Alok Industries

1.  The Company in accordance with the resolution passed by members by
 way of Postal Ballot on 14th February 2008 issued for cash on
 preferential basis 1,98,00,000 warrants to the Promoter Group of the
 Company, which are convertible into equity shares. The warrant holder
 have the option of subscribing for one equity share of the Company of
 Rs. 10/- each per warrant at a price of Rs.102/- per share, (including
 premium of Rs. 92/- per share), determined in accordance with the SEBI
 guidelines, at any time within 18 months from the date of allotment of
 the Warrants, in two stages viz. (a) 98,00,000 Warrants to be converted
 into Equity Shares on or before 31 March,2009, against which entire
 issue price has been received and these warrants were converted into
 equity shares on 28 April 2008 and (b) 1,00,00,000 Warrants to be
 converted into Equity Shares on or before 31 July 2009, against which
 10% of the issue price has been received in previous year and Rs.91.80
 crore being brought in as share application money which has been
 treated as the balance 90% amount payable upon exercising of the option
 of conversion of warrants into equity shares. The said application
 money has since refunded at the request of the warrant holder.
 
 2.  475 FCCBs (previous year 475 FCCBs) are carried forward from
 earlier year and pending conversion/ redemption as at the year end
 aggregating Rs. 121.00 crore (Previous Year Rs. 94.87 Crore) are
 disclosed under Unsecured Loans (Schedule 4).  The total proceeds on
 this account have been fully utilised during the earlier years.
 
 3. The Company during the year mainly capitalised Spinning unit (Phase
 III) and Power Plant 18 MW and Texturising at Saily, Dadra and Nagar
 Haveli .
 
 Pre-operative expenses included in Capital work in progress (Schedule
 6) represent the direct expenses incurred for projects undertaken by
 the company which are yet to be commissioned. Such pre-operative
 expenses mainly pertain to plants/building under erection/construction
 at units located at Vapi and Silvassa to be capitalised on completion
 of the project at that location.  The details of pre-operative expenses
 are as under :
 
 4.  Employee benefit plans:
 
 a.  Defined contribution plans:
 
 Amounts recognized as expenses towards contributions to provident fund,
 superannuation and other similar funds by the Company are Rs. 9.54
 Crore (Previous Year Rs. 4.79 crore) for the year ended 31March 2009.
 
 b.  Defined benefit plans:
 
 a) Gratuity Plan: The Company makes annual contribution to the
 Employees Group Gratuity Assurance Scheme, administered by the Life
 Insurance Corporation of India (LIC), a funded defined benefit plan
 for qualifying employees. The scheme provides for lump sum payment to
 vested employees at retirement, death while in employment or on
 termination of employment of an amount equivalent to fifteen days
 salary payable for each completed year of service or part thereof in
 excess of six months.  Vesting occurs on completion of five years of
 service.
 
 b) Compensated absences: Employees entitlement to compensated absences
 in future periods based on unavailed leave as at balance sheet date, as
 per the policy of the Company, is expected to be a long term benefit
 and is actuarially valued.
 
 5.  In the opinion of the Board, carrying value of all Current assets,
 loans and advances and other receivables is not less
 
 than their realizable value in the ordinary course of business.
 
 6.  Provision for Income Tax of Rs. 32.98 crore (previous year Rs.
 33.67 crore) has been computed on the basis of Minimum Alternate Tax
 (MAT) in accordance with Section 115JB of the Income Tax Act, 1961, in
 view of deductions available to the company. Considering the future
 profitability and taxable positions in the subsequent years, the
 company has recognized MAT credit entitlement amounting to Rs. 28.65
 crore (Previous year Rs. 4.12 crore), aggregating to Rs. 33.88 crore
 (previous year Rs. 5.23 crore), as an asset by crediting the Profit and
 Loss Account for an equivalent amount and disclosed under Loans and
 Advances (Schedule 11) in accordance with the Guidance Note on
 Accounting for credit available in respect of Minimum Alternate Ta x
 under the Income Tax Act, 1961 issued by The Institute of Chartered
 Accountants of India.
 
 7.  Excess provision for dividend of earlier year of Rs. 0.17 crore
 (Previous Year Rs. 0.19 cores) [including dividend tax Rs. 0.02 crore
 (Previous year Rs. 0.03 crore)] represent the difference between the
 amount provided and paid considering the legal opinion obtained by the
 company and the amount finally paid on the shares allotted as on
 outcome of conversion of FCCBs.
 
 8. The company has invested in a subsidiary company viz; Alok
 Industries International Limited aggregating to Rs 368.12 Crores
 (Previous year Rs. 344.29 Crores) (including share application money)
 as at year end, which is a strategic long-term investment.
 
 a) The subsidiary company has made investment in Alok European Retail,
 s.r.o. (AER), a 100% subsidiary, of Rs. 0.06 crores and granted an
 advance aggregating Rs. 0.74 crores. As per the audited financials
 statements as at March 31, 2009, the AER has incurred losses. The
 subsidiary company, for the time being, does not intend to continue
 with the business plans of investing further in this subsidiary and out
 of abundant caution, has made provision towards diminution in the value
 of investment of Rs. 0.06 crores and for doubtful advances Rs. 0.74
 crores which would be adjusted, if any, based on future operational
 results of the subsidiary company. Accordingly, the investment in and
 advances to such subsidiary stand fully provided for.
 
 b) The subsidiary company has made investment in its subsidiary viz;
 Mileta, a.s. aggregating Rs. 39.80 crores Previous year Rs. 20.47
 crores] and given interest free loan aggregating Rs. 58.24 crores
 [Previous year Rs. 24.96 crores] which is outstanding as at the year
 end. Mileta has accumulated losses at the year end. However, it
 continues to have positive net worth. The subsidiary company has
 embarked upon renovation of the basic production facilities and expects
 to achieve higher turnover, reduced costs and consequently the
 profitability. On that basis, investment in Mileta and the loan amount
 as at the year end is considered good and recoverable.
 
 c) The subsidiary company has investment in an associate viz; Grabal
 Alok (UK) Limited aggregating to Rs.  34.71 crores Previous year Rs.
 22.16 crores] (including share application money) which is a strategic
 long- term investment. The company has also invested Rs. 38.06 crores
 [Previous year Rs. Nil] in another associate viz; Grabal Alok
 International Limited and given interest free loan of Rs. 16.73 crores)
 [Previous year Rs. 29.84 crores], which has entirely invested such
 amounts in Grabal Alok (UK) Limited. Based upon the financial support
 of Alok and the future growth plan of embarking upon more trendy stores
 and wider reach in the market by opening new stores, though the net
 worth at the year end had been eroded. The said company continues to
 implement the growth plans with aggressive cost reduction programs
 which is expected to yield positive results. Accordingly the directors
 of that company expect the initiative to deliver the expected sales
 growth and profitability in the subsequent years. On that basis, in the
 opinion of the Company, the aforesaid investments and the loan amounts
 outstanding as at March 31, 2009 are considered good and recoverable.
 
 d) Advance subscription by subsidiary company towards investments
 includes:
 
 (i) Rs. 6.67 crores being subscription money paid by the subsidiary
 towards equity capital of Aisle 5 LLC (Aisle5), which is the business
 of development, marketing and licensing of trade brands, in respect of
 which the shares are yet to be allotted. Aisle5 has incurred losses
 during the year and has accumulated losses at the year end as per the
 unaudited financials compiled by the management. However, it continues
 to have positive net worth and expects to achieve higher sales on the
 basis of the client-wise projections prepared by its management which
 will result into profits in the following one or two years.  On that
 basis, in the opinion of the Subsidiary Company, the advance given to
 Aisle5 as at March 31, 2009 is considered good.
 
 (ii) Rs. 38.21 crores, being subscription money paid to PowerCor LLC
 towards 5% Group B Membership
 
 interest, which is considered by the subsidiary to be a strategic
 investment.  The membership interest is yet to be allotted. The said
 company is yet to commence its operations and has exclusive rights to
 market, commercialise and sell specific software used in development
 and implementation of certain products. On that basis, in the opinion
 of the Company, the aforesaid subscription advance is considered as
 good.
 
 On the above basis in opinion of the Company the investment in
 subsidiary company viz Alok Industries International Limited is
 considered good.
 
 9. a) The Company, during the year based on the Announcement of The
 Institute of Chartered Accountants of India “ Accounting for
 Derivatives” along with the principles of prudence as enunciated in
 Accounting Standard 1 (AS-1) “Disclosure of Accounting Polices” has
 accounted for derivative
 forward contracts at fair values. On that basis, changes in the fair
 value of the derivative instruments as at 31 March 2009 aggregating to
 Rs. 16.85 crore (previous year Rs. 9.95) have been debited to the
 Profit and Loss Account. The charge on account of derivative losses has
 been computed on the basis of MTM values based on the report of counter
 parties.  b) Derivative contracts entered into by the company and
 outstanding as on 31March 2009 For hedging currency and interest rate
 related risks Nominal amounts of derivative contracts entered into by
 the company and outstanding as on 31 March 2009 amount to Rs. 169.36
 crore (previous year
 
 10 The Company during the previous year consequent to the damage caused
 to the assets by fire at its Texturising unit located at Silvassa,
 computed the loss of such assets in accordance with the terms of the
 policy and submitted the claim together with the details to the
 surveyors of the insurer for an amount aggregating to Rs.217.72 Crore
 including for loss of profit and accounted the same in the books of
 account.
 
 During the year, the insurer released payment of Rs. 25 Crore (Previous
 Year Rs. 110.00 Crore) (including for loss of profit) pending
 finalisation of the claim which has been adjusted to the claim
 receivable to that extent and the balance claim receivable of Rs. 80.63
 Crore (Previous Year Rs. 90.74 Crore) is carried forward under Loans
 and Advances (Schedule 11) which would be adjusted on receipt of the
 final claim amount.
 
 11 The company in accordance with the resolution passed by members by
 way of postal ballot on 28th November, 2008 hived off its retail
 business to a 100% subsidiary, namely Alok Retail (India) Limited
 w.e.f.1st December, 2008.
 
 12.  In line with the notification dated 31March 2009 issued by the
 Ministry of Corporate Affairs, amending Accounting Standard (AS) 11 –
 Effect of changes in Foreign Exchange Rates, the Company has chosen
 to exercise the option under paragraph 46 inserted in the Standard by
 the notification.
 
 Accordingly with retrospective effect from 1 April 2007 exchange
 differences on all long term monetary items are:
 
 a.  To the extent such items are used for financing fixed assets, added
 to/subtracted from the cost of those fixed assets and depreciated over
 balance useful life of the asset.
 
 b.  In other cases accumulated in the Foreign Currency Monetary Item
 Translation Difference Account and amortised over the balance period
 of such long term monetary item but not beyond 31 March 2011.  In
 effect of the above the company has i) Added to General Reserve
 Rs.24.78 crore (net of tax Rs. 14.95 crore) which was recognised in the
 Profit & Loss Account in previous financial year ended 31 March 2008.
 ii) Added to fixed assets/ capital work-in-progress Rs. 166.46 crore
 being exchange difference on long term monetary items relatable to
 acquisition of fixed assets.  iii) Charged to Profit & Loss Account Rs.
 6.55 crore.  iv) Carried forward Rs. 11.20 crore in the Foreign
 Currency Monetary Item Translation Difference Account being the
 bamount remaining to be amortised as at 31 March 2009.
 
 As a result of the above change in Accounting Policy the net profit
 before tax for the year is higher by Rs. 152.19
 
 crore (net of tax Rs. 100.46 crore).
 
 13.  The amounts in balance Sheet, Profit and Loss account and cash
 flow statement are rounded off to the nearest lakh and denominated in
 crore of rupees.