year key corporate event 1980 1992 1994 2002 2003 2005 2006 · 2018-12-15 · firm called m/s....

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Making growth fashionable.

HISTORY & EVOLUTION

Mr. Kewalchand P. Jain and Mr. Hemant P. Jain entered into apparel manufacturing business through a partnershipfirm called M/s. Keval Kiran & Company. Mr. Dinesh P. Jain and Mr. Vikas P. Jain were subsequently taken as partnersin M/s. Keval Kiran & Company in 1994. Over a period of time, Kewal Kiran group comprised of various companiesand firms. In January 1992, your Promoters incorporated a private limited company called Kewal Kiran ApparelsPrivate Limited, which was also engaged in apparel manufacturing. It was long felt need of your promoters toconsolidate the business under single corporate umbrella to achieve the benefits of consolidation of marketing andmanufacturing operations. Hence, the restructuring started with the conversion of the partnership firm, M/s. KevalKiran & Company into a private limited company under Chapter IX of the Companies Act, 1956 on July 31, 2002. Thisprivate limited company was called Kewal Kiran Clothing Private Limited. Kewal Kiran Clothing Private Limited wasmerged with Kewal Kiran Apparels Private Limited with effect from December 1, 2002. Kewal Kiran Apparels PrivateLimited acquired the business of Kasturchand & Sons, a partnership firm, with effect from February 1, 2003. Toleverage the goodwill of past business, name of Kewal Kiran Apparels Private Limited was changed to Kewal KiranClothing Private Limited on October 17, 2003. On April 1, 2005 Kewal Kiran Clothing Private Limited acquiredwashing unit of Kewal Kiran Enterprises located at Vapi. On November 2, 2005, Kewal Kiran Clothing Private Limitedwas converted into a public company and changed its name to Kewal Kiran Clothing Limited. The company enteredthe capital market with an issue of 31,00,037 Equity shares of Rs. 10/- each through 100% Book Building Routewhich opened for public subscription on March 20, 2006 and closed on March 23, 2006. The issue was oversubscribedby around 12.56 times. The shares were alloted on April 5, 2006. The shares of the company got listed on BombayStock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE) on April 13, 2006.Now your companyis an integrated apparel manufacturer with capability of designing, manufacturing process encompassing cutting,body stitching, washing and ironing & finishing and marketing of branded men’s wear apparel.

Year Key Corporate Event

1980 Mr. Kewalchand P Jain and Mr. Hemant P Jain commenced apparel manufacturing business through

a partnership firm called Keval Kiran & Company

1992 Incorporated a company with the name Kewal Kiran Apparels Private Limited on January 30, 1992

with Mr. Kewalchand P Jain and Mr. Hemant P Jain as promoters.

1994 Mr. Dinesh P Jain and Mr. Vikas P Jain were admitted as partners in the firm Keval Kiran & Company

2002 The partnership firm, Keval Kiran & Company, was converted into a private limited company called

Kewal Kiran Clothing Private Limited under Chapter IX of the Companies Act, 1956.

2002 Kewal Kiran Clothing Private Limited merged with Kewal Kiran Apparels Private Limited w.e.f. 1st

December 2002 and Kewal Kiran Apparels Private Limited was the surviving entity.

2003 Kewal Kiran Apparels Private Limited changed its name to Kewal Kiran Clothing Private Limited.

2005 Kewal Kiran Clothing Private Limited was converted into a Public Limited Company and consequently

its name was changed to Kewal Kiran Clothing Limited w.e.f. 2nd November 2005.

2006 The company entered the capital market with an issue of 31,00,037 Equity shares of Rs. 10/- each

through 100% Book Building Route which opened for public subscription on March 20, 2006 and

closed on March 23, 2006. The issue was oversubscribed by around 12.56 times. The shares were

alloted on April 5, 2006. The shares of the company got listed on Bombay Stock Exchange Ltd.

(BSE) and National Stock Exchange of India Ltd. (NSE) on April 13, 2006.

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MAKING GROWTH FASHIONABLE

“Integriti” is the latest brand introduced by the company. Launched in 2002,Integriti’s product offerings are formal shirts, T-shirts, jeans and cotton trouserspriced between Rs.495 to Rs.995. “Integriti” is positioned as a brand for themasses without compromising on quality. This brand is primarily offered throughMulti Brand Outlets. Clothing Manufacturers Association of India (CMAI) awarded“Integriti” with the “Casual Brand of the Year” in 2004-05.

“Easies” was launched in 1998. This brand is targeted to the customers betweenthe age group of 25 to 40 years, mostly corporate executives. The productofferings under this brand include formal and semi-formal apparel for men, pricedbetween Rs.795 to Rs.1895. “Easies” is positioned as a brand for youngexecutives.

“Lawman” was launched in 1998. This brand is targeted to the customers betweenthe age group of 18 to 28 years, with a focus on denim and party/club wear.Lawman’s product offerings include shirts, jackets, denims and cotton trousersand are priced between Rs.695 to Rs.1995. “Lawman” is positioned as a fashionbrand.

Launched in 1989, “Killer” is the flagship brand of the company contributing over53% of the turnover. “Killer” is one of the brands in the premium men’s’ wearsegment. This brand is targeted to the customers between the age group of 16 to25 years. The product line of this brand includes jeans, shirts, jackets andaccessories such as belts, bags and caps. The products under this brand arepriced ranging from Rs.495 to Rs.1895. Killer Jeans is one of the largest sellingdenim brands in India. Clothing Manufacturers Association of India (CMAI)awarded “Killer” with the “Denim Brand of the Year” in 2001-02 and the “BrandCampaign of the Year” in 2001-02.

The company has its own retail stores concept under the brand name “K-Lounge”.These stores exclusively display and sell apparels manufactured under thecompany’s brands. These stores are either self owned and self operated; or selfowned and franchisee operated; or franchisee owned and franchisee operated.As on June 30, 2006 the company has 39 K-Lounge stores operational acrossthe country. To enhance visibility and to ensure maximum footfalls, K-Loungestores are situated at high end malls and high streets of the major metros, minimetros and large cities with prominent locations.

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General Information 04

Biography of Directors 06

Letter to the Shareholders 08

Directors Report 10

Compliance Certificate 19

Report on Corporate Governance 25

Management Discussion and Analysis 41

Auditors Report 44

Balance Sheet 48

Profit & Loss Account 49

Cash Flow Statement 50

Schedule forming part of Accounts 52

Statement pursuant to Section 212 (1)(e) of the Companies Act, 1956 71

Balance Sheet Abstract & company’s General Business Profile 72

Auditors Report on Consolidated Accounts 75

Consolidated Balance Sheet 76

Consolidated Profit & Loss Account 77

Consolidated Cash Flow Statement 78

Schedule forming part of Consolidated Accounts 80

INDEX

Mr. Abhijit B. Warange*

Company Secretary*appointed w.e.f November 4, 2005

M/s. Jain & Trivedi

Chartered AccountantsStatutory Auditors

M/s. N.A. Shah Associates

Chartered AccountantsJt. Statutory Auditors

Standard Chartered BankMumbai.

Bankers

GENERAL INFORMATION

Mr. Kewalchand P. Jain

Chairman & Managing Director

Mr. Hemant P. Jain

Whole-time Director

Mr. Dinesh P. Jain

Whole-time Director

Mr. Vikas P. Jain

Whole-time Director

Mr. Popatlal F. Sundesha*

Non Executive Independent Director

Dr. Prakash A. Mody*


Mr. Nimish G. Pandya*


Mr. Mrudul D. Inamdar*


*appointed w.e.f. November 14, 2005

Board of Directors

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Registered Office

B-101 to 107, Synthofine Estate, Opp Virwani Industrial Estate,Goregaon (East), Mumbai: 400 063

Corporate Office

Kewal Kiran Estate, Behind Tirupati Udyog, 460/7,I.B. Patel Road, Goregaon (East), Mumbai: 400 063

Factories

Vapi

Plot No. 787/1, 40, Shed, IInd Phase,G.I.D.C Vapi - 396 195,Gujarat

Daman

697/5, Near Maharani Estate,Somnath Road, DhabelDaman: 396 210

Mumbai

Synthofine Estate,Opp Virwani Industrial EstateGoregaon (East),Mumbai: 400 063

71-73, Kasturchand Mill CompoundBhawani Shankar Cross Road,Dadar (West),

Registrar & Transfer Agents

Intime Spectrum Registry Limited,C-13, Pannalal Silk Mills Compounds,L.B.S. Marg, Bhandup (West),Mumbai-400078

Subsidiaries

Kewal Kiran Retail India Pvt. Ltd.(upto 06.08.05)Kornerstone Retail Ltd.(upto 20.12.05)

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DIRECTORS BIOGRAPHY

MR. KEWALCHAND P. JAIN

Born in 1962 Mr. Kewalchand P. Jain decided to join the business at early age aftercompleting school. He learnt the business on the job and spearheaded the groups’foray in to branded apparel business. A keen student of finance and a hands-onmanager he heads the finance functions of the company and is responsible for theoverall management of the affairs of the company.

Mr. Jain is a trustee of Jatnobai Karmchandji Ratanparia Chauhan Charitable Trust. Heis also the treasurer of Shree Jain Vyapar Udyog Seva Sansthan.

MR. HEMANT P. JAIN

Born in 1965, Mr. Hemant P. Jain decided to join the business at early age after completingschool. He learnt the business on the job and leads the marketing functions of thecompany. He was instrumental in launching the new brands of the company. An avidtraveler and field person, he keeps a keen eye on the latest trends in internationalmen’s fashion.

Mr. Jain is a trustee of Jatnobai Karmchandji Ratanparia Chauhan Charitable Trust.

Mr. Jain is responsible for marketing of Killer and Easies brands. He also looks afterthe business of K-Lounge, the retail concept of the company.

MR. DINESH P. JAIN

Born in 1969 Mr. Dinesh Jain joined the business in 1990 and heads the manufacturingoperations of the company. He specialises in production and HR related issues.

Mr. Jain is a trustee of Jatnobai Karmchandji Ratanparia Chauhan Charitable Trust. Heis also the treasurer of Daman Industries Association.

Mr. Jain is responsible for ensuring optimum utilization of production facilities of thecompany at its units at Dadar, Goregaon, Daman and Vapi.

MR. VIKAS P. JAIN

Born in 1970 Mr. Vikas P. Jain joined the group in 1992, after completing his graduationin commerce. He heads the operations and distribution functions of the company.

Mr. Jain is a trustee of Jatnobai Karmchandji Ratanparia Chauhan Charitable Trust.

Mr. Jain is responsible for marketing of Lawman and Intigriti brands. He also looks afterthe business of K-Lounge, the retail concept of the company. Mr. Jain travels extensivelyand scouts for new technologies in garment manufacturing.

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MR. POPATLAL F. SUNDESHA

Mr. Popatlal Fulchand Sundesha is a reputed exporter of garments and has a widerange of experience in the field of marketing, finance and general administration.

Mr. Sundesha along with his three brothers took over his fathers business and converteda medium sized trading firm into one of the leading manufacturer and exporter ofknitted readymade garments to Non Quota countries like Switzerland, Netherland,U.K and others. His firm has supplied garments to Wal-Mart, Woolworth, Benetton,Manor AG and others.

Mr. Sundesha has been awarded the President’s award in exports as also ApparelsExport Promotion Council Award for six years.

DR. PRAKASH A. MODY

Dr. Prakash Amrut Mody is the Chairman and Managing Director of Unichem LaboratoriesLimited. He has a rich experience in the field of marketing, research and production.

Dr. Mody is a doctorate (Ph.D.) in Organic Chemistry from the University of Mumbai. Hehas perceived marketing management from Jamnalal Bajaj Institute of ManagementStudies, University of Mumbai. He is also a Graduate Alumni of Harvard BusinessSchool having undergone the Owner Presidents’ Management Program.

Dr. Mody is the former Vice President of the Indian Pharmaceutical Association. He isalso on the Executive Committee of the Indian Drug Manufacturers Association. He isa member of the Young Presidents’ Organisation Inc, an international organization foryoung presidents. He is a member of the Senate - SNDT Women’s University andRotary Club of Bombay Mid-Town and is also involved in many other social activities.

MR. NIMISH G. PANDYA

Mr. Nimish Gulabrai Pandya, aged about 53 years, holds a Bachelor’s Degree in Lawfrom Bombay University. He is a member of the Bar Council of Maharashtra and wasappointed as a Notary Public by the Government of Maharashtra in the year 1993.

Mr. Pandya is a proprietor of Pandya & Co., Advocates and specializes in mergers andacquisitions. Besides, his career in law, he has been actively involved in many spiritualand social activities and has been a Member of Council of Management of Sri SathyaSai Trust, Maharashtra. He is also a prominent member of the International Faculty ofPersonality Development Courses based on Human Values.

A prolific speaker, a dramatist and an ardent social worker, he has dedicated himselfto the cause of Education in Human Values for children all over the world.

MR. MRUDUL D. INAMDAR

Mr. Mrudul Dattakumar Inamdar, a fellow member of the Institute of CharteredAccountants of India is a partner in Bansi Mehta and Company one of the most reputedChartered Accountancy firm in Mumbai.

Mr. Inamdar has been practicing for over 24 years in the field of Corporate and Individualtaxation; with special emphasis on representation before Income-tax appellateauthorities at all levels; Tax Audits; Tax and Legal Due Diligence and Corporate Taxplanning.

Dear Shareholders,

It is my pleasure to address you, the new family members of Kewal Kiran Clothing Limited, and appraise you of thesteps we have taken to further the growth of your company. We are looking ahead to a sustained growth situation, asa new textile revolution unfolds.

Environment: Thriving in the Revolution!

The textile and apparel industry traditionally consisting of unorganized players has witnessed a paradigm shift toorganized manufacturing and retailing. The growth in retail space across the country, changing lifestyle of theconsumers, rise in disposable income and an increase in the consumer appetite for branded products has furtherfueled this revolution.

The Government of India recently allowed international players to invest up to 51% stake in Indian JVs and to opensingle brand stores in India. Opening up of the retail sector would not only see premium-end luxury brands but alsomid-range mass appeal brands setting up shop in India. We are confident of exploiting the opportunities available inthe present retail revolution.

Initial Public Offer (IPO): Roadmap for Future Success!

This year, we decided to enter the capital market with an initial public offer of 31,00,037 Equity shares of Rs. 10/-each through 100% Book Building Route. The IPO opened for public subscription on March 20, 2006 and closed onMarch 23, 2006, and was oversubscribed by around 12.56 times. The shares were allotted on April 5, 2006. Theshares of your company got listed on the Bombay Stock Exchange Limited and the National Stock Exchange of IndiaLimited on April 13, 2006.

The issue proceeds will be used for financing your company’s capital expenditure in setting up new manufacturingfacilities, expansion of the distribution network by opening additional retail outlets, building the corporate office, andmeeting general corporate purposes. We are now poised to take your company to greater heights.

Dividend @ Rs 1.5 per share: Token of Appreciation!

With the overall performance of your company and a positive outlook ahead, a dividend of Rs. 1.5 per equity share[@ 15% on face value of Rs.10/- each] on the enhanced capital of Rs.12,32,50,370/- has been recommendedsubject to your approval. An amount of Rs. 1 Crore has been transferred to the reserves.

LETTER TO THE SHAREHOLDERS

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Business Strategy: Integrating Design, Manufacturing, Retail!

Kewal Kiran Clothing Limited is an integrated apparel manufacturer with the capability of designing, manufacturingprocess encompassing cutting, body stitching, washing and ironing and finishing and marketing of branded men’swear apparel.

We have four well-established brands viz. KILLER, LAWMAN, EASIES and INTEGRITI. Your company is alsoaggressively making a foray in the domestic retail market, under the K-LOUNGE brand, and has opened 24 outletsduring the year ended March 31, 2006. This has taken the total number of operational retail shops to 31, as on March31, 2006. These stores are set up at diverse locations across the country. As on June 30th, 2006 39 K Lounge storesare operational across the country.

We have launched various innovative products & new brand campaigns during the year. We have also completed workon new corporate office at Goregaon (East) Mumbai subsequent to the financial year 2005-06.

Your company has 4 units one each at Dadar (Mumbai), Goregaon (Mumbai), Vapi (Gujarat) and Daman (UnionTerritory) with a total annual capacity of 2 million pieces. We are in the process of identifying a location to set up anew manufacturing facility for manufacturing of apparels to increase our total annual capacity to 4 million pieces.

Your company’s facilities at Daman, Vapi and Mumbai have been assessed and registered as an ISO 9001:2000 andISO 14001:2004 compliant pertaining to quality management system and environment management systemrespectively.

During the year your company has been awarded the CNBC TV 18 Emerging India Award 2005 for the Bestemerging company in the Textile and Apparel Category. Your company has also been awarded with the best brandin small & medium category by CMAI for the brand “Integriti”.

Performance: Zooming Profits!

During the financial year ended 31st March, 2006, the sales and operating income increased from Rs. 261.19 Mn toRs. 859.64 Mn. The net profit before tax stood at Rs. 181.99 Mn as against Rs 48.79 Mn in the previous year. The netprofit after tax stood at Rs. 116.50 Mn as against Rs. 37.23 Mn in the previous financial year.

As a result of restructing of the group entities during the year the entire apparel manufacturing and marketingbusiness now vests with the company. Results of the company include effect of the above for part of the year andhence previous year figures are not strictly comparable. Also, at the beginning of the financial year 2005–06, yourcompany had two subsidiaries viz Kewal Kiran Retail India Private Limited and Kornorstone Retail Limited (Formerlyknown on Kornerstone Retail Private Limited). The aforesaid companies ceased to be subsidiaries of Kewal KiranClothing Limited with effect from August 6, 2005 and December 20, 2005 respectively.

Looking Ahead: Better Integration, Greater Capacity, Better Spreads

Your company will continue its foray into the domestic apparel market. In the year ahead, your company will test-market women’s casual wear and Men’s formal wear & accessories under the existing brands. We will also set up anew manufacturing facility for apparels. We will continue to fuel the growth by setting up exclusive retail chain stores“K-Lounge”. Besides, we are also planning to set up few exclusive brand outlets (EBO) for our flagship brand “Killer”.We have also planed to sell accessories like time wear, fashion jewelry, fragrances etc. through our retail stores. Yourcompany will also benefit from the aggressive growth plans of organized retail across the country. We will continueto innovate and expand in this way.

Finally, I would take this opportunity to sincerely thank our highly motivated team for their dedication and supportwithout which your company would not have been able to reach the position it enjoys today. I would also like to thankmy fellow members on the Board for their active and valuable support while guiding the course of your company. I amsure that with continued support of the Board Members, Employees and all the stake holders your company willcontinue to scale new heights in the times to come.

With this, I would like to thank you again, my dear shareholders.

Kewalchand P. JainChairman & Managing Director

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To The Members

Your Directors have pleasure in presenting the 15th Annual Report together with the audited accounts of the

Company for the year ended 31st March, 2006.

OVERVIEW:

The Indian textile and apparel industry has traditionaly been the backbone of the Indian economy for centuries. The

country has been witnessing a steady increase in its GDP over the years. One of the key developments during India’s

growth path has been a favourable shift towards the services sector, which now accounts for almost 50% of the total

GDP. The textile and apparel industry which traditionally consisted of unorganized players has witnessed a paradigm

shift from unorganized manufacturing and retailing to organized manufacturing and retailing. There has been a big

rise in organized retailing in India and the popularity of shopping malls in recent years goes to show the changing

habits of more globalized consumers. The growth in retail space across the country, the changing lifestyle of the

consumers, increase in the disposable income and the increase in the consumer appetite for branded products has

further fueled this revolution.

Your company is an integrated apparel manufacturer with capability of designing, manufacturing process

encompassing cutting, body stitching, washing and ironing and finishing and marketing of branded men’s wear

apparel. We have four well established brands i.e. KILLER, LAWMAN, EASIES and INTEGRITI. We have also

developed a retail concept K-LOUNGE under which your company operates its retail shops across the country.

Your company is aggressively making its foray in the domestic retail market and has opened 24 retail shops during

the year ended March 31, 2006 thereby taking the tally of the total number of operational retail shops to 31 as at

March 31, 2006.

Your company has 4 units one each at Dadar (Mumbai), Goregaon (Mumbai), Vapi (Gujarat) and Daman (Union

Territory) with a total annual capacity of 2 million pieces (depending on the styling and design of the apparel

manufactured). We are in the process of identifying location to set up a new manufacturing facility for manufacturing

of men’s apparel to increase our total annual capacity to 4 million pieces.

With a population of more than one billion, India has become a magnet for many international industries who found

their growth to be stagnating due to saturated domestic market in their countries. With a robust economy experiencing

sustained growth, India is proving to be an irresistible temptation to companies looking to expand their scope of

operations. With the government showing proclivity in allowing FDI in retailing, the idea of permitting FDI in the

Indian retail sector is slowly gaining momentum.

The Government of India recently allowed international players to pick upto 51% stake in Indian JVs and then open

single brand stores in India. FDI up to 51 per cent in retail trade of single brand products would cover only those that

are branded during manufacturing and are sold under the same brand internationally. These stipulations would

prevent third party sourcing and encourage multinationals to set up a manufacturing base in India. Opening up of the

retail sector would not just see premium-end luxury brands setting up shops in India, but also mid-range mass

appeal brands entering the country.

The Indian retailing market is in a state of inefficiency and it is quite likely that a section of the domestic retailing

industry will be severely hurt due to the entry of foreign retailers.

While new opportunities have been created in Indian and the Overseas markets, competition amongst the organised

retail players both domestic and international is expected to accelerate, with the result that the efficient ones

would replace the poor performers. Your Board is confident of successfully guiding your company to exploit the

opportunities available in the retail revolution across the country, and present hereunder the financial results for

your consideration:-

DIRECTORS’ REPORT

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FINANCIAL RESULTS:

Rs. ’000Year ended

March 31, 2006 March 31, 2005

Net Sales/Income from operations 859,638 261,191

Other Income 7,156 7,376

Total Expenditure 660,118 199,812

Gross profit (Before deducting any of the following) 206,676 68,755

a. Interest 10785 9,394

b. Provision for depreciation 13,903 10,572

c. Tax provision 62,646 11,571

Net profit for the year 119,344 37,218

i Prior Period Expenses 2,873 –

ii Tax adjustment of prior year (25) (13)

iii Balance of profit/(loss) 116,495 37,231

Appropriation of profit – –

i Bonus shares issued during the year 30,000 –

ii Proposed Dividend (Including Dividend Tax) 21,080 –

iii Transfer to General Reserve 10,000 –

Dividend (in Rs.) per ordinary share 1.50 –

Paid up Equity capital 92,250 10,000

Reserves except revaluation reserve 275,987 78,517

TURNOVER & PROFITS:

Your Directors wish to inform you that during the financial year ended March 31, 2006, the sales and operating

income increased from Rs. 261,191 thousand to Rs. 859,638 thousand. The net profit before tax and extraordinary

items stood at Rs. 181,990 thousand as against Rs. 48,788 thousand in the previous year. The net profit after tax

stood at Rs. 116,495 thousand as against Rs. 37,231 thousand for the previous financial year. Your company had

during the year acquired substantial assets of Kewal Kiran Enterprises, a partnership firm and therefore the data for

the current year would not be strictly comparable with that of the previous year for the corresponding period.

DIVIDEND:

Keeping in mind the overall performance of your company and the positive outlook for your company’s future, your

Directors are pleased to recommend a dividend of Rs. 1.5/- per equity share [@ 15% on face value of Rs.10/- each],

on the enhanced capital of Rs.12,32,50,370/- subject to the approval of shareholders. An amount of Rs. 1 Crore have

been transferred to the reserves.

INITIAL PUBLIC OFFER:

The company entered the capital market with an issue of 31,00,037 Equity shares of Rs. 10/- each through 100%

Book Building Route which opened for public subscription on March 20, 2006 and closed on March 23, 2006. The

issue was oversubscribed by around 12.56 times. The allotment of the shares was made on April 5, 2006. The shares

of the company got listed on Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE) on

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April 13, 2006. The company acknowledges the overwhelming support of the investor fraternity in making its initial

public issue a grand success.

IPO FUND UTILISATION:

The objects of the issue are to finance your company’s capital expenditure in setting up new manufacturing facilities,

expansion of distribution network by opening additional exclusive outlets, building corporate office, to meet general

corporate purposes and achieve the benefits of listing.

The details of the utilization of funds as on the date of this report is detailed below:

Rs. ’000

Purpose of utilization of fund Projected utilization upto year Actual utilization uptoended 31st March 2008 21st July 2006

Corporate Office 50,000 42,637

Setting up retail stores 346,760 42,619

Setting up of Manufacturing unit 323,990 8,589

Share issue Expenses 72,550 77,279

Total Expenses 793,300 171,124

CAPITAL STRUCTURE:

The pre issue issued, subscribed and paidup capital of the company was Rs. 9,22,50,000/- comprising of 92,25,000

Equity shares of Rs. 10/- each. Post issue of 31,000,37 Equity shares of Rs. 10/- each the issued, subscribed and

paidup capital of the company is Rs. 12,32,50,370/- comprising of 1,23,25,037 Equity shares of Rs. 10/- each.

SUBSIDIARY COMPANIES:

During the financial year 2005 – 06 your company had two subsidiaries viz. M/s. Kewal Kiran Retail India Pvt. Ltd.

and M/s. Kornorstone Retail Limited (formerly known as Kornerstone Retail Pvt. Ltd.). The said two companies

ceased to be the subsidiaries of your company w.e.f. August 6, 2005 and December 20, 2005 respectively.

CASH FLOW STATEMENT:

In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow

Statement for the year ended 31st March 2006 is annexed hereto.

CONSOLIDATED ACCOUNTS:

In accordance with the requirements of Accounting Standards AS-21 prescribed by the Institute of Chartered

Accountants of India, the Consolidated Accounts of your company and its erstwhile subsidiaries for the period they

were the subsidiaries of the company in the financial year 2005-06 is annexed to this report.

RELATED PARTY TRANSACTION:

Related party transactions have been disclosed in the notes to accounts. During the year ended March 31, 2006 the

company had entered into a few transaction with a firm falling under the same management and thereby inadvertently

violating the provisions of Section 297 of the Companies Act, 1956. The company suo moto made an application to

the Company Law Board, Western Region for compounding the said inadvertent offence. The Company Law Board

has by its order dated July 10, 2006 compounded the said offence on payment of compounding fees of Rs. 10,000/- by

the company and Rs. 5,000/- each by Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. Vikas

P. Jain, Directors of the company.

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DIRECTORS:

In accordance with the provisions of the Companies Act, 1956, and the Articles of Association of the company, Mr.

Hemant P. Jain, Director of your Company would retire by rotation at the ensuing Annual General Meeting and being

eligible has offered himself for reappointment.

During the year under review Mr. Popatlal F. Sundesha, Mr. Mrudul D. Inamdar, Dr. Prakash A. Mody and Mr. Nimish G.

Pandya were appointed as additional Directors of your company and pursuant to Section 260 of the Companies Act,

1956 would hold office as a Director upto the date of the ensuing Annual General Meting of the company. The

company has received notice from a member pursuant to Section 257 of the Companies Act, 1956 signifying his

intention to propose the appointment of Mr. Popatlal F. Sundesha, Mr. Mrudul D. Inamdar, Dr. Prakash A. Mody and Mr.

Nimish G. Pandya as Directors liable to retire by rotation. It will be advantageous for the company to continue to avail

the services of Mr. Sundesha, Mr. Inamdar, Dr. Mody and Mr. Pandya in their capacity as ordinary Directors of the

company and take the benefit of their vast experience and expert knowledge.

DIRECTORS’ RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Director’s

Responsibility Statement, it is hereby confirmed:

(i) that in the preparation of the annual accounts for the financial year ended March 31, 2006, the applicable

accounting standards have been followed along with proper explanation relating to material departures;

(ii) that the directors have selected such accounting policies and applied them consistently and made judgements

and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the

Company at the end of the financial year and of the profits of the Company for the year under review;

(iii) that the directors have 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 have prepared the accounts for the financial year ended March 31, 2006 on a ‘going concern’

basis.

CORPORATE GOVERNANCE:

Kewal Kiran Clothing Limited is committed to conducting business of the company with the highest level of integrity

and transparency. The commitment of your company is clearly reflected through the business activities of the company.

Report on Corporate Governance as stipulated by Clause 49 of the Listing Agreement with the Stock Exchanges

forms a part of the Annual Report. The Auditors’ certificate confirming compliance with Corporate Governance

requirements by the company is attached to the Report on Corporate Governance.

MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed review of operations, performance and future outlook of the company is given separately under the head

Management Discussion and Analysis.

COMPLIANCE WITH THE CODE OF CONDUCT:

The company has put in place a Code of Conduct effective from January 14, 2006, for its Board members and Senior

Management Personnel. Declaration of compliance with the code of conduct have been received from all the Board

Members and Senior Management Personnel. A certificate to this effect from Mr. Kewalchand P. Jain, Chairman &

Managing Director forms a part of this Report.

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AUDIT COMMITTEE:

In accordance with Clause 49 of the Listing Agreement the company has constituted an Audit Committee which

consists of three non-executive independent directors of the company viz. Mr. Mrudul D. Inamdar (Chairman of Audit

Committee), Mr. Popatlal F. Sundesha and Mr. Nimish G. Pandya.

Mr. Abhijit Warange, Company Secretary acts as secretary of the Committee.

COMPLIANCE CERTIFICATE:

The paidup capital of the company was enhanced from Rs. 1 Crore to Rs. 4 Crores w.e.f October 12, 2005 and

thereafter to Rs. 8.76 Crores and Rs. 8.79 Crores and Rs. 9.22 Crores w.e.f October 25, 2005, November 16, 2005

and December 16, 2005 respectively. The Compliance certificate issued by M/s. U. P. Jain & Co., Practicing Company

Secretaries required pursuant to Section 383A of the Companies Act, 1956 for the period April 1, 2005 to March 31,

2006 forms a part of this report.

RECOGNITION AND AWARDS:

Your company received the following awards during the year 2005-06:

• CNBC TV18 – ICICI Bank Award for the best SME company in Textile/ Apparel Sector

• Golden Sales Trophy by CMAI for Casual wear brand of the year (small and medium) for INTEGRITI

Your company’s facilities at Daman, Vapi and Mumbai have been assessed and registered as an ISO 9001:2000 and

ISO 14001:2004 compliant pertaining to quality management system and environment management system

respectively.

OUTLOOK:

The market is extremely competitive and tough. Notwithstanding this your company is doing its utmost to maintain

and increase its margins, having already succeeded in maintaining market share in existing markets, and looking to

new markets for growth. The company would continue its foray into the domestic retail market. In the year ahead the

company would be test marketing women casual wear under the existing brands. We also plan to sell accessories

like time wear, fashion jewelry, fragrances and other accessories through our retail stores K-LOUNGE. We would

also be finalizing the location for setting up our new manufacturing facility and commence the process for setting up

the same.

FIXED DEPOSIT:

Your company has not accepted any deposit within the meaning of Section 58A of the Companies Act, 1956.

ELECTRONIC FILING:

Since SEBI has stipulated electronic filing of Annual Report including Corporate Governance Report, Shareholding

Pattern etc. on website of SEBI i.e. www.sebiedifar.nic.in, statements of your company are also accessible at this

website. These statements are also displayed on the company’s website viz. www.kewalkiran.com.

LISTING FEES:

The equity shares of the company are listed on the Bombay Stock Exchange Limited and National Stock Exchange

of India Limited. The company has paid applicable listing fees to the above Stock Exchanges upto date.

DEMATERIALISATION OF SHARES:

The company has entered into agreements with the National Securities Depository Limited (NSDL) and Central

15


Depository Services (India) Limited (CDSL) for dematerialization of the shares of the company. Accordingly the

shares of your company are available for dematerialization and can be traded in Demat form.

AUDITORS:

The company’s auditors M/s. Jain & Trivedi, Chartered Accountants and the joint auditors M/s. N.A. Shah Associates,

Chartered Accountants, retire at the conclusion of the ensuing Annual General Meeting of the company and being

eligible offer themselves for re-appointment.

PARTICULARS OF EMPLOYEES:

Information in accordance with Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars

of Employees) Rules, 1975 is detailed below for perusal of members:

Name Kewalchand P. Jain Hemant P. Jain Dinesh P. Jain Vikas P. Jain

Designation Chairman & Wholetime Wholetime Wholetime

Managing Director Director Director Director

Remuneration Received Rs. 24,00,000 p.a. Rs. 24,00,000 p.a. Rs. 24,00,000 p.a. Rs. 24,00,000 p.a.

Nature of employment Non rotational Liable to retire Liable to retire Liable to retire

Director by rotation by rotation by rotation

Other Terms and Conditions N.A N.A N.A N.A

Nature of Duties Finance Marketing - Production Marketing -

Overall control of Killer & Easies Lawman

the company affairs K-Lounge Stores & Integriti

K-Lounge Stores

Qualification and Under Graduate Under Graduate Under Graduate Graduate

Experience 24 years 22 years 17 years 14 years

Date of commencement January 30, 1992 January 30, 1992 January 30, 1992 January 30, 1992

of employment

Age 44 years 42 years 37 years 35 years

Last Employment Keval Kiran & Co. Keval Kiran & Co. Keval Kiran & Co. N.A

% of Equity shares held 6.63% 6.63% 6.80% 6.80%

in the company*

*Note:

Mr. K.P. Jain also holds 0.17% equity shares in his capacity of Karta of Kewalchand P. Jain H.U.F

Mr. H.P. Jain also holds 0.17% equity shares in his capacity of Karta of Hemant P. Jain H.U.F

Mr. D.P. Jain also holds 0.17% equity shares in his capacity of Karta of Dinesh P. Jain H.U.F

Mr. V.P. Jain also holds 0.17% equity shares in his capacity of Karta of Vikas P. Jain H.U.F

PERSONNEL:

Employer-Employee relations continued to be cordial during the year under review. The Company continued its

thrust on Human Resource Development. The Board wishes to place on record its appreciation to all the employees

in the company for their sustained efforts and immense contribution to the high level of performance and growth of

the business during the year.

INFORMATION UNDER SECTION 217 (1)(e) OF COMPANIES ACT,1956 READ WITH COMPANIES (DISCLOSUREOF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988 :

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:

A. 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 continued basis.

B. TECHNOLOGY ABSORPTION, ADAPTATIONS & INNOVATION: Not Applicable

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Activities relating to exports, initiatives taken to increase exports, development of new export markets for products

and services and export plans.

Total Foreign Exchnage used and earned

Total Foreign Exchange earned

Rs. ’000

(FOB Value ) 66,652/-

Total Foreign Exchange outgo 3,588/-

ACKNOWLEDGEMENTS:

The Board would like to place on record its sincere appreciation for the wholehearted support and contribution made

by its customers, its shareholders, and its employees across the country, as well as the various Government

Departments, Banks, Distributors, Suppliers and other business associates towards the conduct of efficient and

effective operations of your company.

For and on behalf of the Board


Place : Mumbai

Dated : July 21, 2006

CERTIFICATE OF COMPLIANCE WITH THE CODE OF CONDUCT

I, Kewalchand P. Jain, Chairman & Managing Director of the company, hereby declare that the company has adopteda Code of Conduct for its Board Members and Senior Management at the meeting of the Board of Directors held onJanuary 14, 2006 and the Board Members and Senior Management have affirmed compliance with the said Codeof Conduct.

For Kewal Kiran Clothing Limited


Place : Mumbai

Dated : July 21, 2006

16


COMPLIANCE CERTIFICATE

To,

The Members,

Kewal Kiran Clothing Limited

(Formerly known as Kewal Kiran Clothing Private Limited)

We have examined the registers, records, books and papers of Kewal Kiran Clothing Limited having its Registered

office at B-101 To 107, Synthofine Estate, Opp. Virwani Industrial Estate, Goregaon (East), Mumbai-400063 as

required to be maintained under the Companies Act, 1956, (the Act) and the rules made there under and also the

provisions contained in the Memorandum and Articles of Association of the Company for the financial year ended on

31st March, 2006. In our opinion and to the best of our information and according to the examinations carried out by

us and explanations furnished to us by the company and its Directors, we certify that in respect of the aforesaid

financial year:

1. The company has kept and maintained all registers as stated in Annexure ‘A’ to this certificate, as per the

provisions and the rules made there under and all entries therein have been duly recorded.

2. The company has duly filed the forms and returns as stated in Annexure ‘B’ to this certificate, except the

following, with the Registrar of Companies within the time prescribed under the Act and the rules made there

under.

(i) Form No. 32 dated 13th July, 2005 for appointment of Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh

P. Jain and Mr. Vikas P. Jain as whole-time directors of the company.

(ii) Form No. 23 dated 13th July, 2005 for appointment of Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh

P. Jain and Mr. Vikas P. Jain as whole-time directors of the company.

(iii) Form No. 32 dated 16th November, 2005 for cessation of Director on death.

3. The company, being a public limited company, has the minimum prescribed paid up capital.

4. (i) The Board of Directors duly met 14 (fourteen) times on 6th April,2005, 7th May,2005, 6thJuly,2005,

1stAugust,2005, 8th September,2005, 30th September,2005, 12th October,2005, 25th October,2005, 2nd

November,2005, 4th November,2005, 14th November,2005,3rd December,2005, 14th January,2006 and 27th

February,2006 in respect of which meetings proper notices were given and the proceedings were properly

recorded and signed in the Minutes Book maintained for the purpose.

(ii) The Committee of Directors for allotment of equity shares on preferential basis duly met twice i.e. on 16th

November, 2005 and 16th December, 2005 in respect of which meetings proper notices were given and the

proceedings were properly recorded and signed in the Minutes Book maintained for the purpose.

(iii) The Audit Committee duly met twice i.e. on 3rd December,2005 and 27th February,2006 in respect of which

meetings proper notices were given and the proceedings were properly recorded and signed in the Minutes

Book maintained for the purpose.

(iv) The Shares Transfer Committee duly met twice i.e. on 21st December, 2005 and 8th January, 2006 in respect

of which meetings proper notices were given and the proceedings were properly recorded and signed in the

Minutes Book maintained for the purpose.

(v) The Remuneration Committee duly met once on 3rd December,2005 in respect of which meeting, proper

notices were given and the proceeding were properly recorded and signed in the Minutes Book maintained

for the purpose.

(vi) The IPO Committee duly met 4 (four) times on 6th March,2006, 8th March,2006, 24th March,2006 and

29th March,2006 in respect of which meetings proper notices were given and the proceedings were properly

recorded and signed in the Minutes Book maintained for the purpose.

19


20


5. During the year under report, the company, closed the Register of Members and Share Transfer Book for the

period from 10th October, 2005 to 12th October, 2005 (both days inclusive) for the purpose of issue and allotment

of bonus shares and has complied with the requirement of Section 154 the Act.

6. The Annual General Meeting for the financial year ended on 31st March, 2005 was held on 30th September, 2005

after giving due notice to the members of the company and the resolutions passed thereat were duly recorded

in Minutes Book maintained for the purpose.

7. Five Extra Ordinary Meetings were held on 15th July, 2005, 2nd November, 2005, 12th November, 2005, 9th

December, 2005 and 9th January, 2006 respectively, during the financial year, after giving due notice / shorter

notice in accordance with the provisions of the Act and in terms of the Articles of Association of the company, to

the members of the company and the resolutions passed thereat were duly recorded in the Minutes Book

maintained for the purpose.

8. The company has not advanced any loan to its directors and/or persons or firms or companies referred in the

Section 295 of the Act during the year under report.

9. Compliance of the provisions of section 297 of the Act:

(a) During the year under report, the company has entered into various transactions with the firm M/S Kewal

Kiran Enterprise, in which the directors of the company are interested, attracted the provisions of Section

297 of the Act. However, in our opinion, the said transaction were entered into by the company as it had to

complete/fulfill the commercial obligations undertaken by the amalgamating private limited company and

the firm, prior to take over / amalgamation, with the M/s Kewal Kiran Enterprise.

(b) During the year under report the company has purchased plant & machinery from the firm, in which the

directors of the company are interested, and hence, the same, in our opinion, falls within meaning of Section

297 of the Act, for which no prior permission was obtained from Regional Director. However, as reported to

us, the company, suo moto, has made application under Section 621A of the Act for compounding of offence

under Section 297 of the Act.

10. The company has made necessary entries in the register maintained under Section 301 of the Act.

11. As reported to us, during the year under report, the company did not appoint any person in the office or place of

profit within the meaning of Section 314 of the Act, and hence the company was not required to obtain any

approvals pursuant to Section 314 of the Act.

12. During the year under report, the company did not issue any duplicate share certificates.

13. The Company has:

(i) during the year under report, delivered all the certificates of shares, in respect of allotment of, 30,00,000

bonus shares of Rs. 10/- each, 47,60,000 further equity shares of Rs. 10/- at premium of Rs. 8/- per share,

30,000 further equity shares of Rs. 10/- at premium of Rs. 15/- per share and 4,35,000 further equity shares

of Rs. 10/- at the premium of Rs. 215/- per share, in accordance with the provision of the Act.

(ii) during the year under report, received request for transfer of 4,000 equity shares and 61,53,000 equity

shares, which were transferred on 1st August,2005 and 8th January,2006 respectively and received and

effected request for split of equity shares certificates on 21st December,2005.

(iii) did not deposit any amount in a separate Bank Account as no dividend was declared during the year under

report.

(iv) did not require to post warrants to any members of the company as no dividend was declared during the

year under report.

21


(v) since no amount, unpaid dividend account, application money due for refund, matured deposits, matured

debentures and interest accrued thereon remained unclaimed or unpaid, was not required to transfer the

same to Investors Education and Protection Fund.

(vi) duly complied with the requirements of Section 217 of the Act in respect of disclosure of information in

directors’ Report.

14. (a) The Board of Directors of the company is duly constituted. During the year under report, the company

appointed Mr. Popatlal F. Sundesha, Dr. Prakash A. Mody, Mr. Nimish G. Pandya and Mr. Mrudul D. Inamdar,

who have consented to act as Directors of the company, as additional directors of the company on 14th

November, 2005.

(b) During the year under report, Mr. Abhijit B. Warange was appointed as company secretary of the company

on 4th November, 2005.

15. During the year under report, the company revised the remuneration payable to Mr. Kewalchand P. Jain,

Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. Vikas P. Jain as Whole-time directors of the company with effect from

3rd November, 2005.

The designation of Mr. Kewalchand P. Jain has been changed to Chairman & Managing Director of the company

with effect from 3rd December, 2005.

16. During the year under report, the company did not make any appointment of sole-selling agents.

17. (a) As reported to us, during the year under report, no approvals of Central Government, Company Law Board,

Regional Director and Registrar of Companies were obtained in respect of any matter under the Act, as the

same were not required. However during the year under report the company has filed a suo moto application,

for compounding of offence under Section 621A of the Act in respect of non compliance of Section 297 and

other applicable provisions of the Act and the matter is pending before the Honourable Company Law

Board Bench, Western Region Bench, Mumbai

(b) The company was converted into a public limited company under Section 44 of the Act and consequently

changed its name from Kewal Kiran Clothing Private Limited to Kewal Kiran Clothing Limited.

18. All the Directors of the company except one Director have disclosed their interest in other firms / companies, vide

notice of Disclosure submitted to the company in the month of March, 2006. While One Director submitted his

notice of Disclosure on 1st April, 2006.

19. During the year under report, the company has allotted and issued, 30,00,000 bonus shares of Rs. 10/- each,

47, 60,000 equity shares of Rs. 10/- at premium of Rs. 8 per share, 30,000 equity shares of Rs. 10/- at premium

of Rs. 15/- per share and 4,35,000 equity shares of Rs. 10 at the premium of Rs. 215/- per share on 12th October,

2005 25th October, 2005, 16th November,2005 and 16th December, 2005 respectively and complied with the

provisions of the Act in respect of allotment of shares and issue of share certificates.

20. During the year under report, the company has not bought back any shares.

21. During the year under report, the company has not issued any kind of preference shares nor has it redeemed

any preference shares issued earlier, during the year under report.

22. There were no transaction necessitating the company to keep in abeyance the rights to dividends, rights shares

and bonus shares pending registration of transfer of shares.

23. During the year under report, the company did not accept nor renewed any fixed deposit, within the meaning of

the Act read with the Companies (Acceptance of Deposit) Rules, 1975

24. We have been informed that, the amount borrowed by the company from its banks and others during the

financial year 31st March, 2006 are within the borrowing limits of the company duly approved by its shareholders

22


and that necessary resolutions, pursuant to Section 293(1) (d) of the Act, have been passed in the Extra Ordinary

General Meeting held on 12th November, 2005.

25. The company has made investment in mutual funds in compliance with the provisions of the Act.

26. During the year under report, the company has not altered any of the provisions of the Memorandum of Association

with respect to situation of registered office of the company from one state to another.

27. During the year under report, the company has not altered any of the provisions of the Memorandum of Association

with respect to the objects of the company.

28. During the year under report, the company was converted into a public limited company under Section 44 of the

Act and consequently changed its name from Kewal Kiran Clothing Private Limited to Kewal Kiran Clothing

Limited and obtained new incorporation certificate from the Registrar of Companies, Maharashtra on 2nd

November, 2005 and complied with the provisions of the Act and the requisite clauses of the Memorandum of

Association have been altered to effect the change of name of the company.

29. During the year under report, the company has altered the provision of the Memorandum of Association with

respect to the share capital of the company as the authorised share capital of the company has been increased

from Rs. 1 Crores to Rs. 20 Crores.

30. The company has adopted new set of Articles in the Extra Ordinary General Meeting held on 2nd November, 2005

and the same was further modified in the Extra General Meeting held on 9th January, 2006 and the same have

been duly filed with the Registrar of Companies.

31. As reported to us, during the year under report, no prosecution initiated against the company nor show cause

notices received by the company for alleged offences under the Act nor any fines/penalties or other punishment

imposed on the company.

32. As reported to us the company has not received any money as security from its employees during the period

under certification.

33. As reported to us, the company has deposited Provident Fund with prescribed authorities pursuant to Section

418 of the Act.

For U. P. JAIN & CO.

Company Secretaries

Ummedmal P. Jain

Proprietor

C. P. No.: 2235

Place : Mumbai

Date : June 15, 2006

23


ANNEXURE TO THE COMPLIANCE CERTIFICATE DATED 15TH JUNE, 2006

ANNEXURE A

Registers as maintained by the Company:

1. Register of Members u/s 150

2. Register of particulars of contracts in which directors are interested u/s 301

3. Register of Directors, Managing Director, Manager and Secretary u/s 303

4. Register of Directors Shareholding u/s 307

5. Minutes of the meetings of the Board of Directors, Committees of Directors and General Meeting.

6. Register of Directors / shareholder Attendance

7. Register of Charges u/s 143

8. Register of transfers

9. Register of application and allotment of shares.

ANNEXURE B

Forms and Returns as filed by the Company with the Registrar of Companies, during the financial year ending on31st March 2006.

1. Form No. 23 dated 20th July, 2005 for increasing of authorized capital of the company from Rs. 1 crore to Rs. 20crores.

2. Form No. 5 for increasing of authorized capital from Rs. 1 crore to Rs. 20 crores.

3. Annual Accounts for the year ended 31st March 2005.

4. Compliance Certificate dated 1st August, 2005

5. Annual Return dated 30th September, 2005

6. Form No. 32 dated 13th July, 2005 for appointment of Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh P.Jain and Mr. Vikas P. Jain as whole-time directors of the company.

7. From No. 23 dated 13th July, 2005 for appointment of Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh P. Jainand Mr. Vikas P. Jain as whole-time directors of the company.

8. Form nos. 8 & 13 dated 8th July, 2005 for creation of charges.

9. Form nos. 8 & 13 dated 8th July, 2005 for creation of charges.

10. Form No. 2 dated 12th October, 2005 for allotment of 30,00,000 bonus shares.

11. Form No. 2 dated 25th October, 2005 for allotment of 47,60,000 equity shares of Rs. 10/- each at premium of Rs.8/- per share.

12. Form No. 23 dated 2nd November, 2005 for conversion of private limited company into public limited companyand adoption of new set of Articles of Association.

13. Statement in lieu of prospectus dated 2nd November, 2005 under Section 44 of the Act.

14. Form nos. 8 & 13 dated 14th December, 2005 for creation of charges.

15. Form No. 32 dated 16th November, 2005 for appointment of additional Directors.

16. Form No. 32 dated 16th November, 2005 for cessation of director on death.

17. Form No. 29 for Consent to act as Director.



24



21. Form No. 32 dated 4th November, 2005 for appointment of Company secretary.

22. Form No. 2 dated 17th November, 2005 for allotment of 30,000 equity shares of Rs. 10/- each at premium ofRs. 15/- per share.

23. Form No. 32 dated 31st December, 2005 for Mr. Kewalchand P. Jain’s re-designation as Managing director.

24. Form No. 25C dated 31st December, 2005 for appointment of Mr. Kewalchand P. Jain as Managing director.

25. Form No. 25C dated 31st December, 2005 for appointment of Mr. Hemant P. Jain as Whole-time director.

26. Form No. 25C dated 31st December, 2005 for appointment of Mr. Dinesh P. Jain as Whole-time director.

27. Form No. 25C dated 31st December, 2005 for appointment of Mr. Vikas P. Jain as Whole-time director.

28. Form No. 23 dated 31st December, 2005 for issue and allotment of 4, 35,000 equity shares and modification interms of appointment of Mr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. Vikas P.Jain andissue of 31,00,000 equity shares to public.

29. Form No. 23 dated 11th January, 2006 for amendment of various articles of the Articles of Associations of thecompany.

30. Form No. 23 for authority to borrow u/s 293 (1) (a) & (d) and issue of 30,000 equity shares.

31. Form Nos. 17 & 13 dated 23rd January, 2006 for satisfaction of charges.

32. Form No. 2 dated 31st December, 2005 for allotment of 4, 35,000 equity shares of Rs. 10/-each at a premium ofRs. 215/- per share.

33. Form No. III dated 31st January, 2006 for declaration by person not holding of beneficiary interest in the equityshares under Section 187C of the Act.

34. Red Hearing Prospectus dated 8th March, 2006.

35. Final Prospectus dated 31st March, 2006.

For U. P. JAIN & CO.

Company Secretaries

Ummedmal P. Jain

Proprietor

C. P. No.: 2235

Place : Mumbai

Date : June 15, 2006

25


I. COMPANY’S PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE:

Kewal Kiran Clothing Ltd. is committed to good corporate governance in order to enhance shareholders’ value.The company believes that Corporate Governance is not an end in itself but a catalyst in the process towardsmaximization of shareholder value. The company’s philosophy on Corporate Governance enshrines the goal ofachieving the highest levels of transparency, accountability and equity in all spheres of its operations and in allits dealings with the shareholders, employees, the Government and other parties. It is the company’s belief thatgood ethics make good business sense and our business practices are in keeping with the spirit of maintainingthe highest level of ethical standards.

In so far as compliance of Clause 49 of the Listing Agreement with the Stock Exchanges is concerned, thecompany has complied in all material respects with the requirements of Corporate Governance specified in theListing Agreement with Bombay Stock Exchange Ltd. and National Stock Exchange of India Limited.

II. BOARD OF DIRECTORS: –

(a) Composition of the Board: –

The Board of Directors of Kewal Kiran Clothing Limited have an optimum combination of executive and nonexecutive directors. As on 31st March 2006 the Board of Directors of the company comprises of the Chairmanand Managing Director, Mr. Kewalchand P. Jain, who is an executive director and one of the promoters of thecompany. Besides, there are three executive directors viz. Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. VikasP. Jain, who are also the promoters of the company. The Board comprises of four non–executive independentdirectors, which accounts for fifty percent of the strength of Board. The non executive independent directorsare eminent professionals with wide range of knowledge and experience in various spheres of businessand industry, finance and law. The composition of the Board and other relevant details relating to Directorsas on 31st March, 2006 are given below: –

Name of the Director Designation Category of ** No of ** No ofDirectorship other Committee

Directorship Chairmanship/membership

Mr. Kewalchand P. Jain Chairman & Promoter & 3 1Managing Director Executive

Mr. Hemant P. Jain Whole-time Promoter & 4 1Director Executive

Mr. Dinesh P. Jain Whole-time Promoter & 3 0Director Executive

Mr. Vikas P. Jain Whole-time Promoter & 3 0Director Executive

Mr. Popatlal F. Sundesha Director Independent 5 3Non Executive

Mr. Mrudul D. Inamdar Director Independent 1 1Non Executive

Dr. Prakash A. Mody Director Independent 10 1Non Executive

Mr. Nimish G. Pandya Director Independent 2 3Non Executive

** Details of other directorships/committee memberships of all directors are given by way of a separateAnnexure. The committee chairmanship/membership of the Directors are restricted to the chairmanship/membership of Audit Committee, Shareholders/Investors Grievance committee and RemunerationCommittee.

CORPORATE GOVERNANCE REPORT FOR THE YEAR 2005-06

26


(b) Number of Board Meetings held, and attended by Directors.

(i) The meetings of the Board of Directors are scheduled well in advance. The Board Members are presentedin advance with the detailed agenda in respect of all Board meetings. During the year under review 14meetings of the Board of Directors were held on the following dates: –

April 6, 2005, May 7, 2005, July 6, 2005, August 1, 2005, September 8, 2005, September 30, 2005,October 12, 2005, October 25, 2005, November 2, 2005, November 4, 2005, November 14, 2005,December 3, 2005, January 14, 2006 and February 27, 2006. The gap between two consecutive boardmeetings is less than four months.

(ii) The attendance record of each of the Directors at the Board Meetings during the year ended on 31stMarch, 2006 and during the last Annual General Meeting is as under: –

Name of Director No. of Board Meetings Attended Attendance At The Last AGM

Mr. Kewalchand P. Jain 14 Present

Mr. Hemant P. Jain 13 Present

Mr. Dinesh P. Jain 13 Present

Mr. Vikas P. Jain 14 Present

Mr. Popatlal F. Sundesha * 3 N.A

Mr. Mrudul D. Inamdar * 4 N.A

Dr. Prakash A. Mody * 2 N.A

Mr. Nimish G. Pandya * 4 N.A

* Appointed as Additional Director on November 14, 2005.

(c) Code of Conduct

In line with the company’s objective to follow the best Corporate Governance Standards the Board ofDirectors have laid down a Code of Conduct for all Board Members and Senior Management of the company.The Code is effective from January 14, 2006.

(d) Details of shares held in the company as on March 31, 2006

Name of the Director Number of shares held

Mr. Kewalchand P. Jain* 6,11,250

Mr. Hemant P. Jain* 6,11,250

Mr. Dinesh P. Jain* 6,27,250

Mr. Vikas P. Jain* 6,27,250

Mr. Popatlal F. Sundesha** Nil

Mr. Mrudul D. Inamdar Nil

Dr. Prakash A. Mody Nil

Mr. Nimish G. Pandya Nil

*Note:

Mr. K.P. Jain also holds 16,000 equity shares in his capacity of Karta of Kewalchand P. Jain H.U.F

Mr. H.P. Jain also holds 16,000 equity shares in his capacity of Karta of Hemant P. Jain H.U.F

Mr. D.P. Jain also holds 16,000 equity shares in his capacity of Karta of Dinesh P. Jain H.U.F

Mr. V.P. Jain also holds 16,000 equity shares in his capacity of Karta of Vikas P. Jain H.U.F

27


**Note:

Fulchand Exports Private Limited is the holder of 20,000 Equity Shares. Further, Fulchand Finance PrivateLimited is the holder of 20,000 Equity Shares. Mr. Popatlal Sundesha, Independant Non-Executive Directorof the company is Chairman & shareholder of Fulchand Finance Private Limited. Relatives of Mr. PopatlalSundesha are directors and shareholders of Fulchand Exports Private Limited.

III. Audit Committee: –

Constitution of Audit Committee: –

The Audit Committee was constituted on November 14, 2005 in accordance with Clause 49 of the ListingAgreement, consisting of three Directors all being non–executive and independent. The Committee consists ofthe following non executive independent directors:

Name of the Director Position Held

Mr. Mrudul D. Inamdar Chairman

Mr. Popatlal F. Sundesha Member

Mr. Nimish G. Pandya Member

Mr. Abhijit B. Warange, Company Secretary acts as the secretary of the Committee.

All the members of the Audit Committee are financially literate and Mr. M.D. Inamdar, Chairman of the AuditCommittee possesses financial/accounting expertise.

Meetings of Audit Committee: –

During the year ended 31st March, 2006, two Audit Committee meetings were held on December 3, 2005 andFebruary 27, 2006. The attendance of each Audit Committee member is given hereunder: –

Name of the Audit Committee Member No. of meetings held No. of meetings attended

Mr. Mrudul D. Inamdar 2 2

Mr. Popatlal F. Sundesha 2 2

Mr. Nimish G. Pandya 2 2

Attendees: -

The Audit Committee invites such of the executives and directors, as it considers appropriate to be present at itsmeetings. The Executive Directors, the Chief Financial Officer, and the Statutory Auditors are the permanentinvitees to the Audit Committee meetings.

The terms of reference of the Audit Committee includes:

Powers

1. To investigate any activity within its terms of reference.

2. To seek information from any employee.

3. To obtain outside legal or other professional advice.

4. To secure attendance of outsiders with relevant expertise, if it considers necessary.

Roles

1. Oversight of the company’s financial reporting process and the disclosure of its financial information toensure that the financial statement is correct, sufficient and credible.

2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement or removalof the statutory auditor and the fixation of audit fees.

3. Approval of payment to statutory auditors for any other services rendered by the statutory audiors.

4. Reviewing, with the management, the annual financial statements before submission to the board forapproval, with particular reference to:

a. Matters required to be included in the Director’s Responsibility Statement to be included in the Board’sreport in terms of clause (2AA) of Section 217 of the Companies Act, 1956;

28


b. Changes, if any, in accounting policies and practices and reasons for the same;

c. Major accounting entries involving estimates based on the exercise of judgment by management;

d. Significant adjustments made in the financial statements arising out of audit findings;

e. Compliance with listing and other legal requirements relating to financial statements;

f. Disclosure of any related party transactions;

g. Qualifications in the draft audit report.

5. Reviewing, with the management, the quarterly financial statements before submission to the board forapproval

6. Reviewing, with the management, performance of statutory and internal auditors, adequacy of the internalcontrol systems.

7. Reviewing the adequacy of internal audit function, if any, including the structure of the internal auditdepartment, staffing and seniority of the official heading the department, reporting structure coverage andfrequency of internal audit.

8. Discussion with internal auditors any significant findings and follow up there on.

9. Reviewing the findings of any internal investigations by the internal auditors into matters where there issuspected fraud or irregularity or a failure of internal control systems of a material nature and reporting thematter to the board.

10. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as wellas post-audit discussion to ascertain any area of concern.

11. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders,shareholders (in case of non payment of declared dividends) and creditors.

12. To review the functioning of the Whistle Blower mechanism, in case the same is existing.

13. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee.

IV. Remuneration Committee:

Composition of committee

The Remuneration Committee was constituted on November 14, 2006. The Committee consists of the followingnon executive independent Directors:

Name of the Director Position Held

Mr. Nimish G. Pandya Chairman

Mr. Popatlal F. Sundesha Member

Dr. Prakash A. Mody Member


The terms of reference of Remuneration Committee includes determining and reviewing the remunerationpayable to managerial personnel and any revision thereof.

During the year ended March 31, 2006 one meeting of the Remuneration Committee was held on December 3,2005. The attendance of each Remuneration Committee member is given hereunder: –

Name of the Remuneration Committee Member No. of meetings held No. of meetings attended

Mr. Nimish G. Pandya 1 1

Mr. Popatlal F. Sundesha 1 1

Dr. Prakash A. Mody 1 0

29


Details of sitting fees, remuneration etc., paid to Directors for the year ended 31st March, 2006.

Name of the Director Sitting Fees Salary Perquisites Total

Mr. Kewalchand P. Jain Nil Rs. 24,00,000 Nil Rs. 24,00,000

Mr. Hemant P. Jain Nil Rs. 24,00,000 Nil Rs. 24,00,000

Mr. Dinesh P. Jain Nil Rs. 24,00,000 Nil Rs. 24,00,000

Mr. Vikas P. Jain Nil Rs. 24,00,000 Nil Rs. 24,00,000

Mr. Popatlal F. Sundesha Rs. 1,20,000 Nil Nil Rs. 1,20,000

Mr. Mrudul D. Inamdar Rs. 1,20,000 Nil Nil Rs. 1,20,000

Dr. Prakash A. Mody Rs. 40,000 Nil Nil Rs. 40,000

Mr. Nimish G. Pandya Rs. 1,40,000 Nil Nil Rs. 1,40,000

Service contracts, notice period and severance fee

The appointment of the executive directors is governed by the Articles of Association of the company, theresolution of the Board of Directors and the resolution of the members of the company.

There is no provision for severance fees.

Remuneration Policy of the company

Remuneration Policy for Executive Directors

The Board of Directors of the company presently comprises of four executive directors namely Mr. KewalchandP. Jain, Chairman & Managing Director, Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. Vikas P. Jain, Directors.

The remuneration of the executive directors is governed by the Articles of Association of the company, theresolution of the Board of Directors and the resoultion of members of the company. The remuneration paid to theexecutive directors has been approved by the members of the company in the extra ordinary general meetingheld on December 3, 2005. The details of the remuneration paid to the executive directors for the year endedMarch 31, 2006 have been detailed aforesaid.

Revisions, if any in the remuneration of the executive directors are deliberated by the Remuneration Committeeof the Board. Based on the recommendation of the Remuneration Committee, the Board decides on the revisionsubject to the shareholders approval.

Remuneration Policy for Non Executive Directors

Non Executive Directors of a the company can add substantial value to the company through their contributionto the Management of the company. In addition, they can safeguard the interest of the investors at large byplaying an appropriate control role. Non executive directors bring in their vast experience and expertise and addsubstantial value to the deliberations of the Board and its Committee.

Apart from receiving sitting fees for attending the Board/Committee meetings the non executive directors haveno other pecuniary relationship or transaction with the company. The sitting fees paid to the non executivedirectors is within the statutory limits prescribed under the Companies Act, 1956 for payment of sitting feeswithout the approval of the Central Government.

V. Shareholders and Investors Grievance Committee: –

Composition of Committee

The Shareholders and Investors Grievance Committee was constituted on December 3, 2005 to look intoinvestors’ complaints/queries.

The Committee is headed by a non executive independent director and comprises of the following directors:

Name of the Shareholders/Investors Grievance Committee Member Position Held

Mr. Nimish G. Pandya Chairman

Mr. Kewalchand P. Jain Member

Mr. Hemant P. Jain Member

30



No meeting of the committee was held during the financial year ended March 31, 2006.

The terms of reference of Shareholders and Investors Grievance Committee are to specifically look into theredressal of shareholders and investors complaints like transfer of shares, non receipt of balance sheet, nonreceipt of dividends, etc.

Status report of Investors complaints for the year ended March 31, 2006

No. of complaints received - Nil

No. of complaints resolved - Nil

No. of complaints pending - Nil

Name and Designation of the compliance officer:

Mr. Abhijit B. Warange – Company Secretary

VI. General Body Meetings: –

Location, time and date where the three immediately preceding Annual General Meetings of the company wereheld are given below:

Financial Year Day & Date Time Venue

2002-03 Tuesday, September 30, 2003 1.00 p.m. B 101, Synthofine Estate,Opp. Virwani Industrial Estate,Goregaon (E), Mumbai: 400 063

2003-04 Thursday, September 30, 2004 11.00 a.m. B 101, Synthofine Estate,Opp. Virwani Industrial Estate,Goregaon (E), Mumbai: 400 063

2004-05 Friday, September 30, 2005 11.00 a.m B 101, Synthofine Estate,Opp. Virwani Industrial Estate,Goregaon (E), Mumbai: 400 063

Special Resolutions were passed in previous three Annual General Meetings:-

No special resolution was passed in any of the three immediately preceding Annual General Meetings of thecompany.

Special Resolutions whether passed by postal ballot:-

No special resolution was passed by postal ballot in the last Annual General Meeting and also no resolutionrequiring approval of shareholders by way of postal ballot is proposed to be passed in the ensuing AnnualGeneral Meeting.

VII. Disclosures: –

(i) Disclosure regarding materially significant related party transaction: -

The Register of Contracts containing the transactions in which Directors are interested is placed before theBoard regularly for its approval. There are no materially significant related party transactions which havepotential conflict with the interest of the company at large. Transactions with related parties are disclosedseparately in note no. 12 of part B of Schedule 22 to the Accounts in the Annual Report. During the yearended March 31, 2006 the company had entered into a few transaction with a firm falling under the samemanagement and thereby inadvertently violating the provisions of Section 297 of the Companies Act, 1956.The company suo moto made an application to the Company Law Board, Western Region for compoundingthe said inadvertent offence. The Company Law Board has by its order dated July 10, 2006 compoundedthe said offence on payment of compounding fees of Rs. 10,000/- by the company and Rs. 5,000/- each byMr. Kewalchand P. Jain, Mr. Hemant P. Jain, Mr. Dinesh P. Jain and Mr. Vikas P. Jain, Directors of the company.

(ii) No penalties or strictures have been imposed on the company by the Stock Exchanges or SEBI or any otherStatutory Authority on any matter related to capital market during the last three years.

31


(iii) The Board hereby confirms that no personnel have been denied access to the Audit Committee.

(iv) The company has complied with all the mandatory requirements of Clause 49 of the Listing Agreement.Except for the composition of the Remuneration committee of the Board of Directors, the company has notadopted any other non mandatory requirements of Clause 49 of the Listing Agreement.

(v) The company has regrouped its immovable property acquired by virtue of its shareholding in SynthofineChemicals of India Ltd. under fixed assets which were earlier grouped under investment. The company hasprovided depreciation of Rs. 43,31,095/- as prior period expenses, which has resulted in deferred tax assetsof Rs. 14,57,847/-. As benefit of depreciation in income tax will be available to the company from the currentyear, the time difference in taxation has been recognised as deferred tax as per Accounting Standard 22of ICAI.

VIII. Means of Communication: -

The company got listed on the Bombay Stock Exchange Ltd. and National Stock Exchange of India Ltd. on April13, 2006. The results of the company for the financial year ended March 31, 2006 were published in TheEconomic Times and The Maharashtra Times. The results of the company would normally be published in TheEconomic Times/Free Press Journal and The Maharashtra Times/Navshakti. The financial results and otherinformation are displayed on the company’s website viz. www.kewalkiran.com The company also displaysofficial news releases on its website for the information of its shareholders/investors. Presentations made toinstitutional investors have been displayed on the website of the company.

The company does not have the system of intimating shareholders individually of its quarterly/half–yearlyresults. However, investors/shareholders desirous of getting the quarterly/half yearly unaudited results aregiven copies thereof after consideration of results by the Board and publication in newspapers.

The company has been complying with the provisions of Clause 51 of the Listing Agreement pertaining toElectronic Data Information Filing & Retrieval (EDIFAR) System since March, 2006. The audited financial resultsof the company for the financial year ended 31st March, 2006 have been uploaded on the EDIFAR web site. Thesame has also been uploaded on the company’s website viz. www.kewalkiran.com

The Management discussion and Analysis Report forms a part of the Annual Report.

IX. General Shareholders’ Information: -

a) Annual General Meeting:

Date & Time : September 14, 2006 at 3.00 p.m.

Venue : Indian Education Societies, Manik Sabhagriha, Opp. Lilavati Hospital,Bandra Reclamation, Bandra (West), Mumbai: 400 050

b) Financial Year : April 1 to March 31

c) Dates of Book Closure:

September 1, 2006 to September 14, 2006 (both days inclusive)

d) Dividend payment date:

Dividend when sanctioned by shareholders will be made payable on or after September 19, 2006.

e) Listing on Stock Exchanges:

The equity Shares of the company got listed on April 13, 2006 and continue to be listed at the following StockExchanges: –

Bombay Stock Exchange Ltd., Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai: 400 001.

National Stock Exchange of India Ltd., Exchange Plaza, Bandra Kurla Complex Bandra (E),Mumbai: 400 051.

Note: Listing fees for the financial year 2006–07 has been paid to both the stock exchanges i.e BombayStock Exchange Ltd. and National Stock Exchange of India Ltd.

32


f) Stock Code/Symbol:

The Bombay Stock Exchange Ltd. : 532732

National Stock Exchange of India Ltd. : KKCL

ISIN No. : INE401H01017

g) Market Price Data:

The shares of the company got listed on the Bombay Stock Exchange Ltd. and National Stock Exchange ofIndia Ltd. on April 13, 2006. Therefore no market price data can be made available for the financial yearended March 31, 2006.

h) Performance in comparison to broad based indices:

The shares of the company got listed on the Bombay Stock Exchange Ltd. and National Stock Exchange ofIndia Ltd. on April 13, 2006. Therefore no comparison of the shares of the company with the BSE Sensexor Nifty Index can be drawn for the financial year ended March 31, 2006.

i) Registrar & Share Transfer Agents:

Intime Spectrum Registry LimitedC-13, Pannalal Silk Mills Compounds,L.B.S. Marg, Bhandup (West), Mumbai-400078Tel: +91 22 25960320Fax: +91 22 5960329Email: [email protected]: www.intimespectrum.com

j) Share Transfer System:

Shares held in the dematerialised form are electronically traded in the Depositories and the Registrar andShare Transfer Agents of the company, viz. Intime Spectrum Registry Limited periodically receive from theDepository the beneficial holdings data, so as to enable them to update their records and to send allcorporate communications, dividend warrants etc. Physical shares received for dematerialisation areprocessed and completed within a period of 15 days from the date of receipt provided they are in order inevery respect. Bad deliveries are immediately returned to Depository participants under advice to theshareholders within the aforesaid period.

Transfers in Physical forms are registered by the registrar and transfer agents immediately on receipt of thecompleted documents and certificates are issued within one month of the date of lodgment of transferrequest. Invalid share transfer request are returned within fifteen days of receipt.

k) Distribution Pattern of shareholding as on March 31, 2006: –

No of equity No. of % of No. of %shares shareholders shareholding shares held

1–500 0 0.00 0 0.00

501–1000 2 3.17 2000 0.02

1001–2000 7 11.11 13500 0.15

2001–3000 2 3.17 5500 0.06

3001–4000 4 6.35 15000 0.16

4001–5000 15 23.81 75000 0.81

5001–10000 9 14.29 88000 0.96

10001 & above 24 38.10 9026000 97.84

63 100.00 9225000 100.00

33


Shareholding Pattern as on March 31, 2006.

Category No. of Shares %

A. Promoters Holding

1. Promoters:–

a. Indian Promoters 8790000 95.28

b. Foreign Promoters Nil Nil

2. Persons acting in Concert Nil Nil

Sub total: 8790000 95.28

B. Non Promoters Holding

3. Institutional Investors:–

a. Mutual Funds & UTI Nil Nil

b. Banks Nil Nil

c. FIIs Nil Nil

Sub total: Nil Nil

4. Others:–

a. Private Corporate Bodies 65000 0.71

b. Indian Public 370000 4.01

c. NRIs/OCBs Nil Nil

d. Any other Nil Nil

Sub total: 435000 4.72

GRAND TOTAL 9225000 100.00

As per Regulation 3 of SEBI Takeover Code, 1992 as amended upto date, group companies include KornerstoneRetail Limited, Kewal Kiran Retail India Pvt. Ltd. and Kewal Kiran Realtors Pvt. Ltd. as also the firms viz. KewalKiran Enterprises, Kasturchand & Sons and Karamchand.

Shareholding pattern graph as on March 31, 2006

SHARE

Promoters

Indian Pubilc(Associates)

Bodycorporates

34


l) Dematerialisation of equity shares:

The shares of the company got listed on the exchanges on April 13, 2006. The entire pre issue capital of thecompany i.e. 92,25,000 equity shares were held in physical form as on March 31, 2006. Post initial publicoffering by the company the shares of the company are compulsorily traded in dematerialised form and areavailable for trading under both the Depository Systems – NSDL (National Securities Depository Limited )and CDSL (Central Depository Services (India) Limited ). As on March 31, 2006 no shares of the companywere held in dematerialised form either with NSDL or CDSL.

Liquidity:

Shares of Kewal Kiran Clothing Limited are actively traded on Bombay Stock Exchange Ltd. and NationalStock Exchange of India Ltd.

m) Outstanding GDRS/ADRS/Warrants or any Convertible Instruments conversion date and likely impacton equity:

The company has not issued any GDRS/ADRS/Warrants or any convertible instruments.

n) Plant Locations:

VapiPlot No. 787/1, 40, shed,IInd Phase, G.I.D.C.,Vapi: 396 195Gujarat

Daman697/5, Near Maharani Estate,Somnath Road, Dhabel,Daman: 396 210

MumbaiSynthofine Estate,Opp Virwani Industrial Estate,Goregaon (East),Mumbai: 400 063

71-73, Kasturchand Mill Compound,Bhawani Shankar Cross Road,Dadar (West),Mumbai; 400 028

o) Address for Investor Correspondence:Shareholding related queriesIntime Spectrum Registry LimitedC-13, Pannalal Silk Mills Compounds,L.B.S. Marg, Bhandup (West),Mumbai-400078Tel: +91 22 25960320Fax: +91 22 5960329Email: [email protected]: www.intimespectrum.com

General correspondenceKewal Kiran Estate,Behind Tirupati Udyog,460/7, I.B. Patel Road,Goregaon (East), Mumbai: 400 063Tel: +91 22 26814400Fax: +91 22 26814410Email: [email protected]: www.kewalkiran.com

35


DETAILS OF OTHER DIRECTORSHIPS/COMMITTEE MEMBERSHIPS OF ALL DIRECTORS

[1] BODIES CORPORATE OF WHICH MR. KEWALCHAND P. JAIN IS A CHAIRMAN/DIRECTOR

Name of The Company Board Position Held

Kornerstone Retail Ltd. Chairman

Kewal Kiran Realtors Pvt. Ltd. Chairman

Kewal Kiran Retail India Pvt. Ltd. Chairman

COMMITTEE MEMBERSHIPS

Name of The Company Name of the Committee Position Held

Kewal Kiran Clothing Ltd. Shareholders and Investors Grievance Committee Member

[2] BODIES CORPORATE OF WHICH MR. HEMANT P. JAIN IS A CHAIRMAN/ DIRECTOR


Kornerstone Retail Ltd. Director

Synthofine Chemicals of India Ltd. Director

Kewal Kiran Realtors Pvt. Ltd. Director

Kewal Kiran Retail India Pvt. Ltd. Director



Kewal Kiran Clothing Ltd. Shareholders and Investors MemberGrievance Committee

[3] BODIES CORPORATE OF WHICH MR. DINESH P. JAIN IS A CHAIRMAN/DIRECTOR





[4] BODIES CORPORATE OF WHICH MR. VIKAS P. JAIN IS A CHAIRMAN / DIRECTOR





[5] BODIES CORPORATE OF WHICH MR. POPATLAL F. SUNDESHA IS A CHAIRMAN/DIRECTOR


Apaksh Broadband Ltd. Director

Aksh Opti Fibre Ltd. Director

Aksh Broadband Ltd. Director

Derivium Capital & Securities Pvt. Ltd Chairman

Fulchand Finance Pvt. Ltd. Chairman

ANNEXURE TO CORPORATE GOVERNANCE

36


COMMITTEE MEMBERSHIPS:


Kewal Kiran Clothing Ltd. Audit Committee Member

Kewal Kiran Clothing Ltd. Remuneration Committee Member

Aksh Opti Fibre Ltd. Audit Committee Member

[6] BODIES CORPORATE OF WHICH MR. MRUDUL D. INAMDAR IS A CHAIRMAN/DIRECTOR


Kanbans Consultancy Services Pvt. Ltd. Director



Kewal Kiran Clothing Ltd. Audit Committee Chairman

[7] BODIES CORPORATE OF WHICH DR. PRAKASH A. MODY IS A CHAIRMAN/ DIRECTOR


Unichem Laboratories Ltd. Chairman

Viramrut Investment Pvt. Ltd. Director

A.V.M. Investment Pvt. Ltd. Director

M. Investment Pvt. Ltd. Director

Pranit Financing & Investment Co. Pvt. Ltd. Director

Chevy Investments & Finance Pvt. Ltd. Director

Niche Generics Ltd. U.K Director

Unichem Farmaceutica Do Brazil Ltda. Director

Unichem SA (Pty) Ltd. Director

Unichem Pharmaceuticals (USA) Inc Director



Kewal Kiran Clothing Ltd. Remuneration Committee Member

[8] BODIES CORPORATE OF WHICH MR. NIMISH G. PANDYA IS A CHAIRMAN/ DIRECTOR


Lipi Data Systems Pvt. Ltd. Director

Aasia Trade Development Pvt. Ltd. Director



Kewal Kiran Clothing Ltd. Remuneration Committee Chairman

Kewal Kiran Clothing Ltd. Shareholders and Investors Grievance Committee Chairman

Kewal Kiran Clothing Ltd. Audit Committee Member

37


Daba Garden, Vishakhapatnam

Devare House, B.S. Road, Dadar (W), Mumbai

K–LOUNGE STORES

38


Premier Chambers, Ground Floor, Opp. G.B. Office, R.C.Dutt Road, Baroda

9-A, Vaibhav Chambers, Budhwar Peth, Bajirao Road, Pune

K–LOUNGE STORES

39


Shop No. 4, 5, 6 & 7 Ground Floor, Devi Plaza, Opp Shriram Petrol Pump, Anand Mahal Road, Adajan, Surat

Shop No. AG. 1/2, Rajeev Plaza, Near Bus Stand, Bilaspur

K–LOUNGE STORES

40


Unit No. 12, Hi-Street Phoenix, Sky Zone, Senapati Bapat Marg, Lower Parel, Mumbai

Gaurav Towers, Malviya Nagar, Jaipur

K–LOUNGE STORES

41


1. Overview:

Over the years, we have witnessed various stages of evolution in the Indian Textile and Apparel Industry. Since2004-05, we are observing positive changes in the way Indian domestic apparel industry is functioning. Thedomestic apparel sales have grown by over 10 percent in last 5 years, while demand for branded apparel hasgrown rapidly at more than 30 percent over the same period. Overall growth in the apparel sector is expected toshow a CAGR of 14% over next 5 years. Branded apparel sales are expected to register a CAGR of 25% duringthe same period.

As the government is poised to open the domestic apparel industry for the world’s best brands by allowing theFDI in retail sector, we will witness an increasingly healthy competition for branded apparels. These will challengethe Indian industry to enable their brands to meet the expectations of the discerning Indian consumers. This is athreat as well as opportunity for the industry to display their manufacturing and brand building capabilities in thecompetitive market. Factors like time to market and freshness of collection will become extremely important in thecurrent scenario.

Indian consumers are expecting and demanding more in terms of product quality, fashion trends & overallexperience of buying a lifestyle product. The Country is also going through a retail boom. Malls are becoming aplace to go and hang around and also shop.

The government is proactively addressing an urgent need to eliminate the duplication in the tax on sales, freemovement of goods within states will result in better retail sales.

2. Industry:

In 2005, the Indian domestic apparel industry was worth Rs. 88,340 Crores billion in 2005. By 2010, the domesticsales is expected to reach Rs. 1,11,000 Crores billion. Growing income levels and economic well being ofworld’s largest middle class population, increase in working women population, younger working population,preference for recognizable brands, switch to readymade garments from tailored garments and rapid growth oforganized retail will provide an impetus to branded apparels. The Indian manufacturers possessing the ability todesign, manufacture & retail, apparels on large scale will benefit immensely from this shifting of paradigms.

Existing players in domestic and export apparel market have ever increasing diversification and expansionplans. Companies are expanding their manufacturing capacities. Government of India is also setting up variousapparel parks, integrated textile plans and special economic zones in partnership with private sector. Most of theproducts in apparels category are de-reserved for all the sectors. Apparel industry need to focus on developmentof technology in cutting, stitching, processing and finishing machines.

3. Opportunities & threats:

India offers a never before opportunity for branded apparels. We have definitive strengths in terms of integratedmanufacturing from Cutting to Finishing, which gives us edge in terms of economy and lead over others in termsof time to market. We employ latest technology and always strive to get the best available technology the worldhas to offer, when coupled with the knowledge and productivity gives us a tremendous edge.

We have four established brands KILLER, INTEGRITI, LAWMAN & EASIES. These brands are extremely wellaccepted amongst Indian consumers and enjoy a deserved reputation for high quality and correct pricing. Theabove brands are operating in different design and price segments. We are operating in men’s casual wear, butintend to introduce women’s wear and men’s formal wear soon. We would also like to tap the expandingchildren’s wear market. Company also plans to introduce various accessories & life style products under existingbrands.

Also the Company wants to expand its retail operations aggressively under K Lounge brand. K Lounge retailsstores sell all the apparel brands of the company under one roof. We are planning to add more than 50 stores toour existing 31 stores (as on 31st March 2006.). We have also identified and booked more than 50 stores acrossthe country.

4. Segment wise performance:

Segments have been identified in line with the accounting standard on segment reporting taking into accountthe organization structure as well as the differential risks and returns of these segments. The Company operates

MANAGEMENT DISCUSSION AND ANALYSIS

42


only in the clothing and accessories segment and has no reportable business segment as required by accountingstandard (AS 17) of ICAI.

Geographical Segments are identified and given below.

Rs. ’000

India Rest of the World Total

Segment Revenue 791,924 67,714 859,638

5. Risks and Concerns:

There are risks which are inherent to the apparel industry, mainly, not being able to identify the consumerpreferences, forecasting the demand, timely delivery to the market etc. Company also faces the challengingsupply chain related issues in the Indian supply chain. The apparels business is seasonal in nature & hence anyadverse event effecting the overall economy affects the sales of the company.

In terms of expansion of the retail business of the company, biggest challenge lies in the availability of qualityreal estate and ability of the developers to meet the delivery deadlines.

6. Internal control systems and their adequacy:

The company has a proper and adequate system of internal control to ensure that all assets are safeguardedand protected against any loss from unauthorized use or disposition and that transaction are authorized, recordedand reported correctly. The Company’s internal control systems are supplemented by an extensive programmeof internal audit conducted by an internal team and external auditors and periodically reviewed by the managementtogether with the Audit Committee of the Board. We place greater emphasis on internal controls across functionsand processes, covering the entire gamut of activities including finance, supply chain, sales and distribution,marketing etc.

7. Company’s Financial performance:


March 31, 2006 March 31, 2005

Sales & Other Income 866,794 268,567

Profit before interest, depreciation & tax 206,676 68,755

Less: Interest 10,785 9,394

Depreciation 13,903 10,572

Profit before tax for the year 181,990 48,789

Provision for taxation (Net) 62,646 11,571

Prior period adjustments 2,848 (13)

Profit after tax for the year 116,495 37,231

As a result of restructuring of the group entities during the year, the entire apparel manufacturing and marketingbusiness now rests with the company. The results of the Company include effect of the above for part of the yearand hence the previous year figures are not strictly comparable. The Company owns four apparel brands namely“KILLER”, “LAWMAN”, “INTEGRITI” and “EASIES” and one retail brand “K-LOUNGE”. Consolidated Sales inrespect of brands owned by the Company and manufactured /marketed by the company and promoter groupentities up to 31st March 2006 is as below.


March 31, 2006 March 31, 2005

Net Sales (Net of intra group sales) 940,854 754,963

43


8. Human Resources:

The company places a high emphasis on the well being and safety of its employees.

As on 31st March 2006, we had over 1200 employees. We are aggresively focusing on attracting and retainingthe best manpower available. We strive to provide to our employees high degree of motivation, training andstructured compensation package.

The Company has excellent industrial relations with all its employees at manufacturing facilities. Adequatesafety and welfare measures are in place and the company will continue to improve the same on an ongoingbasis.

9. Cautionary Statements:

This discussion contains certain forward-looking statements within the meanings of applicable securities laws.Readers are cautioned not to place undue reliance on these forward looking statements, which reflectsmanagement’s analysis describing the company’s objectives and expectations based on certain informationand assumptions. Company’s operations are dependent on various internal and external factors within andoutside the control of the management of the company.

The company assumes no responsibility in respect of forward looking statements herein which may undergochanges in future on the basis of subsequent developments, information or events.

AUDITORS’ CERTIFICATE

To,The Members ofKewal Kiran Clothing Limited

1. We have examined the compliance of conditions of corporate governance by Kewal Kiran Clothing Limited, forthe year ended on March 31, 2006, as stipulated in Clause 49 of the Listing Agreement of the said Company withstock exchanges.

2. The compliance of conditions of corporate governance is the responsibility of the management. Our examinationwas limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance ofthe conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financialstatements of the Company.

3. In our opinion and to the best of our information and according to the explanations given to us and representationsmade by the management, we certify that the Company has complied with the conditions of Corporate Governance,as stipulated in the abovementioned clause of the Listing Agreement, to the extent applicable.

We state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency oreffectiveness with which the management has conducted the affairs of the Company.

For N.A. Shah Associates For Jain & TrivediChartered Accountants Chartered Accountants

Sandeep Shah Satish C. TrivediPartner PartnerMembership No. :- 37381 Membership No. :- 38317

Place: MumbaiDate : July 21, 2006.

44


To,The Members ofKewal Kiran Clothing Limited

1. We have audited the attached Balance Sheet of Kewal Kiran Clothing Limited as at March 31, 2006 and alsothe Profit and Loss Account for the year ended on that date and the Cash Flow Statement for the year ended onthat date both annexed thereto. These financial statements are the responsibility of the Company’s management.Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order 2003 as amended by the Companies (Auditor’s Report)(Amendment) order, 2004 issued by the Central Government of India in terms of sub-section (4A) of section 227of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4and 5 of the said Order.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows:

a. we have obtained all the information and explanations, which to the best of our knowledge and belief werenecessary for the purposes of our audit;

b. in our opinion, proper books of account as required by law have been kept by the Company so far asappears from our examination of those books;

c. the Balance Sheet and Profit & Loss Account and Cash Flow Statements dealt with by this report are inagreement with the books of account;

d. in our opinion, the Balance Sheet and Profit and Loss Account and Cash Flow Statement dealt with by thisreport comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the CompaniesAct, 1956;

e. on the basis of the written representation received from the directors, and taken on record by the Board ofDirectors, as on 31st March, 2006, we report that none of the directors is disqualified as on 31st March,2006 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of theCompanies Act, 1956;

f. The prior period item represents depreciation for earlier years on account of regrouping of immoveableproperty, used for the purpose of business, from investment to fixed assets. Also refer note to Schedule 5– Fixed Assets.

g. in our opinion and to the best of our information and according to the explanations given to us, the saidaccounts read with Significant accounting policies, notes to accounts and para (f) above give the informationrequired by the Companies Act, 1956, in the manner so required and give a true and fair view in conformitywith the accounting principles generally accepted in India:

i) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2006;ii) in the case of Profit & Loss Account, of the profit of the Company for the year ended on that date; and

iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.


Sandeep Shah Satish C. TrivediPartner PartnerMembership No.: 37381 Membership No.: 38317

Place : MumbaiDate : April 26, 2006

AUDITORS’ REPORT

45


(Referred to in paragraph 3 of our report of even date)

(i) In respect of fixed assets:

(a) The Company has maintained proper records showing full particulars including quantitative details andsituation of its fixed assets.

(b) A portion of the fixed assets has been physically verified during the year by the management in accordancewith a phased programme for verification which, in our opinion, provides for physical verification of all thefixed assets at reasonable intervals having regards to the size of the Company and the nature of its assets.According to the information and explanation given to us, no material discrepancies were noticed on suchverification.

(c) Fixed assets disposed off during the year, in our opinion, do not constitute substantial part of the fixedassets of the Company and such disposal has, in our opinion, not affected the going concern status of theCompany.

(ii) In respect of its inventories;

(a) As explained to us, the inventories have been physically verified by the management during the year. Incase of stock lying at third parties, certificates confirming the stocks so held have been received from thesaid parties.

(b) In our opinion and according to the information and explanations given to us, the procedures of physicalverification of inventory followed by the management are reasonable and adequate in relation to the sizeof the company and nature of its business.

(c) In our opinion and according to the information and explanations given to us, the company has maintainedproper records of its inventories. The discrepancies noticed on verification between the physical stocksand the book records were not material.

(iii) In respect of loans taken / granted:

(a) According to the information and explanation given to us, the Company has not taken loans from companiesand firms covered in the register maintained under section 301 of the Companies Act, 1956. Details inrespect of loans taken from directors and their relatives/HUF’s is given below:

(Amount in Rs.)

Relationship No. of Opening Amount Amount Year EndParties Balance Accepted Repaid Balance

Directors Four 82,023,189 91,455,078 173,478,267 Nil

Relatives/HUF’s Thirteen 15,536,254 34,339,016 49,875,270 Nil

(b) According to the information and explanation given to us, the Company has not granted loans to firms,Directors and relatives covered in the register maintained under section 301 of the Companies Act,1956. Details in respect of loans granted to companies is given below:

(Amount in Rs.)

Relationship No. of Opening Amount Amount Year EndParties Balance Accepted Repaid Balance

Company in which One 22,800,000 Nil 22,800,000 NilDirector is a Director

(c) In our opinion the rate of interest and other terms and conditions of on which the loans mentioned abovehave been taken/granted are not, prima facie, prejudicial to the interest of the company.

(d) In the absence of stipulations in respect of the terms of payment of principal amount and interest for theloans taken, we are unable to comment whether the payment of the aforesaid amounts is regular.

(e) There are no amounts outstanding towards principal or interest for above-mentioned loans, on the balancesheet date.

(iv) In our opinion, and according to the information and explanations given to us, there are adequate internalcontrol procedures commensurate with the size of the Company and nature of its business for the purchase ofinventory and fixed assets and for the sale of goods and services. During the course of our audit, we have notobserved any continuing failure to correct major weaknesses in such internal controls.

ANNEXURE TO THE AUDITORS’ REPORT

46


(v) In respect of register maintained under section 301 of the Companies Act, 1956:

(a) Except for transaction as mentioned in note 23 of Schedule - 22 to the Financial statements regardingcompany’s application under section 621A of the Companies Act, 1956 pending with the CentralGovernment and based on the information and explanations given to us, the transactions pertaining tocontracts and arrangements that need to be entered into a register in pursuance of section 301 of theCompanies Act, 1956 have been so entered.

(b) According to information and explanation given to us, the transactions of sale of goods and materialsmade in pursuance of contracts or arrangements entered in the register maintained under section 301 ofthe Companies Act, 1956 and aggregating during the year to Rs. 500,000/- or more in respect of eachparty, have been made at prices which are reasonable having regard to the prices at which transactions ofsimilar goods and materials have been made with other parties.

(vi) In our opinion and according to the information and explanations given to us, the Company has complied withthe directives issued by the Reserve bank of India and the provisions of Section 58A and Section 58AA of theCompanies Act, 1956 and the rules framed there under with regard to deposits accepted from the public. We areinformed that no order has been passed by the Company law Board or National Company Law Tribunal orReserve Bank of India or any court or any other Tribunal.

(vii) In our opinion, the internal audit functions carried out during the year by a firm of Chartered Accountants appointedby the management have been commensurate with the size of the Company and nature of its business.

(viii) As informed to us, the Central Government has not prescribed the maintenance of cost records under 209-(1)(d) of the Companies Act, 1956 for any of the products of the Company.

(ix) In respect of statutory dues:

(a) According to the information and explanations given to us and on the basis of our examination of the booksof account, the Company has been regular in depositing undisputed statutory dues including InvestorEducation and Protection Fund, Income-tax, Sales-tax, VAT, Wealth Tax, Custom Duty, Excise Duty, Cessand any other dues during the year with the appropriate authorities. In respect of tax deducted at source,Provident Fund and Employees’ State Insurance there were minor delays in deposit of dues with theauthorities during the year.

(b) According to information and explanations given to us, there are no disputed Sales-tax, VAT, Wealth Tax,Custom Duty, Excise duty and Cess as on March 31, 2006. The details of disputed Income-tax which havenot been deposited as on March 31, 2006 are given below:

Name of the Statute Nature of Dues Amount Period to which Forum where dispute(in Rs.) it relates is pending

Income Tax Act, 1961 Tax liability 1,093,806 Assessment Commissioner ofyear 1999-00 Income Tax (Appeals)

Tax liability 380,310 Assessment Commissioner ofPenalty 80,000 year 2000-01 Income Tax (Appeals)

Tax liability *3,562,834 Assessment Income Tax Appellateyear 2001-02 Tribunal

Tax liability *219,681 Assessment Income Tax Appellateyear 2002-03 Tribunal

Tax liability 112,792 Assessment Commissioner ofyear 2003-04 Income Tax (Appeals)

* Appeal is partly allowed by Commissioner of Income Tax (Appeals) and effect order is pending in favor ofthe company.

(c) Service Tax is not applicable to the company.

(x) The Company does not have any accumulated losses at the end of the financial year and has not incurred cashlosses during the financial year covered by our audit and the immediately preceding financial year.

(xi) Based on our audit procedures and the information and explanations given by the management, we are of theopinion that the Company has not defaulted in repayment of dues to bank during the year.

(xii) According to the information and explanations given to us, the Company has not granted loans and advanceson the basis of security by way of pledge of shares, debentures and other securities.

47


(xiii) The Company is not a chit fund / nidhi / mutual benefit fund / society.

(xiv) The Company has maintained proper records of transactions and contracts in respect of investments in MutualFunds and timely entry has been made therein. All the Investments made by the company are in the name of thecompany.

(xv) According to the information and explanations given to us, the terms and conditions of the guarantees given bythe Company for loans taken by others from banks or financial institutions are not prima facie prejudicial to theinterest of the Company.

(xvi) To the best of our knowledge and belief and according to the information and explanation given to us, in ouropinion, term loans availed by the Company were, prima facie, applied by the Company during the year for thepurposes for which the loans were obtained, other than temporary deployment pending application.

(xvii) According to the information and explanation given to us, and on an overall examination of the balance sheetof the Company, funds raised on short-term basis have, prima facie, not been used during the year for long-term investment.

(xviii) The Company has during the year made preferential allotment of shares to parties covered in the registermaintained under section 301 of the Companies Act, 1956, as under:

(a) Allotment during the period the Company was a private company:

The shares were allotted at a price which is not materially lower than book value of shares (based on thebreak up value as per the latest audited accounts). The issue price has been approved by the shareholdersat the General Meeting.

(b) Allotment during the period the Company was a unlisted public company:

The shares were allotted at a price greater than the fair value as computed in accordance with theerstwhile CCI guidelines for valuation of shares

Based on the above, in our opinion the prices at which the preferential allotment has been made is prima-facie not pre judicial to the interest of the Company

(xix) The Company did not have outstanding debentures during the year. Accordingly, no security/charge has beencreated.

(xx) The monies raised during the year by way of public issue have not been utilized as of March 31, 2006 and hasbeen retained in the designated Escrow Accounts with bankers to the public issue.

(xxi) To the best of our knowledge and belief and according to the information and explanations given to us, no fraudof material significance on or by the company was noticed or reported during the year.



Place: MumbaiDate: April 26, 2006

48


BALANCE SHEET

As at March 31,

Schedule 2006 2005Rs. ’000 Rs. ’000

SOURCES OF FUNDS

SHAREHOLDER’S FUNDS

Share Capital 1 92,250 10,000

Share Application Money Pending Allotment 806,010 –

(Refer Note B-2 to Schedule 22)

Reserves and surplus 2 275,987 78,517

1,174,246 88,517

LOAN FUNDS

Secured loans 3 163,867 54,282

Unsecured loans 4 – 97,559

163,867 151,842

DEFERRED TAX LIABILITIES (NET) 1,295 1,307

TOTAL 1,339,409 241,666

APPLICATION OF FUNDSFIXED ASSETS

Gross block 5 226,420 108,694

Less : Depreciation (51,026) (33,065)

Net block 175,393 75,629

Capital work-in-progress 76,035 19,668

251,428 95,297

INVESTMENTS 6 23,009 9,350CURRENT ASSETS, LOANS AND ADVANCES:

Inventories 7 137,165 28,350

Sundry debtors 8 131,594 35,450

Cash and bank balances 9 4,828,437 30,546

Loans and advances 10 39,153 72,614

5,136,349 166,960

LESS: CURRENT LIABILITIES AND PROVISIONS 11

Liabilities 4,090,236 28,838

Provisions 28,565 1,104

4,118,801 29,941

NET CURRENT ASSETS 1,017,548 137,019MISCELLANEOUS EXPENDITURE 12 47,423 –

TOTAL 1,339,409 241,666

Notes to Financial Statements 22

As per our report of even date

For and on behalf of For and on behalf of

N. A. Shah Associates Jain & Trivedi For and on behalf of the Board

Chartered Accountants Chartered Accountants

Sandeep Shah Satish C. Trivedi Kewalchand P. Jain Hemant P. Jain Abhijit B. Warange

Partner Partner Managing Director Director Company Secretary

Membership No. : 37381 Membership No. : 38317

Place: Mumbai Place: Mumbai

Date : April 26, 2006 Date : April 26, 2006

49


PROFIT AND LOSS ACCOUNT

For the year ended March 31

Schedule 2006 2005Rs. ’000 Rs. ’000

INCOME

Sales and service charges 13 859,638 261,191

Other income 14 7,156 7,376

Increase / (decrease) in stocks 15 79,611 (200)

946,406 268,366

EXPENDITURE

Cost of material consumed 16 438,560 80,689

Purchase of Trading material 3,045 910

Personnel Cost 17 91,693 46,477

Manufacturing and operating expenses 18 73,826 28,684

Administrative and other expenses 19 38,616 15,662

Selling and distribution expenses 20 93,989 27,190

Finance expenses 21 10,785 9,394

Depreciation 5 13,903 10,572

764,416 219,578

Net Profit Before Tax and Prior Period items 181,990 48,789Provision for current tax[including Rs.50 thousand (P.Y. Rs.17 thousand) for wealth tax] 60,400 10,750Provision for deferred tax 1,446 821

Provision for Fringe Benefit Tax 800 –

Net Profit after tax and before Prior Period Items 119,343 37,218Prior Period Item:

Depreciation for earlier years (Refer note to Schedule 5 – Fixed Assets) 4,331 –

Deferred Tax effect on deprecition for earlier years (1,458) –

Excess Provision for tax in earlier years (25) (13)

Net Profit after Prior Period items 116,495 37,231

Balance brought forward 78,517 41,287

Appropriations:Bonus Shares Issued 30,000 –Proposed Dividend 18,488 –Tax on proposed dividend 2,593 –Transfer to general reserves 10,000 –

Balance carried to balance sheet 133,932 78,517

Earnings per Share – Basic & Diluted 17.81 8.09(Refer Note – B–14 of Schedule 22)











50


For the year ended March 31,2006 2005

Rs. ’000 Rs. ’000

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before taxes as per Profit and Loss Account 181,990 48,789

Adjustments for:

Depreciation 13,903 10,572

Preliminary Expenses w/off – 7

(Profit)/Loss on Sale of Fixed Assets (186) 4

(Profit)/Loss on sale of Securities (40) (2,863)

Sundry Balance written off 202 –

Interest paid 8,236 8,720

Dividend income on mutual fund (751) –

Exchange Rate Fluctuation 940 –

Interest earned (2,459) (3,030)

19,845 13,411

Operating Profit before Working Capital Changes 201,835 62,199

Adjustments for:

Trade and other receivables (119,818) (35,688)

Inventories (108,815) (4,344)

Trade payables and other liabilities 53,209 3,278

(175,423) (36,754)

Cash generated from Operations 26,411 25,445

Direct Taxes (54,568) (11,792)

Net Cash utilised in Operating Activities (28,157) 13,652

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (140,065) (19,456)

Sale of Fixed Assets 791 150

Purchase of Investments (81,500) –

Sale of Investments 83,802 18,113

Dividend Received 279 –

Loans given (48) (29,252)

Recovery of Loans given 13,552 5,455

Interest received 2,459 3,030

Net Cash utilised in Investing Activities (120,729) (21,960)

STATEMENT OF CASH FLOW

51


C. CASH FLOW FROM FINANCING ACTIVITIES

Secured Loans taken 158,005 –

Secured Loans repaid (48,026) (4,355)

Secured Loans – Bank Overdraft (Net) (729) 46,342

Unsecured loans taken 149,237 87,733

Unsecured loans repaid (161,116) (94,968)

Interest paid (6,304) (8,720)

Exchange Rate Fluctuation (605) –

Share Issue Expenses (23,747) –

Proceeds from Issue of Shares 98,625 –

Proceeds from Share Application Money pending Allotment 806,010 –

Proceeds from Share Application Money pending refund 3,975,429 –

Net Cash generated in Financing Activities 4,946,777 26,033

NET INCREASE IN CASH AND CASH EQUIVALENTS 4,797,891 17,725

CASH AND CASH EQUIVALENTS – OPENING BALANCE 30,546 12,822

CASH AND CASH EQUIVALENTS – CLOSING BALANCE 4,828,437 30,546

Notes:

1 Cash and Cash equivalents includes:

a. Rs. 4,781,439 thousand (P.Y. NIL) received towards Share Application retained in Escrow account.Refer Note B – 2 of Schedule 22

b. Fixed deposits of Rs.19,506 thousand (P.Y. Rs.8,857 thousand) are under lien. Refer Schedule 9

2 The Cash flow statement is prepared under ‘indirect method’ as set out in Accounting Standard – 3 onCash Flow Statements issued by the Institute of Chartered Accountants of India.

3 Previous year’s figures have been regrouped, wherever necessary.

For the year ended March 31,

2006 2005Rs. ’000 Rs. ’000










52


SCHEDULES 1 TO 21 ANNEXED TO AND FORMING PART OF THE BALANCE SHEET ASAT MARCH 31, 2006 AND THE PROFIT & LOSS ACCOUNT FOR THE YEAR ENDEDMARCH 31, 2006.

March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 1 :SHARE CAPITAL

Authorised capital

20,000,000 (P.Y 1,000,000) equity shares of Rs.10 each 200,000 10,000

Issued and subscribed :

9,225,000 (P.Y. 1,000,000) equity shares of Rs.10 each 92,250 10,000

(of the above shares 3,000,000 (PY Nil) shares are allotted as fully paid up

by way of bonus shares by Capitalisation of Profits)

92,250 10,000

SCHEDULE – 2 :RESERVES AND SURPLUS

Securities Premium Account

Opening Balance – –

Add: Addition during the year 132,055 –

132,055 –

General Reserves

Opening Balance – –

Add: Transfer from Profit and loss account 10,000 –

10,000 –

Closing Balance in Profit and loss account 133,932 78,517

275,987 78,517

SCHEDULE – 3 :SECURED LOANS

1) Term loan from ICICI Home Finance Co Ltd – 4,296

(Amount due within a year Rs. Nil, Pevious year Rs. 4296 thousands)

2) Term Loan from Standard Chartered Bank 70,000 –

Repayment is based on certain conditions and hence amount repayblewithin one year not ascertainable

3) Foreign Currency Demand Loan 44,610 –

(Amount due within a year Rs. 44610 thousands)

4) Working capital loans from Banks 49,257 49,986

163,867 54,282

Note:

Loans mentioned in 2, 3 and 4 above are secured by lien on depositsin favour of bank, mortgage of commercial property, stock and receivablesand personal guarantee of some of the Directors.

53


SCHEDULE – 5 :SCHEDULE OF FIXED ASSETS

Rs. ’000

Sr Description of the GROSS BLOCK DEPRECIATION NET BLOCK

No. Block of Assets As at Additions Deduction As at Upto Depre- Deduc- Upto As at As at31/03/05 during during 31/03/06 31/03/05 ciation tions 31/03/06 31/03/06 31/03/05

the year the year during duringthe year the year

TTTTTangible Assetangible Assetangible Assetangible Assetangible Asset

1 Leasehold Land – 1,574 – 1,574 – 19 – 19 1,556 –

2 Building 56,557 63,894 – 120,451 17,691 8,241 – 25,932 94,518 38,866

3 Furnitures & Fixtures 12,345 25,735 16 38,065 3,247 2,638 – 5,885 32,180 9,098

4 Plant and Machinery 30,388 13,070 825 42,634 9,268 4,514 267 13,515 29,119 21,120

5 Computer 3,124 3,826 – 6,950 1,386 1,059 – 2,445 4,505 1,738

6 Office Equipments 1,775 7,156 37 8,893 305 432 5 732 8,161 1,469

7 Vehicles 4,284 2,734 – 7,018 1,161 1,189 – 2,350 4,668 3,123

Intangible AssetIntangible AssetIntangible AssetIntangible AssetIntangible Asset

8 Software 221 615 – 835 6 143 – 150 686 214

TTTTTotalotalotalotalotal 108,694108,694108,694108,694108,694 118,604118,604118,604118,604118,604 878878878878878 226,420226,420226,420226,420226,420 33,06533,06533,06533,06533,065 18,23418,23418,23418,23418,234 272272272272272 51,02651,02651,02651,02651,026 175,393175,393175,393175,393175,393 75,62975,62975,62975,62975,629

Previous Year 94,889 13,988 183 108,694 22,522 10,572 29 33,065 75,629

Note:

Additions to Building includes Rs.7,350 thousands for premises acquired at the time of merger with the erst whileKewal Kiran Clothing Pvt. Ltd. formed from the erstwhile firm Keval Kiran & Company. The said premises were untilllast year shown as Investments. In the current year the same has been regrouped under Fixed Assets and depreciationhas been provided on a retrospective basis from the date of purchase by the erstwhile firm Keval Kiran & Company.Accordingly depreciation for previous years amounting to Rs.4,331 thousands and included above in “Depreciationduring the year” has been debited to Profit and Loss account as Prior Period items.

March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 4 :UNSECURED LOANS

From directors – 82,023

From members and relatives – 15,536

– 97,559

54


March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 6 :INVESTMENTS(Refer Note B–16 to Schedule 22)

LONG TERM INVESTMENTS

In Equity shares of Subsidiary Company(ceased to be a subsidiary during the year), Fully paid (unquoted)

Kewal Kiran Retail India Pvt Ltd. – 2,000(NIL (P.Y. 200,000) Shares of face value Rs. 10 each)

In Equity shares, Fully paid (unquoted)Synthofine Chemicals of India Ltd. – 7,350(NIL (P.Y.11,800) Shares of face value Rs. 100 each)(Refer note to Schedule 5 – Fixed Assets)

In Mutual FundsKotak Liquid (Institutional) Fund 447 –[Units: 44,558.6306 (P.Y. NIL), Net Asset Value Rs.447 thousands (P.Y. NIL)]UTI – Money Market Fund 22,563 –[Units: 1,294,747.599 (P.Y. NIL), Net Asset Value Rs.22,566 thousands (P.Y. NIL)]

23,009 9,350

SCHEDULE – 7 :INVENTORIES(As taken, valued and certified by the management)

Finished goods [Includes Stock in transit of Rs.2,427 thousands(P.Y. NIL)] 42,080 9,408

Work–in–process 51,495 4,555

Raw material 34,892 12,402

Packing material & Accessories 6,423 1,985

Stores, chemicals and consumables 2,275 –

137,165 28,350

SCHEDULE – 8 :SUNDRY DEBTORS

Unsecured (considered good)

a) Debts outstanding for a period exceeding six months 2,850 4,994

b) Other Debts 128,743 30,456

(Refer Note –B– 6 to Schedule 22)

131,594 35,450

SCHEDULE – 9 :CASH & BANK BALANCES

Cash on hand 1,081 531

Bank balances with scheduled banks :–

In current accounts 6,064 651

In Public Issue Escrow Accounts 4,781,439 –

In fixed deposits 39,854 29,364

[Out of the above Fixed deposits under lien are Rs.19,506 thousands(P.Y. Rs.8,857 thousands)]

4,828,437 30,546

55


March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 10 :LOANS AND ADVANCES

(Unsecured, considered good except otherwise stated)

(Refer Note –B– 7 to Schedule 22)

Loans given to employees 2,814 1,158

Loan given to others 548 37,054

Deposits (Includes deposits with directors Rs.324 thousands,Previous Year NIL) 24,036 9,167

Advances recoverable in cash or in kind or for value to be received 9,729 1,955

Advance for capital expenditure 2,026 22,199

Advance tax / tax deducted at source (Net of Provision) – 1,080

39,153 72,614

SCHEDULE – 11 :CURRENT LIABILITIES & PROVISIONS

(A) Liabilities :

Sundry creditors for capital expenditure 7,843 461

Sundry creditors for materials & services 31,723 14,296

Sundry creditors for expenses 39,299 10,666

Security Deposit 6,300 1,554

Advance from customers 5,342 1,860

Share issue expenses payable 24,301 –

Excess Share Application Money to be refunded 3,975,429 –

4,090,236 28,838

(B) Provisions :

Proposed Dividend 18,488 –

Tax on proposed dividend 2,593 –

for Taxation (Net of taxes paid) 5,526 –

for Employee benefits 1,958 1,104

28,565 1,104

TOTAL (A + B) 4,118,801 29,941

Note :i There are no amounts due & outstanding to be credited to Investor

Education & Protection fund as at March 31, 2006.ii Refer NoteB– 8 to Schedule 22 for details on Small Scale Industrial

Units

SCHEDULE – 12 :MISCELLANEOUS EXPENDITURE(to the extent not written off or adjusted)

Share Issue Expenses 47,423 –

(To be adjusted against Securities Premium account on allotmentof equity shares pursuant to public issue during the year)

47,423 –

56


SCHEDULE – 13 :SALES & SERVICES

Sales (Net of trade discount, allowances, etc) 852,668 198,464

Less : Excise duty – (3,695)

852,668 194,768

Service charges 6,970 66,423

859,638 261,191

SCHEDULE – 14 :OTHER INCOME

Interest on bank deposits 2,100 770

(Tax Deducted at Source – C.Y Rs.404 thousands, P.Y. Rs. 159 thousands)

Interest – others 359 2,260

(Tax Deducted at Source – C.Y. 76 thousands, P.Y. Rs. 468 thousands )

Profit on sale of securities 40 2,863

Dividend income on mutual fund 751 –

Profit on Sale of Assets (net) 186 –

Export Incentives (net) 3,477 1,466

Sundry Income 243 17

7,156 7,376

SCHEDULE – 15 :INCREASE / (DECREASE) IN FINISHED & PROCESS STOCK

Opening stock

Work – in– Process 4,555 5,333

Finished goods 9,408 10,599

13,963 15,932

Closing Stock

Work – in– Process 51,495 4,555

Finished goods 42,080 9,408

93,575 13,963

Add / (Less): Variation in excise duty on opening and

closing stock of finished goods – 1,768

79,611 (200)

March 31,

2006 2005Rs. ’000 Rs. ’000

57


March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 16 :COST OF MATERIAL

a. Raw Material Consumed:

Opening stock 12,402 7,140

Add: Purchases 356,307 67,021

368,709 74,161

Less: Closing stock 34,892 12,402

333,816 61,759

b. Semi–finished material 3,974 1,110

c. Packing material, Accessories and other cost 70,310 16,521

d. Stores, chemicals and consumables 30,459 –

438,560 79,390

Transitional cenvat – 1,299

438,560 80,689

SCHEDULE – 17 :PERSONNEL COST

Salary, wages and other amenities to staff 80,962 38,374

(Refer Note B– 9 to Schedule 22)

Contribution to Provident and other funds 5,284 2,601

Gratuity 1,109 2,331

Bonus and ex–gratia 3,489 2,499

Leave salary 849 671

91,693 46,477

SCHEDULE – 18 :MANUFACTURING EXPENSES

Embroidery expenses 2,331 826

Electricity expenses 7,918 3,975

Factory rent 2,285 1,853

General factory expenses 1,151 858

Processing charges 39,142 9,287

Loading and unloading charges 1,043 288

Fuel expenses 13,966 356

Water Charges 1,526 –

Waste Disposal Charges 1,090 –

Washing charges (including sub–contracting charges) 234 10,091

Repairs to machinery 3,140 1,150

73,826 28,684

58


March 31,

2006 2005Rs. ’000 Rs. ’000

SCHEDULE – 19 :ADMINISTRATION & OTHER EXPENSES

Rent, Rates and Taxes 11,483 4,794

Communication expenses 2,081 1,028

Insurance premium 839 454

Legal, professional fees and consultancy charges 6,425 2,560

Postage, Printing and stationery 3,311 628

Donations 792 50

Vehicle expenses 954 933

Auditors Remuneration (Refer Note B–10 to Schedule 22) 1,419 182

Conveyance 654 732

Staff welfare 2,900 1,154

Loss on sale of assets (net) – 4

Repairs to building 1,650 829

Repairs & maintenance (others) 2,378 1,551

Sundry balance writen off 208 14

Preliminary expenses written off – 7

Directors Sitting Fees 420 –

General office expenses 3,101 741

38,616 15,662

SCHEDULE – 20 :SELLING & DISTRIBUTION EXPENSES

Commission on sales 907 115

Discount and rebates on sales 8,405 1,487

Octroi, clearing and forwarding charges 5,202 2,290

Tour and travelling expenses 4,307 775

Advertisement and publicity expenses (Net of recoveries) 70,198 20,878

Sales promotion expenses 4,970 1,645

93,989 27,190

SCHEDULE – 21 :FINANCE EXPENSES

Bank charges 1,356 638

Finance charges 252 36

Interest on bank overdraft 1,347 463

Interest on term loan 6,889 505

Exchange rate fluctuation 940 –

Interest on unsecured loans – 7,752

10,785 9,394

59


SCHEDULE – 22 :NOTES FORMING PART OF FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2006.

A. Significant Accounting Policies:

1. Basis of Accounting:

The Accounts have been prepared on accrual basis and under the historical cost convention, unless otherwisestated in accordance with the Companies Act, 1956 and the applicable Accounting Standards issued by theInstitute of Chartered Accountants of India.

2. Fixed Assets & Capital Work -in -Progress:

Fixed assets are stated at cost less depreciation and/or at recoverable value in case of impairment, if any. Thecost of fixed assets includes interest on borrowings attributable to acquisition of fixed assets up to the date ofcommissioning of the assets and other incidental expenses incurred up to that date.

Capital work- in- progress are carried at cost comprising direct cost, related incidental expenses and attributableinterest.

3. Depreciation/Amortization:

a) Depreciation is provided on written down value method at the rates prescribed under Schedule XIV of theCompanies Act, 1956 for all assets except those given below.

b) Assets lying at retail stores are depreciated over a period of five years on straight-line basis.

c) Software is amortized over a period of three years on straight-line basis.

4. Impairment:

Impairment loss is recognized whenever the carrying amount of the asset is in excess of its recoverable amountand the same is recognized as expense in the statement of profit and loss and the carrying amount of the assetis reduced to its recoverable amount.

5. Investments:

Long-term investments are valued at cost, less provision for permanent diminution in the value of investment.Current Investments are valued at cost or market value whichever is lower.

6. Inventories:

a) Raw material, packing material, accessories, stores and consumables are valued at cost

b) Work-in-process and finished products are valued at lower of cost and net realizable value

c) Unserviceable/damaged finished goods are valued at net realizable value.

d) Cost is ascertained on specific identification method and includes appropriate production overheads incase of work-in-process and finished goods.

7. Foreign Currency Transactions:

Income and expenses in foreign currency are converted at rates prevailing as on the date of the transaction.Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing as on thebalance sheet date and the resulting exchange differences are recognized in the profit and loss account.

8. Revenue Recognition:

a) Sales are recognized when significant risks and rewards of ownership of the goods have passed to thebuyer that coincides with delivery and are recorded net of trade discounts, rebates, and excise duties.Sales do not include inter divisional transfers.

b) Service Charges are recognized after rendering of services.

c) Export incentives under the Duty Drawback Scheme are recognized on accrual basis in the year of export.

d) Interest income is recognized on accrual basis and Dividend income is accounted for when the right toreceive payment is established.

60


9. Retirement Benefits:

Retirement benefits are dealt with in the following manner:

a) Contribution to Provident Fund is accounted on accrual basis with corresponding contribution to recognizedfunds.

b) Payment for present liability of future payment of gratuity is made to an approved gratuity fund, which fullycovers the said liability under Cash Accumulation Policy of Life Insurance Corporation of India (LIC). Theadditional liability arising out of the difference between the actuarial valuation and the fund balance withthe LIC, if any, is accrued at the year-end.

c) Liability for leave encashment is determined arithmetically and provided on accrual basis

10. Taxes on Income:

Income tax expenses for the year comprises of current tax, deferred tax and fringe benefit tax. Current taxprovision has been determined on the basis of reliefs and deductions available under the Income Tax Act, 1961.Deferred tax is recognized for all timing differences, subject to consideration of prudence, applying tax rates thathave been substantively enacted by the Balance Sheet date.

11. Provisions and Contingent Liabilities:

Provisions are recognized when the company has a legal and constructive obligation as a result of a past event,for which it is probable that a cash outflow will be required and a reliable estimate can be made of the amountof the obligation.

Contingent liabilities are disclosed when the company has a possible obligation or a present obligation and itis probable that a cash outflow will not be required to settle the obligation.

12. Operating Lease:

Lease arrangements where risks and rewards incidental to ownership of an asset substantially vests with thelessor are classified as operating lease.

Rental income and expense on assets given or obtained under operating lease arrangements are recognizedon a straight-line basis over the term of relevant lease.

B. Notes to Accounts:

1. The company was converted to a public limited company with effect from November 2, 2005.

2. Public Issue money Pending Allotment :

Share application money pending allotment includes Rs.806,010 thousands (P.Y. Nil) being subscription receivedtowards issue of shares through a 100% book building process. The proceeds from the issue have beenretained in designated bank accounts earmarked for that purpose, since the allotment process has beencompleted subsequent to March 31, 2006.

On April 5, 2006, 3,100,037 equity shares were allotted to subscribers to the issue at the premium of Rs.250 pershare.

3. Contingent Liabilities:

a. Disputed demands in respect of income tax not acknowledged as debt - Rs.5,449 thousand (P.Y. Rs.220thousand).

b. The company has purchased capital assets under EPCG license against which the company has an exportobligation. Contingent liability, to the extent of duty saved, on not being able to fulfill the export obligationis Rs. 1,152 thousand (P.Y. Nil).

c. Bank guarantees of Rs. 4,437 thousand (P.Y. Nil).

d. Letter of Credit of Rs. 1,622 thousand (P.Y. Nil) discounted with Banks.

e. Letter of Credit of Rs. 3,772 thousand (P.Y. Nil) opened by the company with Banks.

61


Note:Contingent Liabilities disclosed above represent possible obligations where the probability of cash outflow tosettle the obligation is remote.

4. The company has fulfilled its export obligation with regards to an advance license. However, the Customauthorities have yet to discharge the obligation under the said license.

5. Estimated amount of contracts remaining to be executed on Capital Account and not provided for - Rs. 1,516thousand (net of advances paid) (P.Y. Rs. 2,274 thousand)

6. Sundry Debtors include Rs. Nil (P.Y. Rs.1,511 thousand) [Maximum amount due during the year Rs.7,244thousand (P.Y. Rs.13,471 thousand)] due from partnership firms in which directors are interested.

7. Loans and Advances includes amount due from:

i. Kewal Kiran Enterprises, a partnership firm under the same management – Rs. Nil (P.Y. Rs. 19,500 thousand)[Maximum amount due during the year Rs.19,500 thousand (P.Y. Rs.19,500 thousand)]

ii. Kornerstone Retail Ltd, a company under the same management – Rs. 100 thousand (P.Y. Rs.22,800thousand) [Maximum amount due during the year Rs.22,800 thousand (P.Y. Rs.22,800 thousand)]

8. Dues to Small Scale Industrial Units:

As per the records available with the Company:

i. Sundry Creditors include Rs.2,910 thousand due to small scale industrial units

ii. The list of Small Scale Industrial Units (SSI) in respect of which the amounts are due for more than 30 days,as at March 31, 2006 are as under:

Bhawani Digital Systems Pvt. Ltd., Climax Apparel Pvt. Ltd., Sewing System Pvt. Ltd., Stud Apparel, Technoair Refrigeration Corporation.

9. Managerial Remuneration:

Rs. ’000

31-03-2006 31-03-2005

Managerial remuneration for directors (excluding provision for gratuityas separate actuarial valuation for the whole-time directors is not available) 9,600 –

Estimated expenditure on perquisites as per revised Income Taxules for A.Y. 2006-07. Nil –

Total 9,600 –

Note: Managerial remuneration is paid as per the provisions of Section II of Part II of Schedule XIII to theCompanies Act, 1956.

10. Auditors Remuneration:

Rs. ’000

31-03-2006 31-03-2005

As Auditors (includes service tax of Rs.107 thousand P.Y. Rs.8 thousand) 982 83

For taxation matters 151 99

For Others matters (includes service tax of Rs.26 thousand, P.Y.NIL) 286 –

1,419 182

Share issue related services (includes service tax of Rs.114 thousand)forming part of Miscellaneous Expenditure (Schedule 12) 1,214 –

Total 2,633 182

62


11. Segment Reporting:

a. Primary Segment:

The company is primarily engaged in single business segment of manufacturing apparel and is managedas one business unit.

b. Secondary Segment (By Geographical Segment):

Rs. ’000

Particulars India Outside India Total

Sales and Services Income [Net of Excise duty] 791,924 67,714 859,638

(238,958) (22,234) (261,191)

(figures in bracket indicate previous year’s figures)

In view of the interwoven / intermix nature of business and manufacturing facility, other information is notascertainable.

12. Related Party Disclosure

a. Subsidiary:

Kewal Kiran Retail India Private Limited (upto August 6, 2005)

Kornerstone Retail Limited (upto December 20, 2005)

b. Name of the enterprises having same Key Management Personnel and/or their relatives as thereporting enterprise:

Kewal Kiran Enterprises

Kasturchand & Sons

Karamchand

Kewal Kiran Realtors Private Limited

Kewal Kiran Retail India Private Limited (w.e.f. August 7, 2005)

Kornerstone Retail Limited (w.e.f. December 21, 2005)

c. Relatives / Other concerns of key Management Personnel:

Shantaben P Jain

Veena K. Jain

Lata H. Jain

Sangita D. Jain

Kesar V. Jain

Pankaj K. Jain

Hitendra H. Jain

Arpita K. Jain

Pukhraj K. Jain (HUF)

Kewalchand P. Jain (HUF)

Hemant P. Jain (HUF)

Dinesh P. Jain (HUF)

Vikas P. Jain (HUF)

d. Key Management Personnel:

Kewalchand P. Jain

Hemant P. Jain

Dinesh P. Jain

Vikas P. Jain

63


Rs. ’000

Nature of Transaction Subsidiaries Enterprises Relatives/Other Keyunder the Concerns of Key Management

Same Management Personnelmanagement Personnel

Service Charges received – 6,970 – –( – ) (66,423) ( – ) ( – )

Service charges paid – – – –( – ) (10,091) ( – ) ( – )

Purchase of Goods – – – –( – ) (336) ( – ) ( – )

Miscellaneous Purchase 129 56 – –( – ) ( – ) ( – ) ( – )

Purchase of Assets – 19,819 – –( – ) (3,010) ( – ) ( – )

Advance given for acquisition of assets – – – –( – ) (19,500) ( – ) ( – )

Loans Granted – – – –( – ) (22,800) ( – ) ( – )

Investment in Equity Shares 22,800 – – –(2,000) ( – ) ( – ) ( – )

Sale of Equity shares of Subsidiary – 22,800 – 2,000(–) ( – ) ( – ) ( – )

Payment for Assignment ofLeasehold Rights – – – –

(1,440) ( – ) ( – ) ( – )

Reimbursement of Professional Fees – – – –(412) ( – ) ( – ) ( – )

Reimbursement of AdvertisementExpense incurred on our behalf – – – –

( – ) (20,551) ( – ) ( – )

Reimbursement received forAdvertisement expenses – 6,162 – –

( – ) ( – ) ( – ) ( – )

Security deposit given – – 459 324( – ) ( – ) ( – ) ( – )

Security deposit Accepted[refer note (i) given below] 4,800 – – –

( – ) ( – ) ( – ) ( – )

Rent paid – – 274 2,281( – ) ( – ) ( – ) (1,848)

Interest paid – – – –( – ) ( – ) (1,184) (6,569)

Loans taken – – 34,339 91,455( – ) ( – ) (8,171) (66,047)

Repayment of Loans taken – – 49,875 173,478( – ) ( – ) (1,678) (86,677)

Managerial Remuneration – – – 9,600( – ) ( – ) ( – ) ( – )

64


Guarantee Given 30,000 – – –( – ) ( – ) ( – ) ( – )

Preferential Allotment of equity shares – – 8,252 78,178( – ) ( – ) ( – ) ( – )

Franchisee fees – 100 – –( – ) ( – ) ( – ) ( – )

Outstanding balance as on March 31, 2006

Unsecured Loans – – – –( – ) ( – ) (15,536) (82,023)

Sundry Creditors – 4,821 – 291(412) (2,755) ( – ) ( – )

Sundry Debtors – – – –( – ) (1,511) ( – ) ( – )

Loans and Advances – 100 459 324( – ) (42,300) ( – ) ( – )

Disclosure of Related Party Transactions, the amount of which are in excess of 10% of total relatedparty transactions of the same type:

Rs. ’000

Nature of Transaction Name of the related party Amount

Service Charges received Kewal Kiran Enterprises 6,970(66,423)

Service charges paid Kewal Kiran Enterprises –(1,00,91)

Purchase of Goods Kewal Kiran Enterprises –(3,36)

Miscellaneous Purchase Kornerstone Retail Limited 185( – )

Purchase of Assets Kewal Kiran Enterprises 19,819(3,010)

Advance given for acquisition of assets Kewal Kiran Enterprises –(19,500)

Loans Granted Kornerstone Retail Limited –(22,800)

Investment in Equity Shares Kornerstone Retail Limited 22,800(2,000)

Sale of Equity shares of Subsidiary Kewal Kiran Retail India Pvt. Ltd. 22,800( – )

Payment for Assignment of Leasehold Rights Kewal Kiran Retail India Pvt. Ltd. –(14,40)

Rs. ’000

Nature of Transaction Subsidiaries Enterprises Relatives/Other Keyunder the Concerns of Key Management

Same Management Personnelmanagement Personnel

65


Rs. ’000


Reimbursement of Professional Fees Kewal Kiran Retail India Pvt. Ltd. –(412)

Reimbursement of Advertisement Expense Kewal Kiran Enterprises –incurred on our behalf (20,551)

Reimbursement received for Advertisement exp. Kewal Kiran Enterprises 6,162( – )

Security deposit given Shantaben P Jain 459( – )

Kewalchand P. Jain 162( – )

Hemant P. Jain 162( – )

Security deposit Accepted Kornerstone Retail Limited 4,800( – )

Rent paid Kewalchand P. Jain 709(492)

Hemant P. Jain 589(372)

Dinesh P. Jain 492(492)

Vikas P. Jain 492(492)

Shantaben P. Jain 274( – )

Interest paid Kewalchand P. Jain –(765)

Hemant P. Jain –(2,778)

Dinesh P. Jain –

(1,815)

Vikas P. Jain –(1,210)

Loans taken Shantaben P Jain 22,817(1,809)

Kewalchand P. Jain 22,146(17,492)

Dinesh P. Jain 37,150(16,261)

Vikas P. Jain 27,393(20,376)

Repayment of Loans taken Shantaben P Jain 26,425(228)

Kewalchand P. Jain 33,963(21,727)

66


Hemant P. Jain 36,692(21,225)

Dinesh P. Jain 60,146(15,005)

Vikas P. Jain 42,677(28,720)

Managerial Remuneration Kewalchand P. Jain 2,400( – )

Hemant P. Jain 2,400( – )

Dinesh P. Jain 2,400( – )

Vikas P. Jain 2,400( – )

Guarantee Given Kornerstone Retail Limited 30,000

( – )

Preferential Allotment of Equity Shares Shantaben P Jain 8,252

( – )

Kewalchand P. Jain 19,779

( – )

Hemant P. Jain 19,488

( – )

Dinesh P. Jain 19,455

( – )

Vikas P. Jain 19,455

( – )

Franchisee Fees Kornerstone Retail Limited 100

( – )

(Figures in bracket indicate previous year’s figures)

Note:

i) The company had accepted a security deposit of Rs.4,800 thousand from its erstwhile subsidiaryKornerstone Retail Ltd. The outstanding balance of the said deposit has been shown as payable toEnterprises under the same management.

ii) During the period the company has entered into a lease agreement with an enterprise under thesame management. The company is entitled to a rent of Rs.800 thousand p.m. from the date thepremises are ready for use.

iii) Key Management Personnel have provided personal guarantee for bank loans obtained by thecompany.

13. Operating Lease Arrangements:

a. As lessee:

Rental expenses of Rs.10,012 thousand (P.Y. Rs.4,961 thousand) in respect of obligation under operatingleases have been recognized in the profit and loss account.

At balance sheet date, minimum lease payments under non-cancelable operating leases fall due asfollows:

Rs. ’000


67


Rs. ’000

31-03-2006 31-03-2005

Due not later than one year 13,060 8,368

Due later than one year but not later than five years 96,073 92,413

Later than five years 26,108 7,746

Total 135,241 108,527

The above figures include:

i. Lease rentals calculated based on estimated date of commencement of lease in cases where theagreements / MOU’s have been entered into but the date of commencement of lease is dependent onthe date of construction/renovation of premises.

ii. The afore-mentioned lease rentals include a lease the period of which is dependent on the occurrenceof an event, the date of which is not ascertainable beyond five years. Hence the lease rentals areconsidered up to a period of five years only.

b. As lessor:

The company has leased certain premises under operating lease arrangements. Lease rent in respect ofthese leases will be recognized in the profit and loss account as follows:

Rs. ’000

31-03-2006 31-03-2005

Due not later than one year 8,800 –

Due later than one year but not later than five years 20,000 –

Later than five years – –

Total 28,800 –

Note: The above-mentioned lease rent is calculated on the basis of estimated date of commencement oflease

14. Earnings per Share (EPS) are calculated as under:

Rs. ’000

31-03-2006 31-03-2005

Net Profit after Tax and Prior Period Items Rs. 116,495,064 37,230,595

Weighted average number of Equity Shares Nos. 6,540,144 4,603,298

Basic & Diluted Earning per share Rs. 17.81 8.09

Note: Share application money pending allotment as at the Balance Sheet date amounting to Rs.806,010thousand being the amount received towards the public issue of the Company has not been consideredfor the purpose of calculation of diluted earnings per share as the allotment of shares has taken placeduring the subsequent financial year and the amount has not been utilized in the business of theenterprise, during the year of account.

15. Deferred Tax:

In view of the Accounting Standard 22 issued by Institute of Chartered Accountants of India, the significant

component and classification of deferred tax liability/asset on account of timing difference comprises of thefollowing:

68


Rs. ’000

31-03-2006 31-03-2005

Deferred Tax Asset:

Merger Expenses 40 61

Deferred Tax Liability:

Depreciation (1,336) (1,367)

Net deferred tax (liability)/asset (1,295) (1,307)

16. Investments purchased and sold during the year:

Rs. ’000

Particulars Purchases Sale

No. of shares / (Rs.) No. of shares / (Rs.) units units

Kornerstone Retail Ltd.(subsidiary 152,000.000 22,800 152,000.000 22,800and ceased to be such on sale) ( – ) ( – ) ( – ) ( – )

HDFC Cash Management Fund 940,282.635 10,001 940,282.635 10,001( – ) ( – ) ( – ) ( – )

Kotak Liquid (Institutional) Fund 817,884.172 10,001 817,884.172 10,001( – ) ( – ) ( – ) ( – )

UTI Liquid Cash Plan Institutional 22,126.045 22,519 22,126.045 22,514( – ) ( – ) ( – ) ( – )

UTI Fixed Maturity Plan 2,251,354.728 22,514 2,251,354.728 22,534( – ) ( – ) ( – ) ( – )


17. Value of Imports (C.I.F. Value):

Rs. ’000

31-03-2006 31-03-2005

Trading goods – 910

Capital goods – 661

Components and spare parts 121 72

Accessories 2,336 –

18. Expenditure in Foreign Currencies:

Rs. ’000

31-03-2006 31-03-2005

Traveling expenses 369 –

Advertisement expenses 2,829 –

Legal expenses 62 –

Others 328 –

69


19. Earnings in Foreign Exchange:

Rs. ’000

31-03-2006 31-03-2005

Export of goods (F.O.B. Value) 66,652 21,868

20. Raw Material Consumed:

Rs. ’000

31–03–2006 31–03–2005

Material Measure Qty. (Rs.) Qty. (Rs.)

Woven Fabric Mtrs 2,510,825 325,999 426,945 60,038

Knitted Fabric Kgs. 38,726 7,817 11,394 3,020

333,816 63,058

Semi–finished ** ** 3,974 ** 1,110

Packing material & Accessories ** ** 70,310 ** 16,521

Stores, chemicals and consumables ** ** 30,459 – –

Total 438,560 80,689

** Comprises of various items the value of which is less then 10% of the total Cost of Material.

21. Particulars of Finished Product:

Qty in Pcs. and Value in Rs. ’000

Opening stock Production Sales Closing stock

Qty. Value Qty. Qty. Value Qty. Value

Apparel 27,644 9,284 1,670,578 1,573 852,441 125,341 39,219

(72,449) (10,599) (377) (421,447) (191,949) (27,644) (9,284)

Note:

1. Figures in bracket indicate previous year’s figures

2. Sales includes samples distributed free of cost

3. Closing stock is after adjusting shortages on physical verification of inventories

22. Particulars of Trading Activities

Qty in Pcs. and Value in Rs. ’000

Opening stock Purchase Sales Closing stock

Qty. Value Qty. Value Qty. Value Qty. Value

Apparel 334 124 Nil Nil 334 227 Nil Nil

(Nil) (Nil) (4,783) (9,10) (4,449) (28,19,677) (334) (124)

Accessories Nil Nil 61,234 3,045 12,308 833 48,926 2,941

(Nil) (Nil) (Nil) (Nil) (Nil) (Nil) (Nil) (Nil)


70


23. The Company in previous year had entered into transactions for purchase of Assets and raw material and

during the year has entered into transaction for purchase of Assets with Firms for which prior approval of Central

Government u/s 297 of the Companies Act inadvertently was not obtained. The company’s application u/s

section 621A of the Act is pending with the Government.

24. Due to acquisition of business unit during the year, the figures of the previous year are not strictly comparable.

25. Previous year’s figures are regrouped, rearranged or recast wherever considered necessary.










71


STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956

Name of the subsidiary company Kewal Kiran Retail Kornerstone RetailIndia Private Limited* Limited*

Financial year ending March 31, 2006 March 31, 2006

Share of the subsidiary held by thecompany on the above date

(a) Number and face value NIL NIL

(b) Extent of holding NIL NIL

Net aggregate amount of profit/(loss) of the subsidiary for theabove financial year so far as they concern members of thecompany :–

(a) dealt within the accounts of the NIL NILcompany for the year ended 31st March, 2006

(b) not dealt within the accounts of the NIL NILcompany for the year ended 31st March, 2006

Net aggregate amount of profit for previous financial years ofthe subsidiary, since it became subsidiary so far as they concernmembers of the company

(a) dealt within the accounts of the NIL NILcompany for the year ended 31st March, 2006

(b) not dealt within the accounts of the NIL NILcompany for the year ended 31st March, 2006

Changes, if any, in the holding company’s interest in the NIL NILsubsidiary between the end of the financial year of the subsidiaryand that of the holding company.

Material changes, if any, between the end of the financial year NIL NILof the subsidiary and that of the holding company.

Note*

Kewal Kiran Retail India Pvt. Ltd. and Kornerstone Retail Ltd. ceased to be the subsidiaries of the company w.e.fAugust 6, 2005 and December 20, 2005 respectively. As at March 31, 2006 Kewal Kiran Clothing Ltd. has nosubsidiary company.

For and on behalf of the Board

Mr. Kewalchand P. Jain Mr. Hemant P. Jain Mr. Abhijit WarangeChairman and Managing Director Director Company Secretary

Place: Mumbai

Date : July 21, 2006

72


ADDITIONAL INFORMATION PURSUANT TO PART VI OF THE COMPANIES ACT, 1956.

Balance Sheet abstract and Company’s general business profile

I Registration Details

Registration No. 6 5 1 3 6 State Code 1 1

Balance Sheet date 3 1 0 3 2 0 0 6

II Capital Raised During the Year (Amount in Rs. Thousand )

Public Issue 8 0 6 0 1 0 Rights Issue N I L

Bonus Issue 3 0 0 0 0 Private Placement 1 8 4 3 0 5

III Position of Mobilisation and Deployment of Funds (Amount in Rs Thousand )

Total Liabilities * 1 3 3 9 4 0 9 Total Assets 1 3 3 9 4 0 9

Sources of Funds

Paid -up Capital** 8 9 8 2 6 0 Reserves & Surplus 2 7 5 9 8 7

Secured Loans 1 6 3 8 6 7 Unsecured Loans N I L

Deferred tax Liability 1 2 9 5

Application of Funds

Net Fixed Assets 2 5 1 4 2 8 Investments 2 3 0 1 0

Net Current Assets 1 0 1 7 5 4 8 Misc. Expenditure 4 7 4 2 3

IV Performance of Company (Amount in Rs. Thousand )

Turnover (Incl. Other Income) 8 6 6 7 9 4 Total Expenditure *** 6 8 0 4 7 4

Profit / Loss Before Tax 1 7 7 6 5 9 Profit / Loss After Tax 1 1 6 4 9 5

Earning per share **** 1 7 . 8 1 Dividend Rate % 1 5

V Generic Name of Principal Product / Service of Company (as per monetary terms )

Item Code No. (ITC Code): 6 2 0 4 6 2 1 1

Product description : Men Trouser 100% Cotton

* Including Shareholders Fund

** Including share application money pending allotment

*** Including prior period items

**** Disclosure in respect of Earning Per share

Earning Per share

Basic 1 7 . 8 1

Diluted 1 7 . 8 1

Net Profit / (Loss)(Rs. in thousands)

Basic 1 1 6 4 9 5

Diluted 1 1 6 4 9 5

Average no. of shares (Rs. 10/- each)

Basic 6 5 4 0 1 4 4

Diluted 6 5 4 0 1 4 4

Signatures to Schedules and Notes










73


DAMAN FACTORY

74


VAPI FACTORY

75


To,

The Board of DirectorsKewal Kiran Clothing Limited

1. We have audited the attached Consolidated Balance Sheet of Kewal Kiran Clothing Limited (‘the Company’)and its subsidiaries (‘the Company and its subsidiaries constitute ‘the Group’) as at March 31, 2006 and also theConsolidated Profit and Loss Account and the Consolidated Cash Flow Statement for the year ended on thatdate both annexed thereto. Those financial statements are the responsibility of the Company’s Managementand have been prepared by the management on the basis of separate financial statements. Our responsibilityis to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

3. The financial statements of subsidiaries, since inception, have been audited by the joint auditor M/s. N.A. ShahAssociates; whose reports have been furnished to us and our opinion is based solely on the said report.

4. We report that the Consolidated Financial Statements have been prepared by the Company’s management inaccordance with the requirements of Accounting Standard-21, Consolidated Financial Statements, issued bythe Institute of Chartered Accountants of India;

5. As stated in Note B-2 and B-3 to Schedule 22 of Consolidated Financial Statements both the subsidiariesceased to be the subsidiaries of the Company during the year. Accordingly, the operations up to the date ofdivestment have been considered in the consolidated profit and loss account. The Consolidated Balance sheetdoes not include the assets and liabilities of the companies which have ceased to be subsidiaries before theyear-end.

6. The prior period item represents depreciation for earlier years on account of regrouping of immoveable propertyof the Company, used for the purpose of business, from investment to fixed assets. Also refer note to Schedule5 – Fixed Assets

7. Based on our audit and on consideration of the reports of M/s. N.A. Shah Associates on separate financialstatements and to the best of our information and according to the explanations given to us, we are of theopinion that the attached Consolidated Financial Statements read with para 5 and 6 above gives a true and fairview in conformity with the accounting principles generally accepted in India:

(i) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at March 31, 2006;

(ii) in the case of the Consolidated Profit and Loss Account, of the profit of the Group for the year ended on thatdate; and

(iii) in the case of the Consolidated Cash Flow Statement, of the consolidated cash flows of the Group for theyear ended on that date.

For N.A. Shah Associates For Jain & TrivediChartered Accountants, Chartered Accountants,


Place : MumbaiDate : April 26, 2006

AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS

76


CONSOLIDATED BALANCE SHEETAs at March 31,

Schedule 2006Rs. ’000 Rs. ’000

SOURCES OF FUNDS

SHAREHOLDER’S FUNDS

Share Capital 1 92,250

Share Application Money Pending Allotment 806,010(Refer Note B–4 to Schedule 21)

Reserves and surplus 2 275,987

1,174,246LOAN FUNDS

Secured loans 3 163,867

DEFERRED TAX LIABILITIES (NET) 1,295

TOTAL 1,339,409

APPLICATION OF FUNDS

FIXED ASSETS 4

Gross block 226,420

Less : Depreciation (51,026)

Net block 175,393Capital work–in–progress 76,035

251,428

INVESTMENTS 5 23,009

CURRENT ASSETS, LOANS AND ADVANCES:

Inventories 6 137,165

Sundry debtors 7 131,594Cash and bank balances 8 4,828,437

Loans and advances 9 39,153

5,136,349Less: CURRENT LIABILITIES AND PROVISIONS 10

Liabilities 4,090,236Provisions 28,565

4,118,801

NET CURRENT ASSETS 1,017,548

MISCELLANEOUS EXPENDITURE 11 47,423

TOTAL 1,339,409











77


CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended March 31,

Schedule 2006Rs. ’000

INCOMESales and service charges 12 880,212Other income 13 8,803Increase / (decrease) in stocks 14 81,350

970,365EXPENDITURECost of material consumed 15 438,560Purchase of Trading material 22,612Personnel Cost 16 93,685Manufacturing and operating expenses 17 73,826Administrative and other expenses 18 40,433Selling and distribution expenses 19 94,282Finance expenses 20 11,256Depreciation 5 14,915

789,569Net Profit Before Tax and Prior Period items 180,796Provision for current tax [including Rs.50 thousand for wealth tax] 60,421Provision for deferred tax 605Provision for Fringe Benefit Tax 810Net Profit after tax and before Prior Period Items 118,960Prior Period Item:Depreciation for earlier years 4,331(Refer note 1 to Schedule 4 - Fixed Assets)Deferred Tax effect on deprecition for earlier years (1,458)Excess Provision for tax in earlier years (25)Net Profit after Prior Period items 116,112Minority Interest 399Net Profit after tax and Minority Interest 116,511Balance brought forward 78,502Profits available for appropriation 195,012Appropriations:Bonus Shares Issued 30,000Proposed Dividend 18,488Tax on proposed dividend 2,593Transfer to general reserves 10,000Balance carried to balance sheet 133,932Earnings per Share - Basic & Diluted 17.81(Refer Note - B-14 of Schedule 21)Notes to Financial Statements 21










78


STATEMENT OF CASH FLOWFor the year ended March 31,

2006Rs. ’000 Rs. ’000

A. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit before taxes as per Profit and Loss Account 180,796

Adjustments for:

Depreciation 14,915

Preliminary Expenses w/off 91

(Profit)/Loss on Sale of Fixed Asset (186)

(Profit)/Loss on sale of Investment (1,288)

Sundry Balance written off 202

Interest paid 8,495

Dividend income on mutual fund (751)

Exchange Fluctuation on term Loan 940

Interest earned (2,522)

19,897

Operating Profit before Working Capital Changes 200,692

Adjustments for:

Trade and other receivables (125,061)

Inventories (108,824)

Trade payables and other liabilities 52,528

(181,356)

Cash Generated from Operations 19,336

Direct Taxes (54,578)

Net Cash utilised in Operating Activities (35,242)

B. CASH FLOW FROM INVESTING ACTIVITIES

Purchase of Fixed Assets (147,235)

Sale of Fixed Assets 791

Purchase of Investments (81,500)

Sale of Investments 83,802

Dividend Received 279

Loans given (48)

Recovery of Loans given 13,552

Interest received 2,474

Adjustment on acquisition of subsidiaries 4,340

Adjustment on sale of subsidiaries (280)

Net Cash utilised in Investing Activities (123,824)

79


For the year ended March 31,2006

Rs. ’000

C. CASH FLOW FROM FINANCING ACTIVITIES

Secured Loans taken 166,455

Secured Loans repaid (48,026)

Secured Loans – Bank Overdraft (Net) 1,142

Unsecured loans taken 149,237

Unsecured loans repaid (161,116)

Interest paid (6,563)

Exchange Rate Fluctuation (605)

Share Issue Expenses (23,776)

Proceeds from Issue of Shares 98,625

Proceeds from Share Application Money pending Allotment 806,010

Proceeds from Share Application Money pending refund 3,975,429

Net Cash utilised in Financing Activities 4,956,811

NET INCREASE IN CASH AND CASH EQUIVALENTS 4,797,745

CASH AND CASH EQUIVALENTS – OPENING BALANCE 30,692

CASH AND CASH EQUIVALENTS – CLOSING BALANCE 4,828,437

Notes:

1 Cash and Cash equivalents includes:

a. Rs. 4,781,439 thousand received towards Share Application retained in Escrow account. Refer Note B - 4

of Schedule 21

b. Fixed deposits of Rs.19,506 thousand are under lien. Refer Schedule 8

2 The Cash flow statement is prepared under ‘indirect method’ as set out in Accounting Standard - 3 on Cash

Flow Statements issued by the Institute of Chartered Accountants of India.










80


SCHEDULES 1 TO 21 ANNEXED TO AND FORMING PART OF THE CONSOLIDATEDBALANCE SHEET AS AT MARCH 31, 2006 AND THE CONSOLIDATED PROFIT &LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2006.

March, 31

2006Rs. ’000

SCHEDULE – 1 :SHARE CAPITAL

Authorised capital

20,000,000 equity shares of Rs.10 each 200,000

Issued and subscribed :

9,225,000 equity shares of Rs.10 each 92,250

(of the above shares 3,000,000 shares are allotted as fully paid up byway of bonus shares by Capitalisation of Profits)

92,250

SCHEDULE – 2 :RESERVES AND SURPLUS

Securities Premium Account

Opening Balance –

Add: Addition during the year 132,055

132,055General Reserves

Opening Balance –

Add: Addition during the year 10,000

10,000

Closing Balance in Profit and loss account 133,932

275,987SCHEDULE – 3 :SECURED LOANS

1) Term Loan from Standard Chartered Bank 70,000

(Repayment is based on certain conditions and hence amountrepayble within one year not ascertainable)

2) Foreign Currency Demand Loan 44,610

(Amount due within a year Rs. 44610 thousands)

3) Working capital loans from Banks 49,257

163,867

Note:

Loans mentioned in 2, 3 and 4 above are secured by lien on deposits in favour of bank, mortgage ofcommercial property, stock and receivables and personal guarantee of some of the Directors.

81


SCHEDULE – 4 :SCHEDULE OF FIXED ASSETS

Rs.’000Rs.’000Rs.’000Rs.’000Rs.’000

Sr Description of the GROSS BLOCK DEPRECIATION NET BLOCK

No. Block of Assets As at Additions Deduction As at Upto Depre- Deduc- Upto As at

31/03/05 during during 31/03/06 31/03/05 ciation tions 31/03/06 31/03/06

the year the year during during

the year the year

TTTTTangible Assetangible Assetangible Assetangible Assetangible Asset

1 Leasehold Land – 1,574 – 1,574 – 19 – 19 1,556

2 Building 56,557 83,614 19,720 120,451 17,691 8,967 726 25,932 94,518

3 Furnitures & Fixtures 12,345 27,033 1,314 38,065 3,247 2,804 166 5,885 32,180

4 Plant and Machinery 30,388 13,334 1,088 42,634 9,268 4,536 290 13,515 29,119

5 Computer 3,124 4,001 175 6,950 1,386 1,121 62 2,445 4,505

6 Office Equipments 1,775 7,232 114 8,893 305 450 24 732 8,161

7 Vehicles 4,284 2,951 217 7,018 1,161 1,206 17 2,350 4,668

Intangible AssetIntangible AssetIntangible AssetIntangible AssetIntangible Asset

8 Software 221 615 – 835 6 143 – 150 686

TTTTTotalotalotalotalotal 108,694108,694108,694108,694108,694 140,353140,353140,353140,353140,353 22,62822,62822,62822,62822,628 226,420226,420226,420226,420226,420 33,06533,06533,06533,06533,065 19,24619,24619,24619,24619,246 1,2851,2851,2851,2851,285 51,02651,02651,02651,02651,026 175,393175,393175,393175,393175,393

Previous Year 94,889 13,988 183 108,694 22,522 10,572 29 33,065 75,629

Note:

1 Additions to Building includes Rs.7,350 thousands for premises acquired at the time of merger with the erstwhile Kewal Kiran Clothing Pvt. Ltd. formed from the erstwhile firm Keval Kiran & Company. The said premiseswere untill last year shown as Investments. In the current year the same has been regrouped under Fixed Assetsand depreciation has been provided on a retrospective basis from the date of purchase by the erstwhile firmKeval Kiran & Company. Accordingly depreciation for previous years amounting to Rs.4,331 thousandsand included above in “Depreciation during the year” has been debited to Profit and Loss account as PriorPeriod items.

2 Depreciation during the year and deductions to depreciation during the year includes Rs.1,012,430 asdepreciation for the period Kornerstone Retail Limited was a subsidiary of the Company.

82


March, 31

2006

Rs. ’000SCHEDULE – 5 :INVESTMENTS (Refer Note B–12 to Schedule 21)

LONG TERM INVESTMENTS

In Equity shares of Subsidiary Company (ceased to subisiary during the year) ,Fully paid (unquoted)

In Mutual Funds

Kotak Liquid (Institutional) Fund 447

[Units: 44,558.6306, Net Asset Value Rs.447 thousand]

UTI – Money Market Fund 22,563

[Units: 1,294,747.599, Net Asset Value Rs.22,566 thousand]

23,009

SCHEDULE – 6 :INVENTORIES

(As taken and valued and certified by the management)

Finished goods (Includes Stock in transit of Rs.2,427) 42,080

Work–in–process 51,495

Raw material 34,892

Packing material & Accessories 6,423

Stores, chemicals and consumables 2,275

137,165

SCHEDULE – 7 :SUNDRY DEBTORS

Unsecured (considered good)a) Debts outstanding for a period exceeding six months 2,850

b) Other Debts 128,743

(Refer Note – B–8 to Schedule 21)

131,594

SCHEDULE – 8 :CASH & BANK BALANCES

Cash on hand 1,081

Bank balances with scheduled banks :–

In current accounts 6,064

In Public Issue Escrow Accounts 4,781,439

In fixed deposits 39,854

(Out of the above Fixed deposits under lien are Rs.19,506 thousands)

4,828,437

83


March, 31

2006Rs. ’000

SCHEDULE – 9 :LOANS AND ADVANCES

(Unsecured, considered good except otherwise stated)

(Refer Note – B–9 to Schedule 21)

Loans given to employees 2,814

Loan given to others 548

Deposits (Includes deposits with directors Rs.324 thousand) 24,036

Advances recoverable in cash or in kind or for value to be received 9,729

Advance for capital expenditure 2,026

39,153

SCHEDULE – 10 :CURRENT LIABILITIES & PROVISIONS

(A) Liabilities :

Sundry creditors for capital expenditure 7,843

Sundry creditors for materials & services 31,723

Sundry creditors for expenses 39,299

Security Deposit 6,300

Advance from customers 5,342

Share issue expenses payable 24,301

Excess Share Application Money to be refunded 3,975,429

4,090,236(B) Provisions :

Proposed Dividend 18,488

Tax on proposed dividend 2,593

for Taxation (Net of taxes paid) 5,526

for Employee benefits 1,958

28,565

TOTAL (A + B) 4,118,801

Note :

There are no amounts due & outstanding to be credited toInvestor Education & Protection fund as at March 31, 2006.

SCHEDULE – 11 :MISCELLANEOUS EXPENDITURE

(to the extent not written off or adjusted)

Share Issue Expenses 47,423

(To be adjusted against Securities Premium account on allotment of equity sharespursuant to public issue during the year)

47,423

84


March, 31

2006Rs. ’000

SCHEDULE – 12 :SALES & SERVICES

Sales (Net of Sales Tax trade discount,allowances,etc) 873,243

Service charges 6,970

880,212

SCHEDULE – 13 :OTHER INCOME

Profit on Disposal of shares of Subsidiaries 1,248

Interest on bank deposits 2,100

(Tax Deducted at Source – C.Y Rs.404 thousand)

Interest – others 422

(Tax Deducted at Source – C.Y. 76 thousand)

Profit on sale of securities 40

Dividend income on mutual fund 751

Profit on Sale of Assets (net) 186

Export Incentives (net) 3,477

Sundry Income 579

8,803

SCHEDULE – 14 :INCREASE / (DECREASE) IN FINISHED &PROCESS STOCK

Opening stock

Work – in– Process 4,555

Finished goods 9,408

13,963Closing Stock

Work – in– Process 51,495

Finished goods 43,818

95,313

81,350

85


March, 31

2006Rs. ’000

SCHEDULE – 15 :COST OF MATERIAL

a. Raw Material Consumed:

Opening stock 12,402

Add: Purchases 356,307

368,709

Less: Closing stock 34,892

333,816

b. Semi–finished material 3,974

c. Packing material, Accessories and other cost 70,310

d. Stores, chemicals and consumables 30,459

438,560

SCHEDULE – 16 :PERSONNEL COST

Salary, wages and other amenities to staff 82,696

(Refer Note B–10 to Schedule 21)

Contribution to Provident and other funds 5,363

Gratuity 1,109

Bonus and ex–gratia 3,489

Leave salary 1,028

93,685

SCHEDULE – 17 :MANUFACTURING EXPENSES

Embroidery expenses 2,331

Electricity expenses 7,918

Factory rent 2,285

General factory expenses 1,151

Processing charges 39,142

Loading and unloading charges 1,043

Fuel expenses 13,966

Water Charges 1,526

Waste Disposal Charges 1,090

Washing charges (including sub–contracting charges) 234

Repairs to machinery 3,140

73,826

86


March, 31

2006Rs. ‘000

SCHEDULE – 18 :ADMINISTRATION & OTHER EXPENSES

Rent, Rates and Taxes 11,604

Communication expenses 2,136

Insurance premium 897

Legal, professional fees and consultancy charges 6,866

Postage, Printing and stationery 3,382

Donations 792

Vehicle expenses 983

Auditors Remuneration (Refer Note B–11 to Schedule 21) 1,628

Conveyance 693

Staff welfare 2,814

Repairs to building 1,650

Repairs & maintenance (others) 2,511

Sundry balance writen off 208

Preliminary expenses written off 91

Directors Sitting Fees 420

General office expenses 3,254

Electricity Charges 504

40,433

SCHEDULE – 19 :SELLING & DISTRIBUTION EXPENSES

Commission on sales 907

Discount and rebates on sales 8,405

Octroi, clearing and forwarding charges 5,260

Tour and travelling expenses 4,307

Advertisement and publicity expenses (Net of recoveries) 70,431

Sales promotion expenses 4,972

94,282

SCHEDULE – 20 :FINANCE EXPENSES

Bank charges 1,461

Finance charges 358

Interest on bank overdraft 1,350

Interest on term loan 7,146

Exchange rate fluctuation 941

11,256

87


A. Significant Accounting Policies:

1. Basis of Accounting:

The Accounts have been prepared on accrual basis and under the historical cost convention, unless

otherwise stated in accordance with the Companies Act, 1956 and the applicable Accounting Standards

issued by the Institute of Chartered Accountants of India.

2. Fixed Assets & Capital Work–in–Progress:

Fixed assets are stated at cost less depreciation and/or at recoverable value in case of impairment, if any.

The cost of fixed assets includes interest on borrowings attributable to acquisition of fixed assets up to the

date of commissioning of the assets and other incidental expenses incurred up to that date.

Capital work–in–progress are carried at cost comprising direct cost, related incidental expenses and

attributable interest.

3. Depreciation/Amortization:

a) Depreciation is provided on written down value method at the rates prescribed under Schedule XIV of

the Companies Act, 1956 for all assets except those given below.

b) Assets lying at retail stores relating to apparel business are depreciated over a period of five years on

straight–line basis.

c) Software is amortized over a period of three years on straight–line basis.

4. Impairment:

Impairment loss is recognized whenever the carrying amount of the asset is in excess of its recoverable

amount and the same is recognized as an expense in the statement of profit and loss and the carrying

amount of the asset is reduced to its recoverable amount.

5. Investments:

Long–term investments are valued at cost, less provision for permanent diminution in the value of investment.

Current Investments are valued at cost or market value whichever is lower.

6. Inventories:

a) Raw material, packing material, accessories, stores and consumables are valued at cost

b) Work–in–process and finished products are valued at lower of cost and net realizable value

c) Unserviceable/damaged finished goods are valued at net realizable value.

d) Cost is ascertained on specific identification method and includes appropriate production overheads

in case of work–in–process and finished goods.

7. Foreign Currency Transactions:

Income and expenses in foreign currency are converted at rates prevailing as on the date of the transaction.

Foreign currency monetary assets and liabilities are translated at the exchange rate prevailing as on the

balance sheet date and the resulting exchange differences are recognized in the profit and loss account.

SCHEDULE – 21 :NOTES FORMING PART OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2006.

88


8. Revenue Recognition:

a) Sales are recognized when significant risks and rewards of ownership of the goods have passed to

the buyer that coincides with delivery and are recorded net of trade discounts, rebates, and excise

duties. Sales do not include inter divisional transfers.

b) Service charges are recognized after rendering of services.

c) Export incentives under the Duty Drawback Scheme are recognized on accrual basis in the year of

export.

d) Interest income is recognized on accrual basis and Dividend income is accounted for when the right

to receive payment is established.

9. Retirement Benefits:

Retirement benefits are dealt with in the following manner:

a) Contribution to Provident Fund is accounted on accrual basis with corresponding contribution to

recognized funds.

b) Payment for present liability of future payment of gratuity is made to an approved gratuity fund, which

fully covers the said liability under Cash Accumulation Policy of Life Insurance Corporation of India

(LIC). The additional liability arising out of the difference between the actuarial valuation and the fund

balance with the LIC, if any, is accrued at the year–end.

c) Liability for leave encashment is determined arithmetically and provided on accrual basis

10. Taxes on Income:

Income tax expenses for the year comprises of current tax, deferred tax and fringe benefit tax. Current tax

provision has been determined on the basis of reliefs and deductions available under the Income Tax Act,

1961. Deferred tax is recognized for all timing differences, subject to consideration of prudence, applying

tax rates that have been substantively enacted by the Balance Sheet date.

11. Provisions and Contingent Liabilities:

Provisions are recognized when the company has a legal and constructive obligation as a result of a past

event, for which it is probable that a cash outflow will be required and a reliable estimate can be made of

the amount of the obligation.

Contingent liabilities are disclosed when the company has a possible obligation or a present obligation

and it is probable that a cash outflow will not be required to settle the obligation.

12. Operating Lease:

Lease arrangements where risks and rewards incidental to ownership of an asset substantially vests with

the lessor are classified as operating lease.

Rental income and expense on assets given or obtained under operating lease arrangements are

recognized on a straight–line basis over the term of relevant lease.

89


B. Notes to Accounts:

1. Criteria for Preparation of Consolidated Financial Statements:

a. Kewal Kiran Clothing Limited has presented Consolidated Financial Statements by consolidating its

own financial statements with those of its Subsidiaries in accordance with Accounting Standard–

21(Consolidated Financial Statements) issued by the Institute of Chartered Accountants of India.

b. The company does not have any Joint Venture.

c. The Financial statements of each of those Subsidiaries are prepared in accordance with the generally

accepted accounting principles & accounting policies of the Parent Company. The effects of inter–

company transactions between consolidated companies/entities are eliminated in consolidation.

2. Disclosure of Particulars regarding Subsidiaries:

Subsidiaries included in the Consolidated Financial Statements in terms of AS–21 are as follows:–

Name of subsidiaries Controlling Country Period for which it was

interest with of a subsidiary

voting Power incorporation

Kewal Kiran Retail India Pvt. Ltd. 95.24% India May 31, 2004 to August 6, 2005

Kornerstone Retail Limited 76.00% India April 10, 2005 to December 20, 2005

3. Principles of consolidation:

The Consolidated Financial Statements relate to Kewal Kiran Clothing Limited (the Company) and

its subsidiary Companies. The Consolidated Financial Statements have been prepared on the

following basis:

a. The consolidated financial statements have been combined on a line–by–line basis by adding the

book values of like items of assets, liabilities, income and expenses after fully eliminating intra–group

balances and intra–group transactions resulting in unrealized profits or losses as per Accounting

Standard 21 – Consolidated Financial Statements issued by the Institute of Chartered Accountants of

India.

b. The difference between the costs of investments in the subsidiary companies over the net assets is

recognized in the financial statements as Goodwill upon consolidation.

c. As both the subsidiaries were sold during the year the financial statements of the subsidiaries used in

the consolidation are drawn up to the date they ceased to be subsidiary’s (refer para 2 above) of the

Company.

d. As the subsidiaries have been sold during the year, the year–end balances in the Balance sheet and

Notes to accounts as at March 31, 2006 do not include the balances of the said subsidiaries.

e. Minority interests’ share of net profit/losses of subsidiaries consolidated for the year is identified and

adjusted against the income of the group in order to arrive at the net income attributable to the

shareholders of the Company.

90


f. The loss of Rs. 20 thousand (as per AS–21) on sale of Kewal Kiran Retail India Pvt. Ltd. and the profit

of Rs. 1,268 thousand (as per AS–21) on sale of Kornerstone Retail Limited have been separately

disclosed in Schedule 13 – Other Income.

4. Public Issue money Pending Allotment :

Share application money pending allotment includes Rs.806,010 thousand being subscription received

towards issue of shares through a 100% book building process. The proceeds from the issue have been

retained in designated bank accounts earmarked for that purpose, since the allotment process has been

completed subsequent to March 31, 2006.

On April 5, 2006, 3,100,037 equity shares were allotted to subscribers to the issue at the premium of

Rs.250 per share.

5. Contingent Liabilities:

a. Disputed demands in respect of income tax not acknowledged as debt – Rs.5,449 thousand.

b. The company has purchased capital assets under EPCG license against which the company has an

export obligation. Contingent liability, to the extent of duty saved, on not being able to fulfill the export

obligation is Rs. 1,152 thousand.

c. Bank guarantees of Rs. 4,437 thousand.

d. Letter of Credit of Rs. 1,622 thousand discounted with Banks.

e. Letter of Credit of Rs. 3,772 thousand opened by the company with Banks.

Note:

Contingent Liabilities disclosed above represent possible obligations where the probability of cash

outflow to settle the obligation is remote.

6. The company has fulfilled its export obligation with regards to an advance license. However, the Custom

authorities have yet to discharge the obligation under the said license.

7. Estimated amount of contracts remaining to be executed on Capital Account and not provided for – Rs.

1,516 (net of advances paid).

8. Sundry Debtors include Rs. Nil [Maximum amount due during the year Rs.7,244 thousand] due from

partnership firms in which directors are interested.

9. Loans and Advances includes amount due from:

i. Kewal Kiran Enterprises, a partnership firm under the same management – Rs. Nil [Maximum amount

due during the year Rs.19,500 thousand]

ii. Kornerstone Retail Ltd, a company under the same management – Rs.100 thousand [Maximum

amount due during the year Rs.22,800 thousand]

91


10. Managerial Remuneration:

Rs. ’000

31-03-2006

Managerial remuneration for directors (excluding provision for gratuity as

separate actuarial valuation for the whole–time directors is not available) 9,903

Estimated expenditure on perquisites as per revised Income Tax Rules for A.Y. 2006–07. Nil

Total 9,903

11. Auditors Remuneration:

Rs. ’000

31-03-2006

As Auditors (includes service tax of Rs.107 thousand) 982

For taxation matters 151

For Others matters (includes service tax of Rs.45 thousand) 495

1,628

Share issue related services (includes service tax of Rs.114 thousand) forming part 1,214

of Miscellaneous Expenditure (Schedule 11)

Total 2,842

12. Investments purchased and sold during the year:

Rs. ’000

Particulars Purchases Sale

No. of shares / (Rs.) No. of shares / (Rs.)

units units

Kornerstone Retail Ltd. (subsidiary 152,000.000 22,800 152,000.000 22,800

and ceased to be such on sale)

HDFC Cash Management Fund 940,282.635 10,001 940,282.635 10,001

Kotak Liquid (Institutional) Fund 817,884.172 10,001 817,884.172 10,001

UTI Liquid Cash Plan Institutional 22,126.045 22,519 22,126.045 22,514

UTI Fixed Maturity Plan 2,251,354.728 22,514 2,251,354.728 22,534

13. Deferred Tax:

In view of the Accounting Standard 22 issued by Institute of Chartered Accountants of India, the significant

component and classification of deferred tax liability/asset on account of timing difference comprises of the

following:

92


Rs. ’000

31-03-2006

Deferred Tax Asset:

Merger Expenses 40

Deferred Tax Liability:Depreciation (1,336)

Net deferred tax (liability)/asset (1,295)

14. Earnings per Share (EPS) are calculated as under: 31-03-2006

Net Profit after Tax and Prior Period Items Rs. 116,510,567

Weighted average number of Equity Shares Nos. 6,540,144

Basic & Diluted Earning per share Rs. 17.81

Note:

Share application money pending allotment as at the Balance Sheet date amounting to Rs.806,010

thousand, being the amount received towards the public issue of the Company has not been considered

for the purpose of calculation of diluted earnings per share as the allotment of shares has taken placeduring the subsequent financial year and the amount has not been utilized in the business of the enterprise,

during the year of account.

15. Segment Reporting:

a. Primary Segment:Rs. ’000

Particular Apparel Super market Unallocated Total

(from 1/4/05

to 20/12/05)

REVENUE

External Sales 863,544 20,910 – 884,454

Internal Sales – 129 – 129

Total Revenue 863,544 21,039 – 884,583

RESULTS

Segment Results 178,739 (2,500) – 176,239

Interest Income – – 2,522 2,522

Income from securities – – 2,039 2,039

Expenses – – (4) (4)

Profit before tax and prior period items 178,739 (2,500) 4,557 180,796

Provision for Tax – – (61,811) (61,811)

Profit after tax and before prior period items 178,739 (2,500) (57,254) 118,985

Prior period depreciation (4,331) – – (4,331)

Deferred tax on above – – 1,458 1,458

Profit after tax and prior period items 174,408 (2,500) (55,796) 116,112

93


Rs. ’000

Particular Apparel Super market Unallocated Total

(from 1/4/05

to 20/12/05)

OTHER INFORMATION

Segment assets 566,484 32,919 4,844,302 5,443,705

Segment liabilities 280,632 12,149 3,980,955 4,273,737

Capital expenditure 174,970 22,862 – 197,833

Depreciation (including prior period 18,234 1,012 – 19,246

item as shown above)

Non–cash expenses other than depreciation – – 91 91

Notes:

1. The Group is engaged in two main business segments, namely:

• Apparel Business

• Super Market business

Segments have been identified and reported based on different lines of business in the Group and

differential risk and returns and the internal financial reporting systems.

2. Segment revenue comprises of:

• Sales and service income

• Other income excluding interest income and income from investment in securities

3. Kornerstone Retail Limited, engaged in Super Market segment, became a subsidiary of the Company

during the year and also ceased to be the subsidiary w.e.f. December 20, 2006. Accordingly the

assets / liabilities of the said business segment as reflected above do not form part of the consolidated

balance sheet.

b. Secondary Segment (By Geographical Segment):

Rs. ’000

Particulars India Outside India Total

Sales and Services Income 812,498 67,714 880,212

[Net of Excise duty]

In view of the interwoven / intermix nature of business and manufacturing facility, other information is not

ascertainable.

94


16. Related Party Disclosure

a. Name of the enterprises having same Key Management Personnel and/or their relatives as the

reporting enterprise:

Kewal Kiran Enterprises

Kasturchand & Sons

Karamchand

Kewal Kiran Realtors Private Limited

Kewal Kiran Retail India Private Limited (w.e.f. August 7, 2005)

Kornerstone Retail Limited (w.e.f. December 21, 2005)

Krishna Super Market Private Limited

b. Relatives / Other concerns of key Management Personnel:

Shantaben P Jain

Veena K. Jain

Lata H. Jain

Sangita D. Jain

Kesar V. Jain

Pankaj K. Jain

Hitendra H. Jain

Arpita K. Jain

Pukhraj K. Jain (HUF)

Kewalchand P. Jain (HUF)

Hemant P. Jain (HUF)

Dinesh P. Jain (HUF)

Vikas P. Jain (HUF)

Renu Ahuja

Shrichand Ahuja

c. Key Management Personnel:

Kewalchand P. Jain

Hemant P. Jain

Dinesh P. Jain

Vikas P. Jain

Ashok Ahuja

95


Rs. ’000

d. Nature of Transaction Enterprises Relatives/other Key

under the same concerns of key Mgmt.

management Mgmt. Personnel Personnel

Service Charges received 6,970 – –

Miscellaneous Purchase 56 – –

Purchase of Assets 41,924 – –

Sale of Equity shares of Subsidiary 22,800 – 2,000

Reimbursement received for Advertisement expenses 6,162 – –

Security deposit given – 459 324

Security deposit Accepted [refer note (i) given below] 4,800 – –

Rent paid – 360 2,281

Loans taken – 34,339 91,455

Repayment of Loans taken – 49,875 173,478

Managerial Remuneration – 475 9,903

Preferential Allotment of equity shares – 8,252 78,178

Franchisee fees 100 – –

Outstanding balance as on March 31, 2006

Sundry Creditors 4,821 62 314

Loans and Advances 100 459 324

Disclosure of Related Party Transactions, the amounts of which are in excess of 10% of total

related party transactions of the same type:

Rs. ’000


Service Charges received Kewal Kiran Enterprises 6,970

Miscellaneous Purchase Kornerstone Retail Limited 56

Purchase of Assets Kewal Kiran Enterprises 19,819

Krishna Super Market Pvt. Ltd. 22,105

Sale of Equity shares of Subsidiary Kewal Kiran Retail India Pvt. Ltd. 22,800

Reimbursement received for Kewal Kiran Enterprises 6,162

Advertisement exp.

Security deposit given Shantaben P Jain 459

Kewalchand P. Jain 162

Hemant P. Jain 162

96



Security deposit Accepted Kornerstone Retail Limited 4,800

Rent paid Kewalchand P. Jain 709

Hemant P. Jain 589

Dinesh P. Jain 492

Vikas P. Jain 492

Shantaben P. Jain 274

Loans taken Shantaben P Jain 22,817




Repayment of Loans taken Shantaben P Jain 26,425





Managerial Remuneration Kewalchand P. Jain 2,400



Vikas P. Jain 2,400

Preferential Allotment of Equity Shares Shantaben P Jain 8,252





Franchisee Fees Kornerstone Retail Limited 100

Note:

i) The company had accepted a security deposit of Rs.4,800 thousand from its erstwhile subsidiary

Kornerstone Retail Ltd.

ii) During the period the company has entered into a lease agreement with an enterprise under the

same management. The company is entitled to a rent of Rs.800 thousand p.m. from the date the

premises are ready for use.

iii) Key Management Personnel have provided personal guarantee for bank loans obtained by the

company.

17. Operating Lease Arrangements:

a. As lessee:

Rental expenses of Rs.10,012 thousand in respect of obligation under operating leases have beenrecognized in the profit and loss account.

At balance sheet date, minimum lease payments under non–cancelable operating leases fall due

as follows:

Rs. ’000

97


Rs. ’000

31-03-2006

Due not later than one year 13,060

Due later than one year but not later than five years 96,073

Later than five years 26,108

Total 135,241

The above figures include:

i. Lease rentals calculated based on estimated date of commencement of lease in cases wherethe agreements / MOU’s have been entered into but the date of commencement of lease isdependent on the date of construction/renovation of premises.

ii. The afore–mentioned lease rentals include a lease the period of which is dependent on theoccurrence of an event, the date of which is not ascertainable beyond five years. Hence the leaserentals are considered up to a period of five years only.

b. As lessor:

The company has leased certain premises under operating lease arrangements. Lease rent in respect

of these leases will be recognized in the profit and loss account as follows:

Rs. ’00031-03-2006

Due not later than one year 8,800

Due later than one year but not later than five years 20,000

Later than five years –

Total 28,800

Note : The above–mentioned lease rent is calculated on the basis of estimated date of commencementof lease

18. The Company in previous year had entered into transactions for purchase of Assets and raw material and

during the year has entered into transaction for purchase of Assets with Firms for which prior approval of

Central Government u/s 297 of the Companies Act inadvertently was not obtained. The company’s

application u/s section 621A of the Act is pending with the Government.

19. As this is the first year the Company has prepared consolidated financial statements previous year’s

figures are not available.










98


NOTES

99


year key corporate event 1980 1992 1994 2002 2003 2005 2006 · 2018-12-15 · firm called m/s....

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