maintain its leadership in files business, the Files & Tools
Division developed 10 new SKU's for the Export market for customer specific
engineering and agro applications.

The details of expenditure on Research and Development is given in Schedule
- 16 notes forming part of the Accounts.

The Company has incurred an expenditure of Rs. 18.67 lacs towards Research
and Development which is 0.01% of the total turnover of the Company for the
year 2008-09.

(b) Technology Absorption, Adaptation and Innovation

Textile Division

The Textile Division undertook the following measures towards Technology
absorption, Adaptation and Innovation:

1) As part of its modernization project, installation of new energy
efficient machines in Spinning and Finishing processes at Chhindwara and
Jalgaon plants.

2) Indigenous development of Energy Monitoring System (SCADA) at Vapi plant
by which the power consumption of each department can be monitored,
analysed and report generated.

3) Automatic dispensing of chemicals in Rope Scouring machines at Vapi
plant's Finishing Dept.

4) Implementation of the Weavemaster and Qualimaster for on line monitoring
of various parameters of looms and report generation at Vapi Plant.

5) Indigenous development of cloth roller in Designing Picanol Looms at
Vapi Plant.

6) Regeneration of Steam from Gas Generator at Vapi Plant

7) Circulation of hot water received from Jacket cooling of Gas Generator
in Dyeing Machines at Vapi Plant Files & Tools Division

The Files & Tools Division undertook the following Process Improvement
measures:

1) Introduction of rust preventive oil (Castrol Rustilo DWX 32) for final
packaging of files for enhanced corrosion resistance

2) Introduction of File finishing lines for online washing of files at its
Ratnagiri plant

3) Introduction of Single piece flow packing and cartoning of files at its
Ratnagiri plant

4) Introduction of Stand-alone Brine Chillers for the hardening systems at
its Ratnagiri plant to maintain optimum brine temperature in hardening
process

5) Process stage elimination in Tang punching of Flat files for
productivity improvement

C. Foreign Exchange Earnings and Outgo:

Global recession has severely impacted business in major export markets,
particularly in the apparel sector. Textile Division's exports declined by
3%, in comparison with the previous year, to Rs. 110.77 crores. In adverse
market conditions and facing stiff competition from Indian and overseas
competitors, the Division was able to deliver a sustained performance. This
has been achieved through focused effort on enhancing customer base and
providing value added products.

In spite of unprecedented Global recession particularly in second half of
the financial year, the Files & Tools Division's endeavor to expand and
consolidate its presence in International market continues. During the year
under review the division recorded an all time high sales volume of files
in international market and also crossed a milestone of Rs. 100 crores
export for the first time.

The appreciation of USD against major global currencies including Indian
Rupee caused lot of imbalance in the flow of orders as well as pressure on
prices. However, the division has strengthened its presence in USA and
Latin America besides further consolidating its position in Asia and
Africa.

The particulars regarding foreign exchange earnings and outgo are given in
Schedule 16 - notes forming part of the Accounts.

Form A'

[Forming part of Annexure (1)]

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

A. POWER AND FUEL CONSUMPTION

Purchased Own generation
(through Diesel
Generator/Steam
Turbine)
Current Previous Current Previous
Year Year Year Year

1. Electricity

a) Total units (KWH in thousands)

Textiles * 63736 68049 69124 64449
Files & Tools 14665 14621 42 37

b) Total Amount (Rupees in lacs)

Textiles 3198 3015 2123 1808
Files & Tools 708 697 6 5

c) Units/per Liter of Diesel Oil

Textiles - - 2.79 3.14
Files & Tools - - 4.83 4.77

d) Units/per Kg. of Coal

Textile - - 0.90 0.90

e) Units/per Cubic mtr of Gas

Textile - - 3.78 -

f) Cost per unit (Rs.)

Textiles 5.02 4.43 3.07 2.81
Files & Tools 4.83 4.77 13.55 13.82

* 595.46 lac KWH units generated through steam turbine (Previous year
607.23 lac KWH units)

Total Total Cost Average Rate
Quantity Rs. Lacs per Unit (Rs.)

2. Coal (M.T.)

a) Textile Division**
Current Year 74998 1473 1964
Previous Year 76457 1407 1840

3. Furnace Oil (Lac Liters)

a) Textile Division
Current Year 53.72 1557 28.97
Previous Year 60.84 1349 22.18

b) Files & Tools Division
Current Year 3.83 106 27.65
Previous Year 4.79 105 21.94

4. Diesel Oil (Lac Liters)

a) Textile Division
Current Year 3.09 124 40.04
Previous Year 5.61 201 35.87

b) Files & Tools Division
Current Year 0.50 18 35.75
Previous Year 0.54 16 30.31

5. LPG (Kgs.)

a) Textile Division
Current Year 91412 49 53
Previous Year 95909 46 48

b) Files & Tools Division
Current Year 79160 38 47
Previous Year 85543 43 50

6. Natural Gas (Lacs Cubic Mtr.)

a) Textile Division
Current Year 55 695 13
Previous Year 29 289 10

** 66136 MT used for CPP (Previous year 67376 MT)

B. CONSUMPTION PER UNIT OF PRODUCTION:

Unit Standard Current Previous
(if any) Year Year
Electricity

a) Fabrics KWH/Metre - 4.67 4.87
b) Engineers' Steel Files KWH/Piece - 0.22 0.23