MIRA INFORM REPORT

Report Date :

06.04.2012

IDENTIFICATION DETAILS

Name :	NAHAR INDUSTRIAL ENTERPRISES LIMITED (w.e.f.1994)

Formerly Known As :	OSWAL FATS AND OILS LIMITED

Registered Office :	Focal Point, Ludhiana - 141 010, Punjab

Country :	India

Financials (as on) :	31.03.2011

Date of Incorporation :	27-09-1983

Com. Reg. No.:	16-018321

Capital Investment/ Paid-up Capital:	Rs. 400.340 Millions

CIN No.: [Company Identification No.]	L15143PB1983PLC018321

TAN No.: [Tax Deduction & Collection Account No.]	JLDN00400B / JLDN00758C

PAN No.: [Permanent Account No.]	AAACN7244C

Legal Form :	Public Limited Liability Company. Company's Shares are listed on the Stock Exchange.

Line of Business :	Subject is engaged in manufacturing and sale of writing and printing paper and vanaspati ghee.

No. of Employees:	9132 (Approximately)

RATING & COMMENTS

MIRA’s Rating :

Ba (53)

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 24000000

Status :	Good

Payment Behaviour :	Regular

Litigation :	Clear

Comments :	Subject is a well established and reputed company having fine track records. General Financial position of the company is Good. 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

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

LOCATIONS

Registered / Administrative Office :	Focal Point, Ludhiana - 141 010, Punjab, India
Tel. No.:	91-161-2672590-592
Fax No.:	91-161-2670596/2674072
E-Mail :	msood@owmnahar.com nilldh@owmnahar.com
Website :	http://www.owmnahar.com

Corporate Office 1 :	Nagar Tower Industrial Area –A, Ludhiana-141003, India
Tel. No.:	91-161-2600701 to 705
Fax No.:	91-161-2600709 / 2601956
E-Mail :	nahar@owmnahar.com

Corporate Office 2 :	G.T. Road, Sherpur, India
Tel. No.:	91-161-2542501 to 07
Fax No.:	91-161-2542509
E-Mail :	oswal@owmnahar.com

Factory 1 :	Arham Spinning Mills Located at: Village Udaipur / Khijuriwas, Bhiwadi, District Alwar (Rajeshtan), India

Factory 2 :	Spinning Unit Located at : Jalalpur, Chandigarh-Ambala Road, Lalru, District Patiala (Punjab), India

Factory 3 :	Arham Spinning Mills Located at : Village Jalalpur, Chandigarh-Ambala Road, Lalru, District Patiala (Punjab), India

Factory 4 :	Sambhav Spinning Mills Located at : Industrial Focal Point, Phase-VIII, Mundian Kalan, District Ludhiana, India

Factory 5 :	Fabrics Unit Located at : Village Jalalpur, Chandigarh-Ambala Road, Lalru, District Patiala (Punjab), India

Factory 6 :	Garment Unit Located at : Focal Point, Ludhiana, India

Factory 7 :	Nahar Sugar Located at : Village Salana Joon Singh Wala, Amloh, District Fatehgarh Sahib (Punjab), India

Factory 8 :	Nahar Steel Located at : Village Salana Jeon Singh Wala, Amloh, District Fatehgarh Sahib (Punjab), India

Factory 9 :	Oswal Fats And Oils Located at : Village Jalaldiwal, Near Raikot, District Ludhiana (Punjab), India

DIRECTORS

(AS ON 31.03.2011)

Name :	Mr. Jawaharlal Oswal
Designation :	Chairman

Name :	Mr. Kamal Oswal
Designation :	Vice Chairman and Managing Director
Qualification :	B.Com
Date of Appointment :	01.02.1998
Last Employment:	Vice Chairman-Gum- Managing Director of Erstwhile Nahar International Limited Since merged with the Company

Name :	Mr. Dinesh Oswal
Designation :	Director

Name :	Mr. Dinesh Gogna
Designation :	Director

Name :	Mr. N. D. Jain
Designation :	Director

Name :	Mr. O. P. Sahni
Designation :	Director

Name :	Mrs. H. K. Bal
Designation :	Director

Name :	Prof. K. S. Maini
Designation :	Director

Name :	Dr. Y. P. Sachdev
Designation :	Director

Name :	Dr. A. S. Sohi
Designation :	Additional Director

KEY EXECUTIVES

Name :	Mr. Mukesh Sood
Designation :	Company Secretary

Name :	Mr. B. Bhushan Gupta
Designation :	Corporate Finance Controller

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

(AS ON 31.12.2011)

Names of Shareholders	No. of Shares	Percentage of Holding

(A) Shareholding of Promoter and Promoter Group
(1) Indian
Individuals / Hindu Undivided Family	1324	--
Bodies Corporate	25589919	64.24
Sub Total	25591243	64.24
(2) Foreign
Total shareholding of Promoter and Promoter Group (A)	25591243	64.24
(B) Public Shareholding
(1) Institutions
Mutual Funds / UTI	18552	0.05
Financial Institutions / Banks	18819	0.05
Insurance Companies	169463	0.43
Foreign Institutional Investors	112	--
Any Others (Specify)	334664	0.84
NRI / OCB	334664	0.84
Sub Total	541610	1.36
(2) Non-Institutions
Bodies Corporate	1576254	3.96
Individuals
Individual shareholders holding nominal share capital up to Rs. 0.100 Million	6956505	17.46
Individual shareholders holding nominal share capital in excess of Rs. 0.100 Million	5169229	12.98
Sub Total	13701988	34.40
Total Public shareholding (B)	14243598	35.76
Total (A)+(B)	39834841	100.00
(C) Shares held by Custodians and against which Depository Receipts have been issued
(1) Promoter and Promoter Group	--	--
(2) Public	--	--
Sub Total	--	--
Total (A)+(B)+(C)	39834841	100.00

BUSINESS DETAILS

Line of Business :

Subject is engaged in manufacturing and sale of writing and printing paper and vanaspati ghee.

Products :

· Yarns

· Woven Fabrics

· Knitwears and Garments

· Sugar and Other Products

Product Description	ITC Code
Cotton Yarns and its Blends	52.05
Woven Fabrics of Cotton	52.09
White Crystal Sugar	1701109

PRODUCTION STATUS 31.03.2011

Particulars	Unit	Licensed Capacity	Installed Capacity
Yarn	Spindles	434800	204288
Yarn	Rotors	11808	7832
Grey Fabric	Air Jet looms	730	453
Processed Fabric	Meters Per annum	107000000	58400000
Sugar	TCD	5000	2500
Steel Ingots	MTs per annum	60000	50000

Particulars	Unit	Actual Production
Yarn (1)	MTs	63423
Yarn on Job Work Basis (1)	MTs	14
Grey Fabric (2)	Mtrs	20003522
Processed Fabric (3)	Mtrs	42294809
Readymade Garments	Pcs	--
Cotton Fibre (4)	MTs	--
Sugar (5)	Qtls	305672
Molasses	Qtls	148788
Bagasses (6)	Qtls	888482
Steel Ingots	MTs	--
Runner and Risers	MTs	--
Others (7)		--

Notes:

1. Production excludes 517 MTs. material reprocessed (Previous year 115 MTs.) and excludes 3,368 MTs. For captive consumption (Previous year 3,288 MTs.). Sales Includes interunit transfer of 20,761 MTs. amounting to Rs. 4.016 millions (Previous Year 19,820 MTs. amounting to Rs.2.593 millions).

2. Production excludes 633,385 Mtrs. reprocessed (Previous year 361,806 Mtrs.) It also excludes 27,161,755 Mtrs. for captive consumption (Previous year 21,554,951 Mtrs.). Sales include inter unit transfer of 16,513,629 Mtrs amounting to Rs. 1.205 millions (Previous Year 16,485,423 Mtrs. amounting to Rs.0.961 millions.)

3. Production excludes 1,632,437 Mtrs. material reprocessed (Previous year 1,403,659 Mtrs.) and include 159,935 Mtrs. On Job work basis (Previous year 940,559). Sales Includes inter unit transfer of 871,110 Mtrs. amounting to Rs.0.076 million (Previous year 2,177,726 Mtrs. amounting to Rs 0.813 million).

4. Sale Includes interunit transfer of 1,625 MTs. amounting to Rs.0.124 million (Previous year 76 MTs. amounting to Rs.0.005 million)

5. Production excludes 4,720 Qtls. of Brown sugar reprocessed (Previous Year 3,950 Qtls.).

6. Production includes 815,387 Qtls. for captive consumption (Previous Year 467,755 Qtls.). Sale include inter unit transfer of 65,995 Qtls. amounting to Rs.0.013 million (Previous year 13,870 Qtls. amounting to Rs.0.004 million).

7. Other sales includes inter unit transfer of Rs.0.923 million (Previous year Rs.0.804 million).

GENERAL INFORMATION

No. of Employees :

9132 (Approximately)

Bankers :

· State Bank of Patiala

· Canara Bank

· Punjab National Bank

· Allahabad Bank

· Punjab and Sind Bank

· Bank of Punjab Limited

· Indian Overseas Bank

· State Bank of India

· ICICI Bank Limited

· IDBI Bank

Facilities :

Secured Loans	As on 31.03.2011	As on 31.03.2010
Working Capital Borrowing from Banks	5972.837	3576.463
Term Loans	5467.943	4402.076
Total	11440.780	7978.539

(Rs. in millions)

Notes:

1. Working Capital Borrowings are secured by hypothecation of stocks of Raw Materials, Work-in-Process, Finished Goods, Stores and Book Debts and further secured by 2nd Charge on Fixed Assets of the Company and also personally guaranteed by some of the Directors of the Company.

2. Term loan from ICICI Bank Limited, IDBI Bank Limited., Canara Bank, State Bank of Patiala, Indian Overseas Bank, Allahabad Bank, Punjab National Bank, Axis Bank, State Bank of Mysore, Punjab and Sind Bank, Corporation Bank and Government of India, Ministry of Consumer Affairs are secured by hypothecation as pari-passu first charge on whole of the immovable properties of the Company situated at Village Jalalpur, Chandigarh Ambala Road, Lalru, District Mohali, Industrial Focal Point, Phase VIII, Village Mundian, District Ludhiana, Village Jalaldiwal, Near Raikot, District Ludhiana (Punjab), Village Udaipur / Khijuriwas, Bhiwadi, District Alwar (Rajasthan), Focal Point Phase IV, Ludhiana (Punjab) and Village Salana Jeon Singh Wala, Tehsil Amloh, District Fatehgarh Sahib (Punjab) including the Company's movable Plant and Machinery, Machinery Spares and other moveable’s both present and future and subject to the charge or charges created or to be created by the Company in favour of its Bankers on its movables and also personally guaranteed by some of the Directors of the Company.

(Rs. in millions)

Unsecured Loans	As on 31.03.2011	As on 31.03.2010
Foreign Currency Convertible Bonds (FCCBs)	0.000	440.283
others	32.487	31.591
Total	32.487	471.874

Banking Relations :	--

Auditors :
Name :	Raj Gupta and Company Chartered Accountants
Address :	549/10, Sutlej Tower, Opposite Petrol Pump, Near Fountain Chowk, Ludhiana – 141001, Punjab, India.

Associates :	· Nahar Spinnig Mills Limited · Nahar Poly Films Limited · Nahar Capital and Financial Services Limited · Oswal Woolen Mills Limited · Atam Vallabh Financers Limited · J. L. Growth Fund Limited · Vardhman investments Limited · Abhilash Growth Fund Private Limited · Kovlam Investment Trading Company Limited · Ludhiana Holding Limited · Nagdevi Trading Investment Company Limited · Nahar Growth Fund Private Limited · Neha Credit Investment Private Limited · Sankheshwar Holding Company Limited · Vanaik Investor Limited · Vinayak Spinning Mills Limited · Nahar Industrial Infrastructure Corporation Limited · Cotton County Retail Limited · Crown Star Limited · Nahar Financial and Investment Limited

CAPITAL STRUCTURE

(AS ON 31.03.2011)

Authorised Capital :

No. of Shares	Type	Value	Amount

65000000	Equity Share	Rs.10/- each	Rs. 650.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount

40395865	Equity Share	Rs.10/- each	Rs. 403.959 millions
	Less: Allotment Money in Arrear		Rs. 3.619 millions

	Total		Rs. 400.340 millions

Note:

Of the above Shares

i) 1,599,360 Equity Shares allotted as fully paid up by way of bonus shares during the year 1992-93 by capitalization of share premium.

ii) 2,933,280 Equity Shares were allotted as fully paid up during the year 1997-98 pursuant to scheme of amalgamation with Nahar Fabrics Limited without payment received in cash.

iii) 12,176,625 Equity Shares were allotted as fully paid up during the year 2005-06 pursuant to the scheme of amalgamation of Nahar International Limited and Nahar Sugar and Allied Industries Limited with the Company without payment received in cash.

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		400.340	400.340	400.340
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		5831.490	5536.937	5389.023
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		6231.830	5937.277	5789.363
LOAN FUNDS
1] Secured Loans		11440.780	7978.539	7542.600
2] Unsecured Loans		32.487	471.874	496.737
TOTAL BORROWING		11473.267	8450.413	8039.337
DEFERRED TAX LIABILITIES		310.776	246.076	195.560

TOTAL		18015.873	14633.766	14024.260

APPLICATION OF FUNDS

FIXED ASSETS [Net Block]		6438.121	5856.121	6330.932
Capital work-in-progress		399.439	716.137	179.099

INVESTMENT		1408.600	1411.678	1432.247
DEFERREX TAX ASSETS		0.000	0.000	0.000

CURRENT ASSETS, LOANS & ADVANCES
	Inventories	7307.568	4618.111	2456.396
	Sundry Debtors	1745.434	1393.786	1314.231
	Cash & Bank Balances	23.588	20.678	1331.970
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	1956.693	1396.555	1814.990
	Fixed Assets held for disposal	5.615	9.223	11.700
Total Current Assets		11038.898	7438.353	6929.287
Less : CURRENT LIABILITIES & PROVISIONS
	Sundry Creditor	832.294	364.284	338.128
	Other Current Liabilities	390.211	377.409	462.352
	Provisions	46.683	46.838	46.838
Total Current Liabilities		1269.188	788.531	847.318
Net Current Assets		9769.710	6649.822	6081.969

MISCELLANEOUS EXPENSES		0.003	0.008	0.013

TOTAL		18015.873	14633.766	14024.260

PROFIT & LOSS ACCOUNT

	PARTICULARS		31.03.2011	31.03.2010	31.03.2009
	SALES
		Operating Income	12444.208	10174.617	9998.410
		Other Income	52.548	151.716	308.561
		TOTAL (A)	12496.756	10326.333	10306.971

Less	EXPENSES
		Cost of Material	6343.102	5468.728	5586.298
		Manufacturing Expenses	2629.034	2375.610	2345.628
		Employment Cost	823.608	652.038	657.215
		Administrative and other Expenses	178.312	97.840	171.363
		Selling Expenses	309.085	181.760	202.086
		Excise duty on stocks	9.233	(14.552)	(36.817)
		Miscellaneous Expenditure written off	0.005	0.005	0.005
		TOTAL (B)	10292.379	8761.429	8925.778

Less	PROFIT BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION (A-B) (C)		2204.377	1564.904	1381.193

Less	FINANCIAL EXPENSES (D)		985.515	546.555	565.264

	PROFIT BEFORE TAX, DEPRECIATION AND AMORTISATION (C-D) (E)		1218.862	1018.349	815.929

Less/ Add	DEPRECIATION/ AMORTISATION (F)		745.558	723.124	773.054

	PROFIT BEFORE TAX (E-F) (G)		473.304	295.225	42.875

Less	TAX (H)		158.017	100.480	31.808

	PROFIT AFTER TAX (G-H) (I)		315.287	194.745	11.067

Add	Income tax Liability/refund of earlier years		25.795	0.000	0.000

Add	Transfer from Contingent Liability Reserve		293.516	41.795	0.000

Add	Transfer from FCCBs Periodic Cost Revenue		127.291	0.000	146.598

Add	Transfer from General Reserve		0.000	0.000	496.215

Less	Transfer to Contingent Liability Reserve		0.000	0.000	496.215

Less	APPROPRIATIONS
		Transfer to General Reserve	715.360	167.795	110.659
		Proposed Dividend	40.034	40.034	40.034
		Corporate Tax on Dividend	6.495	6.804	6.804
		Income Tax liability/refund of earlier years (net)	0.000	0.004	0.168
		Transfer to FCCBs Periodic Cost Revenue	0.000	21.903	0.000

	EARNINGS IN FOREIGN CURRENCY
		FOB Value	882.223	594.480	426.297
		Other Earnings	25.556	29.044	36.960
	TOTAL EARNINGS		907.779	623.524	463.257

	IMPORTS
		Raw Materials	24.102	20.172	2.215
		Capital Goods and Stores	426.589	199.073	290.993
		Trading goods	0.000	0.000	63.603
	TOTAL IMPORTS		450.691	219.245	356.811

	Earnings Per Share (Rs.)		7.80	4.82	0.27

QUARTERLY RESULTS

PARTICULARS	30.06.2011	30.09.2011	31.12.2011
Type	1^st Quarter	2^nd Quarter	3^rd Quarter
Net Sales	3875.510	3255.060	3383.720
Total Expenditure	4207.310	2999.500	3106.020
PBIDT (Excl OI)	(331.800)	255.560	277.700
Other Income	24.090	19.300	16.960
Operating Profit	(307.710)	274.860	294.660
Interest	271.620	229.010	210.890
Exceptional Items	0.000	0.000	0.00
PBDT	(579.330)	45.850	83.770
Depreciation	189.950	196.444	204.400
Profit Before Tax	769.280)	(150.590)	(120.630)
Tax	(250.000)	0.000	0.000
Provisions and contingencies	0.000	0.000	0.000
Reported PAT	(519.280)	(150.590)	(120.630)
Extraordinary Items	0.000	0.000	0.000
Prior Period Expenses	0.000	0.000	0.000
Other Adjustments	0.000	0.000	0.000
Net Profit	(519.280)	(150.590)	(120.630)

KEY RATIOS

PARTICULARS		31.03.2011	31.03.2010	31.03.2009
PAT / Total Income	(%)	2.52	1.88	0.11

Net Profit Margin (PBT/Sales)	(%)	3.80	2.90	0.43

Return on Total Assets (PBT/Total Assets}	(%)	2.71	2.22	0.32

Return on Investment (ROI) (PBT/Networth)		0.07	0.05	0.01

Debt Equity Ratio (Total Liability/Networth)		2.04	1.56	1.53

Current Ratio (Current Asset/Current Liability)		8.69	9.43	8.18

LOCAL AGENCY FURTHER INFORMATION

PERFORMANE REVIEW:

The company operates in three main business segments viz. Yarn, Fabric and Sugar. The textile's division (comprises of yarn and fabrics) accounts for 96.69 % of the total turnover (including inter-segment) of the company for the year ended 31st March, 2011. Sugar and others also accounts for 3.31 % of the total turnover of the company for the year ended 31^st March, 2011.

The business wise performance of each segment is as under: -

· Yarn: The Company has produced 63,423 MTs. of yarn as against 65,066 MTs. in the previous year. The total turnover of this segment (including inter-segment) has increased to Rs. 1154.5.700 millions as against Rs. 8277.300 millions in the previous year showing an increase of 39.49 %.

· Fabric: The Company has produced 62,298,331 meters of fabric (both grey and processed) as against 61,161,735 meters in the previous year. The total turnover of this segment (including inter-segment) has increased to Rs. 658.44 crores as against Rs. 5364.100 millions in the previous year showing an increase of 22.75 %

· Sugar: The Company has produced 305,672 Qtls. MOF sugar as against 155,530 Qtls. in the previous year. The total turnover of this segment is Rs. 613.500 millions as against Rs. 1005.400 millions in the previous year.

There was no activity in the steel division during the year.

During the year the company has achieved operational income of Rs. 12475.600 millions as against Rs. 10208.200 millions showing an increase of 22.21% over the previous year. The company has earned profit before financial expenses, depreciation, non-cash expenditure and tax of Rs. 2204.400 millions as against Rs. 1564.900 millions in the previous year. After providing for depreciation and non-cash expenditure of Rs. 745.600 millions (previous year Rs. 723.100 millions), Financial expenses of Rs. 985.500 millions (previous year Rs. 546.600 millions) and provision for current tax of Rs.158.000 millions (previous year Rs. 100.500 millions), the profit after tax comes to Rs. 315.300 millions as against Rs. 194.700 millions in the previous year showing an increase of 61.94% over the previous year.

To keep update, they would also like to share with the prevailing textile scenario. Though the performance of the textile industry was excellent during the last year but things are not moving in the right direction in the current year. The consequential effects of negative threats of yester year are still continuing and its effects has already been witnessed in the financial results of the first quarter of the current year. The company suffered a heavy loss of Rs.519.300 millions because of the sudden crash in the prices of raw cotton from Rs.63,000/- per candy in September, 2010 to Rs.34,000/- per candy in June, 2011 because of pure speculative activity in cotton at the commodity markets. The cotton being a seasonable crop is purchased by the spinning mills for its requirement in the cotton season. The company purchased the cotton at the high prices during the season and is currently stuck with the high cost cotton. Besides sharp decline in the yarn prices coupled with lack of demand in US and European countries has put additional pressure on the inventory intensive industry. In case things do not move for betterment the performance of the textile industry will be adversely affected in the coming periods.

The Management is putting whole heartedly all its efforts in cost reduction, quality management, better product mix etc. so as to improve the efficiencies which in turn will help the company in meeting the challenges ahead. Besides The Management also expect that the Government through its policies will take some initiatives in the form of some relief packages so that the industry could survive in this challenging period.

MANAGEMENT DISCUSSION AND ANALYSIS:

INDUSTRY STRUCTURE/DEVELOPMENT

Although in recent years the economic slowdown in the US and EU did have adverse impact on the overall trade of many economies, yet India and other South Asian economies continued to see their textile and garment sector steady growth. The textile sector has played an important role in the overall growth of South Asian economies. The Indian textile and clothing industry is one of the oldest and largest sectors in India. It is most important sector in Indian economy in terms of output, foreign exchange earnings and employment. To make the industry globally competitive, the central government initiated several policies, reforms which enabled the industry to modernize and expand its capacities and also improve its technical efficiencies. The Indian economy is growing at an estimated rate of 8% p.a and it is expected that Indian textile industry would reach US$ 110 billion by 2015 with an export constituent of US$ 45 billion. To sustain its growth, it is estimated that Indian textile industry would require an investment of $24 billion by 2015.

The textile and apparel industry has witnessed very tough 2010-11 year struggling with the surging and fluctuating prices of raw cotton. In 2010-11 the prices of cotton was increased due to damaged cotton crop in china and Pakistan and fall in global production. The speculative trading in commodities also contributed for the unprecedented increase in prices of cotton. The Government of India in September 2010 announced a cap of 5.5 million bales of cotton for exports. With this lesser cotton for trade was available. With high import demand from China, international prices soared during the month and so as prices in India also increased. 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. In order to check 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.

With ban on exports of cotton yarn and a declining trend in domestic demand had resulted in a huge unsold stock of cotton yarn with the spinning mills all over the country. When exports were allowed from April 2011, the accumulated stock caused a crash of cotton yarn prices in the global and domestic markets. Consumers started shying away from the markets, because of their perception that prices would decline further since mills are flush with stocks and have to sell them at any cost. Post withdrawal of restrictions on export of cotton yarn from 01 April 2011, exports have been very tardy since restriction on exports of Indian cotton yarn for over two months have diverted several regular importers of the Indian cotton yarn to other sources.

MANAGEMENT PERCEPTION OF RISK/CONCERN/THREAT

Short-sighted government policies with reference to both cotton and cotton yarn in the recent past had converted a profitable textile industry to crises ridden sector faced with cash losses. Foreign markets are depressed and domestic demand is deflated. In anticipation of bumper cotton crop this year, the buyers are still playing wait and watch policy. It is hoped that customer will come back as soon as prices are stabilized. Continued weak demand form developed countries, prospect of higher domestic inflation, fiscal tightening and increased borrowing cost are some of the challenges, the textile industry is facing at large. Main concern to the textile industry is raw material prices mainly cotton prices which has seen steep hike in 2010- 11 and the same is still volatile causing uncertainties for textile manufacturer. The continuous increase in power cost adding further pressure on the financial health of textile companies. Non -availability of skilled manpower is also one of the issue faced by the textile industry. Foreign brands have begun sourcing from Vietnam and Indonesia where cost of production is lower than India. Overall this year is proving to be one of the, toughest year in the history of textile industry and would have an adverse impact on the operations of industry at large.

The management is making all efforts to meet the prevailing challenges by focusing its efforts on further reduction of cost and by improving operational efficiencies to reduce the cost pressure.

OUTLOOK

In the last 10 years India has added $930 billion to its economy and it is estimated that it will add almost double that (about $1700 billion) in the next 10 years. India's domestic demand shall be the driver of growth for Indian textile and clothing Industry in the coming decade. However, as new consumer needs and aspiration emerge, the industry will have to reinvent itself to take advantages of opportunities. Besides, the political / economic situation in their neighboring countries is proving to be a blessing in disguise, as many international buyers have moved to Indian markets. The changed equation in global trade is working in favour of the Indian textile industry and rigorous efforts must be made to raise India's share in the global textile trade. Nevertheless, they are confident about the bright future of textile industry in long term provided Government policies need to balance the interests of all stake holders across the value chain. The Government envisions building state of the art production capacities and achieving a preeminent global standing in the textile sector by 2020, which includes manufacture and export of all types of textiles. On the global front, India is set to become a bigger participant, both as a consumer and as a producer.

To sum up, the industry needs to take measures, steps and strategize for further sustainability and growth considering the opportunities and challenges. It is apparent that the opportunities are heavier than the challenges and the industry must make most of it.

SUGAR INDUSTRY OVERVIEW

The Indian sugar industry is one of the largest agro based industry after textile. The Indian Sugar industry is characterized by the co-existence of private, co-operative and public sector. The growth of sugar industry has powerful impact on the rural economy. India is the largest consumer and second largest producer of sugar in the world. Sugar is an essential item of mass consumption. India is still lagging behind from many advanced countries in respect of per capita consumption. With an increase in demand and spending power, the consumption pattern of rural India is changing. Its farm productivity has virtually remained stagnant for decades. Thus there are opportunity in production and consumption of higher quantity of sugar. Most drivers of the Indian sugar industry are unpredictable i.e cost, climate, Government policies, raw material availability and realizations. The Indian sugar industry is characterized by cycle of high and low sugar production.

Sugar business continues to remain highly regulated. The Government of India fixes levy percentage to meet PDS requirement for the benefit of BPL families. The, ratio of levy for the season 2009-10 was increased to 20% from 10% because of lower availability of levy quantity due to lower production. This has since been restored to 10% from 2010-11.The sugar industry is most controlled industry in the country and sugar as commodity continues to be politically sensitive and strictly controlled by Government. The fundamental problem of the Indian sugar Industry is that there is no relation between the price of raw material i.e. sugar cane and its finished goods i.e. sugar.

Sugar industry is seasonal in nature and directly dependent on monsoon for availability of adequate sugar cane which makes the business more vulnerable to a bad season. Lower cane realization can prompt farmers to shift to alternative crops. Shortage of labour is another concern as NREGA has given chances to rural labour of employment and labour is speedily migrating from agriculture. The Company is also making all efforts for sugarcane development in the cane area allotted to it by providing various facilities such as supply of fertilizers and pesticides at subsidized rates. Supply of disease free seeds and free testing of soil etc. to farmers of the area. The Company has undertaken necessary maintenance programme so that the plants fully equipped to crush higher quantity of sugarcane in the ensuing crushing season and to prevent the breakdown during the season.

SEGMENT WISE/FINANCIAL/OPERATIONAL PERFORMANCE

The Company operates in three main business segments i.e. Yarn, Fabrics, and Sugar.

CONTINGENT LIABILITIES NOT PROVIDED FOR (AS ON 31.03.2011) :

a) Estimated amount of contracts remaining to be executed on capital account (net of advances) Rs.1403.628 Millions (Previous year Rs.157.014 Millions).

b) Letter of Credits in favour of suppliers and others Rs.803.267 Millions (Previous year Rs.207.450 Millions).

c) Bank Guarantees in favour of suppliers and others Rs.11.334 Millions (Previous Year Rs.26.769 Millions).

d) Corporate guarantee given on behalf of others Rs.850.000 millions (Previous year Rs.850.000 millions).

e) Sales tax demands against which the company has preferred appeals Rs.12.046 Millions (Previous year Rs.12.046 Millions).

f ) The Central Excise Authorities have issued show cause notices to the Company for Rs.61.881 Millions on various matters under the Central Excise Rules (Previous Year Rs.212.906 millions). The Company has filed suitable replies with the concerned authorities.

g) Punjab State Electricity Board has raised a net demand of Rs.15.866 Millions (Previous Year Rs.15.866 Millions) on account of paralleling operation charges for the captive power generation by the Company. The Company has protested the demand in the Hon'ble Courts.

h) The Company has executed bonds / legal undertakings for an aggregate amount of Rs. 629.303 Millions (Previous year Rs. 316.652 Millions) in favour of the President of India for fulfillment of its obligations under the rules made under Central Excise Act, 1944 and Customs Act, 1962.

i) Claims of Rs.34.967 millions (Previous Year Rs.37.256 millions) lodged against the company on various matters are not acknowledged as debts. The company has filed suitable replies with the concerned authorities.

j) Foreign Exchange contracts which were under dispute in the Courts, for which contingent liabilities were provided, have been partly settled during the year. The net contingent liability at the end of year 2010-11 comes to Rs.160.904 millions. Since the liability arising out of the derivative contracts are sub judice before the Civil Courts and has been considered by the company as Contingent liability, thus the interest of Rs.13.503 millions computed by the banks on the disputed amount is not acknowledged and accordingly not provided for as status quo order is already in force.

FIXED ASSETS:

· Leasehold Land

· Freehold Land

· Building

· Plant and Machinery

· Furniture and Fixture

· Office Equipment

· Vehicles

· Computer Software

BUSINESS DESCRIPTION:

Subject is an India-based company. NIEL is a vertically-integrated textile manufacturer, with operations ranging from spinning, weaving and processing to finished readymade garments. The Company operates in five segments: yarn, fabrics, steel, sugar and others. The textile division consists of yarn and fabrics. During the fiscal year ended March 31, 2010 (fiscal 2010), the Company produced 65,066 metric tons of yarn; 6,11,61,735 meters of fabrics, and 155,530 quintals of sugar. Its products range includes cotton yarn and its blends, woven fabrics of cotton and white crystal sugar. Cotton Country is the brand of the Company. For the nine months ended 31 December 2010, Subject’s revenues increased 19% to RS8.88B. Net income totaled Rs.501.300 millions, up from Rs.158.800 millions. Revenues reflect an increase in income from fabrics and higher income from Yarn Segments. Net income also reflects lower purchase of traded goods, a decrease in employees cost, a fall in depreciation expense and lower interest expense.

MANAGEMENT

Biography of Directors

1. Jawahar Lal Oswal

Title: Non Executive Chairman of the Board

Function: Chairman

Shri. Jawahar Lal Oswal is the Non-Executive Chairman of the Board of Nahar Industrial Enterprises Limited. He is an industrialist with 46 years business experience in the textile industry. He is Chairman cum Managing Director of Oswal Woollen Mills Limited and Chairman of Nahar Industrial Enterprises Limited, Nahar Spinning Mills Limited, Nahar Poly Films Limited and Nahar Capital and Financial Services Limited. He is also Director of J.L. Growth Fund Limited, Atam Vallabh Financier Limited, Girnar Investment Limited, Ludhiana Holdings Limited, Vanaik Investors Limited, Vardhman Investments Limited, Palm Motels Limited. Sankheshwar Holding Company Limited, Monte Carlo Fashions Limited, Nagdevi Trading and Investment Company Limited, Crown Star Limited (UK), Abhilash Growth Fund Private Limited, Nahar Growth Fund Private Limited, Monica Growth Fund Private Limited, Ruchika Growth Fund Private Limited and Neha Credit and Investment Private Limited. He is not the member of any committee

2. Kamal Oswal

Title : Executive Vice Chairman of the Board, Managing Director

Function : Vice-Chairman

Shri. Kamal Oswal is the Executive Vice Chairman of the Board, Managing Director of Nahar Industrial Enterprises Limited. He is a B.Com graduate and has 25 years of experience. He was Vice Chairman cum Managing Director of erstwhile Nahar International Limited since merged with company.

3. Mrs. Harbhajan Kaul Bal

Title: Non-Executive Independent Director