The directors have pleasure in presenting the 34th Annual Report
 together with the Audited Accounts for the year ended on 31st March,
 2004 and Auditors' Report thereon:
 
 FINANCIAL RESULTS :                                        (Rs.in Lacs)
 
 PARTICULARS                                       Current     Previous
                                                   Year        Year
 
 Operating and other Income                        26897.52    22635.53
 Profit before Financial Expenses
 and Depreciation                                   3251.82     2987.72
 Financial Expenses                                 1522.65     2031.32
 Profit before Depreciation                         1729.17      956.40
 Depreciation                                       1718.69     1570.15
 Profit/(Loss) before tax                             10.48    (613.75)
 Provision for tax                                     0.90        0.18
 Profit/(Loss) after tax                               9.58    (613.93)
 Less : Tax liability of earlier years written back    0.62        5.29
 Add : Balance brought forward                    (6757.72)   (6149.08)
 Balance carried to Balance Sheet                 (6747.52)   (6757.72)
 
 SEGMENT REPORTING :
 
 We wish to inform you that the requirement of Accounting Standard AS-17
 is not applicable to the company as the main business activities of the
 company falls under single segment namely yarn.
 
 REVIEW OF OVERALL PERFORMANCE
 
 The company has performed reasonably well during the year under review.
 During the year the total turnover of the company was Rs. 268.98 crores
 as against Rs. 226.36 crores in the previous year. The Company has
 produced 20769 MTs of yam as against 18636 MTs of yam in the previous
 year and sold 21042 MTs of yarn as against 18740 MTs of yarn in the
 previous year. Your company has earned profit before depreciation of
 Rs. 1729.17 lacs as against Rs. 956.40 lacs in the previous year and
 net profit of Rs. 9.58 lacs as against net loss of Rs. 613.93 lacs in
 the previous year. The overall improvement in the performance of the
 company was as a result of various factors such as adequately coverage
 of raw material at reasonable prices, improved operational
 efficiencies, development of new markets & products, close monitoring
 of cash flows, cost effective borrowings and better management of
 working capital.
 
 Due to depressing sentiments prevailing in the yarn segment in the
 current financial year the prices of cotton yarn had become weak and as
 a result of which the margin are squeezed. It is expected that this
 situation will improve and every effort is being made to diversify
 company's sales both locally and internationally. Barring unforseen
 circumstances, your company is expected to sustain its performance.
 
 DIVIDEND
 
 Due to inadequate profit your directors do not recommend dividend for
 the year ended on 31st March, 2004.
 
 CONVERSION OF 100% EXPORT ORIENTED UNIT INTO EPCG SCHEME
 
 As the members are aware that the company had set up a spinning unit
 namely Arham Spinning Mills under EOU scheme at Village Jalalpur,
 Chandigarh - Ambala Road, Lalru, P.O. Dappar, Distt. Patiala (Punjab)
 for the manufacturing and export of cotton yarn. Keeping in view the
 benefits available under EPCG scheme, the company had converted its
 100% EOU into EPCG scheme w.e.f. 23rd December, 2003.
 
 PUBLIC DEPOSITS
 
 During the year the company has not accepted any Deposit within the
 meaning of section 58-A of the Companies Act, 1956 and the rules made
 thereunder.
 
 DIRECTORS
 
 Sh. Dinesh Oswal, Sh. L.C. Gupta and Dr. O.P. Sahni, Directors of the
 Company shall retire by rotation and being eligible offer themselves
 for re-appointment.
 
 IFCI Limited has withdrawn the nomination of Sh. Kamal Kishore from
 Board of directors of the company w.e.f. 8th June, 2004. Your directors
 place on record their appreciation for the valuable services rendered
 by Sh. Kamal Kishore during his tenure with the company as a director.
 
 AUDIT COMMITTEE
 
 The company has constituted an audit committee pursuant to the
 provisions of section 292A of the Companies Act, 1956 and Clause 49 of
 the Listing Agreement. The audit committee consist of Sh. Dinesh Gogna
 and Sh. Amarjeet Singh as members and Dr. (Mrs.) H. K. Bal is the
 Chairperson of the committee.
 
 DIRECTORS RESPONSIBILITY STATEMENT
 
 The Board of Directors of your company state :
 
 i) that in the preparation of the annual accounts, the applicable
 accounting standard had been followed alongwith proper explanation
 relating to material departures;
 
 ii) that the directors had selected such accounting policies and
 applied them consistently and made judgements 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/loss of the company for that period;
 
 iii) that the directors had 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
 the company and for preventing and detecting fraud and other
 irregularities;
 
 iv) that the directors had prepared the annual accounts on a going
 concern basis.
 
 AUDITORS AND AUDITOR'S REPORT
 
 M/s. Raj Gupta & Co., Chartered Accountants, Auditor of the company
 retire at the conclusion of the forthcoming Annual General Meeting and
 being eligible offer themselves for re-appointment. The company has
 received a certificate from the Auditors as required under Section 224
 (1-B) of the Companies Act, 1956 to the effect that their appointment,
 if made, would be within the limits specified in the said section. The
 Auditor's Report on the accounts of the company is self explanatory and
 requires no comments.
 
 COST AUDITORS
 
 M/s. Ramanath Iyer and Co., Cost Accountants, New Delhi have been
 appointed as the Cost Auditor in respect of Spinning Unit for the year
 2004-2005 and their report will be submitted to the Department of
 Company Affairs, Ministry of Finance, Government of India in accordance
 with the requirements of law.
 
 LISTING
 
 The Company's equity shares shall continue to be listed at The Stock
 Exchange, Mumbai (BSE) and National Stock Exchange (NSE). The company
 has applied to Ahmedabad Stock Exchange (ASE), Delhi Stock Exchange
 (DSE), Ludhiana Stock Exchange (LSE) and Jaipur Stock Exchange (JSE)
 for delisting of equity shares under SEBI (Delisting of Securities)
 Guidelines, 2003. ASE has delisted the equity shares of the company
 with effect from 8th July, 2004. The consent from DSE, LSE and JSE
 regarding delisting of equity shares is awaited. The Company has paid
 listing fee upto the financial year 2004-2005.
 
 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE
 EARNINGS AND OUTGO
 
 The information in accordance with the provisions of Section 217(1)(e)
 of the Companies Act, 1956 read with Companies (Disclosure of
 Particulars in the Report of Board of Directors) Rules, 1988 regarding
 conservation of energy, technology absorption and foreign exchange
 earnings and outgo is given in Annexure-I to this report.
 
 CORPORATE GOVERNANCE REPORT
 
 The company continues to follow the principles of good corporate
 governance. The corporate governance report alongwith auditor's
 certificate regarding compliance of the conditions of corporate
 governance as stipulated in clause 49 of the Listing Agreement with the
 stock exchanges, is attached herewith.
 
 PARTICULARS OF EMPLOYEES
 
 None of the employees of the company is covered under section 217(2A)
 of the Companies Act, 1956 read with the Companies (Particulars of
 Employees) Rules, 1975.
 
 INDUSTRIAL RELATIONS
 
 Industrial relations throughout the year continued to be very cordial
 and satisfactory.
 
 ACKNOWLEDGEMENT      
 
 The directors wish to place their sincere appreciation for the
 assistance and co-operation received from financial institutions, banks
 and shareholders during the year under review. Your directors also
 place on record their appreciation for the devoted services of the
 employees of the company during the year under review.
 
                                         For and on behalf of the Board
 
 Place : Ludhiana                                     JAWAHAR LAL OSWAL
 Dated : 30th July, 2004                                       Chairman
 
 ANNEXURE-I TO THE DIRECTORS' REPORT
 
 Disclosure of particulars with respect to conservation of energy,
 technology absorption, foreign exchange earnings and outgo as required
 under the Companies (Disclosure of Particulars in the report of Board
 of Directors) Rules 1988.
 
 FORM-B
 
 Form for disclosure of particulars with respect to Technology
 Absorption and Research & Development (R&D).
 
 (A) RESEARCH & DEVELOPMENT (R&D)
 
 i) Specific Area in which R&D was carried out:
 
 a) The Company is continously making efforts for adoption of latest
 technology by continuous R&D work and innovative manufacturing.
 
 b) Research and Development facility with latest technology to monitor
 entire production and quality of yarn.
 
 ii) Benefits derived as a result of the above R&D:
 
 Better quality of yarn have been achieved.
 
 iii) Future Plans:
 
 We have planned to further strengthen R&D Deptt. to produce better
 quality of yarn as well as to meet future challenges.
 
 iv) Expenditure on R&D
 
                                              (Rs. in Lacs)
 
 a) Capital               :                        Nil   
 b) Recurring             :                        Nil
    Total                                          Nil
 
 (B) TECHNOLOGY ABSORPTION.ADAPTION AND INNOVATION
 
 i) The Company has been making efforts for absorption of latest
 technology. The latest generation of quantum clearers with
 contamination control channel are being installed to make contamination
 free yarn suitable for export.
 
 ii) Benefits derived as a result of above efforts due to adoption of
 latest technology.
 
 The Company has achieved improvement in quality and lower cost of
 production.
 
 iii) Information regarding technology imported during the last five
 years.
 
 Imported Technology                Year of      Whether fully
                                    Imports      absorbed
 
 Particulars of Technology-
 Imported during the last
 5 years Technical consultancy        N.A.            N.A.
 personnel training in India
 and abroad for improvement in
 quality & productivity
 
 4. FOREIGN EXCHANGE EARNINGS AND OUTGO :
 
                                     Current Year    Previous Year
 
 I)  Earnings [FOB value]            2225.71         2498.45
     (Rs. in lacs)
 
 II) Outgo (Rs. in lacs)              685.24          495.48
 
                                         For and on behalf of the Board
 
                                                      JAWAHAR LAL OSWAL
                                                               Chairman
 Place: Ludhiana
 Dated: 30th July, 2004