1. Fixed Assets:
 
 1. The Deductions Includes Rs. 162.75 Lacs Being Reallngment Gain
 Of Foreign Currency Loans Accounted As Per Consistent Accounting
 Policy.
 
 2. Some Of The Fixed Assets Acquired From Welspun India Ltd. During The
 Year 2000-01 Pursuant To Scheme Of Arrangement Are Possessed, Owned And
 Used But Yet To Be Transferred In Companys Name.
 
 1. Previous years figures have been regrouped, rearranged or recast
 wherever considered necessary. Figures in bracket in these notes
 pertain to the previous year.
 
 2. Share Capital (Schedule 1):
 
 The terms of redemption of Preference shares outstanding are as under:
 
 a. 30,000 (30,000) 13% Redeemable Cumulative Preference Shares of
 Rs.100/- each fully paid up are redeemable at par in two equal annual
 installments commencing from 31st December, 2001. However, these shares
 are yet to be redeemed as rescheduling is awaited.
 
 b. 30,000 (30,000) 13.50% Redeemable Cumulative Preference Shares of
 Rs. 100/- each fully paid up are redeemable at par in two equal half
 yearly installments of Rs. 15.00 lacs on 30th September, 2003 and Rs.
 15.00 lacs on 31st March, 2004. These shares are yet to be redeemed.
 
 c. 3,00,000 (3,00,000) 12.50% Redeemable Cumulative Preference Shares
 of Rs.100/- each fully paid up are redeemable at par in three equal
 annual installments commencing from 27th November, 2010.
 
 d. (i) 500,000 (500,000) 0% Redeemable Preference Shares of Rs. 100/-
 each fully paid up are redeemable at par in the year 2009-2010 or after
 repayment of all outstanding term liabilities and preference shares
 held by Banks and Financial Institutions as on 01.04.2000 and interest
 and dividend there on which ever is later.
 
 (ii) 20,00,000 (20,00,000) 0% Redeemable Preference Shares of Rs. 100/-
 each fully paid up are redeemable at par on or before a period of 20
 years from 31.03.2002 being the date of allotment.
 
 e. 1,50,000 (1,50,000) 12.5% Redeemable Cumulative Preference Shares of
 Rs.100/- each, is redeemable in three equal annual installments
 commencing from 8th April 2004.
 
 f. 1,20,00,000 (1,20,00,000) 13% Redeemable Cumulative Preference
 Shares of Rs.10/- each, is redeemable in three equal annual
 installments commencing from 8th April, 2005.
 
 g. 45,000 (45,000) 10% Redeemable Preference Shares of Rs. 100/- each
 fully paid up are redeemable at par in installments of Rs. 15.00 lacs
 each on 30.09.2006,11.04.2007 and 31.03.2008.
 
 3. Secured Loans (Schedule 3):
 
 a) 9% (13.50%) Secured Redeemable Non-Convertible Debentures (NCD) of
 Rs.108.30 lacs are redeemable in 19 quarterly installments from 2004-05
 to 2008-2009.
 
 b) 0% Secured Redeemable Non-Convertible Debentures (NCD) of Rs. 105.90
 lacs are redeemable at par in four equal annual installments starting
 from 15.04.2012.
 
 c) 0% Secured Redeemable Non-Convertible Debentures (NCD) of Rs. 275.14
 lacs are redeemable at par in two equal annual installments starting
 from 01.03.2009 with proportionate redemption premium of 30% in each
 installment.
 
 d) 0% Secured Redeemable Non-Convertible Debentures (NCD) of Rs. 514.67
 lacs are redeemable at par in three equal annual installments starting
 from 01.03.2013 with proportionate redemption premium of 20% in each
 installment.
 
 e) 0% Secured Redeemable Non-Convertible Debentures (NCD) of Rs. 549.90
 lacs are redeemable at par in two equal annual installments starting
 from 01.03.2009 with proportionate redemption premium of 30% in each
 installment.
 
 f) The debentures including interest thereon are secured by way of
 first charge on entire fixed assets of the company ranking pari-passu
 subject to prior charge on specific assets for certain term loans and
 on current assets as per (i) below for borrowing from banks for working
 capital finance.
 
 g) Term loans from Banks and Financial Institutions are secured by way
 of first charge on entire fixed assets, both present and future,
 ranking parri passu, subject to prior charge on specific assets and on
 current assets as per (i) below against borrowing from banks for
 working capital requirements and by way of exclusive charge on the
 specified moveable assets in favour of companys lenders. Certain loans
 are also collaterally secured by certain shares owned by the group
 companies.
 
 h) Foreign currency loan of Rs. 968.06 lacs (Rs. 1,762.48 lacs) from
 banks with interest thereon is secured by exclusive charge on specific
 assets subject to prior charge on current assets in favour of companys
 bankers for working capital facilities out of which Rs. NIL (Rs. 522.36
 lacs) are also partly secured by bank guarantee, which in turn is
 secured by first parri passu charge on entire fixed assets of the
 company.
 
 i) The working capital loans including packing credit loans from banks
 are secured by hypothecation of raw materials, finished and semi
 finished goods, stores and spares and book debts of the Company and
 second charge on entire fixed assets of the company.
 
 j) All the above secured loans are personally guaranteed by the
 promoter director(s) of the company.
 
 k) All the long term debts and working capital facilities including
 interest are also guaranteed by Welspun India Ltd. as per scheme of
 de-merger 4. a. Capital commitment not provided for Rs.22.83 Lacs
 (Rs.60.92 lacs), net of Advance.
 
 b. Future liability of Lease Rentals is Rs. 305.25 lacs (Rs. 427.35
 lacs) on Machinery on Lease finance.
 
 5. In view of accumulated losses, Debenture Redemption Reserve of Rs.
 82.33 Lacs (Rs.39.631acs) up to 31.03.2004 is not created.
 
 6. Current liabilities include, cheques overdrawn balances of Rs.32.89
 lacs (Rs.593.78 lacs).
 
 7. a) Rs. 162.75 lacs being net profit (Rs. 63.13 lacs) and Rs. 122.89
 Lacs (Rs. 152.82 lacs) being net profit on account of exchange
 difference have been adjusted to the cost of fixed assets/capital work
 in progress and respective heads of account in profit and loss account,
 respectively.
 
 b) Rs. 5.45 lacs (Rs.53.58 lacs) being net gain on account of premium
 in respect of forward contracts will be recognised in the profit and
 loss account in subsequent year.
 
 8. Prior period expenses of Rs. 18.28 Lacs (Rs. 16.72 lacs) and income
 of Rs. 9.30 lacs (Rs. 64.65 lacs) are included in respective heads of
 expenses and income in the Profit & Loss Account.
 
 9. The company has set up its plant in the State of Gujarat and the
 Industries Commissioner, Gujarat has issued a provisional eligibility
 certificate for an adhoc amount of Rs. 1,506.00 lacs under the
 Incentive Scheme 1995 issued by the Government of Gujarat. Against
 this, the company have availed sales tax exemption of Rs. 2,628.59
 lacs till 31.03.2004 as per its eligibility and in anticipation for
 issue of final eligibility certificate, as it has complied with all the
 requirements for this purpose. In case certificate is not issued or is
 deficient in amount, the company may be liable to pay the amount
 utilized in excess of the eligibility finally granted with
 consequential interest, if any.
 
 10. Contingent liabilities not provided for :-
 
 a. Disputed demands from excise and sales tax authorities of Rs. 173.66
 lacs (Rs.175.32 Lacs).
 
 b. The long-term debts and working capital loans granted to M/s.
 Welspun India Ltd. by Banks and Financial Institutions are guaranteed
 by the Company including pursuant to the scheme of arrangement.
 Outstanding loan balances as on 31.03.2004 is Rs. 16,550.48 lacs (Rs.
 18,044.53 lacs).
 
 c. Export obligation in respect of custom duty exemption availed under
 EPCG Scheme Rs. 1,868.20 lacs (Rs. 1,758.56) and under advance licence
 Rs. 9.53 lacs (Rs. Nil).
 
 d. Guarantees given by banks Rs. 83.84 lacs (Rs. 28.84 lacs).
 
 e. The accumulated dividend of Rs. 1,140.18 lacs (Rs. 915.47 lacs)
 payable on cumulative Redeemable Preference shares.
 
 f. Bills discounted with Bank Rs. 130.56 lacs (Rs. 990.47 lacs)
 
 g. The lenders right to recompense for the concessions granted to the
 company pursuant to the scheme of arrangement approved by the Gujarat
 High Court for its financial restructuring, amount unascertained.
 
 11. Taxation:
 
 a. In view of the brought forward losses and other deductions available
 to the company, no tax payable works out under the provisions of Income
 Tax Act, 1961, hence no provision for taxation for the year is made.
 
 b. The component of deferred tax balances provided as on 31.03.2004 in
 accordance with the Accounting Standards - 22 Accounting for Taxes on
 Income issued by the Institute of Chartered Accountants of India are
 as under:
 
 i. Deferred Tax Assets arising out of timing difference in:
 
                                                             Rs. in lacs
                                                  2003-04        2002-03
 
 Brought forward fiscal allowances               3,214.43       3,214.84
 
 Other timing differences                           69.02          68.02
 
 Total                                           3,283.45       3,282.86
 
 ii. Deferred Tax Assets arising out of timing difference in:
 
                                                             Rs. in lacs
 
 Fiscal allowance on fixed assets                2,639.28       2,480.01
 
 Total                                           2,039.29       2.480.01
 
 12. Leases:
 
 a. Finance Lease: The Company had expensed out the lease rentals for
 the assets acquired on lease prior to 01.04.2001 as permitted under
 AS-19 Leases. The company has not acquired any assets under finance
 lease during the year.
 
 Fixed assets taken on Finance Lease prior to 1st April, 2001 amounted
 to Rs. 742.97 lacs. Future obligation towards lease rentals under the
 lease agreements as on 31st March, 2004 amounts to Rs. 305.25 lacs
 (Rs. 427.35 lacs).
 
                                                         Rs. in lacs
                                                  2003-04        2002-03
 
 Within one year                                   122.10         122.10
 
 Later than one year and not later                 183.15         305.25
 than five years
 
 Later than five years                                NIL            NIL
 
 TOTAL                                             305.25         427.35
 
 b. Operating Lease The Company leases office and residential facilities
 under operating lease agreements that are renewable on a periodic basis
 at the option of both the lessor and the lessee. The initial tenure of
 lease is generally for eleven months. The minimum rental payments
 under the operating leases that have initially or remaining
 non-cancelable lease term as at 31.03.2004 as per contracts is as
 under:
 
 - Not later than one year Rs. 4.70 lacs
 
 - Later than one year and not later than five years Rs.1.18 lacs
 
 The aggregate rental expenses of all the leases for the year are Rs
 25.53 lacs (Rs. 25.72 lacs)
 
 13. The company owes Rs. 0.19 lacs outstanding for more than 30 days at
 balance sheet date to M/s. Abba International, a party covered under
 Small Scale and Ancillary Industrial Undertakings Act, 1993. The
 above information has been determined to the extent such parties have
 been identified on the basis of information available with the company.
 This has been relied upon by the auditors.
 
 14. a. In the opinion of Board of Directors, the current assets, loans
 and advances have the value at which they are stated in the balance
 sheet, if realised in the ordinary course of business, except otherwise
 stated.
 
 b. Sundry debtors include overdue outstanding from various parties
 aggregating to Rs. 1,766.59 lacs. The company is following up with the
 concerned parties and the management is of the opinion that the overdue
 outstanding debtors are fully recoverable. Hence the amount is
 considered good and recoverable.
 
 c. Debit and Credit balances are subject to confirmation and
 reconciliation.
 
 15. Related party disclosures
 
 Related parties with whom transactions have taken place during the year
 and balances outstanding as on the last day of the year.
 
 Companies over which the directors have significant influence or
 control Welspun Gujarat Stahl Rohren Ltd.
 
 Eupec Welspun Pipecoatings India Ltd.
 
 Welspun India Ltd.
 
 Welspun Syntex Ltd
 
 Welspun Trading Ltd.
 
 Vipuna Trading Ltd.
 
 Goodvalue Polyplast Ltd.
 
 Mertz Securities Ltd.
 
 Directors
 
 B. K. Goenka
 
 R. R. Mandawewala
 
 M. L. Mittal
 
 The directors sitting fees paid Rs. 0.39 lacs
 
 (Rs. 0.31 lacs)
 
 16. The entire operations of the Company relates to only one segment
 viz. Yarn. As such there is no seperate reportable segment under
 Accounting Standard on segment reporting as legally advised by the
 expert.
 
 17. Additional information pursuant to Part II of Schedule VI of the
 Companies Act, 1956.
 
 a) Licensed & installed Capacity of Cotton Yarn
 
 Licensed     Not applicable
 
 As per the Industrial Policy declared In July 1991, as amended in April
 1993, no licences are required for the products manufactured by the
 company. Instilled (p.a.) 20502 MT (18430 MT) (as certified by the
 management)