Celebrity Fashions

The Directors hereby present the 19th Annual Report along with the
 Audited Financial Statements of the Company for the year ended 31st
 March 2008.
 
 Industry Overview
 
 The year 2007-2008 proved to be an exceptional year for the textile &
 garment industries of some countries & tumultuous for others. On one
 hand countries like China & Vietnam had a very excellent year, on the
 other hand countries like India had declining figures.
 
 The textile & garment industry in India had to face the contentious
 issue of the appreciation of the rupee. The rupee has appreciated by
 nearly 15 percent in the last one & half year which has severely
 affected the competitiveness of the textile & garment industry.
 
 India recorded a decline of 12 percent in dollar terms & 20 percent
 decline in rupee terms in the first half of the current fiscal. The
 biggest decline to the tune of 29.13 percent was witnessed in export of
 Man-Made Fibre garments corresponding to the previous year. Export of
 cotton textiles also declined by 16.62 percent.
 
 Business Overview
 
 After the acquisition of the MEPZ plant in 2006-07, your Company had to
 face big challenges for integrating the Plant into the mainstream. Two
 principal customers insisted upon re-qualifying process, which resulted
 in underutilization of capacities in the acquired plant in the initial
 periods. To compensate, your company started sourcing Low Margin Orders
 to have the capacity filled in the short run. Even though the MEPZ
 Plant qualified for the two customers, one of them had run into
 problems in their own backyard in US because of slow down and hence cut
 down on the orders at MEPZ. This was a period when the company has
 indicated capacity bookings. The last minute withdrawal proved costly
 as the a customer acquisition in the field extends to periods varying
 from 8 to 24 months.
 
 During the same period, your company also made a strategic decision to
 convert the Apparel Park Unit - Jwala at Irrungattukkottai into a
 Bottoms Plant against the original plan of manufacturing shirts. This
 was done looking at the Opportunities in Bottoms post quota regime
 wherein China is under strict norms. The Jwala Plant started commercial
 production during January 2007.
 
 FY 2006-07 was characterized by underutilization of capacities and
 slower ramp up both at MEPZ and at new plant resulting in business loss
 even though the turnover of the overall entity grew from Rs 160 Crores
 to 333 Crores.
 
 Present Scenario:
 
 The apparel industry in general and your Company in particular is
 facing Business / Environmental Challenges on Exports mainly on account
 of Strengthening of INR against USD, Slowing down of US Economy
 resulting in shrinkage of Orders and Thinning margins as same Cutmake
 to meet the growing labor and other costs.
 
 Your Company has clearly recognized that the performance of the
 acquired plant at MEPZ-SEZ as the single biggest factor for the losses
 in the last year two years. Performance at MEPZ Plant was affected
 mainly on account of: Operational Costs and efficiencies at the Plant
 not in line with the businesses and margin realizations;
 Non-replacement of high and lower margin businesses and Severe drop in
 Operational Efficiencies while integrating the Staff and Management at
 the acquired Plant.
 
 In view of the above, your Company has been reporting losses in the
 Exports Division for the past six quarters.
 
 Even though your Company was facing challenges on the Exports front,
 Company has been witnessing a significant growth in Indian Terrain.
 Brand Indian Terrain has grown by over 17% as compared to last year.
 Indian Terrain has added nearly 20 Own Stores during the year. Indian
 Terrains presence is felt at over 400 outlets across the nation.
 
 Your Management has realized that for the Indian Terrain brand to reach
 its full potential it would need significant investment in Retail
 space, Advertising, Expansion of Product width and a deeper Management
 band width. Domestic apparel market is on full swing with rising income
 levels of individuals and growth of organized retail sector and Indian
 Terrain has much to be part of the same.
 
 Hence your Company has very clearly formatted its strategy to reduce
 the Companys dependence and exposure on the Exports front and invest
 and grow more deeply in the Indian market through Own retail brand.
 
 As part of the strategy, MEPZ Plant which was operating on double shift
 has been converted into single shift plant in a phased manner. This
 will bring down the manpower and other variable costs significantly.
 The attempt is to bring the costs in line with the planned revenues.
 Further the management of these optimized levels of production will
 drive up the efficiencies in operations.
 
 Indian Terrain will be opening Exclusive Branded Outlets in
 non-traditional locations to grab the opportunities. Indian Terrain has
 launched its foray in to the Womens Wear segment by the launch of
 Womens Wear during May 2008.
 
 The brand values of Indian Terrain are substantial. Your Companys
 turnaround strategies reflect the managements responses to the
 changing Business Environments. This success of the strategy would
 definitely improve the valuations of the Company as a whole.
 
 Financial Snapshot
 
 The Companys Income from Operations was at Rs.332.34, as compared to
 the previous years figure of Rs.332.90 crores.
 
 Loss before tax and prior period adjustments stood at Rs.19.30 crores
 as against Rs.6.39 crores in the previous year Net loss after provision
 for taxes but before prior period items is at Rs. 19.60 crores as
 against Rs.4.85 crores last year.
 
 Financial Performance 
                                                        (Rs. In lakhs)
 
                                                 2007-2008   2006-2007
 
 Income From operations                          33,234.20   33,289.80
 Gross Profit / (Loss) Before
 Interest & Depreciation                          1,012.35    1,869.51
 Interest                                         1,928.69    1,566.29
 Profit /(Loss) Before
 Depreciation & Tax                                (916.34)     303.22
 Depreciation                                     1,013.88      942.38
 Profit/(Loss) Before Tax                        (1,930.22)    (639.16)
 Provision for Taxation                              29.70     (153.96)
 Profit / (Loss) After Tax                       (1,959.92)    (485.20)
 Provision with respect to Earlier Year                  -       64.96
 Net Profit / (Loss) after Tax                   (1,959.92)    (550.16)
 Balance brought forward from last year           1,654.39    2,204.55
 Total amount available for Appropriation          (305.53)   1,654.39
 Appropriations
 Balance carried to Balance Sheet                  (305.53)   1,654.39
 
 Sale of Jwala Plant at Irrungattukottai
 
 The management upon reviewing the opportunities in the textile sector
 decided to sell its undertaking, Jwala, situated at Irrungattukottai on
 a going concern basis by way of slump sale. Accordingly, your Company
 entered into an agreement with M/s. Jeans Knit Private Limited for the
 sale of the plant.  The effective date of transfer of the plant is 1st
 April 2008. The value of assets to be transferred in the sale amounts
 to Rs.35.79 crores as at 31st March 2008.
 
 MEPZ Plant - Suspension of Operations during May 2008
 
 The management of your Company has been taking a series of measures to
 reduce the operating losses and then to streamline the MEPZ Plant in
 all respects to align it to the current business potential and
 revenues. The major actions include: Conversion of the Plant into
 Single Shift from current double shift operations; Manpower
 rationalization and re- location; Reduction in managerial staff and
 supervisory staff; Reasonable increments for Workers for FY 2008-09
 with no increments for Staff including factory staff. This action of
 the Management were not supported by a portion of the workers who
 started indulging in alleged Low productivity which resulted in Wastage
 of Raw material; Short Shipments and Production delays resulting in air
 freights.
 
 Also, some of the workers have taken objection to re-location and has
 resorted to stoppage of work in our Product Development Centre. This
 spread to other areas of the factory resulting in Unjustified and
 illegal strike by 20% of the workers and the balance on tool down
 strike inside the factory. The factory management made all earnest
 efforts and attempts in convincing the workers to restore normalcy but
 the results were in vain. Considering this, the management out of
 painful necessity decided to suspend the Plant operations in May 2008.
 
 The plant resumed operations from 4th June 2008 and over 170 workers
 were removed from the payroll of the Company.  But on a positive note,
 the elimination of shift operations has been done straightaway while
 re-opening the plant instead of doing in a phased manner.
 
 Finance and Accounts
 
 The Company has incurred business loss for the year and hence there is
 no provision for income tax.
 
 The Company has not availed any credit facilities from any institutions
 during the year and has repaid loans to an extent of Rs.17.61 crores.
 
 The Company has not accepted any deposits within the meaning of Section
 58A and 58AA of the Companies Act, 1956.
 
 Share Capital
 
 During the year, the Company pursuant to ESOP 2005 Scheme has allotted
 22,600 equity shares on conversion of options exercised by the
 employees. Consequently, the Share Capital has increased by Rs.2.26
 lakhs.
 
 Dividend
 
 In view of the business loss for the year, no dividend is being
 recommended
 
 Personnel
 
 The Board wishes to piace on record its appreciation to all the
 employees in the Company for their sustained efforts and contribution
 for the operations of the Company.
 
 Directors
 
 The whole time Directors have been accorded approval for payment of
 minimum remuneration under Section 198(4) read with Section II of Part
 II of Schedule XIII of the Companies Act, 1956, consequent to which the
 terms of appointment has been fixed for 3 years effective from 1st
 April 2006. Due to inadequacy of profits, The Board of Directors at its
 Meeting held on 13th December 2007 approved on recommendation of the
 Remuneration and Compensation Committee and subject to the approval of
 Members in the ensuing Annual General Meeting, modified the
 remuneration of the whole time Directors of the Company with effect
 from 01st January 2008 as Rs.24.00 lakhs per annum for each of the
 whole time Director as against Rs.42.00 lakhs per annum earlier.
 
 Mr. P.S. Raman, Mr. N.K. Ranganath and Mrs. Nidhi Reddy were appointed
 as directors in the 17th Annual General Meeting held on 14th September
 2006.
 
 Pursuant 1o Section 255 of the Companies Act, 1956, Mr. N.K.  Ranganath
 and Mr. P.S. Raman, retire by rotation at the ensuing Annual General
 Meeting and being eligible, offer themselves for re-appointment.
 
 Auditors
 
 M/s Anil Nair & Associates, Chartered Accountants, Chennai and M/s
 CNGSN & Associates, Chartered Accountants, Chennai, the Joint Auditors
 of the Company, retire at the ensuing Annual General Meeting and are
 eligible for re- appointment.
 
 Corporate Governance Report and Management Discussion and Analysis
 Statement A report on Corporate Governance is attached to this Report
 as also a Management Discussion and Analysis statement.
 
 Particulars as per Section 217 of the Companies Act, 1956 A) Pursuant
 to the requirement of Section 217 (2AA) of the Companies Act, 1956 and
 based on the representations received, your Directors hereby confirm
 that:
 
 i.  In the preparation of the Annual Accounts for the year ended 31st
 March 2008, the applicable Accounting Standards have been followed and
 there are no material departures;
 
 ii. The Directors have selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Company at the end of the financial year and of the profit or
 loss of the Company for that period;
 
 iii. The Directors have taken proper and sufficient care for
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities;
 
 iv. The Directors have prepared the Annual Accounts on a going concern
 basis.
 
 B) The Particulars of employees, as required under Section 217 (2A) of
 the Companies Act, 1956 are given in a separate statement attached to
 this Report and forms part of it. However as per Section 219(1 )(b)(iv)
 of the Companies Act, 1956, this Report and accounts are being sent to
 all the shareholders of the Company excluding the statement of
 particulars of employees under Section 217(2A) of the Companies Act,
 1956. Any Shareholder interested in obtaining a copy of the said
 statement may write to the Company Secretary of the Company and the
 same will be mailed
 
 C) The information pursuant to Section 217 (1) (e) of the Companies
 Act, 1956 read with Companies (Disclosure of Particulars in the Report
 of the Board of Directors) Rules, 1988 is given below:
 
 i.  Conservation of Energy:
 
 The operations of the Company are not energy- intensive. However,
 wherever possible, the Company strives to curtail the consumption of
 energy on a continuing basis.
 
 ii.  Technology absorption: Not applicable.
 
 iii.  Foreign Exchange Earning and Outgo:
 
 Total Foreign exchange earned (FOB Value) Rs.25,396.20 lakhs
 
 Total Foreign exchange outgo Rs.  9,850.48 lakhs
 
 Employee Stock Option Plan
 
 The particulars of ESOP Scheme 2005 which are provided as per the SEBI
 ESOP Guidelines, forms part of this report.
 
 Appreciation
 
 Your Directors are sincerely thankful to you - the esteemed
 shareholders, customers, business partners, financial / investment
 institutions and commercial banks for the faith reposed and valuable
 support provided by them in your Company and its Management.
 
                                        For and on Behalf of the Board
 
                                           V Rajagopal
 Chennai, 30th June 2008                   Chairman & Managing Director