SALEM TEXTILES LIMITED TEXTILES LIMITED BOARD OF DIRECTORS Shri. R.Prabakaran, B.E., Managing...

SALEM TEXTILES LIMITED

46TH

ANNUAL REPORT


BOARD OF DIRECTORS Shri. R.Prabakaran, B.E.,

Managing Director

Shri. V.Subramaniam

Shri. B.Venkatesan

BANKERS ICICI Bank, CHENNAI.

The Hongkong & Shanghai Banking Corporation Limited

CHENNAI.

The Karnataka Bank Limited,

SALEM.

FINANCIAL INSTITUTIONS ICICI Limited , COIMBATORE.

IDBI Limited, CHENNAI.

IFCI Limited, CHENNAI.

IIBI Limited, CHENNAI.

AUDITORS Messers. Elangovan & Natarajan

Chartered Accountants

SALEM.

REGISTERED OFFICE Selliampalayam

Narasingapuram Post Attur - 636 108

Salem District, TamilNadu.

SALEM TEXITLES LIMITED

NOTICE TO SHAREHOLDERS

NOTICE is hereby given that the Fortysixth Annual General Meeting of the Company will be

held at the Registered Office of the Company at Selliampalayam, Narasingapuram Post,

Attur - 636 108 on Friday, the 30th September 2011 at 10.00 A.M to transact the following

business:-

ORDINARY BUSINESS

1. To receive, consider and adopt the audited Balance Sheet as at 31st March, 2011 and the

Profit and Loss Account for the financial year ended on that date and the Reports of the

Directors and Auditors thereon.

2. To appoint a Director in the place of Sri. V.Subramaniam who retires by rotation and being

eligible offers himself for reappointment.

3. To appoint Auditors and fix their remuneration.

By Order of the Board

R.PRABAKARAN

Managing Director

Registered Office

Selliampalayam,

Narasingapuram post,

Attur - 636 108.

Salem District, Tamilnadu,

Date: 12.08.2011

Notes

1. A member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of himself

and such a proxy need not be a member of the Company. 2. Proxies to be effective should be lodged at the Registered Office of the Company atleast 48 hours before

the meeting. 3. Share holders are requested to intimate the changes, if any, in their registered address to the Company. 4. The Register of Members and the Share Transfer Books of the Company will remain closed from

26.09.2011 to 30.09.2011 5. Members are requested to register their email-id with the Company (at Company’s email-id

[email protected]) and also keep the Company informed of any changes in their email id from time to time .Notice of Meetings, Annual Reports and similar Communications meant for the members will be send by email to members.

6. In terms of clause 49 of the Listing Agreement with Stock Exchanges a brief resume of Director who is proposed to be reappointed at this meeting is given below. Shri.V.Subramaniam is an Industrialist. He is having experience in Management and Marketing. He was first inducted into the Board at the Board Meeting held on 04.09.2002 and is holding the office of the Director since then.


REPORT ON CORPORATE GOVERNANCE

A. MANDATORY REQUIREMENTS:

a) Company's Philosophy on Code of Governance

Your Company believes in conducting its affairs in such a way to provide true and

fair presentation of the affairs of the Company in all aspects to its stakeholders and to

work for the benefit of all its stakeholders, including shareholders, employees, Government and lenders. This has been followed.

b) Board of Directors

(i) The Board comprises of three directors, of which two are non-executive Independent

directors and one is the Managing Director. There are no Institutional/nominee directors. There is no Chairman.

The composition of the Board is given below:

Name of Director Category in

Company

No.of other

Board/Committees in

which

No.of other

Companies in which

Director Chairman Director Chairman

Sri.R.Prabakaran Promoter,

Managing Director

Nil Nil Nil Nil

Sri.V.Subramaniam Director Nil Nil Nil Nil

Sri.B.Venkatesan Director Nil Nil Nil Nil

Five Board Meetings were held during the Financial Year 2010-11 and the gap between two

meetings did not exceed four months. The dates on which the Board Meetings held were as

follows: 30.04.2010, 07.08.2010, 07.08.2010, 13.11.2010 and 05.02.2011.

The last Annual General Meeting was held on 25.09.2010.

The attendance of each Director at the Board Meetings and the last Annual General

Meeting are as under.

Name of Director Attendance at Board

Meetings

Attendance at AGM

Sri R. Prabakaran 5 Absent

SRI V.Subramaniam 5 Present

Sri B.Venkatesan 5 Present

ii) Code of Conduct:-

The code of conduct for the directors and senior management of the Company has been laid down by the Board. The General Manager has declared that Board Members and

Senior Management affirmed compliance with the code of conduct of the Company.


iii) Managing Director Certification:-

The Managing Director of the Company has certified to the Board as required under Clause 49(v) of the listing agreement.

c) Audit Committee

The Audit Committee was formed on 17th March 2003 and it was reconstituted with effect

from 18.08.2007. It consists of three members, two of them independent. The present members are Sri.R.Prabakaran, Sri.V.Subramaniam and Sri. B.Venkatesan. Sri.

V.Subramaniam is the chairman of the Committee. All the members have financial and

accounting knowledge.

Brief terms of reference of the Audit Committee are as under:-

• Study the existing financial control and reporting systems and suggest improvements

and changes.

• Study the existing internal audit procedures and suggest improvements/changes to bring about effectiveness.

• Study and review quarterly working results

• Study and review audit reports

• All functions/features as contained in Clause 49 of the Listing Agreement of the Company

with Stock Exchange.

The role of Audit Committee includes all matters stated in clause 49 of the Listing

Agreement entered into with Stock Exchanges, as amended from time to time.

Four Audit Committee Meetings were held during the Financial Year 2010-11 on

27.04.2010, 05.08.2010, 10.11.2010 and 03.02.2011. These were attended by all the

members.

d) Remuneration Committee

There has been no need to constitute a Remuneration Committee.

e) Shareholders/Investors Grievances Committee

A shareholders/investors grievances committee consisting of the two independent Non-

Executive Directors was formed on 17.03.2003, as the Company had only two Non-

Executive directors. The present Members are Sri.V.Subramaniam and Sri B.Venkatesan.

Sri.V.Subramaniam is the Chairman of the Committee .The Compliance officer will be a Special invitee for the meetings of this committee. The name and designation of the

Compliance Officer is Mr.B.Senthil Kumar, Compliance Officer. During the financial year

2010-11, the Company received no Shareholders Complaints. No Shareholders

Complaint is pending. There were no pending share transfers.

f) Share Transfers:

To expedite share transfers, the Board has delegated the power of share transfer to an

officer of the Company.


g) General Body Meetings

The details of the last three Annual General Meetings of the Company are given below.

FINANCIAL YEAR DATE TIME VENUE

2007-08 30.08.2008 10.35 A.M Registered Office

of the Company

at Selliampalayam Narasingapuram,

Attur – 636108, Salem

2008-09 29.09.2009 10.00 A.M - DO -

2009-10 25.09.2010 10.35 A.M - DO -

There were no Special Resolutions requiring to be put through postal ballot last year.

h) Disclosures

(A) Materially significant related party transactions that may have potential conflict with the interest of the Company - NIL

(B) Non-compliance by the Company, penalties, and strictures imposed on the

Company by the Stock Exchange or SEBI or any authority on any matter related to capital markets during last three years - None

(C) There was no pecuniary relationship or transactions of the non-executive

directors vis-a-vis the Company during the Financial Year.

(D) The Company has complied with all the mandatory requirements.

i) Means of Communications

The quarterly results are normally published in English (Trinity Mirror) and vernacular

(Makkal Kural) Newspapers.

The Company’s Financial Results will be displayed in the website ww.salemtextiles.com

The Management Discussion and Analysis of the operations for the year ended 31st

March 2011 forms part of the Directors Report and is given in paragraph No. 5 thereof.

j) Details of appointment / reappointment of Directors as per clause 49 of the Listing Agreement.

Shri.V.Subramaniam retiring by rotation and being eligible offers himself for re-

appointment . A brief resume of the director is given below

Name Qualification Brief Resume Other Directorship

V.Subramaniam Matric He has got vast experience in Textile line of activity

Nil


k) General Shareholder Information

i) Annual General Meeting : Date 30.09.2011 Time 10.00 AM

Venue : Registered office of the

Company at Selliampalayam,

Narasingapuram, Attur, Salem Dt

ii) Financial Year : 01.04.2010 to 31.03.2011

iii) Financial Calendar (Tentative)

Results for the Quarter ending 30.06.2011 August 2011 (1st or 2nd Week)

Results for the quarter ending 30.09.2011 November 2011 (1st or 2nd Week)

Results for the quarter ending 31.12.2011 February 2012 (1st or 2nd Week)

Results for the quarter ending 31.03.2012 May 2012 (1st or 2nd Week)

Annual General Meeting --- August/Sep 2012

iv) Book Closure Date : From 26.09.2011 to 30.09.2011

v) Dividend payment Date : Not Applicable as no dividend

is recommended / declared.

vi) Listing on Stock Exchanges : The Bombay Stock Exchange Ltd,

Mumbai The Madras Stock Exchange Ltd,

Chennai

vii) (i) Stock Code : Mumbai Stock Exchange - 521052

Madras Stock Exchange - SALEMTEX

ii) Market Price Data - High/Low : NIL as not actively traded in the market.

During each month of the FY

viii) Performance in comparison to broad

based indices such as BSE, Sensex, CRISIL index. etc : N.A

ix) Share transfer system : Share transfers are handled by the

Company at its Registered Office. The

delegated authority approves physical

transfers within 15 days.


x) Distribution of shareholding as on 31st March 2011

No.of Equity

Shares

No.of

Shareholders

% of

Shareholders

No.of Shares

held

% of

Shareholding

001 - 500

501 - 1000 1001 - 2000

2001 - 3000

3001 – 4000

4001 - 5000

5001 -10000 Above 10000

3698

6 6

7

2

2

4 14

98.90

0.16 0.16

0.19

0.05

0.05

0.11 0.38

724572

37950 77760

172678

67026

89650

272262 5158102

10.98

0.57 1.18

2.62

1.02

1.36

4.12 78.15

3739 100.00 6600000 100.00

xi). Shareholding Pattern as on 31st March 2011

Sl.No Category No.of Shares held

% of Shareholding

1 Promoters & Associates 4013444 60.81 %

2 Banks, Financial Institutions and

Insurance Companies

1401000 21.22%

3 Foreign Institutional Investors ---- ----

4 Bodies Corporate 143958 2.19%

5 Indian Public 1039598 15.75%

6 NRI/OCB 2000 0.03%

7 Others -- --

Total 6600000 100.00%

xii) Dematerialization of shares : The Company could not dematerialize

its shares, as the company is sick.

xiii) Plant location : The Plant is located at

Selliampalayam, Narasingapuram, Attur.

Salem District, Tamil Nadu.

xiv) Address for Correspondence : Selliampalayam, Narasingapuram Post, Attur 636108, Salem District,

Tamil Nadu.


(B) NON - MANDATORY REQUIREMENTS

Regarding non-mandatory requirements, items (i) non-executive chairman, (ii) Remuneration

Committee and (iii) Postal Ballot are not presently applicable to the Company. Sending half

yearly performance to each household of Shareholders is presently not possible as the Company is sick. Instead, the Company is publishing quarterly results in the news papers .The

Company could not avoid Audit Qualifications as the Company is sick. The Company is

complying with other items viz, training and evaluating Board Members.

By Order of the Board

R.PRABAKARAN

Place: Attur Managing Director

Date: 12.08.2011

B.VENKATESAN

Director


AUDITOR'S CERTIFICATE

To

The Board of Directors

Salem Textiles Limited

Selliampalayam

Narasingapuram Post

Attur - 636 108.

Salem District Tamil Nadu

We have reviewed the Compliance of Corporate Governance procedures by SALEM TEXTILES

LIMITED (the Company) during the year ended 31.03.2011 with the relevant records and

documents maintained by the Company, furnished to us for our review and the report on

Corporate Governance as approved by the Board of Directors.

The compliance of conditions of Corporate Governance is the responsibility of the management.

Our examination was limited to procedures and implementation thereof, adopted by the

Company for ensuring the compliance of the conditions of the Corporate Governance. It is

neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to

us, and based on the representations made by the Directors and the management, We certify

that the Company has complied with the conditions of Corporate Governance as stipulated in

Clause 49 of the above mentioned Listing Agreement.

We further state that, such compliance is neither an assurance as to the future viability of the

Company, nor as to the efficiency or effectiveness with which the management has conducted

the affairs of the Company.

For ELANGOVAN & NATARAJAN., Chartered Accountants

Firm Regn.No.000799.S

PLACE: Attur S.ELANGOVAN

DATE: 12.08.2011 Partner

M.NO.24654


Declaration Pursuant to Clause 49 of the Listing Agreement regarding adherence to the Code of

Conduct.

To

The Share holders of Salem Textiles Limited, Salem

We hereby declare that all members of the Board and the Senior Management Personnel have

affirmed compliance with the respective provisions of the Code of Conduct of the Company

formulated by the Board of Directors for the Financial Year ended 31.03.2011

R. PRABAKARAN

Managing Director

Place: Attur

Date: 12.08.2011


DIRECTORS’ REPORT TO THE SHARE HOLDERS

Your directors have pleasure in submitting the Fortysixth Annual Report together with the Audited Accounts for the year ended 31st March, 2011.

1. FINANCIAL RESULTS

Rs. In Lacs

2010-2011 2009-2010

NET SALES & OTHER INCOME

858.11 893.24

PROFIT BEFORE FINANACIAL

CHARGES AND DEPRECIATION

97.78 97.59

LESS: FINANCIAL CHARGES DEPRECIATION

4.06

42.55

4.73

39.63

PROFIT FOR THE YEAR 51.17 53.23

LESS /ADD:ADJUSTMENT RELATING TO

PRIOR YEARS - OTHERS

(-) 82.15

24.24

BALANCE (-) LOSS / PROFIT (-) 30.98 77.47

LOSS BROUGHT FORWARD 10035.50 10112.97

ACCUMULATED LOSS 10066.48 10035.50

2. PERFORMANCE

The turnover for the year under review, mainly conversion charges and other income was Rs.

858.11 Lacs compared to the turnover of Rs.893.24 lacs for the year 2009-10.The Company’s

operations resulted in a net profit of Rs. 51.17 Lacs in the year 2010-11 compared to the net profit

of Rs.53.23 lacs in the year 2009-10.

Due to non availability of adequate working capital finance, the Company could not have own

production, and therefore the Company had to continue taking conversion works to the

available extent to keep the Mill working. Also, there was a strike by workers from 12.02.2011 to

09.03.2011 which affected the working of mills. However the Company made net profit in the

year.

3. DIVIDEND

Due to accumulated losses, your directors are unable to recommend any dividend for the year

under review.

4. FINANCIAL POSITION

The Company continues to face critical financial position, due to accumulated loss and the non

availability of sufficient working capital funds. The Company has been declared “Sick Industrial

Company” by Hon’ble BIFR and rehabilitation process is in progress. The Rehabilitation scheme submitted by the Company to Hon’ble BIFR has not so far been and cleared.


5. MANAGEMENT DISCUSSION AND ANALYSIS OF THE OPERATIONS

The management discussed and analyzed the operational results for 2010-2011 and critically

studied the factors that affected production, sales and profit. The management was satisfied with the efforts taken by the Company in the situation prevailed during the year 2010-11.

6. FUTURE TRENDS

The Textile Industry is facing severe problems in the availability of raw materials at

reasonable prices and remunerative price for finished products, besides stiff competition. The Company will be able to show improvements during the current year, depending on the

happening of favourable changes in the Textile Industry and improvement in power cut

position. However, availability of the sufficient working capital funds and finalization of viable

Rehabilitation Scheme are the key factors that are essential for improving the operations in

the coming years.

7. DIRECTORS

During the year under review there was no change in the Board of Directors.

At this Annual General Meeting, Sri V.Subramaniam is retiring by rotation and he being eligible, offers himself for re-appointment.

8. AUDITORS

The retiring auditors M/s. Elangovan & Natarajan, Chartered Accountants are eligible for re-

appointment.

9 . DIRECTORS' RESPONSIBILITY STATEMENT

In compliance of Section 217(2AA) of the Companies Act 1956 as amended by Companies

(Amendment) Act 2000, the Directors of your Company confirm that

a) In the preparation of the annual accounts, the applicable accounting standards had

been followed and there are no material departures.

b) The directors have selected such accounting polices and applied them consistently

and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial

year and of the Profit of the Company for the year ended on 31.03.2011.

c) The Directors have taken proper and sufficient care for the maintenance of

adequate accounting records in accordance with the provisions of the Companies Act

1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) The annual accounts have been prepared on a going concern basis.


10. STOCK EXCHANGES

The Company’s equity shares are listed at the Bombay Stock Exchange Ltd, Mumbai and

Madras Stock Exchange Ltd, Chennai. The Company has been paid Annual Listing Fee to both these Stock Exchanges for the Financial Year 2010-2011.

11. DISCLOSURES

(i) During the year, there were no transactions of material nature with the Directors,

Management, Subsidiaries or their relatives etc., that had potential conflict with the

interests of the Company at large. (ii) There were no instances of non-compliance by the Company, penalties, strictures

imposed on the Company by Stock Exchanges or SEBI or any other Statutory

Authority on any matter related to the Capital Markets, during the last three years.

12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTOIN AND FOREIGN EXCHANGE

EARNING AND OUTGO.

Information pursuant to Section 217(1)(e) of the Companies Act, 1956 is given in Annexure I

and form part of this report.

13. PARTICULARS OF EMPLOYEES

The Company had no employees during the year who were in receipt of remuneration

prescribed u/s 217(2A) of the Companies Act, 1956.

14. ACKNOWLEDGMENT

Your Directors wish to thank the employees at all ranks for the co-operation and untiring efforts

given for running the Company.

On behalf of the Board

Place : Attur Date : 12.08.2011

R.PRABAKARAN

Managing Director

B.VENKATESAN

Director


ANNEXURE - I TO THE DIRECTORS' REPORT

STATEMENT CONTAINING PARTICULARS PURSUANT TO THE COMPANIES (DISCLOSURE OF

PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART

OF DIRECTORS' REPORT.

A. CONSERVATION OF ENERGY

The Company is continuing its thrust on energy conservation by taking suitable measures.

REQUISITE DATA IN RESPECT OF ENERGY CONSUMPTION ARE GIVEN BELOW:

POWER AND FUEL CONSUMPTION

I. ELECTRICITY

2010-2011 2009-2010

a Purchased Units KW in lacs 54.55 62.77

Total Amount Rs.in lacs 268.12 281.99

Rate/ Unit Rs/KW 4.91 4.49

b Own Generation through Diesel KW in Lacs 0.37 2.57

Generator Unit/Ltr KW 3.04 3.27

Cost per Unit Rs/KW 12.92 10.48

II. CONSUMPTION PER KG OF PRODUCTION

2010-2011 2009-2010

Total Units KW in lacs 54.92 65.34

Production Kgs.in lacs 13.88 13.25

Unit/Kg KW 3.96 4.93

B. TECHNOLOGY ABSORPTION

In view of paucity of funds the company has not carried out any technology upgradation work.

Only routine and required maintenance works were carried out.

C. FOREIGN EXCHANGE EARNING AND OUTGO - NIL

On behalf of the Board

R.PRABAKARAN Place: Attur Managing Director

Date: 12.08.2011

B.VENKATESAN

Director


ADDENDUM TO DIRECTOR'S REPORT

The Auditors comments in the Auditors Report dated 12.08.2011 for the year ended 31st March 2011 and the Board's reply are given below :-

Sl.No in Auditors Report annexure

Auditors' Comment Boards' Reply

iii (d). The Company is not regular in the repayment of principal of Loans.

The processing of rehabilitation scheme is in progress. The repayment of loans will be made as per the scheme to be approved.

vi. The Company has not accepted any deposits from the Public from 01.04.1998.However in respect of deposits accepted before 01.04.1998 the Company has not complied with the provisions of section 58A of the Companies Act ,1956 and the Companies (Acceptance of Deposits) Rules 1975 with regard to the repayment of deposits and payment of interest. With regard to the repayment of small deposits, the Company has intimated to the Company Law Board as per the provisions of

Section 58 AA of the Companies Act and also complied with the requirements of the Order passed by the Company Law Board.

The Company has incurred huge loss in the earlier years. The net worth of the Company is fully eroded and has become negative. The reference made by the Company to the BIFR has been registered with BIFR and the Company is declared as a “Sick Industrial Company” under the Sick Industrial Companies (Special Provisions) Act 1985 by BIFR and rehabilitation process

is in progress. The Company is unable to comply with the provisions of Companies Act 1956 regarding repayment of public deposits. With regard to matured, unpaid small deposits, the Company has intimated to the Hon’ble Company Law Board, Chennai complying with the Provision of Sec.58AA of the Companies Act 1956.Also the Company has not accepted any deposits from 01.01.1998.

ix a. In our opinion and according to the information and explanations given to us, undisputed statutory current dues including Provident Fund, Employees State Insurance, Income Tax, Sales Tax, Excise Duty, Cess etc. have been regularly deposited with the appropriate authorities. There are arrears of statutory dues as at 31.03.2011 for a period of more than six months from the date they became payable.

The Company has been paying arrears of Statutory dues depending on funds position from time to time, so as to clear the arrears at the earliest.

xi According to the information and explanations given to us, the Company has defaulted in repayment of dues to Financial Institutions, Banks and Debenture Holders.

The processing of rehabilitation scheme is in progress. The repayment of loans will be made as per the scheme to be approved.

On behalf of the Board Place: Attur

Date: 06.08.2011

R.PRABAKARAN

Managing Director

B.VENKATESAN

Director


AUDITOR'S REPORT

To

The members of M/s. SALEM TEXTILES LIMITED

1) We have audited the attached Balance Sheet of M/s. SALEM TEXTILES LIMITED as at 31st March 2011, and the Profit and Loss Account and Cash Flow

Statement for the year ended on that date annexed thereto . These statements are the

responsibility of the management of the Company. Our responsibility is to express an

opinion on this financial statement based on our audit.

2) We conducted our audit in accordance with generally accepted auditing standards in India. These standards require that we plan and perform the audit to obtain

reasonable assurance whether the financial statements are prepared, in all material

respects, in accordance with an identified financial reporting framework and are free

of material misstatements. An audit includes, examining on a test basis, evidence

supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We

believe that our audit provides a reasonable basis for our opinion.

3) As required by the Companies (Auditor's Report) Order, 2003 as amended by the

Companies (Auditors' Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of Sub-section (4A) of section 227 of the Companies Act,

1956, and on the basis of such checks as we considered appropriate, and according

to the information and explanations given to us, we enclose in the Annexure a

statement on the matters specified in paragraphs 4 and 5 of the said order. Further, we

report that:

a) We have obtained all the information and explanations which to the best of our

knowledge and belief were necessary for the purpose of our audit.

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

c) The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by

this report are in agreement with the books of account.

d) In our opinion the Profit and Loss Account, the Balance Sheet and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in Sub-section 3C of Section 211 of the Companies Act, 1956.


AUDITOR'S REPORT (Contd ...)

e. On the basis of written representations received from the directors as on 31st March 2011 and taken on record by the Board of Directors, we report that all directors of the

Company are disqualified from being appointed/ reappointed as director in other

public Companies under clause g(B) of sub-section (1) of section 274 of the Companies

Act,1956 due to non payment of Redeemable Debenture, Deposits and interest on due

date.

f. In our opinion and to the best of our information and according to the explanations

given to us, and subject to the Note No.20(vii) (a to g) stated in the Notes on Accounts, we

report that the said accounts give the information required by the Companies Act

1956, in the manner so required and give a true and fair view in conformity with the

accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31st

March, 2011 and

ii. in the case of the Profit and Loss Account, of the Profit of the Company for the year

ended on that date.

iii. in the case of Cash Flow Statement, of the Cash Flows of the Company for the

year ended on that date.

For ELANGOVAN & NATARAJAN

CHARTERED ACCOUNTANTS


Place: Attur S.ELANGOVAN

Date: 12.08.2011 Partner

M.No.24654


ANNEXURE TO AUDITOR'S REPORT

The Annexure Referred to in the Auditor's Report to the members of the SALEM TEXTILES LIMITED (the Company) for the year ended 31st March, 2011. We report that:

i. (a) In our opinion , the Company is maintaining proper records to show full particulars

including quantitative details and situation of the fixed assets.

(b) As explained to us, the Fixed Assets have been physically verified by the management

during the year at reasonable intervals and no material discrepancies were noticed

on such verification.

(c) There were no sale of any fixed assets during this year except a small portion of land

acquired by NHA1 for the road.

ii. (a) Inventories have been physically verified by the Management . In our opinion, the

frequency of verification is reasonable.

(b) In our opinion, the procedures of physical verification of inventory followed by the

management are reasonable and adequate in relation to the size of the Company and the nature of its business.

(c) The Company is maintaining proper records of inventory and no material

discrepancies were noticed on such verification as compared to the book records.

iii. (a) During the year the Company has not taken loans, secured or unsecured, from

Companies, firms or other parties listed in the register maintained under section 301 of

the Act.

(b) During the year the Company has not granted loans, secured or unsecured, to

Companies, firms or other parties listed in the register maintained under section 301 of the Act.

(c) In case of the loans accepted in earlier years no interest is charged. Other terms and

conditions are not primafacie prejudicial to the interest of the Company.

(d) The Company is not regular in the repayment of principal of loans.

iv. In our opinion, there is adequate internal control system commensurate with the

size of the Company and the nature of its business for the purchase of inventory and

fixed assets and for the sale of goods. During the course of audit, no major weakness

has been noticed in the internal control system.

v. (a) Based on the audit procedures applied by us and according to the information and

explanations provided by the management, we are of the opinion that the

transactions that need to be entered into the register maintained under section 301

of the Act have been so entered.


ANNEXURE TO AUDITOR'S REPORT (Contd ...)

v. (b) In our opinion and according to the information and explanations given to us, the

transactions made in pursuance of contracts or arrangements entered in the register maintained u/s.301 of the Act during the year are reasonable having regard to the

prevailing market prices at the relevant time.

vi. The Company has not accepted any deposits from the Public from 01.04.1998.

However in respect of deposits accepted before 01.04.1998, the Company has

not complied with the provisions of section 58A of the Companies Act, 1956

and the Companies (Acceptance of Deposits) Rules 1975 with regard to the

repayment of deposits and payment of interest.

With regard to the repayment of small deposits, the Company has intimated to the

Company Law Board as per the provisions of section 58AA of the Act and also

complied with the requirements of the Order passed by the Company Law Board.

Vii. In our opinion, the Company has an internal audit system commensurate with its

size and nature of its business.

Viii. On the basis of the records produced, we are of the opinion that Prima facie, the cost

records and related accounts prescribed by the Central Government under section 209 (1) of the Act have been made and maintained by the Company . However , we have not

made a detailed examination of such records and accounts with a view to determine

whether these are accurate and complete.

ix. (a) In our opinion and according to the information and explanations given to us, undisputed statutory current dues including Provident Fund , Employees State

Insurance, Income Tax, Sales Tax, Excise Duty Cess etc., have been regularly deposited with the appropriate authorities. There are arrears of outstanding statutory dues as at

31.03.2011 for a period of more than 6 months from the date they become payable.

The following are the particulars of undisputed dues.

Name of the Statute Nature of Dues Rs.in Lakhs Period to which the amount

relates

Provident Fund Act

Employees State

Insurance Act

Income Tax Act

Sales Tax Act

Excise Law

Customs Act

Panchayat Act

Cess Act

Provident Fund

Employees State

Insurance

Income Tax

Sales Tax

Excise Duty

Import Duty

Panchayat Tax

Cess

151.18

68.02

13.94

283.06

41.03

16.80

5.30

11.61

1998-99 to 2005-06

1998-99 to 2005-06

1995-96 to 2003-04

1998-99 to 2004-05

2001-02 to 2003-04

1997-98

2002-03 to 2004-05 & 2008-09

1996-97 to 2005-06


ix. (b) As on 31.03.2011, according to the records of the Company, the following are the

disputed dues on account of Sales Tax, Excise Duty, Customs Duty, Cess and other material statutory dues applicable to it that have not been deposited.

Name of the

Statute

Nature of Dues Amount of

Demand

net deposits

Rs. In Lakhs

Period to which the

amount relates

Forum where

dispute is

pending

TNEB

Excise Law

Customs Law

CESS ACT

Income Tax Act

Electricity Tax

Peak Hour

Penalty

Penalty

Duty

Penalty

Duty (Net)

Duty

Penalty

Duty

Penalty

Duty

Penalty

Duty

Penalty

Duty

Penalty

Duty

Penalty

Yarn Cess

FBT

55.51

61.75

10.00

4.18

4.18

7.85

7.70

2.00

2.59

1.00

12.17

2.00

4.99

4.99

52.15

40.91

54.15

99.15

2.76

8.03

From 2003-04 to 2006-07

From Dec 08 to Aug09

2003-2004

2004-2005

1999-2000

2000-01 to 2001-02

2001-02

2001-02 to 2002-03

Feb 2000 to

Oct 2000

1991-92

1995-96 to 2005-06

2005-06 to 2008-09

High Court

Chennai

- Do -

CESTAT,Chennai

C.Excise

(Appeals)Salem

CESTAT,Chennai

- Do –

- Do –

- Do –

- Do –

DGFT, DELHI

Assessing

Officer, Textile

Committee,

Coimbatore

Supreme Court,

New Delhi.

x. In our opinion, the accumulated losses of the Company are more than 50% of its net worth.

The Company has incurred cash loss during the financial year covered by our audit.


ANNEXURE TO AUDITOR'S REPORT (Contd ...)

xi. According to the information and explanations given to us, the Company has defaulted in repayment of dues to Financial Institutions , Banks and Debenture Holders. The particulars are

given below :

Lender Nature of Loan Rs.in Lakhs Period of Default

Financial Institutions

Banks

Debenture Holders

Loans

Loans

Debentures

3,105.57

4,608.95

463.75

1996-97 onwards

1997-98 onwards

1998-99 onwards

xii. The Company has not granted during the year loans and advances on the basis of

security by way of pledge of shares, debentures and other securities.

xiii. The Company is not a chit,nidhi / mutual benefit fund/ society.

xiv. The Company is not dealing or trading in shares, securities, debentures and other

investments

xv. In our opinion, the Company has not given guarantees for loans taken by others from Banks or Financial Institutions.

xvi. The Company has not borrowed any term loan during the year

xvii. There were no funds raised on short-term basis which have been used for long term

investment and vice versa

xviii. There has been no preferential allotment of shares by the Company during the year to

any party.

xix. The Company has not issued any debentures during the year.

xx. During the year the Company has not raised any money by public issue of shares or

other securities

xxi. According to the information and explanations given to us, no fraud on or by the

Company has been noticed or reported during the course of our audit.




Place: Attur S.ELANGOVAN

Date : 12.08.2011 Partner

M.NO.24654


BALANCE SHEET AS AT 31st MAR, 2011

SCHE 31.03.2011 31.03.2010

SOURCE OF FUNDS DULES RS. In Lacs RS. In Lacs RS. In Lacs

SHARE HOLDERS FUNDS

Share Capital A 659.79 659.79

LOAN FUNDS

Secured B 8051.49 8051.49

Unsecured C 613.90 620.66

8665.39 8672.15

9325.18 9331.94

APPLICATION OF FUNDS

FIXED ASSETS D 479.92 522.50

INVESTMENTS E 25.00 25.00

CURRENT ASSETS, LOANS AND ADVANCES

Inventories F 18.66 17.70

Sundry Debtors G 105.14 103.06

Cash and Bank Balances H 16.37 25.83

Loans and Advances I 846.11 827.66

986.28 974.25

Less: Current Liabilities and Provisions

Liabilities J 2232.50 2225.31

NET CURRENT ASSETS -1246.22 -1251.06

PROFIT AND LOSS ACCOUNT 10066.48 10035.50

9325.18 9331.94

NOTES ON ACCOUNTS Q

Schedule "A" to "J" and Notes on Accounts "Q" form part of this Balance Sheet

As per our Report of even date



(Firm Reg.No.000799.S) R.PRABAKARAN

MANAGING DIRECTOR

S.ELANGOVAN B.VENKATESAN

PARTNER DIRECTOR

M.No. 24654

ATTUR, 12.08.2011


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st MAR 2011

2010-11 2009-10

SCHEDULES Rs.in Lacs Rs.in Lacs

SALES & OTHER INCOME K 858.11 893.24

LESS

Materials L 0.00 8.98

Human Resources M 251.71 275.25

Other Expenses N 508.62 511.42

Financial Expenses O 4.06 4.73

Depreciation P 42.55 39.63

806.94 840.01

PROFIT FOR THE YEAR 51.17 53.23

Adjustment relating to prior years - Tax 0.00 0.00

- Others -82.15 24.24

-30.98 77.47

Balance of loss brought forward from previous Year -10035.50 -10112.97

BALANCE OF LOSS CARRIED OVER TO BALANCE SHEET -10066.48 -10035.50

NOTES ON ACCOUNTS Q

Schedule "K" to "P" and Notes on Accounts "Q" form part of this Profit and Loss Account

As per our Report of even date For and an behalf of the Board


CHARTERED ACCOUNTANTS R. PRABAKARAN

(Firm Reg.No.000799.S) MANAGING DIRECTOR

S. ELANGOVAN B. VENKATESAN

PARTNER DIRECTOR

M.No. 24654

ATTUR, 12.08.2011


SCHEDULES TO BALANCE SHEET 31.03.2011 31.03.2010

Rs.in Lacs Rs.in Lacs

A. SHARE CAPITAL

AUTHORISED

1,50,00,000 Equity Shares Of Rs.10/- each 1500.00 1500.00

ISSUED, SUBSCRIBED AND PAIDUP

66,00,000 Equity Shares of Rs.10/-each 660.00 660.00

Less : Calls in Arrears 0.21 0.21

659.79 659.79

B. SECURED LOANS

A) 20 % Secured Non-Convertible privately placed Debentures

with Unit Trust of India redeemable in three equal annual

instalment at a premium of 5% commencing from 27.08.98 175.00 175.00

Interest accrued and due 288.75 288.75

B) From Financial Institutions

Term Loans - Rupee Loans 490.24 490.24

Foreign Currency Loans 289.18 289.18

Corporate Loan from ICICI 276.82 276.82

Interest Accrued thereon 1739.96 1739.96

C) From Banks

Term Loans 298.81 298.81

Interest Accrued 74.70 74.70

Working Capital Loan 1919.70 1919.70

Interest Accrued thereon 2089.08 2089.08

Letter of Credits 226.66 226.66

D) From others

Deferred Credit 182.59 182.59

8051.49 8051.49

1. Term loans from Financial Institutions to an extent of Rs.2796.22 Lacs (2010 Rs.2796.22 Lacs) are secured by

mortgage of Company's land and buildings and first charge by hypothecation of the whole movable properties, both

present and future, of the Company (Save and except book debts) and subject to prior charges created/to be created

in favour of bankers for Raw materials, Semi finished goods, Finished goods and consumable stores for securing the

borrowings for working capital requirement in the ordinary course of business.

2. Term loans from Banks to the extent of Rs.373.51 Lacs (2010 Rs.373.51 Lacs) are secured by hypothecation of

Stock-in-trade, receivables and other moveable assets with pari-passu agreements from the consortium Banks and

Financial Institutions.

3. Cash Credits from Banks are secured by hypothecation of stock-in-trade, receivables and other movable assets. These

assets have also been mortgaged against Letters of Credit and guarantees issued by them.

4. Secured loans taken from Bank and the Loans taken from Financial Institutions are guaranteed by the Managing Director.

5. Deferred credits to an extent of Rs.182.59 Lacs (2010 Rs.182.59 Lacs) are secured by the hire purchase agreements

for the acquisition of certain specific machinery.

6. For all the secured loans the Company has not provided any interest from the year 2004-05 onwards.




C. UNSECURED LOANS

A) DEPOSITS

- FROM DIRECTORS 137.09 137.09

- FROM OTHERS 156.92 163.68

B) INTEREST ACCRUED THEREON 10.52 10.52

C) SHORT TERM LOANS

- FROM UNIT TRUST OF INDIA 125.00 125.00

- INTEREST ACCRUED THEREON 184.37 184.37

613.90 620.66


SCHEDULES TO BALANCE SHEET

(Rs. In Lakhs.)

D. FIXED ASSETS

DEPRECIATION NET BLOCK

DESCRIPTION

As at 31st Additions/ As at 31st TO DATE As at 31st As at 31st

March 2010 (Deductions) MAR 2011 (Deductions) MAR 2011 March 2010

LAND 45.82 -0.03 45.79 0.00 45.79 45.82

BUILDINGS 293.53 0.00 293.53 216.53 77.00 86.80

PLANT AND MACHINERY 2326.24 -0.20 2326.04 2041.81 284.43 317.18

-0.20

VEHICLES 1.10 0.00 1.10 1.05 0.04 0.05

FURNITURE AND 27.89 0.00 27.89 26.49 1.40 1.40

OFFICE EQUIPMENTS

2694.58 -0.23 2694.35 2285.88 408.67 451.25

-0.20

CAPITAL WORK-IN-PROGRESS 71.25 71.25

479.92 522.50

Deduction in land represent to a portion of land accuired by NHAI for road work.

GROSS BLOCK

Deduction in Machinery representing Fire Damage




E. INVESTMENTS

NON TRADE - UNQUOTED

2,50,000 EQUITY SHARES OF RS.10 EACH IN

SALEM DOLERITES LIMITED 25.00 25.00

25.00 25.00

F. INVENTORIES

STORES AND PACKING MATERIALS 18.66 17.70

18.66 17.70

G. SUNDRY DEBTORS

UNSECURED

OVER SIX MONTHS OLD - Considered Good 0.00 0.00

- Considered Doubtful 105.95 105.95

LESS THAN SIX MONTHS - Considered Good 44.52 42.44

150.47 148.39

LESS - Provision for Doubtful Debts 45.33 45.33

105.14 103.06

Of the above, Debts due from Companies

in which some Directors are interested 39.70 39.70

H. CASH AND BANK BALANCES

CASH ON HAND 4.44 10.22

BALANCES WITH SCHEDULED BANKS

ON CURRENT ACCOUNTS 2.67 6.82

ON DEPOSIT ACCOUNTS 9.26 8.79

(WITH INTEREST ACCRUED)

16.37 25.83



RS. In Lacs RS. In Lacs

I. LOANS AND ADVANCES

UNSECURED

* ADVANCES - Recoverable in Cash or in kind or for value

to be received

- CONSIDERED GOOD 794.50 771.34

- CONSIDERED DOUBTFUL 755.86 755.86

1550.36 1527.20

LESS - PROVISION FOR DOUBTFUL DEBTS 755.86 755.86

794.50 771.34

DEPOSITS 51.61 56.33

846.11 827.66

* ADVANCES INCLUDE DUES FROM COMPANIES / FIRMS

IN WHICH SOME DIRECTORS ARE INTERESTED NIL NIL

J. CURRENT LIABILITIES

Trade Creditors and Accrued Charges -

Due to SSI Units 12.61 12.50

Due to Others 1691.38 1707.42

{See Note Q(a)}

OTHER LIABILITIES 528.51 505.39

2232.50 2225.31

SALEM TEXTILES LIMITED 2010-11 2009-10

SCHEDULES TO PROFIT & LOSS ACCOUNT Rs.in Lacs Rs.in Lacs

K. SALES & OTHER INCOME

Yarn Sales 0.00 2.46

0.00 2.46

Conversion Charges Received 830.78 827.98

(TDS.Rs.135008/- In Mar 10 Rs.1549/- )

Other Income 23.77 59.14

(TDS.Rs.143082/- In Mar 10 Rs.603175/- )

Interest Received 3.56 3.65

(TDS.Rs.34039/- In Mar 10 Rs.62231/- )

858.11 893.24

L. MATERIALS

Decrease in Finished Goods stock

Opening Stock

Yarn 0.00 8.98

Saleable Waste 0.00 0.00

0.00 8.98

Closing stock

Yarn 0.00 0.00

Saleable Waste 0.00 0.00

0.00 0.00

0.00 8.98

Yarn Purchase 0.00 0.00

0.00 8.98



Rs. Ps

M. HUMAN RESOURCES

Salaries, Wages and Bonus 188.27 210.93

Gratuity 17.33 14.51

Contribution to PF & Other funds 24.50 28.24

Workmen & Staff Welfare Expenses 21.61 21.57

251.71 275.25

N. OTHER EXPENSES

Consumable Stores 53.23 57.21

Government Power 268.12 281.99

Fuel for Generator 4.78 26.98

Repairs to Building 2.94 1.62

Repairs to Machinery 113.30 78.59

Freight and Handlings 2.53 0.64

Advertisement 0.89 0.32

Rent, Rates & Taxes 6.19 6.22

Insurance 1.74 1.76

Vehicle Maintenance 9.05 9.10

Postage and Telephones 3.66 4.12

Printing and Stationery 4.19 2.87

Travelling and Conveyance 17.59 15.86

Professional Fees 18.30 21.53

Miscellaneous Expenses 2.11 2.61

508.62 511.42

Professional Fees Include

For Audit work 0.50 0.50

For Taxation matters 0.15 0.35

For Other Works 0.71 0.22

For Service Tax 0.12 0.11



O. FINANCIAL EXPENSES

Interest

On Other Loans 3.02 4.11

Bank and Other Financial Charges 1.04 0.63

4.06 4.73

P. DEPRECIATION

Buildings 9.80 9.86

Plant & Machinery 32.75 29.77

42.55 39.63


Q. NOTES ON ACCOUNTS

31.3.2011 31.3.2010

1. SPINDLES CAPACITY:

Installed (as certified by the management) (In Nos)

Spindles

Rotors

39,256

768

39,256

768

2. DIRECTOR'S REMUNERATION

SRI.R.PRABAKARAN , - Salary

MANAGING DIRECTOR - HRA

- EPF

Rs.

In

Lacs

3.00

1.20

0.36

2.97

1.19

0.36

Total Rs.in

Lacs

4.56 4.52

3. CONSUMPTION OF RAW MATERIALS

OWN CONSUMPTION

Rs.

In Lacs

Nil Nil

Cotton, Staple Fibre and Lycra Etc.,

Kgs Nil Nil

ON CONVERSION BASIS

Cotton, Staple Fibre Etc., Kgs 15,37,401 14,13,535

4. FINISHED GOODS a) Own:

Yarn - Opening Stock

Kgs

Rs.in

Lacs

Nil

Nil

5674

8.98

Production Kgs Nil Nil

Purchases Kgs

Rs.in Lacs

Nil

Nil

Nil

Nil

Sales ( Include Wastages) Kgs

Rs.in

Lacs

Nil 5674

2.46

Closing Stock Kgs

Rs.in

Lacs

Nil

Nil

Nil

Nil


31.3.2011 31.3.2010

b) ON CONVERSION BASIS FOR OUTSIDERS:

Yarn - Production

Single Yarn to Double Yarn

Kgs

Kgs

13,88,267

Nil

13,06,229

18,582

5. IMPORTS AND CONSUMPTION

a IMPORTS (CIF)

Raw Materials

Rs.in lacs NIL NIL

Spare Parts Rs.in Lacs NIL NIL

Capital Goods Rs.in Lacs NIL NIL

b CONSUMPTION

(i) Cotton Staple Fibre and Lycra

Indigenous Rs.in Lacs Nil Nil

Imported Rs.in Lacs NIL NIL

(ii) Stores and Components

53.23 57.21 Indigenous

Rs.in Lacs (100%) (100%)

Imported Rs.in Lacs NIL NIL

6. TRANSACTIONS IN FOREIGN EXCHANGE/CURRENCIES

Earnings (FOB) Rs. in Lacs NIL NIL

Freight and Insurance Rs. in Lacs NIL NIL

Other Income Rs. in Lacs NIL NIL

Expenditure Rs. in Lacs NIL NIL

7.CONTINGENT LIABILITIES

a. Claims against the Company not acknowledged as debts ( Net of

Advances paid Rs.116.57 lacs)

Rs. in Lacs

229.72

229.72

b. Excise Duty disputed by the Company Rs. in Lacs 310.01 310.01

c. Demand of Yarn Cess disputed by the Company

Rs. in Lacs 2.76 2.76

d. Fringe Benefit Tax – Disputed by Company

Rs. in Lacs 8.03 8.03

e. TNEB Electricity Tax Rs. in Lacs 55.51 55.51

f. TNEB peak hour penalty ( Net of

Advances paid Rs.12.72 lacs)

Rs. in Lacs 49.03 63.34

8. To the best of our knowledge and as per the information available with the Management a). Sundry Creditors include an amount of Rs. 12.61 lacs due to Small Scale Industrial

Undertakings and Micro, small and medium enterprises


b). The SSI, Micro, small and medium enterprises have been identified on the basis of information available with the Company. This has been relied upon by the auditors.

9. 20% secured Non-convertible Debentures are redeemable in three equal installments

commencing from 27.8.98. However as the Company is not in a position to redeem the

Debentures, the Company has not redeemed the Debentures

10. The Company has started paying the contribution to the earlier years provident fund. A sum of Rs. 39.54 lakhs towards EPF arrears has been paid by the Company during the

year. The Company is taking necessary steps to get time for making the payment of

balance amount of EPF arrears and the ESI arrears.

11. (a). Balance of Debtors, Creditors and Loans and Advances are subject to confirmation by parties.

(b).In the opinion of the Board, the amounts of Current Assets, Loans and Advances stated

in the Balance Sheet are those realizable in the ordinary course of business, except the items mentioned in sl.no.12 & 13 below.

12. (a).Loans and Advances also includes a sum of Rs. 79.11 lacs paid as advances for purchase of certain machineries for the Trichy Dyeing Plant. Because of the hike in the cost of machinery, the Company could not take delivery. These amounts are not

realizable and the Company has not demanded them. In case the Company asks for

these amounts, the machinery suppliers may demand from the Company the balance

amount towards the machines ordered. As the Company is not in a position to pay and

take delivery of the machines, the Company could not demand for return of the

amounts advanced . Hence necessary provision for Bad advance is made in the books.

(b). The loans and advances includes advance of Rs.116.56 lakhs made to M/s. Cotton

Corporation of India (CCI) as an advance made for purchase of raw materials during

the year 1995-96. Because of the hike in the raw materials price, the Company

could not take delivery of the raw materials from CCI. An award was given under Arbitration and the CCI claimed Rs.229.72 lacs as claim after adjusting the above

advance of Rs.116.56 lakhs. As the Company is not in a position to realize the advance

made to CCI, provision for Bad advance is made in the books.

13. Loans and Advances include an amount of Rs. 725.85 Lacs claimed in March 1998 from Insurance Company towards Fire Damages of Cotton, yarn and buildings etc.,

In respect of this Insurance Claim, the Company had filed a case with Consumer Court.

The National Consumer Disputes Redressel Commission passed interim orders dated

14.01.2007 directing the Insurance Company to deposit with the Commission the sum of

Rs.72, 36,290/- as assessed by the final surveyor with interest @ 10% from 21.09.1998 and allowing Company to withdraw the amount, by furnishing security and personal

guarantee of Managing Director and to return the same in case the compliant is

dismissed. Accordingly, the Company withdrew the sum of Rs.1, 36, 21,022/- from the

Commission and the amount is returnable in case the compliant is dismissed. The final

order is awaited.


14. Income tax assessments have been completed up to the assessment year 2007-2008 U/S 143(3) of the Income Tax Act, 1961. In the absence of taxable income, as per the

provisions of the Income Tax Act, 1961, no provision has been made for taxation in the accounts.

15. Capital Work-in-Progress consists of one Mono Block Apparatus imported and paid for,

but could not be taken delivery, as the Company has no funds to pay Custom Duty. It is

stored in Central Ware-Housing Corporation at Chennai since 1996. The amount of duty and warehousing charges payable is much more than the value of the machinery.

16. The Company had invested Rs.25 lakhs in M/s. Salem Dolerities Ltd., Since that Company had huge accumulated losses, the worth of the investment is Nil, although it is

shown at cost in the Balance Sheet.

17. The Company is not having a whole time Company Secretary as required under Sec

383(A) of the Companies Act, 1956, as the Company could not get a suitable candidate,

inspite of efforts taken.

18. Personnel cost is arrived after excluding booking under other heads. 19. Previous years figures have been reclassified to conform to the current year's

classification.

20. STATEMENT OF ACCOUNTING POLICIES

i. GENERAL

The accounts are prepared under historical cost convention and mercantile basis of

accounting. The accounts have been prepared in compliance with the applicable

accounting principles in India and the Accounting Standards notified by the Companies

(Accounting Standards) Rules, 2006 and the relevant presentational requirements of the Companies Act, 1956.

ii. USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting

principles (GAAP) requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and the disclosure of contingent liabilities as at the date of financial statements and reported amounts of revenues and expenses

during the reporting period. Actual results could differ from these estimates. Any

revision to accounting estimates is recognized prospectively in current and future periods.

iii. FIXED ASSETS AND DEPRECIATION

a) Expenditure which results in the creation of a new independent asset with an economic life of a sizeable period and considering the nature of the asset is capitalised. Assets whose costs are so capitalized are depreciated on straight

line method at the rates specified in Schedule XIV of the Companies Act ,

1956 for the period for which the asset is put to use. No depreciation is

charged on the assets sold in the year of disposal


As the Plant and Machinery of Fibre Dyeing Plant at Trichy is not put to use during the year, no depreciation is provided on that Plant and Machinery.

b) Impairment of Assets

As per AS 28 prescribed by ICAI, the Company assesses at each Balance Sheet date whether there is any indication of impairment of carrying of amount of the Company’s

Fixed Assets. The recoverable

amount of such assets are estimated, if any indication exists, and impairment of loss

is recognized wherever the carrying amount of assets exceeds their recoverable

amount.

iv. INVESTMENTS

a) Investments in unquoted Companies are valued at cost.

b) Appreciation or depreciation in the value of investment is reckoned only at the time of sale and therefore no entries are passed for the market value of those investments.

v). INVENTORIES

Stores and packing materials are valued at cost or market value whichever is lower.

There is no stock of raw materials, yarn, saleable waste, process stock and yarn at the

end of the year.

There are certain items which are long time non-moving items in the stores inventories

which has become obsolete due to the non usage for long time. All these items are

valued at Zero Cost.

vi. LIABILITIES

All known and certain liabilities have been provided for in the accounts. Liabilities/

Claims which in the opinion of the management is considered not tenable (will not

ultimately result in actual liability) have not been provided in the accounts, but have been given as information elsewhere in the accounts.

vii. BORROWING COSTS

a) As the Financial Institutions and Banks have filed cases in the DRT, the Company has not provided interest from the year 2004-2005 onwards and the amount not provided

upto the year ended March 2011 is Rs.1189.54 lakhs (March 2010 Rs.1020.16 lakhs) on

term loans with Financial Institutions and Banks and Rs.2019.71 lakhs (March 2010

Rs.1751.42 lakhs) on Working Capital Loan with Banks. Also the Company has not

provided interest from the year 2004-05 onwards on Non-Convertible privately

placed debentures with UTI and the amount till March 2011 is Rs.153.13 lakhs ( March 2010 Rs.131.26 lakhs)


b) The above interest is worked as per the prevailing rate.

c) The Company has not provided for penal interest from 1996-97 to 2001-02 of Rs. 1791.30 lakhs on term loans availed from Financial Institutions. For the years 2002-

03 to 2010-11,no provision for penal interest has been made and the figures of penal

interest are not available.

d) The Company has not provided interest on Inter Corporate Deposit availed from Companies and on bill discount facilities availed from Financial Companies as

the Company will settle the dues, on most favourable terms and interest, if any will

be accounted for in the year of settlement.

e) The Company has not provided interest from 1996-97 to 2010-11 of Rs.391.75 lakhs

(upto 2009-10 is Rs.370.86 lakhs) on Fixed Deposits received from Director and his

relatives and from 2004-05 to 2010-11 of Rs.109.38 lacs (upto 2009-10 of Rs.93.75 lacs)

on Short Term Loan received from UTI.

f) Interest on some public deposits and trade deposits was not provided. The interest will be accounted for as and when the payment of interest is made to them.

g)

i. Interest/Penalty on arrears of statutory dues has not been provided, and the actual amount of interest/penalty if any, will be accounted for in the

year of payment. ii. With regard to Sales Tax penalty of Rs.429 lakhs on the arrear taxes, the

company had filed appeal to the appellate authorities in time. The

appellate authorities had returned the appeal documents on the ground

that the arrear tax has not been paid. The Company will resubmit the

appeal documents after paying the arrears of tax and penalty if any and

account the same in the year of payment. iii. With regard to Excise Duty arrears of Rs.27 lakhs and penalty and other

charges of Rs.230 lakhs levied by the Central Excise Department, the

Company has not filed any appeal for the reason that the Company has to

make payment of duty of Rs.27 lakhs before filing appeal. Because of the

sickness, the Company could not pay duty arrears. It will make the

payment in future and file the appeal subsequently for the pending and other dues. Because of the sickness the penalty and other dues are not

booked in the accounts.

viii. REVENUE RECOGNITION

a) SALES

Local sales income is recognised when the goods are actually sold and supplied.

b) OTHER INCOME

Other incomes are accounted on accrual basis. This includes an amount of

Rs.14.28 Lacs/- by way of Profit on Land acquired by NHA1.


ix. EMPLOYEE BENEFITS

(a) Short term employee benefits are recognized as an expense at the undiscounted

amount in the Profit and Loss account of the year in which the related service is

rendered.

(b) Post employment and other long term benefits which are defined benefit plans

are recognized as an expense in the profit and loss account for the year in which the employee has rendered service. The expense is recognized based on the present

value of the obligation determined in accordance with Revised Accounting

Standard15 on Employee Benefits.

(c )Gratuity

Provided as per the actuarial valuation as given by the approved valuers. However the Company has not paid the gratuity amount to the Trust.

(d) Bonus

The Company pays bonus for the period from October to September

every year. The Company has provided taking the rate of bonus given to all the

permanent employees of the Company. However the actual liability would be ascertained and short or excess provision would be adjusted at the time of payment

of Bonus.

x. SEGMENT REPORTING

The Company is only engaged in the manufacturing of yarn and therefore segment

wise reporting as defined in Accounting Standard 17 does not apply.

xi. EARNINGS PER SHARE

31.03.2011 Rs.

31.03.2010 Rs.

Profit for the year after Tax as per P& L Account Rs. 51,16,499 53,22,892

Weighted Average No. of Equity Shares

Outstanding

Nos

66,00,000

66,00,000

Basic and Diluted No. of Shares Nos 66,00,000 66,00,000

Nominal value of Equity Shares Rs. 10 10

Basic / Diluted Earnings per share Rs. ( + ) 0.78 ( + ) 0.81

xii. RELATED PARTY DISCLOSURES (i). Key Management Personnel:

Name Designation Managerial

Remuneration

Rs.in Lacs

Fixed Deposit

Outstanding ( Credit)

Rs. in Lacs

Sri.R.Prabakaran Managing Director 4.56 137.09

Sri. V.Subramaniam Director Nil Nil

Sri. B.Venkatesan Director Nil Nil

ALEM TEXTILES LIMITED

(ii).List of Related Parties with whom transactions taken place :

a. R.P.Rajaram( Relative) : Deposit outstanding Rs.30.00 Lacs b. Salem Spices Private Limited : Car Rent paid Rs. 4.80 Lacs

.

xiii. DEFERRED TAXATION

The Company became Sick since 1997-98. The Company made reference to the BIFR. As the

matter is pending before BIFR, the working of deferred tax asset/liability is not made in view

of the uncertainty of earning taxable income in the near future. The same will be worked out

and shown in the accounts as soon as the BIFR approves the proposal for rehabilitation of

the Company.

xvi. FOREIGN CURRENCY TRANSACTIONS

During the year, the Company had not entered into any foreign currency transactions.

xv. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

As prescribed by the ICAI in AS 29, Provisions are recognised when there is a present

obligation as a result of a past event, it is probable that an outflow of resources will be

required to settle the obligation and in respect of which reliable estimate can be made.

Contingent liabilities are disclosed unless the possibility of any outflow in settlement is

remote, in the Notes on Accounts. Contingent Assets are neither recognised nor disclosed.

As per our Report of even date For and on behalf of the Board

For ELANGOVAN & NATARAJAN R. PRABAKARAN

CHARTERED ACCOUNTANTS MANAGING DIRECTOR


S. ELANGOVAN B. VENKATESAN

Partner DIRECTOR

M.No.24654

ATTUR, 12.08.2011


CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31st, 2011

RS.IN LACS

31.03.2011 31.03.2010 CASH FLOW FROM OPERATING ACTIVITIES

Profit/(-)Loss before Tax 51.17 53.23

Adjustment for - Depreciation

- Profit on disposal of Assets - net - Interest Received

42.55

(14.28)

(3.56)

39.63

(54.46)

(3.66)

Interest paid 3.02 4.11

Prior Period - Adjustment (82.15) 24.24

OPERATING PROFIT BEFORE WORKING CAPITAL

CHANGES

(3.25) 63.09

Adjustment for changes in - Inventories

Trade and other receivables

Trade payables

Loans & Advances

(0.96)

(2.08)

7.19

(18.45)

10.54

(32.22)

(78.07)

26.86

CASH GENERATED FROM OPERATING ACTIVITIES

(17.55) (9.80)

Direct Taxes paid NIL NIL

NET CASH FLOW FROM OPERATING ACTIVITIES (A) (17.55) (9.80)

CASH FLOW FROM INVESTING ACTIVITIES

Payments for assets acquisition NIL (38.63)

Disposal of Assets 14.31 55.18

Sale of Investments NIL NIL

NET CASH FLOW FROM INVESTING ACTIVITIES (B)

14.31 16.55

CASH FLOW FROM FINANCING ACTIVITIES

Borrowing - Raised

- Repaid

Interest - Paid - Received

NIL

(6.76)

(3.02)

3.56

NIL

(2.99)

(4.11)

3.66

NET CASH FLOW FROM FINANCING ACTIVITIES ( C )

(6.22) (3.44)

NET INCREASE/ (DECREASE) IN CASH AND

CASH EQUIVALENTS A+B+C=(D)

(9.46) 3.31

OPENING CASH AND CASH EQUIVALENTS

Cash and Bank balances 25.83 22.52

Cash Credit Balance (4008.78) (4008.78)

(E) (3982.95) (3986.26)

CLOSING CASH AND CASH EQUIVALENTS

Cash and Bank balances 16.37 25.83

Cash Credit Balance (4008.78) (4008.78)

(F) (3992.41) (3982.95)

(F)-(E) = G (9.46) 3.31

As per our report of even date For and on behalf of the Board


CHARTERED ACCOUNTANTS R.PRABAKARAN

Firm Regn.No.000799.S MANAGING DIRECTOR

S.ELANGOVAN B.VENKATESAN

PARTNER DIRECTOR

M.NO.24654

ATTUR, 12.08.2011


PART IV - BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE

I. REGISTRATION DETAILS (CAPITAL) REGISTRATION NO : U17111TZ1964PLC000534 STATE CODE 18

BALANCE SHEET DATE: 31.03.2011

II. CAPITAL RAISED DURING THE YEAR (AMOUNT IN RS. THOUSANDS)

PUBLIC ISSUE NIL RIGHT ISSUE NIL

BONUS ISSUE NIL PRIVATE PLACEMENT NIL

III. POSITION OF MOBILISATION AND DEPLOYMENT OF FUNDS (AMOUNT IN RS.

THOUSANDS)

TOTAL LIABILITIES 932518 TOTAL ASSETS 932518

SOURCES OF FUNDS

PAID UP CAPITAL 65979 RESERVES & SURPLUS Nil

SECURED LOANS 805149 UNSECURED LOANS 61390

APPLICATION OF FUNDS

NET FIXED ASSETS 47992 INVESTMENTS 2500

NET CURRENT ASSETS (-) 124622 MISC. EXPENDITURE Nil

ACCUMULATED LOSSES 1006648

IV PERFORMANCE OF COMPANY

TURNOVER 85811 TOTAL EXPENDITURE 80694

PROFIT BEFORE TAX (+) 5117 PROFIT AFTER TAX (+) 5117

EARNING PER SHARE IN RS. (+) 0.78 DIVIDEND RATE % Nil

V GENERIC NAME OF THREE PRINCIPLE PRODUCTS SERVICES OF COMPANY (AS PER

MONETARY TERMS)

ITEM CODE NO PRODUCT DESCRIPTION:

500400.09 POLYESTER BLENDED YARN 550921.00 POLYESTER YARN

For and on behalf of the Board

R.PRABAKARAN

MANAGING DIRECTOR

B.VENKATESAN

DIRECTOR

ATTUR, 12.08.2011

ATTENDANCE SLIP


Registered Office: Selliampalayam, Attur – 636108, Salem District, TAMILNADU, INDIA.

PLEASE COMPLETE THIS ATTANDENCE SLIP AND HAND IT OVER AT THE ENTARNCE

Joint Saheholders may obtain additional Attendance Slips on Request.

NAME AND ADDRESS OF THE SHAREHOLDER L.F. No.

I hereby record my presence at the 46th ANNUAL GENERAL MEETING of the Company at the

Registered Office of the Company at Selliampalayam, Narasingapuram Post, Attur – 636108 on

Friday the 30th September 2011 at 10.00 am.

SIGNATURE OF THE SHAREHOLDER OR THE PROXY ATTENDING THE MEETING.

PROXY FORM


Registered Office: Selliampalayam, Attur – 636108, Salem District, TAMILNADU, INDIA

L.F No.

I/We ………………………………………………………………… of …………………............ being a

member /members of SALEM TEXTILES LIMITED HEREBY APPOINT…………………………. of

…………………….. or failing him/her ……………………………. of ………………………….. as

my/our proxy to vote for me/us and on my /our behalf at the 46th Annual General Meeting of

the Company to be held on Friday the 30th September 2011 at any adjournment thereof.

As witness my hand/our hand(s) this ………………… day of ………………. 2011

______________________________

( Signature of the Shareholder)

NOTE: The Proxy Form duly completed and stamped must reach the Registered

Office of the Company not less than 48 hours before the time for holding

the aforesaid meeting.

Affix One

Rupee

Revenue Stamp

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