Annual Report of Eastern Silk Industries Limited for the financial year 2007

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Contents of the Annual Report (2007-08) of Eastern Silk Industries Limited

Notice of AGM

Directors' Report

Corporate Governance Report

Management Discussion & Analysis

Auditor's Report

Balance Sheet

Profit & Loss Account

Cash Flow Statement

Schedules

Additional Information, Balance Sheet Abstract and Company's General Business Profile

NOTICE

The Sixty-second Annual General Meeting of Eastern Silk Industries Ltd. will be held on Wednesday, the 24th September, 2008 at 11:00 A.M. at Kala Kunj, 48, Shakespeare Sarani, Kolkata – 700 017, to transact the following business:

1.	1. To receive, consider and adopt the Profit & Loss Account for the year ended 31st March, 2008 and the Balance Sheet as at that date together with the report of the Directors and Auditors thereon.
2.	To declare dividend.
3.	3. To appoint a Director in place of Sri R.S. Rungta who retires by rotation and is eligible for re-appointment.
4.	4. To appoint a Director in place of Sri O.P. Agarwal who retires by rotation and is eligible for re-appointment.
5.	To appoint Auditors and fix their remuneration.

Registered Office:	By order of the Board
19, R.N. Mukherjee Road	K.T.SHETH
Kolkata - 700001	COMPANY SECRETARY
Dated : The 31st July, 2008.

NOTES:

1.	A member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead and the proxy need not be a member of the Company. The proxy, in order to be effective, must be deposited at the Registered Office of the Company not less than 48 hours before the meeting.
2.	The Register of Members and Share Transfer Books of the Company will remain closed from 15th September 2008 to 24th September 2008, both days inclusive.
3.	Dividend, when declared will be made payable to those shareholders whose names appear in the Register of Members of the Company on 24th September 2008. In respect of shares held in electronic form, the dividend will be payable on the basis of beneficial ownership as per details furnished by the National Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL) for this purpose.
4.	Additional information pursuant to Clause 49 of the Listing Agreement with Stock Exchange regarding the Directors who are proposed to be reappointed at the Annual General Meeting are provided in the Report of Corporate Governance forming part of the Annual Report.
5.	Pursuant to the amended provisions of Section 205A of the Companies Act, 1956, dividends for the financial year ended 31st March, 2001 and thereafter, which remains unpaid or unclaimed for a period of seven years will be transferred to the Investor Education and Protection Fund of the Central Government. Members, who have not encashed their dividend warrants pertaining to these years, may approach the Company or its Registrars for obtaining duplicate dividend warrants.

Annexure to Notice dated 31st July, 2008
Details of Directors seeking Re-Appointment at the forthcoming Annual General Meeting
(Pursuant to Clause 49 of the Listing Agreement)

Name of the Director

Shri R. S. Rungta

Shri O. P. Agarwal

Age

74 years

57 years

Date of Appointment on the Board

19-07-1986

23-04-1999

Qualification

B.Com.

C.A.

Experience

Vast experience in managing large and diverse business.

About 34 years of experience in export business.

Directorship held in other Public Companies

1.	D.R. Steel Construction (P) Ltd.

1.	Ambo Exports Ltd.
2.	Capricon Oil Ltd.
3.	Ambo Agro Products Ltd.
4.	Swastik Refinery Pvt. Ltd.
5.	Swaraj Biscuit Bakery & Confectionery Pvt. Ltd.

Memberships / Chairmanships of Committees of Public Companies

Shareholding of Non-Executive Directors

Nil

DIRECTORS' REPORT

TO THE MEMBERS

Your Directors have pleasure in presenting their sixty-second Annual Report together with the Audited Accounts of your Company for the year ended 31st March, 2008.

FINANCIAL RESULTS

	(Rs. in Lacs)
	2008	2007
Profit before depreciation and taxation	7594.62	7999.02
Less: Depreciation	1578.00	1037.31
Profit before taxation	6016.62	6961.71
Less: Provision for current taxation	475.00	850.00
	5541.62	6111.71
Less: Provision for Earlier Year Taxation	(220.41)	-
	5762.03	6111.71
Less: Provision for Fringe Benefit Tax	15.79	23.17
	5746.24	6088.54
Less/Add: Deferred Tax Liability	(67.59)	321.92
Profit after tax	5813.83	5766.61
Add: Balance b/f from previous year	11766.01	7941.77
	17579.84	13708.38
Which the director's have apportioned as follows:
General Reserve	700.00	700.00
Preference Share Redemption Reserve	280.00	280.00
Proposed Dividend on Equity Shares	710.57	710.57
Proposed Dividend on Preference Shares	112.00	112.00
Corporate Dividend Tax	139.80	139.80
Balance carried forward to next year	17579.84	11766.01
	17579.84	13708.38

PERFORMANCE REVIEW
The sale of your Company has increased by 7% over the previous year to Rs.48165.28 lacs. Profit after tax increased by 1% over the previous year to Rs.5813.83 lacs.

SUB-DIVISION OF SHARES
1,57,90,524 Equity Shares of Rs.10/- each were sub-divided into 7,89,52,620 Equity Shares of Rs.2/- each with effect from the record date of 7th July 2008. The effect of subdivision have been given in the demat accounts of the members holding shares in electronic form. Members holding shares in physical form, have been requested to surrender old share certificates to obtain new share certificates in lieu thereof.

POST - BALANCE SHEET DEVELOPMENTS
Your Company posted 2.31% increase in the net profit in the quarter ended 30th June 2008 amounting to Rs.19.46 crores against Rs.19.02 crores in the corresponding quarter last year. The top line also recorded 4.24% rise from Rs.124.64 crores in the corresponding quarter last year to Rs.129.93 crores in the current year.

DIVIDEND
Your Directors recommend payment of the following Dividends for the year:

On 14,00,000 - 8% Cumulative Redeemable Preference Shares of Rs. 100/- each	Rs. 1,12,00,000/-
On 1,57,90,524 Equity Shares of Rs.10/- each @45%	Rs 7,10,57,358/-

PUBLIC DEPOSIT SCHEME
During the year, your Company has not accepted any deposits. There are no outstanding deposits as on date.

CORPORATE GOVERNANCE
A separate section on Corporate Governance and Management Discussion and Analysis together with the Auditors’ Certificate confirming the compliance of conditions on Corporate Governance as per Clause 49 of the Listing Agreement with the Stock Exchanges form part of the Annual Report.

SUBSIDIARY COMPANIES
During the year under review P.K. Textiles Ltd., Ethics Commercials Ltd. and Lucky Goldstar Co. Ltd. ceased to be subsidiaries of the Company.

DIRECTORS
Shri R.S. Rungta and Shri O.P. Agarwal, Directors of the Company retire from the office by rotation and are eligible for re-appointment.

DIRECTORS' RESPONSILBILITY STATEMENT
As required under provisions of Section 217 (2AA) of the Companies Act, 1956, your Directors confirm:

i)	That in preparation of the annual accounts, the applicable accounting standards have been duly followed.
ii)	That the Directors have selected such accounting policies and applied them consistently and 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 at the end of the financial year and of the profit of the Company for the year under review.
iii)	That 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)	That the Directors have prepared the accounts for the financial year ended 31st March, 2008 on a going concern basis.

DISCLOSURE OF PARTICULARS

The information required under Rule 2 of the Companies Act, 1956 (Disclosure of Particulars in the Report of Board of Directors Rules, 1988) relating to conservation of energy, technology absorption, foreign exchange earnings and outgo is annexed.

AUDITORS

Messrs B.K. Shroff & Company, Chartered Accountants, retire at the forthcoming Annual General Meeting and being eligible, offered themselves for re-appointment.
The observations of Auditors are explained where necessary in the appropriate notes to the Accounts.

COST AUDITORS
Pursuant to the directives of the Central Government under the provisions of Section 233 B of the Companies Act, 1956, qualified Cost Auditors have been appointed to conduct Cost Audits relating to products of the Company subject to the approval of the Central Government.

PERSONNEL
The Board of Directors wishes to express its appreciation to all the employees of the Company for their valued contributions to the operations of the Company during the year. The particulars of employees required to be furnished under Sec. 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 as amended is as under.

(a) Employees employed throughout the financial year under review who are in receipt of remuneration in the aggregate of not less than Rs.24,00,000/- during the year:

Name	Age (Years)	Qualification	Designation	Nature of Employment	Remuneration (Rs)	Experience (Years)	Date of commencement of employment	Last employment held	Relationship to any Director
S.S. Shah	73	B.Com LL.B	Chairman & Managing Director	Contractual	43,92,000/-	54	01.9.1952	Nil	Father of Sri Sundeep Shah, Executive Director
Sundeep Shah	46	B.Com	Executive Director	Contractual	28,51,200/-	28	01.12.1980	Nil	Son of Sri S. S. Shah, Chairman & Managing Director

(b)

ACKNOWLEDGEMENT

Registered Office:	By order of the Board
19, R.N. Mukherjee Road	S.S. SHAH
Kolkata - 700001	Chairman & Managing Director
Dated: The 31st July, 2008.

REPORT ON CORPORATE GOVERNANCE

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchange, a report on Corporate Governance for the year 2007-2008 is given below.

COMPANY'S PHILOSOPHY ON CODE OF GOVERNANCE:

The Company lays emphasis on good corporate practices which will assist the management to manage the affairs of the Company in a transparent manner and result in optimum use of its resources for achieving the higher standards of corporate governance. The Company appreciates and rewards the qualities of integrity, transparency and responsibility.

BOARD OF DIRECTORS

The Board comprises eight members – two Executive Directors and six Non-Executive Independent Directors. The composition of the Board of Directors as of 31st March, 2006 and also the number of the Board Committees of which person is a member/Chairperson are as under.

Name of Director	Category	No. of other Directorship	No. of Membership of other Board Committee	No. of Board Committee for which Chairperson
Shri. S.S. Shah	Promoter, Executive	4	-	Nil
Shri. Sundeep Shah	Promoter, Executive	1	-	Nil
Shri. G.D. Harnathka	Non-Executive, Independent	-	-	Nil
Shri. H.S. Gopalka	Non-Executive, Independent	2	-	Nil
Shri. O.P. Agarwal	Non-Executive, Independent	6	-	Nil
Shri. R.S. Rungta	Non-Executive, Independent	3	-	Nil
Shri. R.L. Gaggar	Non-Executive, Independent	12	13	Nil
Shri Sunil V. Diwakar (Nominee-IL&FS Investment Managers Ltd.)	Non-Executive, Independent	8	-	Nil

During the year under review, Board Meetings were held on 26th April 2007, 10th July 2007, 30th July 2007, 24th October 2007 and 17th January 2008. The attendance of the Directors for the Board Meetings and the last Annual General Meeting was as follows:

Name of Director	Meetings Attended	Whether Attended the last AGM
Shri. S.S. Shah	4	Yes
Shri. Sundeep Shah	5	Yes
Shri. G.D. Harnathka	1	No
Shri. H.S. Gopalka	4	No
Shri. O.P. Agarwal	3	Yes
Shri. R.S. Rungta	5	Yes
Shri. R.L. Gaggar	4	No
Shri. Sunil V. Diwakar	3	No

BOARD COMMITTEES

Audit Committee

I.	Constitution
	The Audit Committee of the Company was constituted pursuant to Section 292A of the Companies Act, 1956 in line with the provisions of Clause 49 of the Listing Agreement. The functions of the Committee are to overview the Company’s financial reporting process and disclosure of its financial information, adequacy and effectiveness of the internal control systems, taxation matters and company’s risk management policy.
II.	Composition
	The Audit Committee of the Company comprises three Directors who are all independent and non executive namely Sri H.S. Gopalka, Sri R.S. Rungta & Sri O.P. Agarwal. All these directors have knowledge of corporate finance, accounts and company law. The Chairman of the Committee is Sri H.S. Gopalka, who possesses rich experience. The Company Secretary acts as the Secretary of the Committee. The Statutory Auditors, Cost Auditors and Internal Auditors of the Company are permanent invitees at the meetings of the Committee.
III.	Meetings and Attendance
	During the financial year ended 31st March 2008 five Audit Committee meetings were held on 25th April 2007, 9th July 2007, 28th July 2007, 23rd October 2007 and 16th January 2008.
Remuneration Committee
I.	Constitution
	The Remuneration Committee of the Company was formed to recommend remuneration packages for whole-time Directors. Such recommendations are based on the overall financial performance and profitability of the Company and on evaluation of the personal contribution of the individual directors.
II.	Composition
	The Members of the Remuneration Committee are Shri H. S. Gopalka, Shri R. S. Rungta and Shri O. P. Agarwal, Shri R. S. Rungta acts as the Chairman of the Committee.
III.	Meetings and Attendance
	During the financial year ended 31st March 2008 Remuneration Committee Meeting was not held.

The details of the remuneration to the directors for the year ended 31st March 2008 are as under:

Name of the Director	Salary	Perquisites	Sitting Fees for Board & Committee Meetings	Total Rs.	Service Contract / Notice Period
Shri S.S. Shah	36,00,000	7,92,000	-	43,92,000	Five years w.e.f. 1st September 2006
Shri Sundeep Shah	21,60,000	6,91,200	-	28,51,200	Five years w.e.f. 1st September 2006
Shri H.S. Gopalka	-	-	27,000	27,000	Retire by rotation
Shri R.S. Rungta	-	-	34,000	34,000	Retire by rotation
Shri G.D. Harnathka	-	-	5,000	5,000	Retire by rotation
Shri O.P. Agarwal	-	-	22,000	22,000	Retire by rotation
Shri R.L. Gaggar	-	-	20,000	20,000	Retire by rotation
Shri Sunil V. Diwakar	-	-	15,000	15,000	Retire by rotation

SHAREHOLDERS COMMITTEE:
Share Transfer Committee

I.	Constitution
	Share Transfer Committee was constituted to deal with various matters relating to transfer and transmissoin of shares, issue of duplicate share certificates and approving the split and consolidation requests and other matters relating to transfer and registration of shares.
II.	Composition
	The members of the Committee are Shri S.S. Shah, Shri G. Venkatesh and Shri K.T. Sheth. Shri S.S. Shah acts as the Chairman of the Committee.
III.	Meeting & Attendance
	During the financial year ended 31st March, 2008, fourteen Share Transfer Committee meetings were held. No sitting fee was paid to any member of the Share Transfer Committee.
Investor's Grievance Committee
I.	Constitution
	Investors’ Grievance Committee was formed to oversee the redressal of shareholders’ and investors’ grievances in relation to transfer of shares, non-receipt of annual report, non-receipt of dividend etc.
II.	Composition
	The Committee comprises of three non-executive independent directors Shri H.S. Gopalka, Shri R.S. Rungta and Shri O.P. Agarwal. Shri O.P. Agarwal is the Chairman of the Committee.
III.	Meeting & Attendance
	During the financial year ended 31st March, 2008, four Investors’ Grievance Committee meetings were held.

GENERAL BODY MEETING

General Meetings:

The last three Annual General Meeting of the Company were held as under:

Date	Time	Venue
30th December 2005 and 11th May 2006 (Adjourned)	11:00 A.M. 11:00 A.M.	Kala Kunj, 48 Shakespeare Sarani, Kolkata - 700017
27th September 2006	11:00 A.M.	-- DO --
26th September 2007	11:00 A.M.	-- DO --

ii)

Special Resolution:

At the 61st Annual General Meeting of the Company held on 26th September, 2007 Special resolutions were passed under Sections 94 and 81(1A) of the Companies Act, 1956 for alteration of Memorandum & Articles of Association of the Company and for issue of Foreign Currency Convertible Bonds.

iii)

Postal Ballot

No Postal Ballot was conducted during the year.

DISCLOSURES

a)	The Company has not entered into any transaction of a material nature with the promoters, directors or management, or their relatives that may have potential conflict with the interest of the Company at large.
b)	A qualified practicing Company Secretary carries out a secretarial audit to reconcile the total admitted capital with National Securities Depository Ltd (NSDL) and Central Depository Services (India) Ltd. (CDSL) and the total issued and listed capital. The secretarial audit report confirms that the total issued/paid up capital is in agreement with the total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL.
c)	Chairman and Managing Director and Vice-President (Finance) have furnished the requisite certificates to the Board of Directors pursuant to Clause 49 of the Listing Agreement.

MEANS OF COMMUNICATION

The financial results of the Company are published in all leading newspapers in India which include Economic Times, The Financial Express, Business Standard, Times of India, Business Line and Aajkal. The results are also displayed on the SEBI’s edifar website and also on the Company’s website. Press conference, analysts meet and press releases are also made by the Company from time to time to facilitate better communication with the shareholders and investors.

GENERAL SHAREHOLDERS INFORMATION

i) Sixty Second Annual General Meeting

Venue:	Kala Kunj, 48 Shakespeare Sarani, Kolkata-700 017
Date:	24th September 2008
Time:	11:00 A.M.

ii) Financial Calendar

First quarter results - By end July

Second quarter results - By end October

Third quarter results - By end January

Fourth quarter results - By end April

iii) Book Closure

The date of book closure is from 15th September 2008 to 24th September 2008 (both days inclusive).

iv) Dividend Payment

Dividend if any, declared in the 62nd Annual General Meeting shall be paid / credited on or after 24th September, 2008.

v) Listing on Stock Exchanges

NAME OF STOCK EXCHANGE	STOCK CODE
National Stock Exchange of India	EASTSILK
Listing fee for the year 2008-2009 has been paid to National Stock Exchange of India Ltd.

vi) Stock Market Data

The Company's high and low prices recorded on National Stock Exchange of India Ltd. during the financial year 2007-2008 are given below:

MONTH	HIGH (Rs)	LOW (Rs)
APRIL 2007	292.00	234.00
MAY 2007	260.00	227.25
JUNE 2007	285.00	242.00
JULY 2007	317.70	241.10
AUGUST 2007	350.00	262.25
SEPTEMBER 2007	327.00	262.00
OCTOBER 2007	278.00	243.00
NOVEMBER 2007	253.75	170.05
DECEMBER 2007	237.50	195.00
JANUARY 2008	255.00	206.00
FEBRUARY 2008	289.60	176.00
MARCH 2008	222.10	175.55

vii) Share Holding (as on 31st March, 2008)
The shareholding distribution as on 31st March, 2008 is as follows:

Number of Shares	Number of Shareholders	% of total holders	Number of Shares held	% to total Holding
Upto 500	15,158	94.97	12,78,060	8.09
501-1000	377	2.36	2,95,457	1.87
1001-2000	205	1.28	3,15,437	2.00
2001-3000	77	0.48	1,95,016	1.24
3001-4000	24	0.15	83,799	0.53
4001-5000	19	0.12	92,394	0.59
5001-10000	37	0.23	2,79,028	1.77
10001 & above	63	0.39	1,32,51,333	83.92
TOTAL	15,960	100.00	1,57,90,524	100.00

The shareholding pattern as on 31st March, 2008 is as follows:

Category	Number of Shares	% of Holding
Promoters including NRI Promoters	74,79,090	47.36
Financial Institutions, Banks, Mutual Fund etc.	12,99,914	8.29
Non Indian Residents / OCBs / FIIs	17,32,693	11.36
Private Corporate Bodies	23,30,067	14.76
Indian Public	28,88,760	18.29
TOTAL	1,57,90,524	100.00

viii) Dematerializations of Shares

As directed by Securities Exchange Board of India (SEBI) equity shares of the Company are being traded in compulsory dematerialized form by all the investors.

The Company has entered into an agreement with both depositories viz., National Security Depository Ltd. (NSDL)and Central Depository Services (India) Ltd. (CDSL) enabling the investors to hold shares of the Company in electronic form.

The ISIN of Eastern Silk for transactions of shares in depository mode is INE 962CO1019.

As on 31.03.2008 the dematerialised shares were 1,43,40,391 which represents 90.82% of the total subscribed capital. The equity shares of the Company are regularly traded on the National Stock Exchange.

ix) Share Transfer System

Share transfers in physical and demat form are registered by the Registrar and Share Transfer Agents and are returned to the respective transferees within a period ranging from fifteen days to one month provided the documents lodged with the Registrar/Company are clear in all respects.

x) Registrar and Share Transfer Agents

The Company’s Share Transfer Agents are ABS Consultant Pvt. Ltd., 99, Stephen House, 6th Floor, 4 BBD Bag (East), Kolkata – 700 001 for effecting transfer/transmission etc. in physical and demat form.

xi) Plant Location

Unit 1 :	411, Telugarahalli Road, Anekal, Bangalore - 562 106
Unit 2 :	Kammansandra Agarhara Kasaba Hobli, Anekal, Bangalore - 560 106
Unit 3 :	11A, 2nd Cross Industrial Area, Nanjangud, Karnataka - 571 302
Unit 4 :	Falta Special Economic Zone, 24 Parganas (South), West Bengal

xii) Address for Correspondence

Eastern Silk Industries Ltd.
19, R. N. Mukherjee Road
Kolkata -700 001.
Phone: 2243-0817 - 19 (3 Lines)
Fax: 2248-2486
Email : esilk@giascl01.vsnl.co.in
Website : www.easternsilk.com

CODE OF PROFESSIONAL CONDUCT
The company formulated a Code of Conduct for all Board Members and Senior Managerial Personnel and the same was adopted by the Board in its meeting held on 27th January 2005. The Code is also available on the website of the Company.

MANAGEMENT DISCUSSION & ANALYSIS

Industry Structure and Developments
The estimated exports from the Indian textile industry was expected to grow by over 22% and the target fixed for the silk export was around Rs.3500 crores. The textile industry reached three milestones in the year being:

• The exports rose by 9%
• In spite of the appreciating rupee by over 3.5%, the volumes grew by over 5%.
• Major brands across the globe are vying for a foothold in the Indian retail market.
• Demand pattern for high-end products have grown up.
• Production capabilities of Indian textile manufacturers have achieved a level of international standards.

Silk plays major part in the Indian textile scenario. It not only provides employment to the rural folk, but also brings the valuable brand equity for the country.

The global consumption for silk products is valued at over US$ 25 bn, the major segments comprising furnishings and fashion fabrics. China, India, USA and EU are the major consumers of silk and silk products. China remains the largest global silk producer (72%) and the largest exporter of silk fabrics, exporting primarily to USA and EU markets; the country exports 60% of its total production. With no operating domestic capacity, USA is completely dependant on these Chinese imports. Italy and France are primarily re-exporters, involved in processing fabrics and exporting value-added garments. The furnishings segment is witnessing a strong demand from hotel and residential business.

The industry is likely to grow at the rate 10 – 12% annually with specific focus on value added items and the main stay of Indian silk export is to US, UK, Germany and Middle East. Today Indian silk products are accepted and benchmarked as a quality product and more & more buyers and consumers are wanting to buy silk products made in India.

Opportunities and Threats:
India continues to attract not only buyers from across the globe but also producers of silk products to shift their facilities in India, thanks to its skill in designing, world-class technology and increasing demand for value added products.

There has been vast improvement in producing raw silk in terms of quality and quantity. With further impetus from the Government the production of all the varieties like mulberry, tassar, eri and muga is expected to improve further.

Increased globalization of trade may provide the required impetus to the exports. However, the fluctuation in raw material cost, volatility in the value of Indian rupee against dollar are a few bottlenecks to the growth of the industry.

Although there is improvement in quality of silk yarn produced in India, India continues to import raw silk from China the reason being that the increase in the domestic production is absorbed by the domestic demand.

Segmentwise Performance:
SThe Company’s business activities falls within a single primary segment viz. Textiles.

Outlook
The Company’s foray into home textile has yielded. Good response from the customers and this particular segment of the business is expected to grow by more than 15% annually.

In order to cater to the high-end users of silk products, the Company is embarking on an expansion for producing silk velvets including jacquard velvets and this change in the product mix is likely to place the Company’s products in a different lead.

Internal Control System
The Company has adequate system of internal controls to ensure that all assets are safeguarded and protected against loss and that all transactions are authorised, recorded and reported correctly. The systems are designed to support the reliability of the financial and other records for preparing financial statements and other data.

Human Resources
The Company continues to recognise the importance of good human relation in the smooth working of the organisation. Upgradation of the skills of the employees is a continuous process pursued by the Company.

Cautionary Statement
The statement in the Management Discussion and Analysis Report detailing the Company's objectives, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. As these assessments are based on certain assumptions and expectations of future events, actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include economic conditions that affect the global demand or supplies, political and economic developments in India or other countries, government regulations and taxation policies, prices and availability of raw materials, prices of finished goods, abnormal climatic and geographical conditions etc. The Company assumes no responsibility for forward-looking statements that may be revised or modified in the future on the basis of subsequent developments, information or events.

AUDITOR'S REPORT TO THE BOARD OF DIRECTOR'S OF EASTERN SILK INDUSTRIES LTD.

1.	We have audited the attached Balance Sheet of EASTERN SILK INDUSTRIES LTD. as at 31stMarch, 2008 and also the Profit & Loss Account and the Cash Flow Statement for the year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these financial statements based on our audit.
2.	We conducted our audit in accordance with 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) Order, 2003 as amended by the Companies (Auditor’s Report Amendment) Order 2004 issued by the Central Government of India in terms of Sub-Section (4A) of Section 227 of the Companies Act, 1956 and on the basis of such checks as were considered appropriate and according to the information and explanations given to us, we enclose in the Annexure a statement on the matter specified in paragraphs 4 and 5 of the said Order.
4.	Further to our comments in the Annexure referred to in paragraph 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 purpose of our audit;
	II.	In our opinion, proper books of accounts as required by the Companies Act, 1956 have been kept by the Company so far as appear from our examination of those books;
	III.	The Balance sheet, Profit & Loss Account and Cash Flow Statement referred to in 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 clause (3C) of Section 211 of the Companies Act, 1956
	V.	On the basis of written representation received from the Directors and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March, 2008 from being appointed as a Director in terms of clause (g) of Sub-Section (I) 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 accounts, read together with Accounting Policies and the Notes thereon appearing in schedule – 14 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,2008 (b)in the case of the Profit & Loss A/c 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 yaer ended as on date.

23A, Netaji Subhas Road
Kolkata 31st July, 2008

For B. K. SHROFF & CO.
Chartered Accountants
(L.K. SHROFF)
Partner
Membership No. 60742

ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE

The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

The Company has physically verified certain fixed assets during the year in accordance with a programme of verification, which in our opinion provides for physical verification of the fixed assets at reasonable intervals having regard to the size of the Company and nature of its assets. According to the information and explanations given to us no material discrepancies were noticed on such verification.

The Company has not disposed off substantial Fixed Assets during the year. Therefore, it has not affected the going concern concept of the Company.

ii)

As explained to us, inventories have been physically verified by the management at regular intervals during the year.

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.

In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification as compared to the book records.

iii)

As explained to us and according to the information furnished to us, the Company has neither granted nor taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956 and as such clause (iii) of the Order is not applicable.

iv)

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 nature of its business for the purchase of inventory, fixed assets and also for the sale of goods. During the course of our audit, we have not observed any major weakness in internal controls.

In respect of transactions entered in the register maintained under Sec. 301 of the Companies Act, 1956:

To the best of our knowledge and belief and according to the information and explanations given to us, transactions that needed to be entered into the register pursuant to Section 301 of the Companies Act, 1956 have been so entered.

In our opinion and according to the information and explanations given to us, the transactions in pursuance of contracts or arrangements entered in the register maintained under Section 301 of the Companies Act, 1956 and aggregating during the year to Rs.5 lakhs or more in respect of any party have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time.

vi)

The Company has not accepted any deposits from the public and as such clause (vi) of the Order is not applicable.

vii)

In our opinion, the Company has an adequate internal audit system commensurate with the size and nature of it business and is being further strengthened.

viii)

We have broadly reviewed the books of account and records maintained by the Company relating to ‘Textiles’ pursuant to Sec. 209(1)(d) of the Companies Act, 1956 and 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 these records.

ix)

According to the information and explanations given to us in respect of the statutory dues:

The Company is generally regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year. 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, 2008 for a period of more than six months from the date they became payable except Rs. 19.02 Lacs since paid.

According to the information and explanations given to us, details of dues of Customs Duty/ Excise Duty/ Sales Tax which have not been deposited on account of any dispute are as follows :

Name of the Statute	Name of the Dues	Amount (Rs. in lakhs)	Period to which the amount relates	Forum where dispute is pending
Central Excise Act	Excise Duty and Penalty	26.73	2002-03	Deputy Commissioner, Central Excise
Employees State Insurance Act	Employees State Insurance	6.03	1995-96 & 2002-03	Asst. Director, ESIC
Custom Duty Act	Custom Duty	109.77	2001-02	Hon'ble High Court of Karnataka
Customs Duty Act	Custom Duty	148.50	2005-06	Commissioner of Custom (Port), Kolkata
Customs Duty Act	Custom Duty	78.92	2003-04	CESTAT, Bangalore
Customs Duty Act	Customs Duty	28.70	2003-04	Commissioner of Custom
Customs Duty Act	Customs Duty	44.07	2002-03	Commissioner of Custom
Income Tax Act	Income Tax	2.31	2004-05	C.I.T. (Appeal)

The Company has no accumulated losses and has not incurred any cash losses during the financial year covered by our audit or the immediately preceding financial year.

xi)

Based on our audit procedures and on the information and explanations given to us by the management, we are of the opinion that the Company has not defaulted in the repayment of dues to banks, financial institutions and debenture holders.

xii)

In our opinion and according to the information and explanation given to us, no loans and advances have been granted by the Company on the basis of security by way of pledge of shares, debentures and other securities.

xiii)

The Company is not a Chit Fund or a Nidhi/Mutual Benefit Fund/society and as such reporting under clause (xiii) of the Order is not applicable to the Company.

xiv)

Based on our examination of the records and according to the information and explanations given to us, Company is not dealing or trading in shares, securities, debentures and other investments. We also report that the Company has held the shares, securities, debentures and other investments in its own name.

xv)

According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

xvi)

To the best of our knowledge and belief and according to the information and explanations given to us, term loans availed by the company were, prima facie, applied by the company during the year for the purposes for which the loans were obtained.

xvii)

According to the information and explanations given to us and on an overall examination of the Balance Sheet of the Company, we are of the opinion that prima facie funds raised on short-term basis have not been used for long-term investments.

xviii)

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)

The Company has not issued any debentures during the year.

xx)

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

xxi)

To the best of our knowledge and belief and according to the information and explanations given to us, no fraud on or by the company was noticed or reported during the course of our audit.

23A, Netaji Subhas Road
Kolkata 31st July, 2008

For B. K. SHROFF & CO.
Chartered Accountants
(L.K. SHROFF)
Partner
Membership No. 60742

BALANCE SHEET AS AT 31ST MARCH, 2008

	Schedule		31-03-2008	31-03-2007
			Rs. in Lacs	Rs. in Lacs
SOURCES OF FUNDS
i) Shareholders' Funds
(a) Share Capital	1		2,979.05	2,979.05
(b) Reserves & Surplus	2		34,671.80	31,844.76
ii) Loan funds	3
(a) Secured Loans		10,198.57		9,779.35
(b) Unsecured Loans		2,181.40		1,600.51
			12,379.97
iii) Deferred Tax Liability	4		1,405.80	1,473.39

			47663.79	37456.84
APPLICATION OF FUNDS
i) Fixed Assets	5
(a) Gross Block			25,797.19	19,561.17
(b) Less: Depreciation			7,642.38	5,765.60
(c) Net Block			18,154.81	13,795.57
(d) Capital Work-in-progress			291.81	698.22
			18,446.62	14,493.79
(ii) Investments	6		1,008.42	1,356.03
(iii) Current Assets, Loans & Advances	7
(a) Inventories		16,890.38		14,371.16
(b) Sundry Debtors		14,270.15		13,333.55
(c) Cash & Bank Balance		1,817.32		2,498.59
(d) Loans & Advances		11,124.43		11,160.95
		44,102.28		41,364.25
Less:
(iv) Current Liabilities & Provisions	8
(a) Current Liabilities		9,398.38		6,792.71
(b) Provision		2,722.57		2,744.81
		12,120.95		9,537.52
(v) Net Current Assets (iii-iv)			31,981.33	31,826.73
(vi) Miscellaneous Expenditure (To the extent not written off or adjusted)
Preliminary Expenses			0.25	0.51
			51,436.62	47,677.06
Accounting Policies & Notes on Accounts	14
As per our report of even date annexed
Kolkata	L.K. SHROFF	S.S. Shah	Sundeep Shah	K. T. Sheth
The 31st July, 2008	Partner	Chairman & Managing Director	Executive Director	Secretary

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008

	Schedule		31-03-2008		31-03-2007
INCOME			Rs. in Lacs		Rs. in Lacs
Sales			48,165.28		45,119.14
Other Income	9		1,083.43		1,473.02
Increase/ (Decrease) in Finished Goods	10		739.61		(598.54)
			49,988.35		45,993.62
EXPENDITURE
Purchases			18,465.04		16,738.43
Raw Materials Consumed	11		11,793.80		11,520.34
Manufacturing, Selling & Other Expenses	12		9,837.27		7,713.48
Interest	13		2,297.62		2,022.35
Depreciation		1,878.41		1,337.72
Less: Transferred from Capital Reserve		300.41		300.41
			1,578.00		1,037.31
			43,971.73		39,031.91

PROFIT BEFORE TAXATION			6,016.62		6,961.71
Less Provision for
Current Taxation			475.00		850.00
Earlier year taxation			(220.41)		-
Fringe Benefit Tax			15.79		23.17
Deferred Tax			(67.59)		321.93
PROFIT AFTER TAXATION			5,813.83		5,766.61
Add:
Surplus Brought forward from Previous Year			11,766.01		7,941.77
Available for Appropriation			17,579.84		13,708.38
APPROPRIATION
General Reserve			700.00		700.00
Preference Share Redemption Reserve			280.00		280.00
Proposed Dividend
On Equity Share			710.57		710.57
On Preference Share			112.00		112.00
Corporate Dividend Tax			139.80		139.80
Surplus Carried to Balance Sheet			15,637.47		11,766.01
			17,579.84		13,708.38
Earning Per Share: Basic & Diluted			Rs. 35.99		Rs. 35.69

Accounting Policies & Notes On Accounts	14

Kolkata	For B. K. SHROFF & CO. Chartered Accounts L.K. SHROFF	S.S. Shah		Sundeep Shah	K. T. Sheth
The 31st July, 2008	Partner	Chairman & Managing Director		Executive Director	Secretary

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2008

			31-03-2008	31-03-2007
			Rs. in Lacs	Rs. in Lacs
A.	CASH FLOW FROM OPERATING ACTIVITIES:
	Net Profit Before Tax and Extraordinary Items		6,016.62	6,961.71
	Add : Adjustments for :
	Depreciation	1,578.00		1,037.31
	Interest paid	2,297.62		2,022.35
	Unrealised Foreign Exchange (Net)	54.56		155.05
	Provision for Doubtful Debts	-		81.82
	Loss on sale of Investment	0.07		40.85
	Loss on sale of Fixed Assets	0.83		0.30
	Preliminary Expenses Written off	0.25		0.25
			3,931.33
			9,947.95	10,299.64
	Less : Adjustments for :
	Interest & Dividend received	207.84		64.05
	Profit on sale of Fixed Assets	0.57		0.38
	Profit on sale of Investments	169.75		438.71
	Provision for Bad Debts Written Back	40.54		-
	Sundry Balances Adjusted	3.60		4.74
			422.30	507.88
	Operating Profit Before Working Capital Changes		9,525.65	9,791.76
	Add:
	Decrease in working capital :
	Inventories	-		1,277.76
	Trade Payables	879.69
			879.69	1,277.76
			10,405.34	11,069.52
	Less:
	Increase in working capital:
	Trade Payables	-		2,270.96
	Trade & other Receivables	788.62		8,384.93
	Inventories	2,519.22		-
			3,307.84	10,655.89
	Cash generated from operations		7,097.50	413.63
	Less :
	Interest paid on working capital	2,169.28		1,796.06
	Taxes paid	543.56		647.78
			2,712.84	2,443.84
	Net Cash Flow From Operating Activities		4,384.66	(2,030.21)

B.	CASH FLOW FROM INVESTING ACTIVITIES :
	Inflows
	Sale of Fixed Assets	2.59		2.82
	Sale of Investments	1,661.26		6,284.77
	Interest received	94.22		64.05
	Dividend received	113.62		0.00
			1,871.69	6,351.64
	Less :
	Outflows
	Purchase of Fixed Assets	5,834.08		654.88
	Purchase of Investments	1,143.97		7,141.70
			6,978.05	7,796.58
	Net Cash used in Investing Activities		(5,106.36)	(1,444.94)

C.	CASH FLOW FROM FINANCIAL ACTIVITIES :
	Proceeds from Issue of Equity Share Capital	-		5,753.68
	Proceeds from Long Term Borrowings (Net)	1,006.00		(372.49)
			1,006.00	5,381.19
	Less :
	Interest paid on Term loan	134.23		224.93
	Dividend & Corporate Tax	831.34		895.47
			965.57	1,120.40
	Net Cash Used In Financing Activities		40.43	4,260.79

	Net Changes In Cash & Cash Equivalents (A+B+C)		(681.27)	785.64
	* Cash & Cash Equivalents - Opening Balance		2,498.59	1,712.95
	* Cash & Cash Equivalents - Closing Balance		1,817.32	2,498.59
	* Represents Cash & Bank Balances as indicated in Schedule 7

	For B. K. SHROFF & CO. Chartered Accounts
Kolkata	L.K. SHROFF	S. S. Shah	Sundeep Shah	K. T. Sheth
The 31st July, 2008	Partner	Chairman & Managing Director	Executive Director	Secretary

SCHEDULES TO THE ACCOUNTS

SCHEDULE : 1	31-03-2008	31-03-2007
	Rs. in Lacs	Rs. in Lacs
SHARE CAPITAL
Authorized
15,00,00,000 Equity Shares of Rs.2/- each (Previous Year 2,00,00,000 of Rs.10/-)	3000.00	2000.00
20,00,000 Preference Shares of Rs. 100/- each	2000.00	2000.00
	5000.00	4000.00
Issued
1,58,22,024 Equity Shares of As.10/- each (Previous Year 1,58,22,024)	1582.20	1582.20
14,00,000 Redeemable Cumulative Preference Shares of 100/- each	1400.00	1400.00
	2982.20	2982.20
Subscribed & Paid-up
1,57,90,524 Equity Shares of Rs.10/- each fully paid up (Previous Year 1,57,90,524)	1579.05	1579.05
14,00,000 8% Redeemable Cumulative Preference Shares of Rs. 100/- each fully paid up	1400.00	1400.00
	2979.05	2979.05

Notes :

1.	Of the above shares 17,67,490 Equity Shares were allotted as fully paid up Bonus Shares by Capitalization of General Reserve.
2.	During 1995-96 the company offered 23,62,745 Equity Shares of Rs.10/- each to the existing Shareholders in the ratio of 1 share for every 2 shares held, at a premium of Rs.30/- per share as per letter of offer dated December 21 , 1995. Out of the above shares, allotment of 1200 Equity Shares are kept in abeyance under Court order.
3.	63,39,289 Equity Shares of Rs.10/- each fully paid up at a premium of Rs.78/- per Equity Share were alloted to the Shareholders of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. (since amalgamated) pursuant to the Scheme of Amalgamation without payment being received in cash.
4.	During 2006-07 the Company alloted 23,00,000 Equity Shares of Rs.10/- each fully paid up at a premium of Rs.240.16 per Equity Share on preferential basis.
5.	Equity Shares of the face value of Rs. 10/- each in the Authorised Share Capital of the Company have been sub-divided into 5 Equity Shares of the face value of Rs. 2/- each as per resolution passed by the members in the Annual General Meeting held on 26th September, 2007. The Authorised Equity Share Capital of the Company has been increased from Rs. 20.00 Crores divided into 2,00,00,000 Equity Shares of Rs. 10/- each to Rs. 30.00 Crores divided into 15,00,00,000 Equity Shares of Rs. 2/- each. The issued, subscribed and paid-up Equity Shares of the face value of Rs. 10/- each have not been sub-divided into Rs.2/- each as on the Balance Sheet date since the record date has been fixed as 7th July, 2008.
6.	6,00,000 Redeemable Cumulative Preference Shares were issued by Eastern Silks Industries Ltd. on 21.01.2004. 2,00,000 Redeemable Cumulative Preference Shares were issued by Eastern Jingying Ltd. on 09.02.2004. 6,00,000 Redeemable Cumulative Preference Shares were issued by Sstella Silks Ltd. on 26.03.2005. All the Preference Shares are carrying 8% dividend from the date of issue except 6,00,000 Redeemable cumulative Preference Shares allotted by erstwhile Sstella Silks Ltd. for which Dividend is Payable from 01.04.2005 and redeemable at par after a period of 60 months from the date of allotment of such Preference Shares. However, 6,00,000 Preference Shares allotted by the Company on 21.01.2004 shall not be redeemed till the full repayment of the Term Loan taken for the UNIT - II ( Anekal ) is made. The earliest date of redemption of Preference Share is 20th January, 2009.

SCHEDULE : 2		31-03-2008	31-03-2007
		(Rs. in Lacs)	(Rs. in Lacs)
RESERVES & SURPLUS
Capital Reserve
As per last Balance Sheet	2020.00		2320.41
Less: Depreciation on Revalued Assets	300.41		300.41
		1719.59	2020.00
Capital Redemption Reserve
As per last Balance Sheet		1400.00	1400.00
Securities Premium Account
As per last Balance Sheet	11428.75		5905.07
Add: Additions during the year	-		5523.68
		11428.75	11428.75
General Reserve
As per last Balance Sheet	4350.00		3650.00
Add: Transferred from Profit & Loss Account	700.00		700.00
		5050.00	4350.00
Preference Share Redemption Reserve
As per last Balance Sheet	880.00		600.00
Add: Transferred from Profit & Loss Account	280.00		280.00
		1160.00	880.00

Hedging Reserve Account		(1724.01)	-

Profit & Loss Account Balance
Transferred from Profit & Loss Account		15637.47	11766.01
		34671.80	31844.76

SCHEDULE : 3	31-03-2008	31-03-2007
	Rs in Lacs	Rs in Lacs
LOAN FUNDS
A) Secured Loans
Long Term Loans From Banks and Financial Institution *
Foreign Currency Term Loan	318.81	799.22
Rupee Term Loan	366.84	745.69
Secured by first pari passu hypothecation of movable Fixed Assets pertaining to the Unit II at Anekal, Karnataka, both present & future and mortgage of land & other immovable properties at Anekal .The Loans are additionally secured by personal guarantee of the Managing Director .
Interest accrued but not due	3.34	7.36
	688.99	1552.27
Packing Credit-cum-Cash Credit Loan and Overdrafts From Banks		8213.34
(a) Secured by hypothecation of stocks of Raw Materials, Silk Waste, Silk Yarn, Stores & Spare Parts, Stock in Progress including Stock-in-Transit of Raw Materials, Semi-Finished Goods lying at different manufacturing units at Anekal, Nanajangud, Falta and/or at the centres of its vendors, Book Debts, Bills Receivable and Guarantees of ECGC Ltd. second pari passu charges on movable fixed assets situated at Anekal, Karnataka, both present & future and also mortgage of some immovable property in the Company, alongwith personal guarantee of the Managing Director.	9479.29	8212.09
Vehicles Loans from Banks
Secured against hypothecation of vehicles	30.12	14.99
Interest accrued but not due	0.17	-
	10198.57	9779.35
* Aggregate amount repayable within one year Rs. 594.77 lacs (Previous Year Rs.887.88 lacs)

B) Unsecured Loans
Short Term Loan
From Banks	2152.63	1569.87
From Others	24.73	24.73
Interest accrued but not due	4.04	5.91
	2181.40	1600.51
	12379.97	11379.86

SCHEDULE : 4	31-03-2008	31-03-2007
	Rs. in Lacs	Rs. in Lacs
DEFERRED TAX LIABILITY
As per last Balance Sheet	1473.39	1151.46
Add: Addition/(Deduction) during the year	(67.59)	321.93
	1405.80	1473.39

SCHEDULE : 5
Description of Assets	GROSS BLOCK
	Cost as on 01.04.2007	Additions during the year	Sale/Deductions during the year	Total
	Rs	Rs	Rs	Rs
Land (Including Leasehold Land)	378.78		--	378.78
Building	2325.59	121.28		2446.87
Plant & Machinery	15831.96	6028.12	3.50	21856.58
Electric Installation	675.48	3.74		679.22
Office Equipments & Furniture	207.89	47.74	0.97	254.66
Vehicles	141.47	39.61		181.08
	19561.17	6240.49	4.47	25797.19
Capital work in progress	698.22	217.00	623.41	291.81
Total	20259.39	6457.49	627.88	26089.00
Previous Year's Figure	19610.94	675.59	27.14	20259.39

Cont'd (SCHEDULE 5: FIXED ASSETS)

Description of Assets	DEPRECIATION				NET BLOCK
	Upto 01.04.2007	For the year	Adjustment during the Year	Total	W.D.V. as on 31.03.2008	W.D.V.as on 31.03.2007
	Rs	Rs	Rs	Rs	Rs	Rs
Land (Including Leasehold Land)					378.78	378.78
Building	641.16	118.72		759.88	1686.99	1684.43
Plant & Machinery	4755.19	1667.98	1.07	6422.10	15434.48	11076.77
Electric Installation	185.99	46.23		232.22	447.00	489.49
Office Equipments & Furniture	103.13	27.88	0.55	130.46	124.20	104.76
Vehicles	80.12	17.60		97.72	83.36	61.35
	5765.59	1878.41	1.62	7642.38	18154.81	13795.58
Capital work in progress	-	-	-	-	291.81	698.22
Total	5765.59	1878.41	1.62	7642.38	18446.62	14493.80
Previous Year's Figure	4431.57	1337.72	3.69	5765.60	14493.79
Depreciation includes depreciation on revalued assets Rs. 300.41 ( Previous year 300.41)

SCHEDULE : 6		31-03-2008	31-03-2007
		Rs. in Lacs	Rs. in Lacs
INVESTMENTS: Long Term (at Cost) other than trade
Quoted:
Fully paid Equity Shares of Rs.10/- each unless otherwise stated
25000	Shri Securities Ltd.	1.89	1.89
32	Tata Consultancy Services Ltd. (Including 16 Bonus Equity Shares) Fully paid Equity Shares of Re. 1 each	0.14	0.14
2018	Union Bank of India	-	2.22
Unquoted:
In Mutual Funds ( Face Value of Rs. 10/- each)
977995.110	J.P. Morgan India Equity Fund	100.00	-
(Nil)
977995.110	AIG India Equity Fund	100.00	-
(Nil)
251366.175	Tata Infrastrusture Fund	50.00	-
(Nil)
285437.004	Fidelity Equity Fund	50.00	-
(Nil)
309985.245	Sundaram BNP Paribas Select Midcap Fund	50.00	-
(Nil)
256579.994	Reliance Equity Opportunities Fund	50.00	-
(Nil)
272232.305	J.M. Emerging Leader Fund	30.00	-
(Nil)
71184.510	Birla Sunlife Equity Fund	50.00	-
(Nil)
5000000.000	HDFC Midcap Opportunities Fund	50.00	-
(Nil)
635737.908	Prudential ICICI Infrastructure Fund	100.00	-
(Nil)
248979.185	DSP Merrill Tiger Fund	50.00	-
(Nil)
1955990.220	Reliance Equity Advantage Fund	200.00	-
(Nil)
487807.870	ABN Amro China-India Fund	50.00	-
(Nil)
750000.000	Sundram BNP Paribas Energy Opportunities Fund	75.00	-
(Nil)
13680.983	JM Arbitrage Advantage Fund	1.39	-

B) Current Investments - In Mutual Funds (Face Value of Rs. 10/- each)
(Nil) (637734.766)	Chola Monthly Income Plan	-	80.00
(Nil) (649783.135)	HDFC Mutual Fund Monthly Income Plan	-	80.00
(Nil) (691310.230)	HSBC Advantage India Fund	-	70.00
(Nil) (931424.736)	HSBC Liquid Plus Installment Growth (12)	-	93.86
(Nil) (520978.847)	JM Arbitrage Advantage Fund	-	52.12
(Nil) (792647.805)	Kotak Flexi FOF Series II (16)	-	79.26
(Nil) (450970.997)	Prudential ICICI Monthly Income Plan	-	80.00
(Nil) (1913070.095)	Prudential ICICI Income MRPG	-	250.00
(Nil) (481631.428)	Prudential ICICI Growth Plan	-	100.84
(Nil) ( 365068.419)	Reliance Equity Opportunities	-	58.27
(Nil)(659347.905)	Sundaram Monthly Income Plan	-	80.00
(Nil) ( 2235299.769)	Prudential ICICI E&D Fund (23)	-	228.56
(Nil)(641040.849)	Sundaram BNP PARIBAS Money Fund	-	98.87
		1008.42	1356.03
Aggregate value of Investments
Quoted		2.03	4.25
Unquoted		1006.39	1351.78
		1008.42	1356.03
Market value of Quoted Investments		49.81	52.04

Note: Units of Mutual Funds Purchased & Sold during the year (Face Value of Rs. 10/- each)
No. of Units	Particulars	Cost Price	Cost Price
61509.941	HSBC Advantage India Fund (22,00,825.309 Units)	6.91	200.00
6983.132	DSPML Strategic Bond Fund	70.00	-
491202.562	DWS Money Plus Fund	50.00	-
10247.823	JM Arbitrage Advantage Fund	1.04	-
44389.994	Prudential ICICI Growth Plan	9.63	-
(Nil)	Chola Contra Fund (9,05,432.596 Units)		90.00
(Nil)	Chola Liquid INST.Plus(2) (6,89,979.417 Units)		101.79
(Nil)	DSPML Savings Plus M.Q.(28,29,232.146 Units)		312.11
(Nil)	DSPML India Tiger Fund (15,82,969.433 Units)		290.00
(Nil)	DSPML Savings Plus Moderate (5) (18,01,613.139 Units)		202.76
(Nil)	DSPML Liquid Plus Regular Growth(5) (10,659.486 Units)		108.69
(Nil)	Fidelity India Special S F (20,26,342.452 Units)		200.00
(Nil)	HDFC Cash Management Fund (22,17,538.997 Units)		400.00
(Nil)	HSBC Midcap Equity Fund (6,36,539.118 Units)		95.95
(Nil)	HDFC Equity Fund (2,93,915.940 Units)		90.00
(Nil)	Kotak Income Plus (43,71,985.375 Units)		497.99
(Nil)	Kotak Opportunities (6,25,956.322 Units)		90.00
(Nil)	Kotak Liquid Institutional(17) (11,07,531.403 Units)		111.08
(Nil)	Prudential ICICI Liquid Fund (28,82,409.233 Units)		500.00
(Nil)	Prudential ICICI M I P (26,58,290.373 Units)		312.67
(Nil)	Prudential ICICI Income MRPG (19,13,070.095 Units)		250.00
(Nil)	Prudential ICICI Emerging S F (10,33,070.095 Units)		200.00
(Nil)	Reliance Equity Opportunities (12,81,312.438 Units)		212.03
(Nil)	Reliance Floating Rate Fund (18,19,968.697 Units)		200.00
(Nil)	Reliance Monthly Y I F (39,06,646.769 Units)		500.00
(Nil)	RMIP Quaterely Dividend Plan (20,80,151.421 Units)		245.46
(Nil)	Sundram Select Midcap (18,98,436.537 Units)		379.39
(Nil)	SBI MF-MSFU Contra Fund (8,82,612.533 Units)		200.00
		137.58	5789.92

SCHEDULE : 7		31-03-2008	31-03-2007
		Rs in Lacs	Rs in Lacs
CURRENT ASSETS, LOANS & ADVANCES
Current Assets
Inventories: (as taken, valued & certified by the Management)
Raw Materials (at lower of cost or net realizable value)	8464.59		6948.30
Stock in Progress (at estimated cost)	1618.73		1445.79
Finished Goods ( at lower of cost or net realizable value)	6720.99		5868.46
Stores, Spare Parts, Dyes, chemicals etc (at cost)	86.07		108.61
		16890.38	14371.16
Sundry Debtors :
Outstanding for a period exceeding six months
Considered Good	7587.85		2830.04
Considered Doubtful	22.91		81.82
	7610.76		2911.86
Other Debts	6682.30		10503.51
	14293.06		13415.37
Less: Provision for Doubtful Debts	22.91		81.82
		14270.15	13333.55
Cash & Bank Balances
Cash in hand	2.27		9.69
With Scheduled Banks
In Current Accounts	529.08		602.82
In Fixed Deposit Accounts	1255.63		1855.57
In Foreign Currency Accounts	30.34		30.51
		1817.32	2498.59
Loans & Advances (Unsecured - Considered Good)
Advances for Capital Assets	37.02		5150.00
Advances (Recoverable in cash or kind or value to be recieved)	9389.73		4457.37
Other Deposits	98.45		65.97
Advance Payment of Income Tax and Tax deducted at source	1599.23		1487.61
		11124.43	11160.95
		44102.28	41364.25

SCHEDULE : 8		31-03-2008	31-03-2007
		Rs in Lacs	Rs in Lacs
CURRENT LIABILITIES & PROVISIONS
A. Currency Liabilities
Sundry Creditors	3232.66		4330.29
Security Deposit	900.00		-
Advance Against Order	826.25		1276.16
Other Liabilities *	4428.03		1183.80
Book Overdraft - With Banks	11.44		2.46
		9398.38	6792.71
B. Provisions
Provision for Taxation	1600.00		1775.00
Provision for Fringe Benefit Tax	13.44		-
Provision for Gratuity	15.73		7.44
Proposed Dividend on Equity Shares	710.57		710.57
Dividend on Preference Shares	224.00		112.00
Provision for Corporate Dividend Tax	158.83		139.80
		2722.57	2744.81
		12120.95	9537.52
* Other Liabilities includes change in the fair value of foreign exchange forward & currency option contracts Rs. 1,724.01
Note : No amount was due for credit to Investor Education and Protection Fund as at 31.03.2008
SCHEDULE : 9
OTHER INCOME
Export Incentives/Duty Drawback		657.73	454.34
Interest (Gross) (T.D.S Rs 22.51,Previous Year Rs.11.62)
From Banks	92.12		64.05
From Others	2.10
		94.22
Dividend (Non-Trade)
Long Term Investment	0.05		4.50
Current Investment	113.57		179.36
		113.62
Profit on sale of Fixed Assets		0.57	0.38
Profit on sale of Investment
Long Term *	136.39		438.71
Short Term (Current)	33.36
		169.75
Insurance Claim		1.14	3.05
Sundry Credit Balances Adjusted		3.60	4.74
Rent received		2.00	2.66
Provision for Bad debts written back		40.54
Miscellaneous Income		0.26	2.19
Exchange Rate Difference (Net)			319.04
		1083.43	1473.02
SCHEDULE : 10
INCREASE / (DECREASE) IN FINISHED GOODS
Closing Stock - Work in Progress		1618.73	1445.79
Finished Goods		6720.99	5868.46
		8339.72	7314.25
Less: Opening Stock
Less: Work in Progress	1445.79		1079.27
Finished Goods	5868.46		6701.96
Add: Transferred from raw Materials	285.83		131.56
		7600.08
		739.64	(598.54)
SCHEDULE : 11
RAW MATERIALS CONSUMED
Opening Stock	6948.30		7749.34
Less: Transferred to Finished Goods	285.83	6662.47	131.56
Add : Purchases		13595.92	10850.86
		20258.39	18468.64
Less: Closing Stock		8464.59	6948.30
		11793.80	11520.34

SCHEDULE : 12		31-03-2008 Rs. in Lacs	31-03-2007 Rs. in Lacs
MANUFACTURING, SELLING & OTHER EXPENSES
Conversion, Machining & Other Direct Expenses		2946.06	1716.94
Stores, Spares & Accessories Consumed		239.34	119.97
Dyes, Chemicals etc consumed		178.87	131.06
Power & Fuel		600.28	542.47
Salary, Bonus & Allowances		380.39	309.24
Gratuity		31.74	8.06
Workers & Staff Welfare Expenses		55.67	45.49
Employer's Contribution to Provident Fund & Other Funds		74.07	42.56
Freight, Packing, Forwarding etc.		486.01	538.74
Brokerage & Commission		2635.07	2814.02
Sales Promotion		81.62	87.68
Import Licence Fees		8.70	18.89
Technical Consulting Fee		42.34	45.45
Legal, Professional & Syndication Charges		32.22	316.85
Rent (Net)		67.70	27.08
Rates & Taxes		12.10	14.89
Insurance		108.92	144.93
Traveling Expenses		96.22	88.92
Mailing & Communication Expenses		77.75	62.87
Bank Charges & Commission		296.91	230.51
Directors' Meeting Fee		1.23	1.82
Auditor's Remuneration:
Audit Fees	4.49		2.25
Tax Audit Fees	0.73		0.56
For Other Services	5.10		1.13
Managerial Remuneration		72.43	45.16
Sales Tax		1.35	0.18
Provision for Doubtful Debts		-	81.82
Miscellaneous Expenses		210.82	191.21
Donation		8.45	-
Loss on sale of Fixed Assets		0.83	0.30
Loss on sale of Investments		0.07	40.85
Expenses relating to Previous Year		12.09	9.16
Repairs & Maintenance
Building	2.50		3.88
Plant & Machinery	36.50		10.16
Others	19.86		18.13
		58.86
Exchange Rate Difference		517.49	-
(Gain)/Loss on Forward Contracts / Derivatives		491.10	-
Preliminary expenses written off		0.25	0.25
		9837.27	7713.48

SCHEDULE : 13
INTEREST
To Banks		2297.62	2011.62
To Financial Institutions		-	10.72
To Others		-	0.01
		2297.62	2022.35

SCHEDULE : 14

ACCOUNTING POLICIES AND NOTES ON ACCOUNTS

ACCOUNTING POLICIES :

1 A. Basis of Accounting

The Company adopts the mercantile system of accounting and recognises income and expenditure on accrual basis in accordance with the applicable accounting standards. Export incentives, insurance and other claims, has been accounted for to the extent quantum thereof is ascertainable with reasonable accuracy.

B. Fixed Assets

Fixed assets are stated at original cost, if revalued at revalued amount, less depreciation. The cost of assets comprises its purchase price; direct expenses incurred including finance costs till it is put to use and the revalued amount, if any. The cost including additions, improvements, renewals, revalued amount and accumulated depreciation of assets, which are sold and/or discarded, are removed from the Fixed Assets and any profit or loss resulting there from is included in the Profit & Loss Account.

C. Depreciation

Depreciation is provided for on written down value method, except for Unit 1 & Unit 3, which is provided on Straight Line Method, at the rates prescribed under Schedule XIV of the Companies Act, 1956. Depreciation on the Assets added/disposed off during the year is being provided on pro-rata basis.
Depreciation on revalued assets is calculated on straight line method over the residual life of the respective assets as estimated by the valuer. The charge for depreciation on account of revaluation is withdrawn from capital reserve.

D. Foreign Currency Transactions, Derivatives instruments and hedge accounting

Transactions in foreign currency other than those covered by forward contracts are accounted for at the prevailing conversion rates on the date of transaction and difference arising out of the settlement are dealt with in the Profit & Loss account. Outstanding export documents when covered by foreign exchange forward contracts are translated at contracted rates. Foreign currency loans availed for acquisition of fixed assets are restated at the exchange rate prevailing at year end and exchange rate difference arising on such transactions are adjusted in the Profit & Loss Account. Other foreign currency current assets and liabilities outstanding at the close of the year are valued at the year-end exchange rates. The fluctuations are reflected under the appropriate revenue head.

The company uses foreign currency forward contracts and currency options to hedge its risks associated with foreign currency fluctuations relating to certain firm commitments and forecasted transactions. The company designates these hedging instruments as cash flow hedges applying the recognition and measurement principles set out in the Accounting Standard 30 ‘Financial Instruments: Recognition and Measurement’ (AS-30).

Hedging instruments are initially measured at fair value, and are re-measured at subsequent reporting dates. Changes in the fair value of these derivatives that are designated and effective as hedges of future cash flows are recognized directly in shareholders’ funds and the effective portion is recognized in profit & loss account.

Changes in the fair value of derivatives financial instruments that do not qualify for hedge accounting is recognized in profit & loss account as they arise.

Hedge accounting is discontinued when the hedging instruments expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time for forecasted transactions, any cumulative gain or loss on the hedging instrument recognized in Reserves & Surplus is retained there until the forecasted transaction occurs. If a hedge transaction is no longer expected to occur, the net cumulative gain or loss recognized in shareholder’s funds is transferred to profit & loss account for the year.

E. Expenditure during Construction Period

Expenditure during construction period is included under Capital Work-in-Progress and the same is allocated to the respective fixed assets on the completion of construction/erection/installation/production.

F. Valuation of Investments

Long-term investments are stated at cost of acquisition. Provision for diminution in the value of long-term investments is made only if such a decline is other than temporary in the opinion of the management.

G. Valuation of Inventories

Raw Materials and Finished Goods are valued at lower of cost or net realisable value.
Work-in-progress is valued at estimated cost.
Stores & spares parts, Dyes & chemicals, Packing materials are valued at cost.
Cost of inventories is ascertained at FIFO/Weighted average cost.

H. Employees Benefits

i) Short-term Employee Benefits - Short-term Employee Benefits (i.e. benefits payable within one year) are recognized in the period in which employee services are rendered.
ii) Post employment Benefits
a) Defined Contribution Plans - Contributions towards provident funds are recognized as expense. Provident fund contributions in respect of certain employees are made to Trusts administered by the Company, the interest rate payable to the members of the Trusts is not lower than the rate of interest declared annually by the Central Government under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall if any, is made good by the Company. The remaining provident fund contributions are made to employer established provident funds (other than covered employees)/government administered provident fund towards which the Company has no further obligations beyond its monthly contributions.
b) Defined Benefit Plans - Liability towards gratuity, covering eligible employees, is provided and funded on the basis of year end actuarial valuation.
Accrued liability towards Leave encashment benefits, covering eligible employees, evaluated on the basis of year-end actuarial valuation is recognized as a charge.
Contribution to Central Government administered Employees’ State Insurance Scheme for eligible employees are recognized as charge.

Actuarial gains/losses arising in Defined Benefit Plans are recognized immediately in the Profit and Loss Account as income/expense for the year in which they occur.

I. Miscellaneous Expenditure

Expenses related to issue of fresh capital are being amortized over a period of 10 years.

J. Borrowing Cost

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized as part of the cost of that asset. Other borrowing costs are recognized as an expense in the period in which they are incurred. Capitalization of borrowing costs ceases when substantially all activities necessary to prepare the qualifying asset for its intended use or sale are complete.

K. Deferred Taxation

Deferred Taxation is provided using the liability method in respect of taxation effect arising from material timing difference between the accounting and tax treatment of Income & Expenditure based on tax rates prevailing at the time of Balance Sheet date. Deferred Taxation so provided is reviewed at each Balance Sheet date for necessary adjustments.

L. Earning Per Share

Basic earning per share is calculated by dividing the net Profit for the year attributable to equity shareholders (after deducting the dividend on redeemable preference share) by the weighted average number of equity shares outstanding during the year.
Diluted earning per share is calculated by dividing the net profit attributable to equity shareholders (after deducting the dividend on redeemable preference share) by the weighted average number of equity shares outstanding during the year (adjusted for the effects of dilutive options).

M. Events occuring after Balance Sheet Date

Events occuring after the balance sheet date have been considered in the preparation of financial statements.

N. Contigent Liabilities

Unprovided contigent liabilities are disclosed in the accounts by way of notes giving nature and quantum of such liabilities.

NOTES ON ACCOUNT

2. As per the Court order dated 7th February’ 2005 of Hon’ble Kolkata High Court and 14th December’ 2005 of Hon’ble Karnataka High Court, all the assets and liabilities of erstwhile Eastern Jingying Ltd. and Sstella Silks Ltd. automatically stand transferred in the name of the Company. Based on the Order, the Company has taken necessary steps to have the assets recorded with the relevant authorities in their name.

3. Certain Fixed Assets of the Company were revalued during 2003-04 on the basis of valuation of approved valuer and the increased valuation of Rs. 6,326.22 Lacs is reflected in Fixed Assets.

4. Accounting Standard - 14 states that the identity of the reserves has to be preserved as they appeared in the financial statement of the erstwhile Transferor Companies in the same form. The treatment as per AS-14 has not been followed fully as the High Court approving the Scheme of Amalgamation provided that after taking over all the assets and liabilities of the Transferor Companies as on 31st March 2004, and after accounting for the share premium of Rs.78/- per share as provided in the scheme, surplus, if any, arising after issuance of the new shares be credited to Capital Reserve of the Transferee Company and as such during 2004-05 a sum of Rs. 2,920.35 Lacs was credited in Capital Reserve.

5. Depreciation of Rs.300.41 Lacs on revalued assets has been provided during the year and such depreciation has been reduced from cost of fixed assets and also from capital reserve created on amalgamation.

1. In respect of capital goods imported under EPCG Scheme, the Company has executed bonds of Rs1,986.39 Lacs in favour of President of India for import at a concessional rate of custom duty. The Company is under an obligation to export products for Rs 15,891.15 Lacs within a period of 8 years from the date of issue of licenses between 20th December 2002 to 27th February 2015. The Company has exported goods worth Rs 17,120.62 Lacs till 31st March, 2008.

6. Contigent Liabilities net provided for in respect of :

	2007-08 Rs. in Lacs	2006-07 Rs. in Lacs
(a) Letters of Credit	4,243.04	4,841.24
(b) Guarantees given by the Bankers	68.55	78.07
(c) Bills receivable discounted with Bankers	13,012.61	11,734.12
(d) Excise, Sales Tax, Custom Duty, ESIC & Other Claims	184.44	143.04

7. Claims against the Company not acknowledged as debts:

i)	Demand by the Department of Commercial Taxes, Government of Karnataka, levying a sum of Rs.20 lacs, as Entry Tax on Import of Plant & Machinery. The Company has obtained a Stay Order from the Hon’ble High Court of Karnataka during 1996.
ii)	Demand by the Commissioner of Customs, Bangalore for Rs. 109.77 lakhs have been stayed by the customs and Service Tax Act Appellate Tribunal, Chennai. The Company has deposited a sum of Rs. 38 lakhs with the Customs Authorities under protest.

8. Lining Fabrics valued at Rs.93.78 Lacs were imported in 2002-03 for usage in manufacturing of products for export. Due to the non-acceptance by the Customs Department of the methodology adopted by the Company for the co-relation between the material used and the material imported, an amount of Rs 148.50 Lacs was paid in protest towards Customs Duty on the said imports and shown under Advances. Since the final liability amount is unascertained and not acceptable by the Company in principle, no provision has been made in the accounts. The Adjudicating authority has passed an order confirming the demand of the customs department. The Company’s appeal before the CESTAT was heard and an Order has been passed setting aside the Order of the adjudicating authority and remanded for fresh hearing.

9. The Company’s request for waiver of interest on loans obtained from two NBFC Companies is under consideration by the lenders. In view of the above, no further interest payable has been provided for.

10. During the year three Indian listed Companies namely Ethics Commercials Ltd., Lucky Goldstar Company Ltd and P.K.Textiles Ltd. became subsidiary of the Company due to control on the composition of Board of Directors.

11. Estimated amount of contracts remaining to be executed on Capital account and not provided for Rs. 93 Lacs (Previous Year Rs. 6,600 Lacs).

12. There are no Micro, Small and Medium Enterprises, to whom the Company owes dues, which are outstanding for more than 45 days as at 31st March 2008.This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis of information provided by the supplier.

13. As per Accounting Standard 15 “Employees Benefits”, the disclosures of Employee benefits as defined in the Accounting Standard are given below :
Defined Benefit Plan - The Employees’ gratuity fund Scheme managed by The Life Insurance Corporation of India (LICI) is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.
The obligation for leave encashment is recognized in the same manner as gratuity.

I.	Reconciliation of opening and closing balances of Defined Benefit Obligation	(Rs. in Lacs)
		Gratuity (Funded)	Leave Encashment (Unfunded)
(a)	Defined benefit obligation at the beginning of the year	53.83	16.09
(b)	Current Service Cost	12.25	6.51
(c)	Interest Cost	4.35	1.07
(d)	Actuarial (Gain)/Loss	0.73	0.96
(e)	Benefits paid	(16.01)	(14.06)
(f)	Defined benefit obligation at the end of the year	55.15	10.57
II.	Reconciliation of opening and closing balance of the fair value of Plan Assets
(a)	Fair Value of Plan Assets at the beginning of the year	18.21	-
(b)	Expected Return on Plan Assets	1.60	-
(c)	Actuarial Gain / (Loss)	(0.73)	-
(d)	Contributions by Employer	24.42	14.06
(e)	Benefits paid	(16.01)	(14.06)
(f)	Fair Value of Plan Assets at the end of the year	28.22	-
III.	Reconciliation of fair value of Assets and obligation
(a)	Fair Value of Plan Assets	28.22	-
(b)	present value of obligation	55.15	10.57
(c)	Amount recognized in Balance Sheet	26.93	10.57
IV.	Expense charged to the Profit and Loss Account
(a)	Current Service Cost	12.25	6.51
(b)	Interest Cost	4.35	1.07
(c)	Expected Return on Plan Assets	(1.60)	-
(d)	Actuarial (Gain)/Loss	0.73	0.96
(e)	Total expense charged to the Profit and Loss Account	15.73*	8.54**
* Under the head "Gratuity" on Schedule - 12
** Under the head “Salary, Bonus & Allowances” on Schedule – 12
V.	Percentage of each Category of Plan Assets to total Fair value of Plan assets as at 31st March, 2008 100% with Life Insurance Corporation of India.
VI.	Actual Return on Plan Assets:	7%
VII.	Principal Actuarial Assumption as at 31st March 2008
(a)	Discount Rate (per annum)	8.00%
(b)	Expected Rate of Return on Plan Assets (per annum)	8.00%
(c)	Salary Escalation	5.00%
(d)	Inflation Rate	5.00%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The expected rate of return on plan assets is based on the portfolio of assets held, investment strategy and market scenario. In order to protect the capital and optimize returns within acceptable risk parameters, the plan assets are reasonably diversified.

This being the first year of disclosure, previous year figures have not been furnished.
1. As the Company’s business activities falls within a single primary business segment viz. Silk Textile yarn, Fabrics and Made-ups, no further reporting is necessary as per Accounting Standard – 17 issued by The Institute of Chartered Accountants of India.

14. Related Party Disclosure in-accordance with Accounting Standard - 18 issued by The Institute of Chartered Accountants of India.

(I)	List of Related Parties	Name of the Person/Company
(a)	Associates :-	Ethics Commercials Ltd.
		Lucky Goldstar Company Ltd.
		P.K.Textiles Ltd.
		Tarun Fabrics Ltd.
		Gemini Overseas Ltd.
(c)	Key Management Personnel	Shri S.S. Shah (Chairman & Managing Director)
		Shri Sundeep Shah (Executive Director)
		Shri G. Venkatesh (President)
		Shri Anil Jain (Chief Financial Officer)
(II)	Transactions with Related Parties
		Subsidiaries* (Rs. in Lacs)	Associates (Rs. in Lacs)	Key Management Personnel including relatives (Rs. in Lacs)
	Income & Expenditure:
	Purchase of Raw Materials & Finished Goods	-	14,755.79
		(9,328.37)	(4,688.61)
	Sale of Goods	-	4,194.78
		(3,203.80)	(4,270.66)
	Services Recieved	-	2,349.92
		(730.27)	(483.07)
	Purchase of fixed assets	-	2,700.00
		(-)	(-)
	Rent Received	-	0.17
		(0.15)	(0.02)
	Rent Paid	-	0.72
		(0.72)	(-)
	Remuneration Paid			85.71
				(54.90)
	Balances as on 31-03-08
	i) Debtors / Receivables		3,339.23
		(1,711.49)	(1,036.27)
	ii) Advances		9,037.57
		(3,161.47)	(3,506.50)
* Refer Note 11 as above.

15. As required under Accounting Standard - 22 issued by Institute of Chartered Accountants of India, the Company is required to account for deferred taxation while preparing its accounts. The details of deferred tax assets / liabilities are as under :

	As at 31.3.07	Tax effect for the year	As at 31.3.08
	Rs. in Lacs	Rs. in Lacs	Rs. in Lacs
Deferred Tax (Liability)
Difference between book and tax depreciation	(1,473.39)	47.36	(1,426.03)
Deferred Tax Assets	-	-	-
Employees Benefits	-	20.22	20.22
Net Deferred Tax (Liability)/Assets	(1,473.39)	67.58	(1,405.81)

16. Managerial Remuneration :
(Remuneration to Managing Director & Executive Director)

	Managing Director		Executive Director
	2007-08 Rs. in Lacs	2006-07 Rs. in Lacs	2007-08 Rs. in Lacs	2006-07 Rs. in Lacs
Salary & Bonus	36.00	22.50	23.76	13.60
House Rent Allowance	3.60	3.00	2.16	1.80
Contribution to Provident & Other Funds	4.32	2.70	2.59	1.56
Total	43.92	28.20	28.51	16.96

Computation of Net Profit for the purpose of calculation of Managing Director's and Executive Director's Remuneration under Section 349 of the Companies Act, 1956 has not been given since no commission has been paid.

19. Derivative Instruments:
(a) During the year the company has re-evaluated its risk management program in respect of forecasted transactions. Upon completion of the formal documentation and testing for effectiveness, the company has designated certain foreign currency options in respect of forecasted transactions, which meet the criteria, as Cash Flow Hedges.
(b) Pursuant to The Institute of Chartered Accountants of India’s (ICAI) announcement “Accounting for Derivatives” on the early adoption of Accounting Standard AS 30 “Financial Instruments recognition and measurements”, the company has fully adjusted for mark to market losses aggregating to Rs.1,724.01 lakhs during the year, towards designated Foreign currency transactions. The same has been recognized directly under Reserves & Surplus.
(c) The Company uses forward Exchange Contracts and Currency Option to hedge its exposures in foreign currency related to firm commitments and highly probable forecasted transactions. The information on Derivative Instruments is as follows:

Forward Exchange Contracts	(Figures in Lakhs)
	As at 31-03-2008
Currency Pair	Buy	Sell
EURO/USD	7.55	295.00
GBP/USD	20.00	60.00
USD/CHF	10.00
AUD/USD	-	100.00
USD/INR	-	60.00

Derivatives
USD/YEN	40.00
EURO/USD	30.00	10.00

(d) In respect of losses of Rs.375.00 lakhs incurred on derivative instruments, the Company has been legally advised that these contracts have no liability and therefore not enforceable. However, as a matter of abundant caution, the Company has charged the same to the Profit & Loss Account for the year as per Accounting Standard AS 30 issued by The Institute of Chartered Accountants of India. The company is in the process of taking legal advice and based on the legal advice suitable remedial measures shall be considered.

20. Earning Per Shares (EPS)

	2007-08	2006-07
Profit after tax	5,813.82	5,766.61
Less: Dividend on Redeemable Cumulative Preference Shares (including tax thereon)	131.03	131.03
Profit considered for calculating EPS	5,682.79	5,635.58
Weighted average number of Equity Shares of Rs.10/- each	1,57,90,524	1,57,90,524
Earning per share (Basic & Diluted)	Rs. 35.99	Rs. 35.69

21. Previous Year's figures have been re-arranged, and/or re-grouped and/or re-furbished wherever necessary.

ADDITIONAL INFORMATION AS REQUIRED UNDER PART IV OF SCHEDULE VI OF THE COMPANIES ACT, 1956

1. Registration Details
A. Registration No.	13554
B. State Code	21
C. Balance Sheet Date	31.03.2008
2. Capital Raised during the Year ( Rs. in '000)
A. Public Issue	-
B. Rights Issue	-
C. Bonus Issue	-
D. Privet Placement	-
3. Position of Mobilization& Developments of Funds (Rs. in '000)
A. Total Liabilities ( including Deferred Tax liability)	63,55,757
B. Total Assets	63,55,757
C. Source of Funds
1. Paid-up Capital	1,57,905
2. Reserves & Surplus	34,67,180
3. Secured Loans	10,19,857
4. Unsecured Loans	2,18,140
5. Deferred Tax Liability	1,40,580
D. Application of Funds
1. Net Fixed Assets	18,44,662
2. Investments	1,00,842
3. Net Current Assets	31,98,133
4. Miscellaneous Expenditure	25
5. Accumulated Losses	-
4. Performance Of Company (Rs. in '000)
A. Turnover (including other income)	49,98,835
B. Total Expenditure	43,97,173
C. Profit/ (Loss) before Tax	6,01,662
D. Profit/ (Loss) after Tax	5,81,383
E. Earning per Share	35.99
F. Dividend Rate	45%
5. Generic Names of three Principal Products/Services of Company (as per monetary terms)
Item Code No. (I.T.C. Code)	50.07
Product Description	Silk Fabrics

Kolkata
The 31st July, 2008

For B.K. SHROFF & CO.
Chartered Accountants
L.K. SHROFF
Partner

S. S. Shah
Chairman and Managing Director

Sundeep Shah
Executive Director

K.T. Sheth
Secretary

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