అకౌంట్స్ గమనికలుNamaste Exports Ltd.

Mar 31, 2014

1. CORPORATE INFORMATION

Namaste Exports Limited (hereinafter called as "Company") is a public limited Company incorporated under provisions of Companies Act, 1956, with its registered office at Bangalore. The Company is engaged in the manufacturing of leather garments.

2. The Honourable Board for Industrial and Financial Reconstruction (BIFR) vide their order dated 20th December 2013 approved the modified sanction scheme (the scheme) for the rehabilitation of the Company. As per the said scheme, Success Apparels Private Limited (SAPL) (transferor Company) was amalgamated with Namaste Exports Limited (transferee Company) with retrospective effect from the appointed date, i.e. 1st April 2012. The certified copies of the orders of the BIFR has been filed with the Registrar of Companies, Bangalore. In accordance with the said amalgamation / scheme.

a. All the assets and liabilities of SAPL have been transferred to the and vested with the Company on the appointed date and have been recorded at their respective book value, under the pooling of interest method of accounting for amalgamation. SAPL was wound up without applicablity of the provisions of the Companies Act, 1956.

3. i) Non current assets includes amount due from Thrive Leathers Rs. 186,34,639/- a firm in which a director is interested. The above amount has been considered good and recoverable by the management.

b. 10,00,00,000 equity shares of face value of Rs. 2 each have been allotted to the shareholders of SAPL as a consideration for the amalgamation.

c. 38,71,800 equity shares of the Company held by SAPL has been written off and to that extent the paid up capital of the Company stands reduced without applicability of the provisions of the Companies Act, 1956.

d. The face value of the shares are reduced from Rs. 2 to Re. 1.

e. As per the scheeme,

i. Balance in security premium account,capital reserve account and general reserve account is set off against brought forward losses.

ii. General reserve and surplus in profit &loss account of SAPL is set off against goodwill arising on account of amalgamation.

iii. Reduction in capital is set off against carry forward losses and goodwill on account of amalgamation.

4. The accounting of amalgamation stands at variance from AS-14 with respect to treatment of adjustment of debit balance in profit and loss account with capital reserve Rs. 16,71,000/-, securities premium Rs. 24,49,87,193/-, general reserve Rs. 49,14,49,765/-. Had the scheme not prescribed the treatment, capital reserve would have been higher by Rs. 16,71,000/-, securities premium would have been higher by Rs. 24,49,87,193/-, general reserve would have been higher by Rs. 49,14,49,765/- and debit balance in profit & loss account would have been higher by Rs. 73,81,07,958/-.

5. BIFR in their order waived payment of fees to Registrar of Companies, Karnataka, Bangalore for increasing the authorised capital. However The Registrar of Companies, Karnataka have not accepted the documents filed by the Company earlier without payment of requisite fees. hence company could not file documents for changes in the authorised and paid up capital. The Company is taking necessary steps to complete filing of other documents with the statutory authorities relating to amalgamation and restructuring.

6. Considering the amalgamation, the figures of previous year are not readily comparable with those of the current year.

7. DETAILS OF SECURITIES TO LOANS:

The Company has earlier created charge on the fixed and current assets of the Company in favour of Industrial Development Bank of India, State Bank of India Mutual Fund, Karnataka State Industrial Investment Development Corporation, Karnataka State Financial Corporation, State Bank of India and Canara Bank. The Company has repaid / allotted shares towards these dues as approved by the BIFR. (Refer note 1.2). Company is in the process of filing satisfaction of charges with Registrar of Companies in respect of these charges. Short term borrowings are secured by hypothecation of inventories and receivables, personal guarantee of Directors of Success Apparels Private Limited and Equitable mortgage of an immovable property.

8. CURRENTS ASSETS AND LIABILITIES:

Confirmation of the balances under Sundry Debtors, Loans & Advances, Deposits and Sundry Creditors are not obtained. In the opinion of the management current assets and Loans & Advances would in the ordinary course of business realise the values stated. Certain bank accounts are subject to confirmation.

9. CHANGE IN ACCOUNTING POLICY:

During the year, the Company has changed the method of depreciation of fixed assets of Namaste Exports Limited, from straight line method to written down value method. Consequent to the change, depreciation charge for the year is increased by Rs. 62,462/- with consequential effect on reserve.

10. Considering/taking a conservative approach, the management has decided not to create any further deferred tax asset for the period and restricted it to Rs. 7,44,205/- made as at 31.03.2013 by Success Apparels Private Limited.

11. SEGMENT REPORTING POLICIES:

The Company is primarily engaged in the business of production of leather garments and is managed as one entity, for its various service offerings and is governed by a similar set of risks and returns. In the opinion of the manage- ment, disclosure regarding Segment Reporting as required in Accounting Standard on Segment Reporting (AS 17) is not applicable to the Company during the year under review as there are no reportable segments.

12. RETIREMENT BENEFIT PLANS:

a. Defined contribution plans:

The Company makes Provident Fund contribution to defined contribution retirement benefit plans for eligible em- ployees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs. 70,55,142 (Rs. 26,89,915/-) for provident fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the respective scheme.

13. PROVISIONS AND CONTINGENCIES:

The Company has made provision for leave salary on estimated basis. These being retirement benefits an obligation to pay these amounts might arise at the time of resignation / superannuation of the employees. There is no reimbursement receivable against these obligations. The following table sets out the funded status of the leave salary and the amounts recognized in the Company’s financial statements as at March 31, 2014:

Particulars As at As at 31-03-2014 31-03-2013 Carrying amount in the beginning of the year 925,992 826,532

Additional provision made during the year 2,354,148 417,345

Additions on amalgamation 1,859,962 -

Amounts used during the year 1,462,686 317,885

Unused amounts reversed during the year 732,250 -

Carrying amount in the end of the year 2,945,166 925,992

14. The figures of the current year includes the performance of Success Apparels Private Limited and are hence not comparable. The previous figures have been regrouped / reclassified, wherever necessary to confirm to the current presentation. Figures in brackets are in respect of previous year.

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Mar 31, 2013

1. CORPORATE INFORMATION

The Company is engaged in the manufacturing of leather garments.

1.1 REHABILITATION SCHEME:

In terms of the Rehabilitation Scheme (Scheme) approved by the Hon''ble Board for industrial and Financial Reconstruction (BIFR) vide its order dated 11th July 2003 and amended from time to time.

i) The Financial Institutions and Banks was to be paid principal outstanding as on the cutoff date i.e., 30th September 2002 amounting to Rs 46.46 Crores. Based on this approval the Company has fully repaid Rs 46.46 Crores

ii) in the Annual Genera! Meeting of the Company held on 29.09.2007, the Company has passed a resolution to increase the authorized capital to Rs. 50 Crores. The Company has obtained approval from BIFR for waiver of filing fees with Registrar of Companies, Karnataka, Bangalore (ROC) for the staid increase. ROC has not accepted the documents without filing fees. The Company has provided Rs. 15,00,000 towards fee payable for increase in authorized capital and interest of Rs. 20,93,468 payable up to the date of the Balance Sheet.

iii) The directors in their meeting held on 25.03.2009, allotted 5,255,350 no of equity shares of Rs. 10 each as fully paid up as conversion of interest dues to banks and financial institutions. Further on the same date they have allotted 18,026,780 no of equity shares fully paid up to the promoters and associates.

iv) As per the scheme approved by the BIFR, the directors in their meeting held on 25.03.2009 have written down Rs. 8 per equity share totally amounting to Rs. 345,713,840 setting off the same against the carry forward losses of the Company. Paid up capital of the Company became 43214230 shares of Rs. 2 each fully paid up.

v) Consequent to the reduction in face value of paid up capital from Rs. 10 per share to Rs. 2 per share, the authorized capital of the Company became 25,00,00,000 equity shares of Rs. 2 each.

vi) Since the Registrar of Companies have not accepted the documents filed by the Company for increasing in authorized capital (refer clause iii & iv above) necessary documents for increase in paid up capital and reduction of capital as referred above could not be filed electronically with them. However copies of the same have been manually filed with the Registrar of Companies.

vii) During May 2013, the Company has filed a modified scheme considering amalgamation of Success Apparels Private Limited, a profit making leather garment manufacturer and export Company with the Company. The same is under consideration of BIFR.

1.2 DETAILS OF SECURITIES TO LOANS:

The Company has earlier created charge on the fixed and current assets of the Company in favour of Industrial Development Bank of India, State Bank of India Mutual Fund, Karnataka State Industrial Investment Development Corporation, Karnataka State Financial Corporation, State Bank of India and Canara Bank. The Company has repaid / allotted shares towards these dues as approved by the BIFR. (Refer note 1.2). Company is in the process of filing satisfaction of charges with Registrar of Companies in respect of these charges.

1.3 CURRENT ASSETS AND LIABILITIES:

Confirmation of the balances under Sundry Debtors, Loans & Advances, Deposits and Sundry Creditors are not obtained. In the opinion of the management current assets and Loans & Advances would in the ordinary course of business realize the values stated. Certain bank accounts are subject to confirmation.

1.4 OPERATING LEASES:

The Company has taken various residential / commercial premises under cancelable operating leases. These lease agreements are normally renewed on expiry. Rent debited to profit and loss account Rs. 34,16,136.

The lease agreements provide an option to the Company to renew the lease period at the end of the non- cancelable period. There are no exceptional / restrictive covenants in the lease agreements.

Contingent rent recognized in the Profit and Loss Account Rs. Nil.

1.5 SEGMENT REPORTING POLICIES:

The Company is primarily engaged in the business of production of leather garments on job work basis and is managed as one entity, for its various service offerings and is governed by a similar set of risks and returns. The Company provides services only in India. In the opinion of the management, disclosure regarding Segment Reporting as required in Accounting Standard on Segment Reporting (AS 17) is not applicable to the Company during the year under review as there are no reportable segments.

1.6 RETIREMENT BENEFIT PLANS:

a. Defined contribution plans:

The Company makes Provident Fund contribution to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs.26,89,915/- (Rs. 24,63,097/-) for provident fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the respective scheme.

b. Defined benefit plans:

The Company makes the provision to the Employees'' Gratuity Scheme for eligible employees. The scheme provides for lump sum payment to eligible employees at retirement, death while in employment or on termination of employment, an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Eligibility occurs upon completion of five years of service. The present value of the defined benefit obligation and current service cost were measured using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. The following table sets out the funded status of the gratuity plan and the amounts recognized in the Company''s financial statements as at March 31, 2013.

The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held assessed risks of asset management historical results of the return on plan assets and the Company''s policy for plan asset management.

1.7 PROVISIONS AND CONTINGENCIES:

The Company has made provision for leave salary on estimated basis. These being retirement benefits an obligation to pay these amounts might arise at the time of resignation / superannuation of the employees. There is no reimbursement receivable against these obligations. The following table -sets out the funded status of the leave salary and the amounts recognized in the Company''s financial statements as at March 31, 2013:

There has been no movement in the share capital during the previous year and the immediate proceeding previous year.

The Company has only one class or equity shares having par value of Rs. 10 per share. Each holder of an equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed flay the Board of Directors is subject to the approval of share holders in the Annual General Meeting.

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Mar 31, 2012

1. CORPORATE INFORMATION

The Company is engaged in the manufacturing of leather garments.

1.2 REHABILITATION SCHEME:

In terms of the Rehabilitation Scheme (Scheme) approved by the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 11th July, 2003 and amended from time to time.

i) The Financial Institutions and Banks was to be paid principal outstanding as on the cut off date i.e., 30th September, 2002 amounting to Rs. 46.46 Crores. Based on this approval the Company has fully repaid Rs. 46.46 Crores.

ii) In the Annual General Meeting of the Company held on 29.09.2007, the Company has passed a resolution to increase the authorized capital to Rs. 50 Crores. The Company has obtained approval from BIFR for waiver of filing fees with Registrar of Companies, Karnataka, Bangalore (ROC) for the said increase. ROC has not accepted the documents without filing fees. The Company has provided Rs. 15,00,000 towards fee payable for increase in authorised capital and interest of Rs. 20,93,468 payable up to the date of the Balance Sheet.

iii) The directors in their meeting held on 25.03.2009, allotted 5,255,350 no of equity shares of Rs. 10 each as fully paid up as conversion of interest dues to banks and financial institutions. Further on the same date they have allotted 18,026,780 no of equity shares fully paid up to the promoters and associates.

iv) As per the scheme approved by the BIFR, the directors in their meeting held on 25.03.2009 have written down Rs. 8 per equity share totally amounting to Rs. 345,713,840 setting off the same against the carry forward losses of the Company. Paid up capital of the Company became 43214230 shares of Rs. 2 each fully paid up.

v) Consequent to the reduction in face value of paid up capital from Rs. 10 per share to Rs. 2 per share, the authorized capital of the Company became 25,00,00,000 equity shares of Rs. 2 each.

vi) Since the Registrar of Companies have not accepted the documents filed by the Company for increasing in authorized capital (refer clause iii & iv above) necessary documents for increase in paid up capital and reduction of capital as referred above could not be filed electronically with them. However copies of the same have been manually filed with the Registrar of Companies.

vii) During 2009/2010, the Company has filed a modified scheme considering amalgamation of Success Apparels Private Limited, a profit making leather garment manufacturer and export Company with the Company. The same is under consideration of BIFR.

1.3 DETAILS OF SECURITIES TO LOANS:

The Company has earlier created charge on the fixed and current assets of the Company in favour of Industrial Development Bank of India, State Bank of India Mutual Fund, Karnataka State Industrial Investment Development Corporation, Karnataka State Financial Corporation, State Bank of India and Canara Bank. The Company has repaid /allotted shares towards these dues as approved by the BIFR. (Refer note 1.2). Company is in the process of filing satisfaction of charges with Registrar of Companies in respect of these charges.

1.4 CURRENTS ASSETS AND LIABILITIES:

Confirmation of the balances under Sundry Debtors, Loans & Advances, Deposits and Sundry Creditors are not obtained. In the opinion of the management current assets and Loans & Advances would in the ordinary course of business realise the values stated. Certain bank accounts are subject to confirmation.

1.5 OPERATING LEASES:

The Company has taken various residential/commercial premises under cancelable operating leases. These lease agreements are normally renewed on expiry. Rent debited to profit and loss account Rs. 31,88,160 (Rs. 31,84,860).

The lease agreements provide an option to the Company to renew the lease period at the end of the non- cancelable period. There are no exceptional/restrictive covenants in the lease agreements. Contingent rent recognized in the Profit and Loss Account Rs. Nil.

1.6 SEGMENT REPORTING POLICIES:

The Company is primarily engaged in the business of production of leather garments on jobwork basis and is -managed as one entity, for its various service offerings and is governed by a similar set of risks and returns. The Company provides services only in India. In the opinion of the management, disclosure regarding Segment Reporting as required in Accounting Standard on Segment Reporting (AS 17) is not applicable to the Company during the year under review as there are no reportable segments.

1.7 RELATED PARTY TRANSACTIONS:

a. Relationship during the year:

(i) Key Managerial Personnel : 1. K. Narayana Bhat Chairman

2. Mrs. Madhura N. Bhat Managing Director

3. Mr. E.N.Veerahna Finance Director

4. M. Sripad Rao Director

(ii) Relatives of Key Managerial Personnel:

1. Vishal Bhat Relative of Director

2. Vikas Bhat Relative of Director

(iii) Associates :

1. Elite Leather International Private Limited

2. MNS Exports Private Limited

3. N.P. Properties Private Limited

4. Thrive Leathers

5. Success Apparels Private Limited (w.e.f. 01.10.11)

1.8 RETIREMENT BENEFIT PLANS:

a. Defined contribution plans:

The Company makes Provident Fund contribution to defined contribution retirement benefit plans for eligible employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Company recognized Rs. 24,63,097/- (Rs. 22,75,334/-) for provident fund contributions in the Statement of Profit and Loss. The contributions payable to these plans by the Company are at rates specified in the rules of the respective scheme.

b. Defined benefit plans:

The Company makes the provision to the Employees' Gratuity Scheme for eligible employees. The scheme provides for lump sum payment to eligible employees at retirement, death while in employment or on termination of employment, an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Eligibility occurs upon completion of five years of service. The present value of the defined benefit obligation and current service cost were measured using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. The following table sets out the funded status of the gratuity plan and the amounts recognized in the Company's financial statements as at March 31, 2012:

1.10 The previous figures have been regrouped/reclassified, wherever necessary to confirm to the current presentation. Figures in brackets are in respect of previous year.

NOTES FORMING PART OF THE BALANCE SHEET

Note-2.1 SHARE CAPITAL

There has been no movement in the share capital during the previous year and the immediate preceding previous year.

Terms/Rights attached to equity shares:

The Company has only one class of equity shares having par value of Rs. 2 per share. Each holder of an equity share is entitled to one vote per share. The Company declares and pays dividend in Indian Rupees.

The dividend proposed by the Board of Directors is subject to the approval of share holders in the Annual General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of shares held by the equity share holders.

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Mar 31, 2011

1. Rehabilitation Scheme:

a. In terms of the Rehabilitation Scheme (Scheme) approved by the Hon'ble Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 11th July 2003 and amended from time to time

i. The Financial Institutions and Banks was to be paid principal outstanding as on the cut off date i.e., 30th September 2002 amounting to Rs. 46.46 Crores. Based on this approval the Company has fully repaid Rs. 46.46 Crores.

ii. In the Annual General Meeting of the Company held on 29.09.2007, the Company has passed a resolution to increase the authorized capital to Rs. 50 Crores. The Company has obtained approval from BIFR for- waiver of filing fees with Registrar of Companies, Karnataka, Bangalore (ROC) for the said increase. ROC has not accepted the documents without filing fees. Considering the waiver obtained from BIFR, no provision is made for the filing fees for the said increase.

iii. The directors in their meeting held on 25.03.2009, allotted 5,255,350 no of equity shares of Rs. 10 each as fully paid up as conversion of interest dues to banks and financial institutions. Further on the same date they have allotted 18,026,780 no of equity shares fully paid up to the promoters and associates.

iv. As per the scheme approved by the BIFR, the directors in their meeting held on 25.03.2009 have written down Rs. 8 per equity share totally amounting to Rs. 345,713,840 setting off the same against the carry forward losses of the Company. Paid up capital of the Company became 43214230 shares of Rs. 2 each fully paid up.

v. Consequent to the reduction in face value of paid up capital from Rs. 10 per share to Rs. 2 per share, the authorized capital of the Company became 25,00,00,000 equity shares of Rs. 2 each." In this regard, the Company is seeking the approval of share holders for changes in the memorandum and articles of association in the forthcoming Annual General Meeting.

vi. Since the Registrar of Companies have not accepted the documents filed by the Company for increasing in authorized capital (refer clause iii & iv above) necessary documents for increase in paid up capital and reduction of capital as referred above could not be filed electronically with them. However copies of the same have been manually filed with the Registrar of Companies.

vii. In November 2009, the Company has filed an application before BIFR seeking approval for amalgamating Success Apparels Private Limited with the Company.

2. Details of securities to Loans:

a. Rs. Nil (Rs. 8,38,000) due to Industrial Development Bank of India (IDBI) represents balance in accrued interest account after allotment of shares on a portion of the interest dues.

b. The Company has earlier created charge on the fixed and current assets of the Company in favour of Industrial Development Bank of India, State Bank of India Mutual Fund, Kamataka State Industrial Investment Development Corporation, Karnataka State Financial Corporation, State Bank of India and Canara Bank. The Company has repaid / allotted shares towards these dues as approved by the BIFR. (Refer note 2). Company is in the process of filing satisfaction of charges with Registrar of Companies in respect of these charges.

3. Fixed Assets:

In view of the business restructuring undertaken by the company, entailing closure of certain facilities, fixed assets have been shifted to other units of the company. Pending updation of fixed assets register, reconciliation of the same with the actual inventory is not completed.

A few assets of the company are located / used by certain other companies with whom the company has trading and business connections, the expenses for maintenance thereof being borne by the user company.

4. Current Assets & Liabilities:

Confirmation of the balances under Sundry Debtors, Loans & Advances, Deposits and Sundry Creditors are not obtained. In the opinion of the management current assets and Loans & Advances would in the ordinary course of business realise the values stated, Certain bank accounts are subject to confirmation.

5. Dues to Micro, Small and Medium Industrial Undertakings:

Sundry Creditors do not include any dues to Micro, Small and Medium Industrial Undertakings, to the extent such parties have confirmed.

SI. PARTICULARS 31-03-2011 31-03-2010 No. a. The principal amount and the Nil Nil interest due thereon (to be shown sepa- rately) remaining unpaid to any supplier as at the end of each accounting year;

b. The amount of interest paid by Nil Nil the buyer in terms of section 16 of the Micro, Small and Medium Enterprises Development Act, 2006, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year;

c. The amount of interest due and Nil Nil payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under the Micro, Small and Medium Enterprises Development Act, 2006;

d. The amount of interest accrued Nil Nil and remaining unpaid at the end of each accounting year; and

e. The amount of further interest Nil Nil remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure under section 23 of the Micro,Small and Medium Enterprises Development Act, 2006.

6. Contingent Liabilities; Contingent Liabilities not provided for includes disputed ESI Liabilities Rs. Nil (Rs. 0.87 Lakhs)

7. Leases:

a. Operating Leases; The Company has taken various residential / commercial premises under cancelable operating leases. These lease agreements are normally renewed on expiry. Rent debited to profit and loss account Rs. 31,84,860 (Rs. 29,99,691).

The lease agreements provide an option to the Company to renew the lease period at the end of the non-cancelable period. There are no exceptional / restrictive covenants in the lease agreements.

Contingent rent recognized in the Profit and Loss Account Rs. Nil

8. Segment Reporting Policies:

The Company is primarily engaged in the business of production of leather garments on jobwork basis and is managed as one entity, for its various service offerings and is governed by a similar set of risks and returns. The Company provides services only in India. In the opinion of the management, disclosure regarding Segment Reporting as required in Accounting Standard on Segment Reporting (AS 17) is not applicable to the Company during the year under review as there are no reportable segments. '

9. Related Party Disclosures:

List of Related Parties over which control exists

a. Key Managerial Personnel Whole time Directors

Mrs. Madhura N Bhat Managing Director

Mr. Sripad Rao M Director

Mr. E N Veeranna Director Finance

Mr. K Narayana Bhat Chairman

b. Relatives of Key Managerial Personnel

Vishal Bhat - relative of Director

Vikas Bhat - relative of Director

c. Associates:

a. Elite Leather International Private Limited

b. MNS Exports Private. Limited

c. Thrive Leathers

d. NP Properties P Ltd

10. Retirement Benefit Plans

Defined contribution plans

The Company makes Provident Fund contributions to defined contribution retirement benefit plans for qualifying employees. Under the schemes the Company.is required to contribute.a specified percentage of the payroll costs to fund the benefits. The Provident Fund scheme additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time for which shortfall has been provided for as at the Balance Sheet date.

The Company recognised Rs. 2275334 (Rs. 1935951) for provident fund contributions and in the profit and loss account. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

Defined benefit plans

The Company makes annual contributions to the Employees' Group Gratuity-cum-Life Assurance Scheme Master Policy of the Life Insurance Corporation of India a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service. The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

11. In view of the losses the ability of the Company to continue as a going concern is dependent on the implementation of the rehabilitation scheme approved by the Board of Industrial Financial Reconstruction (Refer note 2 above). As a conservative policy Deferred Tax Assets are not recognised.

12.b. Note: The above represents minimum remuneration payable to the said whole time directors in view of the inadequacy of profits, computation of remuneration payable to whole time directors under section 349 of the Companies Act, 1956 is not furnished.

13. Figures in Brackets pertain to previous year. The figures for the previous year have been reworked, regrouped and reclassified wherever necessary to confirm to the figures of the current year as per our report attached.

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Mar 31, 2010

1. Rehabilitation Scheme.

a. In terms of the Rehabilitation Scheme (Scheme) approved by the Honble Board for Industrial and Financial Reconstruction (BIFR) vide its order dated 11th July 2003 and amended from time to time

i. The Financial Institutions and Banks was to be paid principal outstanding as on the cut off date i.e., 30th September 2002 amounting to Rs. 46.46 Crores. Based on this approval the Company has fully repaid Rs. 46.46 Crores.

ii. In the Annual General Meeting of the Company held on 29.09.2007, the Company has passed a resolution to increase the authorized capital fo Rs. 50 Crores. The Company has obtained approval from BIFR for waiver of filing fees with Registrar of Companies, Kamataka, Bangalore (ROC) for the said increase. ROC has not accepted the documents without filing fees. Considering the waiver obtained from BIFR, no provision is made for the filing fees for the said increase.

iii. The directors in their meeting held on 25.03.2009, allotted 5,255,350 no of equity shares of Rs. 10 each as fully paid up as conversion of interest dues to banks and financial institutions. Further on the same date they have allotted 18,026,780 no of equity shares fully paid up to the promoters and associates.

iv. As per the scheme approved by the BIFR, the directors in their meeting held on 25.03.2009 have written down Rs. 8 per equity share totally amounting to Rs. 345,713,840 setting off the same against the carry forward losses of the Company. Paid up capital of the Company became 43214230 shares of Rs. 2 each fully paid up.

v. Consequent to the reduction in face value of paid up capital from Rs. 10 per share to Rs. 2 per share, the authorized capital of the Company became 25,00,00,000 equity shares of Rs. 2 each. In this regard, the Company is seeking the approval of share holders for changes in the memorandum and articles of association in the forthcoming Annual General Meeting.

vi. Since the Registrar of Companies have not accepted the documents filed by the Company for increasing in authorized capital (refer clause iii & iv above) necessary documents for increase in paid up capital and reduction of capital as referred above could not be filed electronically with them.

vii. In November 2009, the Company has filed a petition before BIFR seeking approval for amalgamating Success Apparels Private Limited with the Company.

2. Details of securities to Loans:

i. Rs. 838,000 (Rs. 1,338,000) due to Industrial Development Bank of India (IDBI) and Rs. NIL (Rs. 1,930,936) due to State Bank of India represents balance in accrued interest account after allotment of shares on a portion of the interest dues.

b. The Company has earlier created charge on the fixed and current assets of the Company in favour of Industrial Development Bank of India, State Bank of India Mutual Fund, Kamataka State Industrial Investment Development Corporation, Karnataka State Financial Corporation, State Bank of India and Canara Bank. The Company has repaid / allotted shares towards these dues as approved by the BIFR. (Refer note 2). Company is in the process of filing satisfaction of charges with Registrar of Companies in respect of these charges.

3. Fixed Assets:

a. In view of the business restructuring undertaken by the company, entailing closure of certain facilities, fixed assets have been shifted to other units of the company. Pending updation of fixed assets register, reconciliation of the same with the actual inventory is not completed.

b. A few assets of the company are located / used by certain other companies with whom the company has trading and business connections, the expenses for maintenance thereof being borne by the user company.

4. Current Assets & Liabilities:

Confirmation of the balances under Sundry Debtors, Loans & Advances, Deposits and Sundry Creditors are not obtained. In the opinion of the management current assets and Loans & Advances would in the ordinary course of business realise the values stated. Certain bank accounts are subject to confirmation.

5. Dues to Micro, Small and Medium Industrial Undertakings: Sundry Creditors do not include any dues to Micro, Small and Medium Industrial Undertakings, to the extent such parties have confirmed.

6. Contingent Liabilities: Contingent Liabilities not provided for includes a. Disputed ESI Liabilities Rs. 0.87 Lakhs ( Rs. Nil)

7. Leases:

a. Operating Leases: The Company has taken various residential / commercial premises under cancelable operating leases. These lease agreements are normally renewed on expiry. Rent debited to profit and loss account Rs.29,99,691 (Rs. 32,47,717).

The lease agreements provide an option to the Company to renew the lease period at the end of the non-cancelable period. There are no exceptional / restrictive covenants in the lease agreements.

Contingent rent recognized in the Profit and Loss Account Rs. Nil

8. Segment Reporting Policies:

(a) Identification of Segments:

Primary Segment:

Business Segment: The Companys operating businesses are organised and managed separately according to the nature of products and services, with each segment representing a strategic business unit that offers different products. The Company is presently operating only in leather garment segment. Hence disclosure of segment wise information is not applicable.

Secondary Segment: The analysis of Geographical segment is based on the geographical location of the customers.

Secondary Segment Reporting (by Geographical Segments)

The following is the distribution of the Companys consolidated sales by geographical market regardless of where the goods were produced.

9. Related Party Disclosures:

List of Related Parties over which control exists

a. Key Managerial Personnel Whole time Directors

Mrs. Madhura N Bhat Managing Director

Mr. Sripad Rao M Director

Mr. E.N. Veeranna Director - Finance

b. Relatives of Key Managerial Personnel

Vishal Bhat - relative of Director

Vikas Bhat - relative of Director

Sharadamma - relative of Director

Mookambikamma - relative of Director



c. Associates :

a. Nadia Leathers Limited

b. Namaste Trading Limited

c. Bangalore Leathers and Leathercrafts Limited

d. Elite Leather International Private Limited

e. MNS Exports Private Limited

f. Khandige Herbs & Plantations Private Limited

g. Thrive Leathers

h. Mother Nature & Company

i. Yessar Enterprises

j. NP Properties P Ltd

k. Grace Leathers

I. Balaji Enterprises



Retirement Benefit Plans

Defined contribution plans

The Company makes Provident Fund contributions to defined contribution retirement benefit plans for qualifying employees. Under the schemes the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The Provident Fund scheme additionally requires the Company to guarantee payment of interest at rates notified by the Central Government from time to time for which shortfall has been provided for as at the Balance Sheet date.

The Company recognised Rs. 1935951(Rs. 1965477) for provident fund contributions and in the profit and loss account. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

Defined benefit plans

The Company makes annual contributions to the Employees Group Gratuity-cum-Life Assurance Scheme Master Policy of the Life Insurance Corporation of India a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service. The present value of the defined benefit obligation and the related current service cost were measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

The expected return on plan assets is determined considering several applicable factors mainly the composition of the plan assets held assessed risks of asset management historical results of the return on plan assets and the Companys policy for plan asset management.

10. In view of the losses the ability of the Company to continue as a going concern is dependent on the implementation of the rehabilitation scheme approved by the Board of Industrial Financial Reconstruction (Refer note 2 above). As a conservative policy Deferred Tax Assets are not recognised.

11. Provisions and Contingencies : The Company has made provision for and leave salary on estimated basis. These being retirement benefits, an obligation to pay these amounts might arise at the time of resignation / superannuation of the employees. There is no reimbursement receivable against these obligations.

12. Figures in Brackets pertain to previous year. The figures for the previous year have been reworked, regrouped and reclassified wherever necessary to confirm to the figures of the current year as per our report attached.