Gujarat Raffia Industries Ltd

Dear Shareholders,

Your Directors present the Twenty second Annual Report together with the AuditedStatement of accounts for the 18 months period ended on 30th September 2007.

1. Financial Results:

2. Dividend:

Due to conservative financial policy adopted by the company, your directors are unableto recommend any dividend for the year under review.

3. Review of Operations-Production, Sales and Working Results:

The turnover of Fabrics/Sacks/Tarpaulin etc. during the 18 months period under reviewwas Rs. 2944 lacs as compared to Rs. 2079 during 2005-2006. The Company went for financialrestructuring in the form of Capital Reduction and got the order from Hon'ble High courtof Gujarat for reducing the paid up capital of the company and wiping off the losses ofthe company .

The Company wiped off its previous carried forward losses to the tune of Rs. 1246.63lacs by utilizing share premium amount and share capital consequent upon capital reductionas per court order.

The operating profit for the 18 months period under review is Rs. 289.55 lacs ascompared to operating loss of Rs. (120.07) lacs during previous year. Further, due toincrease in turnover during the period under review, the company earned profit aftertaxation of Rs. 136.23 lacs as compared to Rs.25.64 lacs in the previous year. Further,due to wiping off losses, the profit to be carried forward to Balance Sheet is Rs. 135lacs as compared to carried forward losses of Rs. 1401.76 lacs during previous year.

Your directors shall strive harder in future to yield better results in future.

4. Directors:

Shri Prakash Ramnani retires by rotation in terms of Article 99 and 100 of Articles ofAssociation of the company. He, however, being eligible offer himself for reappointment.Shri Chandraprakash Jain resigned as director w.e.f 01.02.2007 and Shri Surendra Patwariwas appointed as Additional director on 01.02.2007 &ceased to be director due to deathw.e.f.08.09.2007.The Board took the note of the same.

5. Directors' Responsibility Statement:

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, it is hereby confirmed:

a. That in the preparation of the annual accounts, the applicable accounting standardshas been followed along with proper explanation relating to material departures.

b. Appropriate accounting policies have been selected and applied consistently and madejudgements and estimates that are responsible and prudent so as to give true and fair viewof the state of affairs of the company as at 30th September,2007 and of profit or loss ofthe company for that period.

c. Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of thecompany and for preventing and detecting fraud and other irregularities.

d. The annual accounts have been prepared on a going concern basis.

6. Extension of Financial Year and Annual General Meeting of the Company:

The company was granted extension of financial year upto 30.09.2007 from the Registrarof Companies Gujarat on 24.04.2007 and for Annual General Meeting upto 25.03.2008 from theRegistrar of Companies, Gujarat vide its order dtd. 4.05.2007.

The Board is requested to take note of the same.

7. Capital Reduction and Division of Shares:

The Company planned for its financial restructuring and applied to Hon'ble High Courtfor reduction of capital and consequently obtained order from High court of Gujarat dtd.21.09.2007 approving the scheme of reduction of paid up capital of the company fromRs.9,98,95,550/-(Rs. 10,21,87,000/-being the issued and subscribed capital less forfeitedshare capital Rs.22,91,500/-) divided into 99,89,550 equity shares of Rs.10/- each fullypaid up to Rs.4,99,47,750/- divided into 99,89,550 equity shares of Rs.5/- each fully paidup. The order was also registered with The Registrar of Companies, Gujarat.

Further, after getting approval of scheme of capital reduction from High Court , thecompany converted its reduced face value of shares from Rs.5/- each to Rs.10/- per sharei.e 99,89,550 equity shares of Rs.5/- each fully paid up to 49,94,775 fully paid equityshares of Rs. 10 each vide special resolution passed in the Extra Ordinary General Meetingdtd. 15th October, 2007.

The Board is requested to take note of the same.

8. Personnel:

Industrial relations continued to remain cordial and peaceful during the year underreview.

9. Listing:

The Equity Shares of the Company are listed on the Ahmedabad, Mumbai, Calcutta andNational Stock Exchange. The Company has paid Listing Fees to the Stock Exchange/s up to2006-2007. .

10. Corporate Governance:

As per Clause 49 of the Listing Agreement with the Stock Exchange/s, a ManagementDiscussion & Analysis Statement, a report on corporate governance together withAuditors' Certificate regarding compliance of conditions of Corporate Governance form partof the Annual Report.

11. General:

11.1 Insurance:

The Company's properties including building, plants, and machineries, stock, storesetc. continued to be adequately insured against risks such as fire, riots, strikes, etc.

11.2 Auditors:

The present Auditors of the Company M/s. Talati & Talati , Chartered Accountants,Ahmedabad will retire at the ensuing Annual General Meeting. They have submittedcertificate for their eligibility for reappointment under Section 224(1B) of the CompaniesAct,1956.

The Notes of the Auditors to the accounts are self-explanatory.

11.3 Particulars of Employees:

There is no employee drawing remuneration requiring disclosure under the Companies(Particulars of Employees) Rules, 1975.

11.4 Deposits:

At the end of the Financial Year under Report, no fixed deposit remained unclaimed bythe deposit holder, which was due for repayment.

12. Particulars as required under The Companies (Disclosure of Particulars inthe report of the Board of Directors)Rules, 1988, is as per Annexure 1 annexedherewith.

13. Acknowledgement:

Your Directors express their sincere gratitude for the assistance and cooperationextended by Financial Institutions, Banks, Government Authorities, Shareholders, Suppliersand Customers.

Your Directors also wish to place on record their appreciation of the contribution madeby the employees at their level towards achievements of the Company's goals.

A. Conservation of Energy:

a) Energy consumption measures taken, additional properties and its impact.

The Company has installed Power factor panels so as to reduce overall powerconsumption.

b) Total Energy consumption and Energy Consumption per unit of production as per Form Aprescribed in the Rules is as under:

A. Power and fuel Consumption

B. TECHNOLOGY ABSORPTION:

a) The Company has not carried any Research & Development Activities during theyear under Report.

b) Activities relating to Exports, initiatives taken.

The Company exported goods worth Rs. 1134.05 Lacs which is likely to increase in theyear 2007-2008. The management is in active discussion with the potential customers inforeign countries.

c) Total Foreign Exchange earned and used.

The Company has earned Foreign Exchange of Rs. 567.56 Lacs by exporting its productsand has spent Rs.282.53 lacs for importing raw materials in the current year.