Your Directors present the 38th Annual Report of your Company for its
 financial year ended 30th June 1996.
 
                                                     Rupees in `000
 
 FINANCIAL RESULTS                                     1996      1995
 
 Sales & Service                                    228,989   384,964
 Less :
 Cost of Sales & Services                           145,991   268,392
 Operating Expenses                                  47,922    71,102
 General Administration & Selling Expenses           36,387    58,299
 Research & Development Expenses                      8,883     6,189
 Interest & Financial Charges                       109,002    98,533
 Total Expenses                                     348,185   520,535
 Gross Profit/(Loss)                               (119,196) (117,571)
 Other Income & Sundry Credits (Net)                 16,812    76,419
 Prior Period Income/Expenses)                          147   (22,080)
 Depreciation                                        28,624    29,183
 Provision for Taxation                                   -         -
 Net Profit/(Loss) for the year                    (130,861)  (92,415)
 
 
 In view of absence of profits, your Directors do not recommend any
 dividend for the year under review, and no amount is therefore,
 transferred to the Balance Sheet as at 30th June 1996 to Reserves.
 
 PERFORMANCE
 
 It may be recalled at the outset that the Company had embarked upon an
 export led marketing strategy in the context of liberalization and
 Company's products having being found acceptable with OEMs and Textile
 Mills of developed countries in terms of performance, quality and
 price.  To that end, the Company has spent both directly and through
 its subsidiaries Rs. 80 million over the last 4 years for export market
 and product development and succeeded in establishing our
 competitiveness in the international market.  Whereas the Directors
 were as a result of the above, confident to start to reap the benefit
 our said investments, the efforts of the Company have been thwarted on
 account of the pressures exercised by the German Technical
 collaborators, their Indian Associates and certain machinery makers
 being either their licencees or influenced by them.  Regrettably thus,
 in the last 3 years, this has mainly as narrated below, contributed to
 substantial reduction of the Company's turnover.  
 
 The scheme for amalgamation of erstwhile SITEL with this Company,
 prepared by the Industrial Development Bank of India (IDBI) as the
 Operating Agency was sanctioned by the Board for Industrial & Financial
 Reconstruction (BIFR) on 10th March 1995 with retrospectively effect
 from 1st March 1994.  The scheme had projected sizable internal
 accruals for the Company during the Financial Year 1994-95 and the year
 in question, on the basis of the sales projections that took into
 account the marketing arrangements and agreements that the Company had
 entered into with international Original Equipment Manufacturers (OEMs)
 of spinning machinery, other textile mill groups, representatives,
 agents including our UK & USA subsidiary Companies.
 
 As the concerned major European OEMs were forced to cancel their wide
 ranging export contracts with the Company, and consequently reneging on
 the cooperation agreements that they had entered into with the Company,
 the projections for wide-ranging export of the Company's products could
 not be achieved resulting in unavoidable losses.  The Company had not
 reckoned that the Company's Technical Collaborators of such
 international repute would indulge in business practices that are
 totally unacceptable in business parlance.  In addition in view of the
 large scale violations of the Collaboration agreement by non-supply of
 effective and complete know-how, training etc., besides the deliberate
 and specific mis-representation by the Technical Collaborator, the
 Company was forced to carry out wide-ranging technological
 developmental work on its own for market acceptability of the products
 in question, thus losing substantial time and money.
 
 Had the Company not been forced to face the totally unwarranted and
 violative acts as aforesaid on the part of the Company's Technical
 Collaborator, their Indian Associates, Agents and certain machinery
 manufacturers, the Company would have by achieving its sales
 projections, well have withstood the losses due to the floods at Baroda
 factory in September 1994 and due to the textile industry's reduced
 demand.  The adverse effect of the overall liquidity crises that Indian
 Industries suffered during 1995 and 1996 also did not help the Company
 to retrieve its position particularly in the context of the scheme for
 amalgamation, under which the Company had to take over substantive
 liabilities.  Alas therefore, the highly synergistic and beneficial
 amalgamation has turned unsuccessful otherwise.
 
 After June 1996 too, the Company is continuing to face the liquidity
 crunch and the effect of the Collaborators actions.  Production at
 break-even level has not been maintained and all out efforts have been
 undertaken to retrieve the situation by taking strategic measures that
 include modification of the BIFR's amalgamation scheme for the SITEL
 units and implementation of a total restructuring and re-engineering
 programme with drastic measures.  Your Directors are sanguine that the
 operations of the Company will return to normalcy within a period of 6
 months, once the Company's proposals with regard to the modified
 amalgamation scheme on the basis of the restructuring and
 re-engineering scheme are accepted.
 
 MODIFICATION TO THE BIFR'S AMALGAMATION SCHEME (FOR ERSTWHILE SITEL)
 
 The net worth of the Company as at 30th June 1996 has been eroded by
 more than 50% and therefore, the provisions of Sec. 23(1) of the Sick
 industrial Companies (Special Provision) Act, 1985 have been attracted.
 However subsequent to 30th June, 1996 soon thereafter, due to the
 mounting losses and erosion of `Goodwill' for the reasons outlined
 earlier, the Company's net worth has become negative and the Company
 appears to have attracted the provision of sec. 3(1)(O) of the said
 `SICA'.  Directors have decided therefore as a prudent course of
 action, to seek the reference to the BIFR to safeguard the interest of
 the Company, its shareholders, workers & creditors apart from taking
 consequential measures for restructuring the Company.  An extra
 Ordinary General Meeting of the Company is also being called seeking
 the approval at members of this action.  As the Members are informed,
 SITEL has been amalgamated with the Company vide the Order of BIFR
 dated 10th March 1995, with retrospective effect from 1st March 1994.
 Since the original Scheme for SITEL of its amalgamation as sanctioned
 by BIFR could not be implemented fully, under agreement of all
 concerned, BIFR directed at its meeting held on 16th October 1996, that
 a modified scheme of amalgamation be prepared by IDBI, in its capacity
 as the Operating Agency for the Company.  Accordingly, IDBI was
 directed to submit a modified scheme based on the proposals submitted
 by the Company after arriving at a consensus with Banks, etc. at a
 Joint meeting.  This joint Meeting was held on 5th February, 1997 and
 the modified scheme incorporating the promoters' contribution, the need
 based credit requirements for SITEL units to be provided by banks and
 the revised schedule of repayment of dues to Banks & Institutions was
 agreed upon by all the participants after the long term viability of
 the Company was established.  As per the modified scheme, the promoters
 had agreed to arrange to bring in substantial funds to the extent of
 Rs.33 Crores mainly through external financing, but also by sale of
 surplus assets.  However the external funds were subject to the support
 of the SITEL Bankers for the Dombivli and Nasik units of SITEL.  This
 modified scheme was submitted by IDBI to the BIFR in April 1997.
 
 The modifications inter alia included further funding of interest dues
 to the SITEL Banks and Institutions upto 30th June 1996 and
 reschedulement of their loans and funded interest.  Also specifically
 as per the said consensus at the joint meeting, the Banks were required
 to provide need-based working capital of Rs.242 Lacs, term Loan of
 Rs.105 Lacs and deferred payment guarantee of Rs.430 Lacs.  Of these,
 60% share had been taken by Bank of India, the main Banker of the
 Company, though it was not the banker of the SITEL units but of APS
 only.  This initiative on the part of Bank of India was motivated by
 its anxiety to hasten early normalcy returning to the working of the
 Company.
 
 The Banks of SITEL although earlier had agreed to take over the balance
 40% as per the said consensus and the discussions at the previous BIFR
 hearing and although, the terms and conditions for the sharing of
 securities and charges between Bank of India and the SITEL banks were
 finally settled after prolonged discussions, have, for reasons best
 known to them, chosen to back out from providing their share of 40% of
 the said facilities for the SITEL units.  As a result of this and the
 delay of over a year, Bank of India too has been forced to withdraw its
 approval for its share of 60% of the said facilities.
 
 In the context of the above, the Company would be submitting fresh
 proposal to the BIFR apart from the application under section 15 of the
 SICA, as referred above, for permitting the Company's promoters to
 bring in such minimum funds, including for working capital, which would
 permit operations of the Company to be performed at optimum and
 profitable, level, particularly in the context of the potential orders
 for Company's products in the domestic and international market.  Your
 Directors are confident that on the basis of these revised proposals
 and the re-engineering and restructuring of the activities to normalise
 the Company's operations particularly with the support of the APS'
 major bank within the next 6 months, the Company's financial structure
 would once again get strengthened within 2 years thereafter.
 
 As reported in the Director's Report for the financial year 1994-95,
 the Company has disposed of its Unit IV at Dombivli and shifted its R &
 D activities to other units.  The Dombivli Unit is closed since 1st
 March 1996, and the Nasik unit has been closed from 12.10.97.  The
 Lease rights of Mumbai Corporate Office at Dhanraj Mahal are under
 sale/disposal as directed by the BIFR and consequently the functions of
 the Corporate Office are under transfer to the Unit at Vadodara.
 
 In the context of the modified scheme for BIFR not providing any levy
 of penal interest on overdue payments even to secured creditors the
 Company is seeking waiver from payment of the same with the lenders,
 hence the same has not been provided.  Attention is drawn to note no.
 2(b) in the accounts.
 
 ERSTWHILE SITEL'S MATTERS IN CONNECTION WITH ALGERIA PROJECT
 
 With regard to the case at Delhi High Court on the invocation by SITEL
 of performance guarantee issued by Som Datt Builders (SDB), the Court
 had given an interim injuction, subject to SDB keeping the guarantee
 extended till such time that the case is finally disposed of.  The
 appeal filed by the company against this court injuction is still
 pending disposal.
 
 As regards the arbitration proceedings between SDB and the Company,
 arguments have been concluded by SDB before the Arbitrators and your
 Company has commenced the same.  It is expected that the proceedings
 may conclude in the next 4 to 5 months.
 
 CURRENT STATUS OF COLLABORATION AGREEMENTS SKF-TEXTILMACHINEN KOMPONTEN
 GmbH (`SKF')
 
 SKF having conceded during the discussions that there have been
 breaches, have sought to compensate the Company against premature
 cancellation of the Technical Collaboration Agreement with the Company
 valid for a period of 10 years as from 12th September, 1989.  The
 Company in view of the resultant adverse effect that this will have on
 the textile industry which it has serviced for 35 years, has correctly
 perceived the premature cancellation as an attempt to dominate the
 market through the back door, without redressal of the genuine
 grievances of the Company.  It may be mentioned that after the time SKF
 as collaborators divested their shareholding, in the Company, they have
 withheld effective and complete know-how including continuing know-how
 and new or improved designs.  They have also not provided any training
 and technical support as required under the Agreement.  The Company has
 substantiated claims worth several crores on SKF both against their
 violations of the Technical Collaboration Agreement, besides for their
 violative trade practises in India.  In view of the above position, the
 Company has not paid and provided royalty and know-how fees amounting
 to Rs. 41.56 Lacs being not payable.
 
 CHEMNITZER SPINNEREIMASCHINENBAU GmbH  (`CSM')
 
 CSM reneged on the several agreements executed with your Company due to
 certain internal and external influences brought on them.  As a result
 of the above, claims have been raised by the Company on CSM which has
 reacted with counter-claims.  A Settlement Agreement is now in an
 advanced stage of finalisation with the new management of CSM.  The
 claims of your Company on CSM have therefore not being given effect to
 in the accounts.
 
 GROSSENHAINER TEXTILEMASCHINENBAU GmbH (`GROSSENHAINER') &.
 SPINDELFABRIK NEUDORF GmbH (`NEUDORF')
 
 A comprehensive MOU was executed between your Company and its associate
 Star Spin & Twist Machineries Ltd. on the one hand and Neudorf and
 Grossenhainer on the other hand.  Accordingly, Neudorf was to supply
 heavy duty spindles and inserts to the Company and the Company would
 supply light duty spindles and other components to Neudorf.  Also,
 Grossenhainer was to purchase several components and machinery
 aggregates for their speed frames from the Dombivli unit, for which
 purpose they had stationed a German technical expert in our plant.
 Again, as a result of certain internal and external influence the said
 arrangements have not been given effect to.  In the meantime,
 Grossenhainer has been merged with CSM.  On the Settlement Agreement
 being reached with CSM, it is proposed to settle also the disputes that
 have arisen with Neudorf, which, now once again is interested in
 building constructive relationships with us and the Company's foreign
 subsidiaries.
 
 SUBSIDIARIES
 
 Pursuant to Sec. 212 of the Companies Act 1956 relating to subsidiary
 companies viz. Star of Gujarat Textile Mills Ltd. (SOGTM), the accounts
 are enclosed.  The SOGTM has considerable asset value based on present
 market value of its land including surplus land as assessed by the
 Gujarat Government.
 
 The subsidiary StarWorId-Technologies & Trade Ltd., UK (SWTT) together
 with its subsidiary StarWorld-USA, Inc. have made considerable market
 inroads both with OEMs and Textile Mills in Europe and USA.  Once the
 restructuring and re-engineering scheme with the sanction of BIFR and
 the concerned Banks and Institutions is put into effect and our
 operations normalised, the Company would be able to take advantage of
 substantive potential orders for the export market.
 
 DEPOSITS
 
 Your Company has not accepted or renewed any deposits during the year
 under review.  Deposits of Rs. 11.56 Lacs from depositors remain
 unclaimed as on 30th June 1996.
 
 INSURANCE
 
 All the properties of your Company have been adequately insured.
 
 DIRECTORS
 
 Mr. M. C. Shah and Mr. C. P. Shah resigned from the Board of Directors
 of your Company effective from 1st July 1996 and 14th October 1996
 respectively. Mr. D. M. Popat also ceased as Director of the Company
 w.e.f. 1st August 1996. Mr. J. S. Pant was appointed as an Alternate
 Director for Vice Adm. Ravi Sawhney and automatically ceased as such,
 on arrival of Vice Adm. Ravi Sawhney to the State.  The Directors take
 on record their profound and valuable services and contributions
 rendered by them throughout their association with the Company. Mr.
 Suresh Talwar resigned from the Board effective from 1st July 1996,
 however, to avail of the benefit of his wide experience, he was
 appointed as an Alternate Director for Mr. Tapan Mehta, and
 automatically ceased as such on, arrival of Mr. Tapan Mehta to the
 state.  He has now been appointed as Alternate Director for Mr.Suresh
 A.Seshan.  Mr. Paramjeet Singh Patheja was appointed as Director to
 fill in the casual vacancy caused due to the resignation of Mr. C. P.
 Shah, but ceased as such w.e.f. 31st March 1997.  Mr. Suresh A.
 Seshan, Mr. Inder Chand Jain and Mr. Tapan Mehta, Directors retiring by
 rotation eligible and willing to be re-appointed, have been reappointed
 at the 38th Annual General Meeting of the Company held on 31st March
 1997.
 
 Mr. Suresh Mehta has been appointed as the Managing Director of the
 Company for a period of five years w.e.f. 23rd September 1996.
 Requisite resolution has already been passed at the 38th Annual General
 Meeting held on 31st March 1997.
 
 This is further to report that all the managerial personnel viz., Mr.
 Suresh Mehta, Managing Director, Ms. Chinmayi Mehta, Mr.P.D. Takalkar
 and Mr. Ramesh Verma, Wholetime Directors, have willingly waived their
 right to receive any salary for a period of six months beginning from
 1st October, 1996 in the wider interest of your.  Company due to
 financial crunch.  The Board of Directors at its meeting held on the
 16th September, 1997 have accepted with profound regret the
 resignations of Wholetime Directors Ms. Chinmayi Mehta and Mr. Ramesh
 Verma as from 17th September 1997 and 11th October 1997 respectively
 and taken on record their dedicated services with personal sacrifices
 in the difficult times of the Company and their invaluable contribution
 to the Company over the years.  The tenure of Mr. P D Takalkar as
 Director (Technical) has been extended for 3 more years upto 30th June
 2000 and that of Mr. Ramesh Verma as Director (Finance) upto 10th
 October 1997.
 
 PARTICULARS OF EMPLOYEES
 
 As required under the provisions of Sec. 217(2A) of the Companies Act
 1956 read with the Companies (Particulars of Employees) Rules, 1975,
 the requisite particulars of such employees are set out in Annexure `A'
 to this Report and forms an integral part of this Report.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS & OUTGO
 
 Particulars under Sec. 217(1)(e) of the Companies Act 1956 read with
 the Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988 are disclosed in Annexure `B' to this Report and
 forms an integral part of this Report.
 
 AUDITORS' REPORT
 
 Notes to the accounts are largely self-explanatory to the comments of
 the Auditors in their Report.
 
 AUDITORS
 
 Messrs. Nanubhai & Co., Chartered Accountants, Mumbai, Auditors of the
 Company, retire at the conclusion of this Meeting.  Being eligible,
 they have expressed their willingness for re-appointment, certifying
 that their re-appointment, if made, shall be within the limits
 prescribed under Sec. 224(1B) of the Companies Act, 1956.
 
 APPRECIATION
 
 Your Directors take on record their appreciation and thanks to all the
 well wishers more particularly the shareholders, customers, suppliers,
 financiers, banks, financial institutions, NBFCs, State Governments of
 Gujarat, Maharashtra and Karnataka, Central Government, more
 particularly the BIFR and IDBI as its Operating Agency and Bank of
 India and United Bank of India as the main bankers for their rational
 and constructive support to the Company.  Your Directors also put on
 record the appreciation of the co-operation and sacrifices of all the
 workers, employees, officers and executives of your Company in trying
 period, through which the Company has been passing.
 
 I. CONSERVATION OF ENERGY
 
 a) The Company has taken several steps/measures for conservation of
 energy like -
 
 i) Only those machines are run which can give maximum out-put in view
 of limited requirement of production.  Balance machine kept idle.
 
 ii) Wastage of compressed air reduced by new fittings.
 
 iii) Re-allocation of lighting arrangement done.
 
 b) Additional investments and proposals, if any, being implemented for
 reduction of consumption of energy.  On Account of low production no
 additional investments and proposal done.
 
 c) Impact of measures at (a) and (b) for reduction of energy
 consumption and consequent impact on the cost of production of goods.
 
 As a result of above steps, energy saving upto around 6% is achieved.
 
 d) As per Form `A'
 
 FORM - B
 
 1. RESEARCH & DEVELOPMENT (R&D)
 
 i) Specific areas in which R&D carried out by the Company.
 
 a) New product developed to take care of local as well as export
 market.
 
 b) New (design) drafting components for Ring and Speed frame have been
 already designed.
 
 c) To achieve better quality, time to time development work is being
 done so that quality improvement is achieved.
 
 ii) Benefits derived as a result of above R&D.
 
 Quality improvement, saving in foreign exchange and penetration in
 overseas market.
 
 iii) Future Plan of Action.
 
 We shall continue our efforts to develop new techniques, in order to
 further improve quality of our existing products and through research
 and development activities, we would develop new products to meet
 indigenous and overseas market.
 
 iv) Expenditure on R&D                              Rs. in Lacs
 
                                                 1996       1995
 
 a) Capital                                         -          - 
 b) Recurring                                   17.08     163.26
 c) Total                                       17.08     163.26
 d) Total R&D expenditure as a percentage of 
     total turnover                              0.73       4.33
 
 
 2. TECHNOLOGY ABSORPTION & INNOVATION
 
 i) Efforts in brief, made towards technology absorption and 
 innovation :
 
 Having vast experience in the manufacturing in the field of textile
 machinery components and with the help of available know-how, the
 Company can produce various design of drafting components and meet
 requirement of machinery manufacturers world wide.
 
 ii) Benefits derived as a result of above efforts :
 
 Quality improvement, import substitution, reduction in cost and
 improvement in existing products etc.
 
 iii) Information regarding technology imported during the last five
 years :
 
 Sr.   Technology Imported     Year of     Has Technology  
 No.                           Import      been fully absorbed
 
 
 1.    Spindle Inserts HF-21,  1989-90     Yes, to the extent drawings
       HZ-21 and HC-21         1990-91     and know-how were provided 
                                           to us  
 
 
 2.    Spindle Inserts HF-1/   1992-93     Yes to the extent drawings  
       HZ-1                                and know-how were 
                                           provided to us
 
 3.    Spindle Inserts HF-3/   1991-92     Technology was absorbed to
       HZ-3                                the extent of the drawings/
                                           know-how provided only for
                                           spindle inserts of type HF-30. 
    
 4.    Spindle Inserts HF-/    1992-93     Whatever know-how was given  
       HZ-4                                has been fully absorbed.  
                                           However, detailed technical
                                           data with regard to marketing
                                           application has not been 
                                           provided inspite of repeated
                                           requests by the company.  As
                                           a result of this, technology
                                           absorption for this has been
                                           slowed down and is still in 
                                           progress.                  
                 
 5.   Spindle Inserts HF/HZ-5  1991-92     Technology absorption inspite
      series of Two for One                of know-how not provided by
      Twister and Heavy                    the Collaborators, has been  
      duty Spindles                        finally and fully accomplished
                                           by the Company's own 
                                           development efforts and with
                                           the help of Star Spin & Twist
                                           Machineries Ltd.  
                                             
 
 Sr. If technology not fully absorbed the
 No. reasons thereof and future plan of action
 
 1.  It has come to light that vital know-how/technical information was 
     withheld by the Collaborators and inspite of repeated requests, the
     drawings and technical know-how pertaining to the same were not
     provided by the Collaborators.  Also, no continuing know-how and
     training to the Company's technical team at the collaborators works
     for which the company has paid royalty was given by the
     Collaborators.  By the Company's own R&D department's efforts the
     additional designs/developments have been/are being resolved
     and achieved.
 
 2.  It has come to light that vital know-how/technical information was
     withheld by the Collaborators and inspite of repeated requests, the
     drawings and technical know-how pertaining to the same were not
     provided by the Collaborators.  Also, subsequently design improvements
     and modifications made by the Collaborators, which should have
     been provided to the company have not been given in violation of
     the terms of the Technical Collaboration Agreement.  Furthermore,
     no continuing know-how and training to the company's technical
     team at the collaborators works for which the company has paid
     royalty was given by the Collaborators.  By the Company's  own
     R&D department's efforts the additional designs/developments have
     been/are being resolved and achieved.
 
 3.  Under the series HF-3, although the company was entitled to all
     inserts under this category including type HF-33, HF-35 and others,
     know-how provided only for the same have been withheld inspite of 
     repeated requests to the Collaborators.  By the Company's own R&D 
     department's efforts the additional designs/developments have 
     been/are being resolved and achieved.
 
 4.  The company is making its own development efforts to achieve
     full absorption.
 
 
 3. FOREIGN EXCHANGE EARNINGS AND OUTGO
 
 a) Company has made sincere efforts to increase export of products by
 introduction of new products and improvement of quality would widen
 global market.
 
 b) Total foreign exchange used and earned.          Rs. in lacs
 
                                            1995-96      1994-95
 
 i)  Used                                     84.86       650.79
 
 ii) Earned                                  132.72       524.18