MIRA INFORM REPORT

Report Date :

24.11.2011

IDENTIFICATION DETAILS

Name :	VARDHMAN TEXTILES LIMITED (w.e.f. 05.09.2006) ARISHT SPINNING MILLS (DIVISION OF VARDHMAN TEXTILES LIMITED)
Formerly Known As :	MAHAVIR SPINNING MILLS LIMITED
Registered Office :	Chandigarh Road, Ludhiana – 141 010, Punjab
Country :	India
Financials (as on) :	31.03.2011
Date of Incorporation :	08.10.1973
Com. Reg. No.:	16-3345
Capital Investment / Paid-up Capital :	Rs.636.519 Millions
CIN No.: [Company Identification No.]	L17111PB1973PLC003345
CST :	Sol-3360 (Arisht Spinning Mills)
TAN No.: [Tax Deduction & Collection Account No.]	JLDM03450G JLDM03167D
PAN No.: [Permanent Account No.]	AABCM4692E
Legal Form :	A Public Limited Liability Company. The Company’s Shares are Listed on the Stock Exchanges.
Line of Business :	Manufacturer, Exporter and Trader of Textile Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic Fibre.
No. of Employees :	24000 (Approximately)

RATING & COMMENTS

MIRA’s Rating :

A (65)

RATING		STATUS	PROPOSED CREDIT LINE
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large

Maximum Credit Limit :	USD 77000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well established and reputed company having fine track. Directors are reported as experienced and respectable businessmen. Financial position of the company appears to be sound. Trade relations are reported as fair. Business is active. Payments are reported to be regular and as per commitments. The company can be considered good for normal business dealings at usual trade terms and conditions.

NOTES:

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – September 30, 2011

Country Name	Previous Rating (30.06.2011)	Current Rating (30.09.2011)
India	A1	A1

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

LOCATIONS

Registered/Corporate Office :	Chandigarh Road, Ludhiana – 141 010, Punjab, India
Tel. No.:	91-161-2662543-47 / 2670707/ 09/ 2228943-48
Fax No.:	91-161-2662542/ 2664541/ 2670503/ 2601040/ 2601048/ 2602710/ 2222616
E-Mail :	vssidh@rnj.sprintrpg.ems.vsnl.net.in secretarial.lud@vardhaman.com
Website :	www.vardhman.com
Factory :	Sai Road, Baddi, Solan, Himachal Pradesh (North) – 173205, India Tel No.: 91-1795-392200/ 392275 Fax No.: 91-1795-392311 Email : amishra@vardhman.com secretarial.lud@vardhman.com Location - Owned Anant Spinning Mills, New Industrial Area, Mandideep-462 046, India Arihant Spinning Mills, Industrial Area, Malerkotla-148 023, India Arisht Spinning Mills , Village Baddi, Tehsil Nalagarh, District Solan (H.P.)- 173 205, India Auro Dyeing, Village Baddi, Tehsil Nalagarh, District Solan (H.P.)- 173 205, India Auro Spinning Mills, Village Baddi, Tehsil Nalagarh, District Solan (H.P.)- 173 205, India Auro Textiles, Village Baddi, Teh. Nalagarh, District Solan (H.P.) - 173 205, India Auro Weaving Mills, Village Baddi, Tehsil Nalagarh, District Solan (H.P.)- 173 205, India Mahavir Spinning Mills (Gassed Mercerised Yarn Unit) Phagwara Road, Hoshiarpur-146 001, India Mahavir Spinning Mills (Textile Division) Village Baddi, Teh. Nalagarh, District Solan (H.P.)- 173 205, India Vardhman Spinning and General Mills (Unit-I and II), Chandigarh Road, Ludhiana-141 010, Punjab, India Vardhman Spinning Mills, Village Baddi, Tehsil Nalagarh, District Solan (H.P.)- 173 205, India Vardhman Fabrics Budhni, District Sehore, Madhya Pradesh, India Vardhman Yarns Satlapur, District Raisen, Madhya Pradesh, India Vardhman Fabrics (Power Division) Budhni, District Sehore, Madhya Pradesh, India Vardhman Yarns (Power Division) Satlapur, District Raisen, Madhya Pradesh, India
Branch Office :	· P-22, 3rd Floor, Flat No.6, C.I.T. Road, Scheme IV, Kolkata- 700 014, West Bengal India · Chandigarh Road, Ludhiana- 141 010, Punjab, India · 314, Solaris II, Opposite L and T Gate No.6, Saki Vihar Road, Andheri (East), Mumbai- 400 072, Maharashtra, India · 504, Dalamal House, Nariman Point, Mumbai- 400 021, Maharashtra, India · 309-310, Surya Kiran Building, 19, Kasturba Gandhi Marg, New Delhi- 110 001, India · 212, Urdu Ghar, 1st Floor, Deen Dayal Upadhyaya Marg, New Delhi-110 002, India · 377-B, Muthuswami Industrial Complex, Palladam Road, Tirupur- 638 604, India

DIRECTORS

(AS ON 31.03.2011)

Name :	Mr. Shri Paul Oswal
Designation :	Chairman and Managing Director
Date of Birth / Age :	69 years
Qualification:	M. Com.
Experience :	44 years
Date of Appointment:	01.11.2001
Name :	Mr. S. Padmanbhan
Designation :	Nominee Director of IDBI
Name :	Mr. Arun Kumar Purwar
Designation :	Director
Name :	Mr. Subash Khanchand Bijlani
Designation :	Director
Name :	Mr. Ashok Kumar Kundra
Designation :	Director
Date of Birth/Age :	15.04.1943
Qualification :	M. A. Eco., Ph. D.
Date of Appointment :	28.01.2009
Expertise in specific functional area :	Retired from Indian Administrative Services and having expertise in Industrial Policy/ Industrial Administration and Planning
Directorships of other Companies as on 31.03.2011:	· Nimbua Greenfield (Punjab) Limited · Punjab Alkalies and Chemicals Limited · Geojit Credits Private Limited
Name :	Mr. Darshan Lal Sharma
Designation :	Director
Name :	Mr. Shravan Talwar
Designation :	Director
Name :	Mr. Neeraj Jain
Designation :	Executive Director
Name :	Mr. Prafull Anubhai
Designation :	Director
Date of Birth/Age :	20.01.1938
Qualification :	B.Com, B.S.C. (Eco.) – London
Date of Appointment :	26.07.1980
Expertise in specific functional area :	Industrialist and Business Consultant having experience of more than 38years
Directorships of other Companies as on 31.03.2011:	· Unichem Laboratories Limited · Gruh Finance Limited · Torrent Cables Limited · The EMSAF- Mauritius, Mauritius · Vardhman Special Steels Limited · Management Structure and Systems Private Limited · Baker Oil Tools (India) Private Limited · Birla Sun Life Trustee Company Private Limited · Centre For Science, Technology and Policy (CSTEP)
Name :	Mr. Sachit Jain
Designation :	Executive Director
Date of Birth/Age :	08.07.1966
Qualification:	B. Tech., MBA
Date of Appointment:	30.03.2005
Expertise in specific functional area :	Business Executive having rich experience of more than 21 years in Textile Industry
Directorships of other Companies as on 31.03.2011 :	· Vardhman Holding Limited · Vardhman Acrylics Limited · Vardhman Yarns and Threads Limited · Srestha Holdings Limited · Santon Finance and Investment Company Limited · Flamingo Finance and Investment Company Limited · Ramaniya Finance and Investment Company Limited · Vardhman Spinning and General Mills Limited (formerly known as Vardhman Linen Limited) · Pradeep Mercantile Company Private Limited · Vardhman Apparels Limited · Vardhman Nisshinbo Garments Company Limited · Syracuse Investment and Trading Company Private Limited · Adinath Investment and Trading Company · Devakar Investment and Trading Company Private Limited · Mahavir Spinning Mills Private Limited (formerly known as Vardhman Textile Processors Private Limited) · Marshall Investment and Trading Company Private Limited · Plaza Trading Company Private Limited · Anklesh Investments Private Limited · VTL Investments Limited · UTI Asset Management Company Limited · Vardhman Special Steels Limited
Name :	Mrs. Suchita Jain
Designation :	Executive Director
Qualification:	M. COM
Date of Appointment:	30.03.2005

KEY EXECUTIVES

Name :	Mr. Vipin Gupta
Designation :	Company Secretary
Name :	Mr. Rajeev Thapar
Designation :	CGM (Finance, Accounts and Taxation)

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(AS ON 30.09.2011)

Category of Shareholders	No. of Shares	Percentage
(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	1,461,658	2.30
Bodies Corporate	37,371,862	58.71
Sub Total	38,833,520	61.01
(2) Foreign
Total shareholding of Promoter and Promoter Group (A)	38,833,520	61.01
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI	11,478,439	18.03
Financial Institutions / Banks	62,242	0.10
Insurance Companies	2,146,922	3.37
Foreign Institutional Investors	998,308	1.57
Sub Total	14,685,911	23.07
(2) Non-Institutions
Bodies Corporate	1,223,471	1.92
Individuals
Individual shareholders holding nominal share capital up to Rs.0.100 Million	4,236,265	6.66
Individual shareholders holding nominal share capital in excess of Rs.0.100 Million	2,493,540	3.92
Any Others (Specify)	2,179,172	3.42
Trusts	1,611,554	2.53
Non Resident Indians	125,908	0.20
Hindu Undivided Families	441,710	0.69
Sub Total	10,132,448	15.92
Total Public shareholding (B)	24,818,359	38.99
Total (A)+(B)	63,651,879	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued	-	--
(1) Promoter and Promoter Group	-	--
(2) Public	-	--
Total (A)+(B)+(C)	63,651,879	100.00

BUSINESS DETAILS

Line of Business :

Manufacturer, Exporter and Trader of Textile Yarn, Greige and Processed Fabric, Sewing Thread, Acrylic Fibre.

Products :

Item Code No.	Product Description
52.05	Cotton Yarn
55.09	Yarn of Synthetic
52.08	Woven Fabric of Cotton

Exports :

Products :

· Textile Yarn

· Greige and Processed Fabric

· Sewing Thread

· Acrylic Fibre

Terms :

Selling :

L/C, Cash and Credit (30 days)

Purchasing :

L/C, Cash and Credit (30 days)

PRODUCTION STATUS (AS ON 31.03.2011)

Particulars	Unit	Licensed Capacity	Installed Capacity	Actual Production
Spindles	No	NA	747936	--
Looms	No	NA	900	--
Rotors	No	NA	3768	--
Steel Ingots/Billets	MT	NA	--	64581
Rolled Products*	MT	NA	--	57060
Yarn	MT	NA	--	130861
Fabric $	MN Mtrs	NA	--	11408
Processed Fabric	MN Mtrs	NA	--	7544

Note:

* including goods processed by/for others on job basis and consumed for captive consumption

$ Including fabric transferred to Process House

GENERAL INFORMATION

Customers :

Wholesalers, Retailers and others

No. of Employees :

24000 (Approximately)

Bankers :

· State Bank of Patiala

· Allahabad Bank

· ICICI Bank Limited

· Punjab National Bank

· State Bank of India

· Bank of India

· Corporation Bank

· IDBI Bank Limited

· Canara Bank

· Standard Chartered Bank

· State Bank of Hyderabad

· State Bank of Mysore

· Oriental Bank of Commerce

Facilities :

Secured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Loans and Advances from Banks
- Term Loans	19670.722	18960.713
- Working Capital	7983.875	3306.315
Total	27654.597	22267.028
NOTE: 1. The Term Loans from Banks are secured by mortgage created or to be created on all the immovable assets of the Company, both present and future and hypothecation of all the movable assets including movable machinery, machinery parts, tools and accessories and other movables both present and future (except book debts), subject to charges created or to be created in favour of the Bankers for securing the working capital limits. 2. Working Capital Borrowings from Banks are secured by hypothecation of entire present and future tangible current assets of the Company as well as a second charge on the entire present and future fixed assets of the company. 3. Amount due for repayment out of Term Loans within one year is Rs. 14,91.115 Millions
Unsecured Loans	31.03.2011	31.03.2010
	(Rs. In Millions)
Fixed Deposits	2.415	4.313
Interest accrued and due on above	0.105	0.063
Loans and Advance from Subsidiaries	468.603	975.500
Short term loans and advances
From Banks	0.000	250.000
From Others	194.355	61.975
Other Loans and Advances
Zero Coupon Foreign Currency Convertible Bonds	0.000	2649.100
Total	665.478	3940.951

Note:

Amount due for repayment out of above within one year is Rs.665.391 Millions.

Banking Relations :	--
Auditors :
Name :	S C Vasudeva and Company Chartered Accountants
Address :	New Delhi
Tel. No.:
Holding company :	· Vardhman Holdings Limited · Srestha Holdings Limited
Associates :	· Vardhman Textile Components Limited · Vardhman Spinning and General Mills Limited
Subsidiaries:	· VMT Spinning Company Limited · Vardhman Acrylics Limited · VTL Investments Limited · Vardhman Yarns and Threads Limited · Vardhman Special Steels Limited · Vardhman Nisshinbo Garments Company Limited (Formerly known as Vardhman Texgarments Limited)
Other Companies:	· Vardhman Holdings Limited · Personnel and relative of such personnel is Vardhman Apparels Limited · able to exercise significant influence or Banarso Devi Oswal Public Charitable Trust · control Sri Aurobindo Socio Economic and Management Research Institute · *Adinath Investment and Trading Company · *Devakar Investment and Trading Company Private Limited · *Srestha Holdings Limited · *Santon Finance and Investment Company Limited · *Flamingo Finance and Investment Company Limited · *Ramaniya Finance and Investment Company Limited · *Marshall Investment and Trading Company (Private) Limited · *Pradeep Mercentile Co. (Private) Limited · *Plaza Trading Company (Private) Limited · *Anklesh Investments (Private) Limited · *Syracuse Investment and Trading Company (Private) Limited · **Mahavir Spinning Mills (Private) Limited (Formerly known as Vardhman Textile Processors (Private) Limited) · **Northern Trading Company Note: * Only Loan Transactions have taken place with these Companies. ** No transaction has taken place during the year.

CAPITAL STRUCTURE

(AS ON 31.03.2011)

Authorised Capital :

No. of Shares	Type	Value	Amount
90000000	Equity Shares	Rs.10/- each	Rs.900.000 Millions
10000000	Redeemable Cumulative Preference Shares	Rs.10/- each	Rs.100.000 Millions
	Total		Rs.1000.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
63651879	Equity Shares	Rs.10/- each	Rs.636.519 Millions

NOTES:

Of the above:

(a) 1,35,916 Equity Shares of Rs.10/- each are allotted as fully paid up, pursuant to a contract without payment being received in cash.

(b) 3,54,27,580 Equity Shares of Rs.10/- each are allotted as fully paid up, by way of bonus shares by capitalisation of Share Premium, Capital Redemption Reserve and General Reserve.

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2011	31.03.2010	31.03.2009
SHAREHOLDERS FUNDS
1] Share Capital		636.519	577.695	577.695
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		18546.096	13980.801	12149.808
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		19182.615	14558.496	12727.503
LOAN FUNDS
1] Secured Loans		27654.597	22267.028	21238.725
2] Unsecured Loans		665.478	3940.951	3694.504
TOTAL BORROWING		28320.075	26207.979	24933.229
DEFERRED TAX LIABILITIES		1968.053	1963.807	1798.697
TOTAL		48470.743	42730.282	39459.429
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		21256.569	21823.871	21818.793
Capital work-in-progress		1406.476	406.316	587.819
INVESTMENT		3526.478	2804.849	3349.799
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Inventories	15983.946	11074.593	6201.005
	Sundry Debtors	4884.709	3973.369	2756.678
	Cash & Bank Balances	487.699	2220.701	3572.130
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	4523.767	3096.830	3587.416
Total Current Assets		25880.121	20365.493	16117.229
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditor	897.835	543.198	586.852
	Other Current Liabilities	1530.665	1939.695	1756.331
	Provisions	170.401	187.354	71.028
Total Current Liabilities		2598.901	2670.247	2414.211
Net Current Assets		23281.220	17695.246	13703.018
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		48470.743	42730.282	39459.429

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2011	31.03.2010	31.03.2009
	SALES
		Income	36068.116	27429.536	24536.451
		Other Income	439.784	549.693	335.275
		TOTAL (A)	36507.900	27979.229	24871.726
Less	EXPENSES
		Raw Material Consumed and Purchases of Finished Goods	18704.821	13572.059	12450.234
		Manufacturing Expenses	6726.751	5999.720	5507.063
		Personnel Expenses	1936.319	1648.827	1531.470
		Administrative and Other Expenses	717.451	506.114	980.127
		Selling and Distribution Expenses	1124.619	851.016	837.114
		Increase/(Decrease) in Finished Goods	(2151.775)	(540.871)	(117.298)
		Difference of Excise Duty on Stocks	2.786	(3.963)	(30.668)
		TOTAL (B)	27060.972	22032.902	21158.042
Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		9446.928	5946.327	3713.684
Less	FINANCIAL EXPENSES (D)		1098.122	867.330	1023.356
	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		8348.806	5078.997	2690.328
Less/ Add	DEPRECIATION/ AMORTISATION (F)		2260.236	2208.757	2073.241
	PROFIT BEFORE TAX (E-F) (G)		6088.570	2870.240	617.087
Less	TAX (H)		1391.521	732.610	(790.597)
	PROFIT AFTER TAX (G-H) (I)		4697.049	2137.630	1407.684
Add	Corporate Dividend Tax Written Back		12.344	19.515	12.519
	Balance Brought forward		1313.556	608.504	573.476
Less	Adjustment of Preceding Year’s Tax effect in respect of Premium paid on redemption of FCCBs		251.174	0.000	0.000
Less	APPROPRIATIONS
		Transfer to General Reserve	3000.000	1250.000	1250.000
		Proposed Dividend	332.900	202.093	135.175
	BALANCE CARRIED TO THE B/S		2438.875	1313.556	608.504
	EARNINGS IN FOREIGN CURRENCY
		FOB value of Exports	12182.627	7040.035	6301.995
	TOTAL EARNINGS		12182.627	7040.035	6301.995
	IMPORTS
		Raw Materials	1447.661	1348.981	1105.521
		Components and Spares Parts	418.539	346.618	302.608
		Capital Goods	1249.822	713.403	370.067
	TOTAL IMPORTS		3116.022	2409.002	1778.196
	Earnings Per Share (Rs.)
	- Basic		78.06	37.00	--
	- Diluted		78.06	31.83	--

KEY RATIOS

PARTICULARS		31.03.2011	31.03.2010	31.03.2009
PAT / Total Income	(%)	12.87	7.64	5.66
Net Profit Margin (PBT/Sales)	(%)	16.88	10.46	2.51
Return on Total Assets (PBT/Total Assets}	(%)	12.92	6.80	1.63
Return on Investment (ROI) (PBT/Networth)		0.32	0.20	0.05
Debt Equity Ratio (Total Liability/Networth)		1.61	1.98	2.15
Current Ratio (Current Asset/Current Liability)		9.96	7.63	6.68

LOCAL AGENCY FURTHER INFORMATION

Check list by info Agents	Available in Report (Yes/ No)
Year of Establishment	Yes
Locality of the Firm	Yes
Constitution of the Firm	Yes
Premises details	Yes
Type of Business	Yes
Line of Business	Yes
Promoter’s Background	--------
No. of Employees	Yes
Name of Person Contacted	Yes
Designation of Contact person	Yes
Turnover of Firm for last three years	Yes
Profitability for last three years	No
Reasons for variation <> 20%	No
Estimation for coming financial year	No
Capital in the business	Yes
Details of sister concerns	Yes
Major Suppliers	No
Major Customers	No
Payments Terms	No
Export/ Imports Details (If applicable)	Yes
Market Information	--------
Litigations that the firm/ Promoters Involved in	--------
Banking details	Yes
Banking Facility Details	No
Conduct of the Banking Account	--------
Buyer visit details	--------
Financials, if provided	Yes
Incorporation details is applicable	--------
Last Accounts filed at ROC	--------
Major Shareholders, if available	--------

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

BUSINESS REVIEW:

The global economy kicked off a sputtering growth in FY 2010-11 with developed economies showing faint signs of revival. The main engine of global growth, the United States, moved into a recovery mode with employment coming off highs and retails sales growing month on month, albeit slightly, and consumer confidence improving. This growth was accompanied by a huge surge in world commodity prices, with the Continuous Commodity Index (CCI) surging more than 42% during the year. This rise was mainly attributed to the $600 billion of Quantitative Easing part Deux (QE2) by the Federal Bank of America which released unprecedented amounts of liquidity. This liquidity got channeled into commodities and prices soared.

This also gave rise to supply side inflation and fast growing economies in Asia bore the brunt. Their economies had barely recovered from the financial crises of FY 2008-09 and raising rates at this juncture would have meant putting a spanner in the way of growth. Most Asian economies therefore held off raising interest rates till the second half of the year and then a series of quick rate hikes followed, more particularly in China and India, who have clearly indicated that they don’t mind sacrificing growth at the altar of inflation control. As a result, the earnings growth is expected to be hit in the current fiscal. Further, the QE2 will come to an end in June 2011 and the Fed has no plans of a QE3 as of now. In anticipation, the commodities have already come off their lifetime highs.

COTTON AND YARN:

Cotton prices were buoyed by strong global fundamentals, with US Department of Agriculture (USDA) reports forecasting a 6% y/y reduction in end season stocks to 41.5 million bales (of 480 lbs). This compares with 43.9 million bales (mb) in 2009-10 and 60.5mb in 2008-09.

Although global cotton demand dipped by around 1.3% y/y in 2010-11, import demand from China rose by 37% y/y over the same period. Both developments were mainly due to supply constraints and global price rationing following a 8% decline in China’s cotton output. China traditionally accounts for 30% of global cotton production. Extremely tight global end-season stocks underpinned prices; the stocks-to-use ratio at 35% will be the tightest since the 1993-94 season.

In 2010-11, the cotton crop in China and Pakistan was damaged by bad weather and the global production fell. This led to an increase in cotton prices. The boom in prices was also fuelled by speculative trading in commodities which increased prices beyond fundamentals.

India had exported 8.5 million bales of cotton in 2009-10. In September 2010, the Government of India announced a cap of 5.5 million bales of cotton for exports, around 18% of the estimated production of 31.5 million bales (of 375 lbs) in the current cotton season (CS) 2010-11. This lead to lesser availability of cotton for trade and with high import demand from China, international prices rose during the month. Prices in India also increased. The Cotlook A index rose by 133% from $1 per pound in September, 2010 to about $2.33 per pound in March, 2011 due to limited availability for exports on the back of restrictions by India coupled with robust demand from China and traditional importing countries. Indian Shankar 6 rose in tandem from Rs.37,000/ candy in Sept 2010 to Rs.60,000/ candy in March 2011.

In line with cotton prices, cotton yarn prices also continued to remain high. This increase was in fact more than the increase in cotton prices due to pent up demand in the system where the pipeline of yarn stocks was at very low levels and also due to increased demand from a recovering global economy. Cotton yarn prices touched a high of $6.50/kg. To look at this in perspective, the average of the last 20 years was around $3/kg, with $4.5/kg being the previous all time high in cotton yarn prices. These prices have since corrected and touched around $4.50-$5.00 in the middle of May 2011.

In order to curtail the rise in cotton yarn prices, the Indian Government had imposed a limit of 720 mln kgs on cotton yarn to be exported in FY 2010-11.

OUTLOOK FOR COTTON PRICES:

These high prices are not expected to sustain, in part on expectations of increased acreage, particularly in US, China and Africa. China’s import demand is also expected to slow down on a combination of high market prices, stronger output and competition from synthetic fibres. China has also planned a cotton purchase-and-reserve policy in 2011 with a view to establishing prices in the new season. Pakistan, where floods devastated cotton crops in the 2010-11 season, is another market which is likely to see a substantial increase in cotton output from previous year.

Overall, the world market is expected to remain structurally tight (although better than FY 2010-11), but this will not be fully apparent until later in the season when the new crop stocks are drawn down. Global cotton production is expected to increase by about 13% from 24.5 million tonnes in cotton season 2010-11 (Oct to Sept) to 27.5 million tonnes in cotton season 2011-12. The closing stock of 2011-12 is expected to be around 10.5 million tons which is higher than last 2 years but still lower than normal closing stock levels in the past. The stock-to-use ratio is expected to improve to about 42% but will still be lower than the normal 48-52% in the past (excluding last 2 years).

In anticipation of a bumper cotton crop this year, global cotton prices as of now have already come off their previous highs. The Dec New York future is significantly lower than the current New York future. Global yarn prices are decreasing in line with the cotton prices. The anticipation in the market is that prices may come off further and therefore the demand for yarn has reduced as buyers are waiting for lower prices to buy. Overall, this year is likely to be turbulent and may have adverse impact on the operations of the Industry at large. However because of prudent cotton buying practices and conservative financial norms, Vardhman may not get as much affected as the rest of the spinning industry.

Technology Upgradation Fund Scheme (TUFS):

TUFS had been suspended temporarily by the government in June 2010. The Scheme has now been re-instated with a few changes; (i) Capital subsidy will now be available on looms for weaving as well. (ii) a 5% interest reimbursement may be given to the spinning units (against 4% earlier) if the unit is set up with matching downstream capacity in weaving/processing. (iii) A cap of Rs.19820.000 Millions has been put on the total subsidy which will be given for the next one year. This has been allocated between various sectors. The sunset clause of the scheme remains unchanged at March 31, 2012. All loans sanctioned till that date will be eligible for subsidy for the life of the loan.

Women Empowerment at Vardhman:

Vardhman Group has a long tradition of nondiscriminatory gender neutral Human Resource (HR) policy based on mutual trust, robust value system and transparent procedures. The top management’s commitment to the cause has seen growing female participation at all levels of work spanning from high profile corporate assignments to shop floor operations. The company has seen entry of female in top management right up to executive director position. This is followed by positions occupied by females of all age groups at different corporate positions including several high profile departments.

Inspite of the fact that textile is a hard core manufacturing industry, the organization has witnessed growing numbers of female working at shop floor. The use of technology and rigorous training imparted at various training centers coupled with stringent safety measures, which includes setting up of various female hostels, has led to a situation where women consist of almost one-fourth of the total workforce. This has led to social empowerment of females belonging to semi skilled category especially from rural background. On the other hand, the organization has benefited handsomely in terms of higher commitment and increased discipline at shop floor leading to improved productivity and better working environment.

FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

PRODUCTION AND SALES REVIEW:

The company has registered a turnover of Rs. 36369.600 Millions as compared to Rs. 27672.200 Millions showing an increase of 31.43% over the previous year turnover. The export of the Company increased from Rs. 7040.000 Millions to Rs.12182.600 Millions, showing an increase of 73.05% over the previous year mainly due to price rise and better product/market penetration. The business wise performance is as under:-

a). Yarn:

The production of Yarn increased from 126,146 MT to 130,861 MT during 2010-2011.The sales revenue of yarn increased from Rs.14769.900 Millions to Rs.20410.600 Millions during the year.

b). Steel:

The steel business of the Company stand vested in Vardhman Special Steels Limited w.e.f 1.1.2011 pursuant to the scheme of Arrangement and Demerge as sanctioned by Hon’ble Punjab and Haryana High Court. However for the nine months ending 31st, December 2010, the production of steel ingots/billets has been 64,581 MT and that of Rolled products has been 57,060 MT.

c). Fabric:

During the year, the production of processed fabric increased from 60.78 million meter to 75.44 million meter, showing an increase of 24.12% over the previous year. The sales revenue of the processed fabric also increased from Rs. 5565.200 Millions to Rs.8282.000 Millions showing an increase of 48.81% over the previous year.

Profitability:

The Company earned profit before depreciation, interest and tax of Rs. 9446.900 Millions as against Rs. 5946.300 Millions in the previous year. After providing for depreciation of Rs. 2260.200 Millions, interest of Rs. 1098.100 Millions provision for current tax Rs. 1345.000 Millions provision for deferred tax (net of adjustments), Rs. 46.500 Millions the net profit from operations worked out to Rs. 4697.100 Millions as compared to Rs. 2137.600 Millions in the previous year.

SUBSIDIARIES:

The Company has following subsidiary companies the details of profitability of which are given below:-

VMT Spinning Company Limited (VMT)

Business of this subsidiary of the Company which is a Joint Venture with Marubeni Corporation and Toho Rayon Company Limited of Japan remained good. The sales revenue of the Company has increased to Rs. 1283.400 Millions from Rs. 1016.500 Millions in the last year and the net profits of the Company increased from Rs. 101.300 Millions to Rs. 146.700 Millions. Out of the total present paid-up capital of Rs. 207.000 Millions, The Company holds 73.33 %. The Board of Directors of VMT has recommended a dividend of 12% for the year 2010 -2011.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged in the business of investments in the shares etc. The earnings of the company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year the company has earned a net profit of Rs.10.600 Millions. Vardhman Acrylics Limited (VAL) Vardhman Acrylics Limited (VAL) is another subsidiary of the Company which is engaged in the business of manufacturing of Acrylic Fibre. Presently the company holds 58.74% shares in this subsidiary. During the Financial Year 2010-2011, VAL recorded a sales volume of Rs. 4303.300 Millions as against Rs. 2867.400 Millions, an increase of 50.08% over the previous year, however the net profit for the year has decreased to Rs. 376.400 Millions from Rs. 434.400 Millions in the previous year.

Vardhman Yarns and Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American and Effird Inc. (A and E), is engaged in the business of Threads Manufacturing and Distribution. The Company has a joint venture partnership of 51:49 with A and E, which is the second largest global player in Threads Manufacturing and Distribution, in VYTL. During the year, the gross sales of this Company were Rs. 4261.000 Millions and the Profit after tax was Rs. 493.100 Millions. The Board of Directors of this Company has recommended a dividend @ 23% for the year 2010-11.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company which is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class shirts started production in the fag end of the year and it incurred a loss of Rs. 19.900 Millions as its operations are stabilizing.

Vardhman Special Steels Limited (VSSL)

Vardhman Special Steels Limited was got incorporated as the 100% subsidiary of the Company. Pursuant to the Scheme of Arrangement and Demerger between Vardhman Textiles Limited and Vardhman Special Steels Limited and their respective shareholders and creditors, the Steel Business Undertaking of Vardhman Textiles Limited stand vested in Vardhman Special Steels Limited w.e.f. 01.01.2011 and the shareholders holding shares in Vardhman Textiles Limited were to be allotted one share for every five shares held in Vardhman Textiles Limited as on the relevant record date fixed for the purpose i.e. 30.03.2011. The said allottment of shares was made on 08.04.2011 and Vardhman Special Steels Limited ceased to be a subsidiary of the Company w.e.f. 08.04.2011.

CONTINGENT LIABILITIES:

(Rs. In Millions)

Particular	31.03.2011	31.03.2010	31.03.2009
Claims not acknowledge as debts	103.407	73.906	72.002
Bank Guarantees and Letters of Credit outstanding	1526.442	453.793	308.316
Bills discounted with banks	822.102	21.831	963.857

FIXED ASSETS:

· Freehold Land

· Leasehold Land

· Buildings

· Plant and Machinery

· Furniture and Fixtures

· Vehicles

· Computer Software

AS PER WEBSITE:

OVERVIEW

Globalization

Vardhman ventured in to the global market in 1986 with an export value of one core to reach an outstanding 4400 millions (92 million Dollors) in 2002.

Little wonder then, that Vardhman, today, exports 40% of its yarn production to more than 25 countries and has a strong presence in markets like the EEC, USA, Canada, China, Japan, Korea, Mexico, Brazil and Mauritius, Middle East. Vardhman has a share of more than 6% in total Yarn exports from India.

Its trusted, tested and reliable workforce, coupled with the latest technology, quality consciousness, customer oriented services and strong logistics has given Vardhman an edge over its competitors and in the world’s most quality conscious and price sensitive markets. There by making Vardhman a truly international organisation in terms of sourcing from and catering to the world market.

ALLIANCES

Vardhman’s International Alliances

· Fabric Dyeing and Finishing

Tokai Senko, Japan

· Fiber and Yarn Dyeing

Nihon Sanmo Dyeing Co. Limited, Japan

· Gassed Mercerized Yarns

Kiyung Bang South Korea

· Cotton Yarn

Toho Rayon, Japan

· Sewing Thread

American and Efird Inc., USA

· Acrylic Fibre

Marubeni Corporation and Japan Exlan of Japan

ACHEIVEMENTS:

It's an overwhelming feeling when the efforts and hard work put in are recognized and felicitated. A feeling that galvanizes the Group into believing in more, in itself and reaffirming its commitment to offer products that invoke trust and reliability.

Back home, the Vardhman Group became India's first textile company to be awarded ICO9002/ ISO 14002 Certification. It is the largest producer and exporter of yarns and Grey woven fabrics from India. Vardhman is also the largest producer of tyercord yarns and the second largest producer of sewing threads in India. The Vardhman Group vision of excellence is matched by a dedication and sincerity to be the best and excel in every industry it has a presence

Textile Export Promotion Council 2003-04

Gold trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 2003-04

Bronze trophy in mill fabric exporter category

Textile Export Promotion Council 2002-03

Gold Trophy in EOU/EPZ for export of cotton yarn

Textile Export Promotion Council 1998-99

Silver Trophy

Textile Export Promotion Council 1997-98

Bronze Trophy

Textile Export Promotion Council 1996-97

Silver Trophy

Govt. of India Award 1994-5, 1995-96

Award of Merit

Textile Export Promotion Council 1993-94

(Merchant Export Category for Fabrics)

Bronze Trophy

Textile Export Promotion Council 1993-94

(Merchant Export Category for Fabrics)

Gold Trophy

Textile Export Promotion Council 1990-00

Gold Trophy

CMT REPORT (Corruption, Money Laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No records exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.52.10
UK Pound	1	Rs.81.30
Euro	1	Rs.70.07

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	8
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	8
--PROFITABILIRY	1~10	7
--LIQUIDITY	1~10	7
--LEVERAGE	1~10	7
--RESERVES	1~10	7
--CREDIT LINES	1~10	7
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		65

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
-	NB	New Business	-

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions

This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.