RSWM

Dear Shareholder,
 
 The Financial Year of 2008-09 has been an exceptionally challenging one
 across the global economy. What started off as turmoil in the financial
 sector of the advanced economies has snowballed into the deepest and
 most widespread financial and economic crisis of the last 60 years.
 With all the advanced economies in a synchronised recession, global GDP
 is projected to contract for the first time since the World War II,
 anywhere between 0.5 - 1 percent (As per March 2009 forecast of the
 International Monetary Fund. The World Trade Organisation has forecast
 that global trade volume will contract by 9 per cent in 2009.
 
 The Governments and Central Banks around the world have responded to
 the crisis through both conventional and unconventional fiscal and
 monetary measures.  Initiatives to stanch the bleeding include public
 capital injections, an array of liquidity facilities, monetary easing
 and fiscal stimulus packages. At the same time, there is continued
 debate on the adequacy of the fiscal stimulus packages across
 countries, and their effectiveness in arresting the downturn, reversing
 job losses and reviving consumer confidence. At the recent meeting in
 early April 2009, the G20 leaders collectively committed to take
 decisive, coordinated and comprehensive actions to revive growth,
 restore stability of the financial system, restart the impaired credit
 markets and rebuild confidence in financial markets and institutions.
 
 The acute degree of stress in mature markets and its concentration in
 the banking system has impacted the capital flows to emerging
 economies. The flight to safety of the capital and return of home bias
 has had major impact on the worlds major currencies.  Since September
 2008, the US Dollar, Euro and Yen have all strengthened in real
 effective terms. The Chinese Yuan and currencies pegged to the USD
 (includin those in the Middle East) have also appreciated.  Like all
 emerging economies, India too has been impacted by the crisis. The
 extent of impact has caused dismay, mainly on two grounds: first,
 because our financial sector remains healthy, has had no direct
 exposure to tainted assets and its off-balance sheet activities have
 been limited; and second, because Indias merchandise exports, at less
 than 15 percent of GDP, are relatively modest.  Despite the adverse
 impact, there are several comforting factors that have helped to India
 weatherthe crisis.
 
 1. Our financial markets, (Banks particularly), have continued to
 function normally.
 
 2. Indias comfortable foreign exchange reserves provide
 confidence in ourability to manage our balance of payments
 notwithstanding lower export demand and dampened capital flows
 
 3.  Headline inflation, as measured by the wholesale price index, has
 declined sharply.  Consumer price inflation too has begun to moderate.
 
 4.  Because of mandated agricultural lending and social safety-net
 programmes, rural demand continues to be robust.
 
 The growth rate of Indian economy has slowed down to 6.7 percent for
 2008-09 against 9 percent in 2007-08. India is back in the
 trillion-dollar economy club, thanks to the GDP growth and the recent
 rise in the value of rupee against that of dollar. This may be an
 indication that the economic slowdown may be less harsh in the coming
 months ard there may be a beginning of upturn. The Rs.3,00,000 crore
 stimulus package, the loan waiver of Rs.70,000 crore for the farmers, a
 raise in the salaries of government officials, and the development work
 on National Rural Employment Scheme have helped the cause of the GDP
 growth. An increase in the growth of consumption by the government has
 also contributed to the growth rate.
 
 The FY 2008-09 has been a year of dampened sentiments and demand, which
 has dented corporate margins while the uncertainty surrounding the
 crisis has affected business confidence. Risinc economic slack has
 contained wage increases and eroded profit margins.  Investment demand
 has also decelerated. The demand for working capital finance during
 January-March 2009 from external sources has dropped due to slowdown in
 business, decline in commodity prices and drawdown of inventories, even
 as the availability of finance eased.
 
 The effects of the worldwide recession, dampened sentiments and demand,
 had major impact on the Indian Textile Industry. The textile exports
 from India were drastically reduced, which affected your Company as
 well, as exports had been \ accounting for around 50 percent of the
 revenues in the past few years.  Inspite of that your Company was able
 to sell its production in the I Domestic markets but at far lower
 realisation. j Consequently, your Companys financial; performance
 suffered during the year. The details are given in the chapter on
 Management Discussion and Analysis, including what RSWMs Management
 proposed to do to lift its performance in 2009-10.
 
 Going forward, we hope that bold policy implementation that are able to
 convince markets of decisive handling of the financial strains can
 revive confidence and spending commitments.  Still even with strong
 efforts by policymakers, financial market will take time to stabilize.
 Financial strains in the mature markets are projected to remain heavy
 until well into 2010.  Emerging and developing countries are expected
 to face curtailed access to external financing in 2009 and 2010. Fiscal
 deficits are expected to widen sharply in both advanced and emerging
 economies, as governments are assumed to implement fiscal stimulus
 plans in G20 countries amounting to 2 percent of GDP in 2009 and 1.5
 percent in 2010.
 
 In this era of exceptional uncertainty, there is a need to pool in all
 the resources at disposal and at the same time conserve resources at
 hand. I am sure the Management will rise to the occasion and deliver.
 
                                               With best wishes.
                                              Ravi Jhunjhunwala
                                                       Chairman