Welspun India

1.  Contingent Liabilities not provided for :
 
                                                          Rs. Million
                                                        As at      As at
                                                     March 31,  March 31,
                                                         2008       2007
 
 Excise, Customs and Service Tax
 
 Alleged excess clearance of cotton 
 yarn in Domestic Tariff Area over                     18.50      17.56
 and above the limit specified in 
 para 9.9 (b) of the Exim Policy 1997-
 2002. The Company has deposited 
 Rs. 0.70 million under protest and
 filed an appeal with the Customs, 
 Excise and Service Tax Appellate
 Tribunal (CESTAT), Ahmedabad against 
 the order passed by Commissioner (Appeals) 
 of Central Excise and Customs.
 
 Alleged manufacture and clearance of 
 texturised yarn without payment of 
 excise duty and without entering into 
 statutory records. Further,                            12.76     12.45
 there was an alleged shortage of Polyester 
 Texturised yarn in physical stock as 
 compared to the stock as per statutory records.
 
 Alleged excess claim of excise rebate
 under Central Excise Rules                               -       63.37
 over and above availing benefit under 
 notification No. 39/01-CE 31-07-2001.
 
 Pursuant to retrospective amendment 
 made in the Finance Act 2008, the Company
 has become eligible to claim such excise rebate
 till 07.12.2006
 
 Alleged  improper cenvat credit availed
 under Notification  No. 214/86 CE dated 
 25-03-1986, on furnace oil used for manufacturing      72.60      2.99
 of goods on job work during the period April 2002
 to March 2008.
 The Company has filed its reply against the show
 cause notices issued by Joint Commissioner and 
 Commissioner of Customs and Central Excise, Daman.
 
 Alleged non-payment of cess on cotton consumed 
 during the period April 2002 to February 2007 
 under The Produce Cess Act, 1966.                      1.56      1.10
 The Company has filed appeals with Commissioner 
 of Custom and Central Excise, Daman against the
 orders passed by the Assistant Commissioner of 
 Custom and Central Excise, Vapi.
 
 Alleged improper abatement of service tax on           29.27
 payments made to Goods Transport Agency under 
 Notification No. 32/04-ST dated 3-12-2004. 
 The Company has filed its reply against the 
 show cause notice issued by the Commissioner 
 of Central Excise and Customs, Daman.
 
 Alleged service tax credit based on improper            0.15
 documents. The Company has filed its reply 
 against the show cause notice issued by
 the Assistant Commissioner of Central Excise 
 & Customs, Vapi.
 
 Alleged procurement of furnace oil without 
 payment of duty by wrongly availing the 
 exemptions contained in the Notification No.           14.81        -
 1/95-CE 04-01-1995. The CESTAT, Ahmedabad has 
 passed the order in favour of the Company. 
 However, excise department has preferred an 
 appeal with the Supreme Court against CESTAT order.
 
 Alleged procurement of furnace oil without payment     11.47
 of duty by wrongly availing the exemptions 
 contained in the Notification No.53/97-CUS 
 03-06-1997. The CESTAT, Ahmedabad has passed the
 order in favour of the Company. The Department 
 has filed civil appeal against the CESTAT order 
 in Supreme Court.
 
 Stamp Duty:
 
                                                        4.46       4.46
 Disputed stamp duty liability on De-merger 
 Scheme. The Company has paid Rs. 1.74 million 
 under protest.
 
 Sales Tax:                                             0.97       0.87
 
 The Deputy Commissioner of Sales Tax has issued the assessment
 order for the financial year 2003-04 and raised the demand on
 purchase of Furnace oil during the year 2003-04 in respect of
 purchases made by the Company at a concessional rate of tax. The
 Company has filed an appeal with the Joint Commissioner of Sales
 Tax, Vadodra.
 
 FEMA:                                                  0.90       0.90
 
 The Appellate Tribunal for Foreign Exchange, 
 New Delhi has issued an order for contravention 
 of the provision of section 18(2) of the Foreign
 Exchange Regulation Act, 1973 read with Section 
 49(3) and (4) of Foreign Exchange Management Act, 
 1999 in respect of non-realisation of export 
 proceeds. The Company has filed an appeal with 
 the Delhi High Court.
 
 Others:                                              19.37
 
 Uncalled liability of 800 CHF per share, in 
 respect of partly paid 600 equity shares of 
 Welspun AG, a subsidiary company 
 
 Accumulated dividend on cumulative redeemable 
 preference shares                                    17.41       99.07
 
 Claims against the Company not acknowledged           2.17        1.57
 as debts
 
 Bills discounted in respect of export debtors      1999.32      774.51
 
 2.  On December 20, 2007, the Company acquired 76% of the equity
 shareholding in SOREMA - Tapetes E Cortinas DE Banho, S.A., Portugal
 (SOREMA) through Welspun Holdings Private Limited, its wholly owned
 subsidiary, for consideration of Euro 6,329,431.21 as specified in the
 Share Purchase Agreement.  Further, the Company, through its WOS, has
 entered into a Put and Call Option Agreement to buy remaining 24%
 equity shareholding in SOREMA, 8% each; on or after January 1, 2011,
 January 1, 2012 and January 1, 2013 respectively, at a consideration to
 be determined based on the respective average EBITDA of SOREMA for last
 two financial years prior to these dates.
 
 3.  On July 3, 2006, the Company had acquired 85% of the equity
 shareholding in CHT Holdings Limited - holding company of Christy Group
 (Christy) through conduits of wholly owned subsidiaries (WOS) and
 through these WOS had also entered into a put and call option agreement
 to buy the remaining 15% equity shareholding in Christy. On April 2,
 2008, the Company and its WOS entered into share purchase agreements
 with the holders of the balance 15% equity shares in Christy to acquire
 the said shareholding by the WOS with effect from April 2, 2008.
 Accordingly, with effect from April 2, 2008, Christy has become a
 wholly owned subsidiary of the Company. The payment of the
 consideration for the 15% acquisition aggregating GBP 2.356 million is
 to be made on or before May 31,2009 and the obligation of the WOS under
 the share purchase agreement has been guaranteed by the Company.
 Pursuant to the share purchase agreements, the put and call option was
 cancelled.
 
 4.  During the year, the Company acquired 100% of the equity
 shareholding in Besa Developers and Infrastructure Private Limited to
 undertake effluent discharge pipeline project at Vapi location.
 
 5.  On May 17, 2006, the Company has issued Employee Stock Options
 under the Employee Stock Options Scheme (the Scheme) to employees of
 the Company and its subsidiaries with a right to subscribe to equity
 shares at a price of Rs. 110.80 per equity share (closing market price
 as on May 16, 2006). The salient features of the Scheme are as under:
 
 i) Vesting: Options to vest over a period of four years from the date
 of their grants as under:
 
 -20% of the Options granted to vest at each of the 1st and 2nd
 Anniversaries of the date of grant.
 
 - 30% of the Options granted to vest at each of the 3rd and 4th
 Anniversaries of the date of grant.
 
 6. (a) 500,000 0% Redeemable Cumulative 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 April 1, 2000 and
 interest and dividend thereon; whichever is later.
 
 (b) During the year, the Company has redeemed 12.5% Redeemable
 Cumulative Preference Shares of Rs. 100 each under onetime settlement.
 Consequently, a Capital Redemption Reserve of Rs. 30.00 million
 equivalent to nominal value of Preference shares has been created.
 Premium on redemption paid by the Company has been adjusted against the
 Securities Premium Account.
 
 7. (a) Term loans from banks and financial institutions including
 interest thereon are secured by way of first charge on entire movable
 and immovable properties of the Company, both present and future,
 ranking pari passu, subject to prior charge on specific assets as per
 9(b) below and on current assets as per 9(c) below against borrowing
 from banks for working capital finance. Certain loans are also
 guaranteed by promoter directors.
 
 (b) In addition to 9(a) above, term loans from Banks aggregating Rs.
 47.20 million (March 31, 2007: Rs.  113.72 million) and Rs. 4,509.10
 million (March 31, 2007: Rs. 4,481.16 million) and interest thereon,
 are secured by exclusive charge pari passu, interse, on specific fixed
 assets of the Company and by lien on fixed deposits of the Company,
 respectively.
 
 (c) The working capital loans (which includes cash credit, packing
 credit, and demand 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.
 
 (d) During the year, the Company has prematurely redeemed debentures of
 Rs. 171.60 million under onetime settlement resulting in a gain of Rs.
 3.52 million. This gain on premature redemption of debenture has been
 disclosed as an exceptional item in the Profit and Loss Account.
 Consequently, Debenture Redemption Reserve of Rs. 29.67 million has
 been transferred to the Profit and Loss Account.
 
 8.  Interest in Joint Venture
 
 (a) The Company has accounted the interest in Joint Ventures in Welspun
 Zucchi Textiles Limited (WZTL) and MEP Cotton Private Limited (MCPL) in
 accordance with Accounting Standard 13, Accounting for Investments.
 
 (b) The Companys share of contingent liability of WZTL and MCPL is Rs.
 3.67 million (March 31, 2007 : Rs. 13.42 million) and Rs. 70.34 million
 (March 31, 2007 : Rs. Nil), respectively.
 
 9. a) In accordance with the Companys policy given in Note 1(x)
 above, net exchange gain of Rs. 379.21 million (Previous Year: net
 exchange loss of Rs. 91.60 million) has been accounted in Profit and
 Loss Account and net exchange loss of Rs. Nil (Previous Year: net
 exchange loss of Rs. 43.15 million) has been adjusted to the cost of
 fixed assets/capital work-in-progress.
 
 (b) Pursuant to issuance of the Companies (Accounting Standards) Rules,
 2006, with effect from April 1, 2007; the Company has adopted the
 accounting policy of recognizing the foreign exchange fluctuation, in
 its Profit and Loss Account, in respect of liabilities in foreign
 currencies specific to acquisition of fixed assets from outside India.
 Had the earlier policy of adjusting such foreign exchange fluctuations
 to the carrying cost of the respective fixed assets being followed;
 profit before tax in the Profit and Loss Account would have been higher
 by Rs. 23.95 million.
 
 10.  Exception Item includes gain of Rs. 3.52 million on premature
 redemption of debentures of Rs. 171.60 million under one time
 settlement.
 
 11.  Refer Annexure for additional information to Part IV of Schedule
 VI to the Act.
 
 12.  Prior year comparatives have been reclassified to conform with the
 current years presentation, wherever applicable.