Alok Industries

We have pleasure in presenting the 22nd Annual Report of your Company
 together with the Audited Accounts for the financial year ended 31st
 March, 2008. The summarised financial results (standalone and
 consolidated) are given below in Table 1.
 
 Table 1: Financial Highlights: Stand-Alone and Consolidated
 
                                                         (Rs. in crores)
 Particulars                        Stand alone          Consolidated
                                2007-08    2006-07    2007-08    2006-07
 
 Sales / Job charges 
 (net of excise)               2,170.41   1,824.68   2,282.01   1,824.68
 Other Income (Operating)         24.31       3.87      25.45       3.89
 Total Income                  2,194.72   1,828.55   2,307.46   1,828.57
 Total Expenditure             1,646.97   1,417.59   1,765.30   1,417.64
 Operating Profit Before 
 Interest & Depreciation         547.75     410.96     542.16     410.93
 Interest                        131.83      89.04     133.13      89.04
 Depreciation/ Amortisation      161.96     123.04     166.19     123.04
 Operating Profit Before Tax*    253.96     198.88     242.84     198.85
 Less : Provision for Taxation   
 -  Current                      (28.73)    (22.19)    (29.82)    (22.19)
 -  MAT Credit Entitlement         4.12       1.11       4.12       1.11
 -  Deferred                     (60.37)    (41.72)    (59.74)    (41.72)
 -  Fringe Benefit Tax            (1.25)     (0.90)     (1.26)     (0.90)
 -  Tax in respect of 
    earlier years                   -        (0.16)       -        (0.16)
 Net Profit / (Loss) from 
 Ordinary Activities 
 After Tax *                     167.73     135.02     156.14     134.99
 Extraordinary Items 
 (Net of Tax) 1                   30.93      29.68      30.93      29.68
 Profit After Tax                198.66     164.70     187.07     164.67
 Add : Share of Profit 
       from Associates              -          -         0.03        -
     : Minority Interest            -          -         2.55        -
 Profit After Tax After 
 Minority Interest               198.66     164.70     189.65     164.67
 Add : Balance Brought 
       Forward                   216.18     129.84     216.14     129.84
 Balance available for 
 Appropriation                   414.84     294.54     405.79     294.50
 Appropriations:
 Excess Provision of 
 Dividend Earlier Years           (0.19)     (0.39)     (0.19)     (0.39)
 Dividend-Equity                  22.46      23.85      22.46      23.85
 Dividend- Preference              0.74        -         0.74
 Tax on Dividend                   3.82       4.16       3.82       4.16
 Transfer to Debenture 
 Redemption Reserve               73.55        -        73.55        -
 Transfer to General Reserve      19.00      50.00      19.00      50.00
 Balance Carried to 
 Balance Sheet                   296.20     216.18     287.15     216.14
                                 414.84     294.54     405.79     294.50
 
 Notes:
 
 *1.  Excludes Extraordinary income (gross) for 2007-08 of Rs. 43.63
 crores (net of tax of Rs. 30.93 crores) (Extraordinary income
 (gross)Rs. 33.43 crores-net of tax Rs.29.68 crore in 2006-07)
 
 2.  Previous years’ figures have been regrouped wherever necessary to
 bring them in line with the current year’s representation of figures
 
 Performance
 
 During the financial year, your Company recorded sales of Rs. 2,170.41
 crore and profit before tax (from ordinary activities) of Rs.253.96
 crore, an increase of 18.95% and 27.70% respectively over the previous
 year. Including extraordinary items, your Company’s profit before tax
 grew 28.10% to Rs. 297.59 crore. Your Company’s exports (including
 incentives) increased 62.11%, from Rs. 641.71 crore in 2006-07 to Rs.
 1,036.89 crore during the year under review, the first time that your
 Company has crossed Rs.1,000 crore in exports during a financial year.
 
 The sales performance of all the divisions of your Company, their share
 in the overall business and their growth over last year are reflected
 in Table 2 below.
 
 Table 2: Division-wise Sales Performance: 2007-08 vs. 2006-07
 
                                                        (Rs. in Crores)
 Particulars                      Total Sales for         % to Total
                                  the year ended            Sales
                                  31 March 2008
 
 Cotton & Cotton Yarn                 294.05                13.55%
 Apparel Fabric                       894.79                41.23%
 Home Textiles                        389.02                17.92%
 Garments                              99.56                 4.59%
 POY & Texturising                    492.99                22.71%
 Total Sales                        2,170.41               100.00%
 
 Total Sales for                 % to Total              Growth
 the year ended                     Sales             2008 v 2007
 31 March 2007
 
    84.14                           4.61%               249.48%
   896.82                          49.15%                (0.22)%
   334.59                          18.34%                16.27%
    29.03                           1.59%               242.95%
   480.10                          26.31%                 2.68%
 1,824.68                         100.00%                18.95%
 
 Note: Retail sales of Rs. 6.65 crore (2006-07: Rs. 2.12 crore) has been
 allocated to the respective business segments: apparel fabric, home
 textiles and garments
 
 Details of your Company’s performance for the year under review are
 given in the ‘Management Discussion and Analysis’, which forms part of
 this Directors’ Report.
 
 Dividend
 
 Your Directors feel that prudent business practice demands that, at a
 stage where your Company is growing rapidly, the financial reserves of
 your company should be built up. At the same time, shareholder rewards
 by way of dividend are also important and necessary. Keeping these
 factors in mind, your Directors have recommended a dividend of Rs. 1.20
 per equity share of Rs. 10/- each (previous year Rs.1.40) for the
 financial year ended 31 March 2008 and seek your approval for the same.
 If approved, the total amount of dividend to be paid to the equity
 shareholders will be Rs. 22.46 crore (excluding tax of Rs 3.82 crore)
 as against Rs. 23.85 crore paid last year (excluding tax of Rs. 4.16
 crore).
 
 Capital
 
 During the year under review, your Company allotted following equity
 shares: 
 
                                                        (Rs. in Crores)
 Sr. No.  Details of Issue                                 Amount of
                                                             Issue
 
          Equity as at 01.04.2007
 1        Conversion of 459 FCCBs of USD 50000 each,         113.60
          converted into equity @ Rs. 71.5875 per share
 
 2        Preferential allotment to                            9.52
          Promoter Directors @ Rs.102/- per share
 
          Total as at 31.03.2008
 
 No. of Shares     Equity Capital     Premium
 Issued               Amount          Amount
 
 170371974            170.37           400.47
  15869202             15.87            97.74
 
    933793              0.93             8.59
 
 187174969            187.17           506.80
 
 With the aforesaid additions to equity, as on 31 March 2008, the paid
 up equity capital of your Company stands at Rs.  187.17 crore
 comprising of 187,174,969 equity shares of Rs. 10/- each.
 
 Reserves
 
 Your Company proposes to transfer Rs. 19.00 crore to general reserves
 and Rs. 73.55 crore to debenture redemption reserve out of the balance
 available for appropriation; therefore, after the proposed dividend
 payout and transfer to general reserves and debenture redemption
 reserve, the balance of the Profit & Loss Account would stand at Rs.
 296.20 crore. At the end of the financial year, the total reserves of
 the Company stood at Rs. 1,134.01crore; the corresponding figure at the
 end of the previous year was Rs. 854.07 crore. The total increase in
 Reserves & Surplus was Rs.279.94 crore, mainly on account of profit for
 the year (net of dividend provision ) of Rs. 172.38 crore and increase
 in share premium by Rs. 106.33 crore.
 
 Loans
 
 During the year under review, your Company has raised incremental debt,
 both secured and unsecured by way of rupee loans, foreign currency
 terms loans and non-convertible debentures aggregating to Rs. 2,430.55
 crore. This is to fund the capital expenditure programme of the
 company, investments and working capital requirement.
 
 Capital Expenditure
 
 Your Company’s expansion drive under Phases I and II, aggregating Rs.
 1,175 crore have been commissioned. The terry towel project, which
 forms a part of this phase, is expected to be commissioned in the third
 quarter of 2008-09. Phase III and Phase IV of the expansion of your
 Company’s capacities, aggregating to Rs. 1,100 crore and Rs. 1,180
 crore, respectively are also on track. Moreover, as additional
 projects, your Company envisages the expansion of its capacities in
 Partially Oriented Yarn (POY) and texturising. Details of your
 Company’s expansion plans have been dealt with under the head ‘Capacity
 Expansion’ in the Management Discussion and Analysis accompanying this
 report.
 
 Subsidiary Companies and Consolidated Financial Statements
 
 At the end of the financial year under review, your Company had the
 following subsidiaries:
 
 Subsidiaries of Alok Industries Ltd
 
 1.  Alok Industries International Ltd; (incorporated in the British
 Virgin Islands)
 
 2.  Alok Inc.; (incorporated in the state of New York, USA)
 
 3.  Alok Infrastructure Pvt. Ltd.
 
 4.  Alok Clothing Company Pvt. Ltd.
 
 5.  Alok Retail (India) Ltd.
 
 6.  Alok Apparels Pvt. Ltd.
 
 7.  Alok Land Holdings Pvt. Ltd.
 
 Step-down subsidiaries of Alok Industries Ltd.
 
 Parent Company                       Subsidiary  
 
 Alok Industries International Ltd.   Mileta a.s. incorporated in 
                                      the Czech Republic            
 Alok Infrastructure Pvt. Ltd.        Alok Realtors Pvt. Ltd.
 Alok Land Holdings Pvt. Ltd.         Alok Aurangabad Infratex Pvt. Ltd.
                                      Alok New City Infratex Pvt. Ltd.
 
 % Holding
 
 79.80% holding
   100% holding
   100% holding
   100% holding
 
 Ministry of Corporate Affairs, Government of India, vide Approval No.
 47/301/2008-CL-III dated 30th May 2008 has granted approval that the
 requirement to attach various documents, i.e. Balance Sheet, Profit &
 Loss Account, Directors’ Report and Auditor’s Report of the
 subsidiaries whose accounts have been consolidated for the year ended
 31 March 2008 need not be attached with the Annual Report of the
 Company. These documents will be made available upon request by any
 member of your Company and/or any of its subsidiaries, who wish to
 obtain the same. The accounts of the subsidiary companies will also be
 kept for inspection by any investor at the Corporate Office of the
 Company and that of the respective subsidiary companies. As directed by
 the Central Government, the financial data of the subsidiaries have
 been furnished under ‘Details of Subsidiary Companies’ forming part of
 the Annual Report. Further, pursuant to Accounting Standards AS-21 and
 AS-23, Consolidated Financial Statements presented by your Company
 include financial results of its subsidiaries.
 
 Business and Operations
 
 Your Company’s businesses and operations are now in three broad areas:
 Textiles, Retail and Realty. Your Company believes that sustained focus
 in each of these areas would unlock significant shareholder value over
 a period of time.
 
 The textiles business, which remains a part of the parent Company, will
 capitalise on growing international and domestic demand for Indian
 textile products, both for apparel and for home textiles. Your Company
 has also initiated measures that allow it to expand capacities by
 setting up subsidiaries and joint ventures, especially in the high
 potential area of garmenting.
 
 To capitalise on opportunities in the growing retail segment, your
 Company has set up Alok Retail (India) Ltd., a wholly owned subsidiary,
 that would manage the domestic retail initiatives through its ‘H&A’
 stores, twenty of which were in operation as on 31 March 2008. Your
 Company proposes to expand this business to a pan-India level within
 the current financial year.
 
 Simultaneously, among its international retail initiatives, your
 Company has invested in Grabal Alok (UK) Ltd (previously known as
 Hamsard 2353 Ltd), a UK based retailing company having 218 stores
 across England, Scotland and Wales, offering value for money and
 quality fashion for women, men, girls, boys and babies. After the
 acquisition, the stores are being refurbished and repositioned as Store
 Twenty One to move up the value chain from a discount retailer to a
 value retailer.
 
 Your Company, through its wholly owned subsidiary, Alok Industries
 International Limited (AIIL), signed an exclusive license agreement
 with Aisle 5, LLC with its portfolio of brands like aworld, Cotton +
 Clay etc. for distribution of home textile products to the US
 supermarket chains. This opens an exciting opportunity for a very large
 and hitherto untapped distribution channel in one of the largest home
 textile markets in the world.
 
 The Indian realty space offers exciting business opportunities, both
 for capital appreciation as well as for securing a stream of revenue.
 To leverage these opportunities, your Company has set up two wholly
 owned subsidiaries for its realty foray - Alok Infrastructure Pvt Ltd
 and Alok Land Holdings Pvt Ltd. These subsidiaries are currently
 involved in three projects, which have a total project cost of
 approximately Rs. 2,000 crore, which would be funded by a mixture of
 debt, equity and internal accruals.
 
 In addition, your Company has entered into an Agreement with the
 National Textile Corporation (NTC) to form a joint venture (JV) with
 51% share of NTC and 49% of your Company. The JV would undertake the
 development of New City Mills at Mumbai and Aurangabad Textile Mills at
 Aurangabad, totalling 33.7 acres of land, where garment units would be
 set up; the surplus land would be developed for textile related
 activities.
 
 More details about your Company’s business structure and initiatives
 are contained in the Management Discussion & Analysis.
 
 Awards and Recognition
 
 During the year under review, your Company has been given the following
 awards and recognitions:
 
 Of building and sustaining prosperity without depleting and despoiling
 nature. Your Company believes in ‘growing smart’, through investing in
 process innovations that lead to increased efficiency in the use of
 materials. Your Company has committed resources in aligning new, clean
 technology with production in order produce textiles without damaging
 or diminishing the natural environment. Your Company has a strong bias
 for active measures that help in the protection of the environment and
 goes beyond the levels demanded by regulation.
 
 Details of your Company’s Corporate Social Responsibility (CSR)
 initiatives are given in a separate section — ‘Corporate Social
 Responsibility’ — in the accompanying Management Discussion and
 Analysis.
 
 Corporate Governance
 
 A separate report on Corporate Governance is enclosed as a part of this
 Annual Report. A certificate from the Statutory Auditors of your
 Company regarding compliance with Corporate Governance norms stipulated
 in Clause 49 of the Listing Agreement is also annexed to the report on
 Corporate Governance.
 
 Fixed Deposits
 
 Your Company does not have any fixed deposits under section 58A and
 58AA of The Companies Act, 1956 read with Companies (Acceptance of
 Deposits) Rule, 1975.
 
 Insurance
 
 All the insurable interests of your Company including inventories,
 buildings, plant and machinery are adequately insured.
 
 Directors
 
 Mr. Timothy Ingram and Mr. Ashok B. Jiwrajka will retire from office by
 rotation at the ensuing Annual General Meeting and, being eligible,
 offer themselves for reappointment. Brief resumes of these Directors,
 in line with the stipulations of Clause 49 of the Listing Agreement,
 are provided elsewhere in this Annual Report.
 
 Directors’ Responsibility Statement
 
 As stipulated in Section 217(2AA) of the Companies Act, 1956, your
 Directors subscribe to the ‘Directors’ Responsibility Statement’ and
 confirm that:
 
 i) in the preparation of the annual accounts for the financial year
 ended 31 March 2008, the applicable Accounting Standards have been
 followed and there has been no material departure;
 
 ii) the Directors have selected such accounting policies and applied
 them consistently and made judgements and estimates that were
 reasonable and prudent so as to give a true and fair view of the state
 of affairs of your Company as at 31 March 2008 and of the profit of
 your Company for the year on that date;
 
 iii) 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
 your Company and for preventing and detecting fraud and other
 irregularities;
 
 iv) the Directors have prepared the annual accounts for the financial
 year ended 31 March 2008 on a ‘going concern’ basis.
 
 Auditors and Auditors’ Report
 
 The observations made in the Auditors’ Report are self-explanatory and
 therefore, do not call for any further comments under section 217(3) of
 the Companies Act, 1956.
 
 The statutary auditors of the company M/s. Gandhi & Parekh, retire at
 the conclusion of the ensuing Annual General Meeting of the company and
 being eligible offer themselves for re-appointment.
 
 Cost Auditor
 
 Pursuant to the directives of the Central Government under the
 provisions of Section 233B of the Companies Act, 1956 and subject to
 the approval of the Central Government, M/s B.J.D. Nanabhoy & Co., Cost
 Accountants, Mumbai have been appointed as Cost Auditors to conduct
 cost audit relating to the products manufactured by your Company.
 
 International Accountants
 
 Deloitte Haskins & Sells, Member – Deloitte, Touche & Tohmatsu
 International (DTTI) appointed as International Accountants of your
 Company have submitted the report to the Board of Directors for the
 year under review and the same forms a part of this report for the
 information of members. They have also recast the Indian accounts as
 per the International Accounting Standards (IAS).
 
 Human Resources
 
 The information required on particulars of employees as per Section
 217(2A) of the Companies Act, 1956, read with Companies (Particulars of
 Employees) Rules, 1975 forms part of this report. However, as per the
 provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the
 Report and Accounts are being sent to all shareholders of your Company
 excluding the Statement of Particulars of Employees. Any shareholder
 interested in obtaining a copy of the said statement may write to your
 Company Secretary at the Corporate Office of your Company.
 
 More details on the Human Resources function of your Company and its
 various activities are given in the ‘Human Resources” section of the
 attached Management Discussion & Analysis.
 
 Your Directors appreciate the significant contribution made by the
 employees to the operations of your Company during the year.
 
 Conservation of Energy, Technology absorption, Foreign Exchange
 earnings and outgo
 
 The particulars as prescribed under Section 217(1)(e) of the Companies
 Act, 1956, read with the Companies (Disclosure of Particulars in the
 Report of the Board of Directors) Rules, 1988 are attached as Annexure
 ‘A’ to this report.
 
 Acknowledgements
 
 Your Directors wish to place on record their appreciation of the
 dedication and commitment of your Company’s employees to the growth of
 your Company. Your Directors wish to thank the Central and State
 Governments, Financial Institutions, Banks, Government authorities,
 customers, vendors and shareholders for their continued cooperation and
 support.
 
                                       For and on behalf of the Board
 
 Place: Mumbai                               Ashok B. Jiwrajka
 Dated: September 02, 2008                   Executive Chairman