Garden Silk Mills Ltd

Dear Shareholders,

Your Directors are pleased to present their 31st report on the business and operationsof your Company together with the Audited Statements of Accounts for the year ended 31stMarch, 2010.

Summarised Financial Results:

Previous year's figures have been regrouped wherever necessary to compare with currentyear's presentation.

Financial Year:

The financial year of the Company was changed from 30th June to 31 st March in theprevious year 2008-09 therefore the figures for the current year ended 31st March, 2010are not strictly comparable with the corresponding previous year as the previous yearperiod pertains to 9 months.

Transfer to General Reserve:

Out of the total profit of Rs.63.21 crore for the financial year 2009-10, an amount ofRs.4.75 crore is proposed to be transferred to the General Reserve.

Dividend:

Your Directors are pleased to recommend a dividend of Rs.1.80 per equity share of Rs.10each on 3,82,90,560 shares for the year ended 31st March, 2010 for your consideration. TheDividend, if approved at the ensuing Annual General Meeting, will be paid to thoseshareholders whose names appear on the register of members of the Company as on the BookClosure date.

Review of operations:

Gross sales for the year ended 31st March, 2010 increased to Rs.2,662.33 crore ascompared to Rs. 1,863.64 crore in the corresponding 12 months period of 2008-09,registering a growth of about 43%.

Polyester chip sales increased substantially during the year from Rs.784.45 crore toRs.1,356.04 crore whereas yarn sales were higher at Rs. 1,132.55 crore as compared toRs.911.84 crore in the corresponding 12 months of the previous year. The FOB value ofgoods exported by the Company during the 12 months period ended 31.03.2010 increased toRs. 158.62 crore as compared to Rs.40 crore in the corresponding period of 2008-09.

The Earnings before Interest, Depreciation & Tax (EBIDTA) rose by 18.77% toRs.238.82 crore compared to Rs.201.09 crore in the previous year. The Profit before Taxalso grew by 18.55% to Rs.93.09 crore in the financial year 2009-10.

The Company achieved higher production of chips/polymer melt at 358758 MT during thefinancial year 2009-10 as compared to 231758 MT in the corresponding period of 2008-09.The increase in chip/polymer production was the main reason for the increase in profitsfor the year. The increase in output more than offset the reduction in chip margins whichfollowed increased competition from new entrants.

With the enhancement in POY/FDY manufacturing capacity, the yarn production during theyear, was higher at 127520 MT compared to 94703 MT in the 12 months period of 2008-09. Thehigher yarn production was the second most important reason for profit increase. Duringthe year the Company increased its emphasis on specialty yarns and broadened thegeographical distribution of its products.

Fabric production increased from 318.41 lac meters to 352.10 lac meters in the yearunder review. The Company increased its presence in the kidswear segment by introducingmany new georgette and chiffon varieties for this segment. The Company also increased itssales of embroidered sarees and dress materials and institutional sales.

In the last year fabric development has been geared towards jaquard and dobbies. Inline with the market your Company has made a shift from traditional dress materials andsarees to shirtings, fabric for garmenters and interlining fabric.

The Government of India partially rolled back the stimulus package, by raising theexcise duty on polyester from 4% to 8% in July 2009 and increased it by another 2% onpolyester and feedstock alike in the Union Budget 2010-11, thus bringing them at a uniformrate of 10%. The higher excise duty will enable the Company to substantially reduce itsaccumulated cenvat balance and hence improve financial liquidity.

Your Company has closed down its activity of the finance division during the year andtherefore the present business activity falls within a single primary business segmentviz. 'Textiles'.

Expansion Program:

To expand its product portfolio and to maintain its leadership in domestic market, yourCompany has over a period successfully enhanced its chips and yarn manufacturing capacitywith an emphasis on specialty products.

In January 2009 after the successful expansion of Continuous Polymerization (CP)capacity to 416,000 TPA the Company successfully added POY and FDY capacity of 47,250 TPAin April 2009. The fruits of this expansion are visible in the results of the year underreview. Moreover, the Company has successfully commissioned a project involving furtherenhancement of polyester chips capacity by 300 tonnes per day (TPD) at its plant atVillage Jolwa, Taluka Palsana, Dist. Surat which commenced commercial production duringApril, 2010. The chips to be produced will be specialty chips that will cater to the needsof not just the textile industry but also the fast growing film and packaging industry.

During the year, your Company undertook expansion involving increase in POY capacity byabout 144 TPD and FDY capacity of about 112 TPD at Jolwa. These projects are expected tobe commissioned in a phased manner during January-June, 2011. These new plants willmarkedly increase production of specialty products. To cater to the growing needs of thesized-yarn sector the Company has initiated a draw-warping expansion project which willfurther enhance draw-warping capacity by 35 TPD. This project is expected to be on-streamby October, 2010.

To meet the captive power requirement for these projects, the Company is also puttingup a coal based thermal power project of 18 MW at Jolwa which is expected to commencepower generation before March, 2011.

Our expansion projects over the year are aligned with our objective of maintainingabove-industry-average growth and will consolidate our position as a global leader inspecialized polyester products. These initiatives will improve our economies of scale, ourtechnological capabilities and strengthen our position in a very competitive market.

Review of the Economic Scenario:

The global economy continues to recover amidst ongoing policy support and the improvingfinancial conditions of consumers and businesses alike. The recovery has been almost assynchronized and unanticipated as was the downward phase of the Great Recession.

The recovery process is led by emerging market economies, especially those in Asia.Advanced economies are expected to grow as well though at a much slower rate. According toIMF, the world economy expanded at an annual rate of over 5 per cent during the firstquarter of 2010, primarily driven by the growth in Asian economies. World growth isprojected at about 4.5% in 2010 and 4.25% in 2011. GDP forecasts for Asia have beenrevised upward for 2010, from about 7% to 7.5%.

The global economy however continues to face several challenges. The likely exit fromexpansionary monetary and fiscal policies in 2011 may be the biggest risk facing theglobal recovery. Developed nations are facing high levels of unemployment (around 10% inthe US and the Euro area), poor credit growth and lethargic financial markets. Despitesigns of renewed activity in manufacturing and signs of improvement in retail sales, theprospects of economic recovery particularly in Europe are clouded by acute fiscal strainsand default-risks in some countries.

India's recovery after the slow-down is well under way. Growth is projected to recoverto 8-9% in the next two years. Rising interest rates, rupee appreciation, high inflation,volatility in capital flows and continued low growth in high income nations could somewhatslow the recovery but are unlikely to derail it. Consumer and business confidence is verystrong and are reasonably balanced across the country. The confidence is supported by fastgrowing disposable income and corporate earnings. Manufacturing is expected to be a majordriver of growth over the next few years. Exports have been expanding since October, 2009,a trend that is expected to continue.

On the back of 15.1% growth by the manufacturing sector, the Indian economy expanded by9.0% in the first three months of 2010. In the current fiscal the government projects theeconomy will grow by 8.5% (vs 7.4% in 2009-10).

Inflation in food products, measured by the Wholesale Price Index (WPI), rose to 16.8%in 2009-10 from 10% in 2008-09. With the wholesale price-based inflation still above 9.5%,the RBI may further tighten money supply, which will result in higher interest rates. Withthe unclear prospects for the monsoon, high inflation and the policy responses it maybring, are possibly the biggest hurdles to the economic growth.

China's announcement of a flexible policy for its currency may result in someappreciation against the dollar but may not have much impact on India. Its rapidlyincreasing wage rate on the other hand is having a positive impact on many Indianmanufacturers including PFY manufacturers by improving their relative costcompetitiveness.

Industry Review:

Globally synthetic fibres, led by polyester (polyester staple fibre and polyesterfilament yarn) have been growing rapidly owing to a growing demand for fiber and thecontinuing replacement of natural fibres in a world short of agricultural acreage.

The proportion of synthetics in total fibre consumption worldwide has risen from 47% to57% in the last 15 years while cotton has reduced from 42% to 36%. Moreover the percentageof polyester in global synthetics market has gone up from 58% to 79% in this period(source Oerlikon: Fibre Year 2010). In India polyester has been steadily replacing naturalfibres as well. However since past government policies have led to a much higher ratio ofnatural (especially cotton) fibres to synthetics the potential for polyester growth iscorrespondingly higher. India has overtaken Taiwan and Korea to become the largestproducer of polyester yarn (including PFY) outside of China.

The demand for polyester filament yarn in India grew by around 14% in 2009-10, fasterthan all other major yarn categories. Exports of PFY based textile products have alsoshown good growth unlike exports of other textile products.

As per CRISIL estimates, the domestic textile market (ready-made garments and hometextiles) is expected to grow at a CAGR of 6-7% between FY 2008-09 and FY 2013-14.International experts have estimated a much higher growth rate. Rising income levels andincreased growth in rural spending on textile products will translate into growth indomestic demand for fabric. Moreover India's improved competitive position vis-a-vis Chinashould help in good growth of chips and yarn exports.

In the year 2009-10 the growth in the Indian PFY industry was positive, despite asevere shortage of PTA raw material owing to delayed start-up of a large new Indian PTAplant. It is expected that the recent start-up of this plant will result in healthy growthof the industry in the remaining months of the year. The recent successful start-up of theIOC MEG plant will also significantly reduce the import dependency of MEG in India.

In the years ahead relatively easier availability of raw materials, growing local andinternational demand and improved cost competitiveness of Indian manufacturers vis-a-vistheir global competitors should permit strong growth in the PFY industry.

The general weaving/fabric processing segment of the PFY industry suffered productionlosses due to labour shortage. The market seems to be consolidating from its superfragmented nature. Very small weavers who traditionally were job workers are shuttingshop, and medium large scale weavers are augmenting capacity particularly in automaticlooms.

Opportunities, Strengths and Outlook:

When oil prices were at $147 and costs of polyester raw materials were at a peak, andwhen the economy was in the grip of a severe slowdown, your Company has shown robustprofitability reestablishing its credentials as a relatively low-risk company. During thefinancial crisis Indian consumers skewed their spending toward value-products like PFYtextiles.

The growth of the rural market has played a major role in the resilient growth of PFYin good times and bad. It is expected that rural markets will play an increasinglyimportant role in the economy which offers a major opportunity for growth in the polyesterindustry. The price of cotton has gone up considerably putting it out of reach of manyconsumers thus improving the competitive positioning of PFY.

Per capita consumption of polyester in India is exceedingly low by world standards sothere is great scope for local demand growth. Moreover we believe India will play anincreasingly important role as an exporter of high quality polyester filament chips andyarn. Your Company is well positioned to take advantage of both local and global demandgrowth.

Your Company occupies a leadership position in the manufacturer of Polyester FilamentYarn (PFY)-based textiles in India. It has the distinction of being the largestmanufacturer of PFY-based fabrics in the country. It is also the leading manufacturer offully drawn flat filament yarn and textile-grade chips. The Company is also a significantproducer of differentiated Partially Oriented Yarn (POY), draw-warped yarn, draw-twistedyarn, draw-textured yarn, sized yarn and twisted yarn. Your Company is the second largestspecialty yarn maker and the largest specialty chip maker in India.

Your Company is considered to be a market leader in quality and enjoys a solidreputation with its customers who give it a price-premium across its product range. Itsmarket position gives it the ability to grow fast and profitably. Its specialty rangeallows it to differentiate itself in the market and will enable it to successfullywithstand competitive pressures in times to come. The specialty market is growing and sois the need for quality, providing a great opportunity for your Company's growth.

Your Company is expected to increase its exports substantially this financial year.While China is still the largest and most cost-competitive country in PFY-based clothing,the scarcity of labour and high rate of wage growth in China is making your Companyrelatively more cost competitive in the international markets. Your Company is becoming asizeable exporter of chips and yarn and is sometimes exporting to China, too.

Garden is an integrated player in the polyester chain whose products stem from chips toPOY to processed yarn, preparatory yarn, to finished, dyed and printed fabric. Thisintegration helps insulate it from the vagaries of the market and gives it leadinginformation on which to base decisions across the chain.

The introduction of GST will be beneficial to your Company's performance as it willcreate a level playing field vis-a-vis its some of competitors who presently have centralsales tax exemptions.

The general economic expansion is expected to contribute further to the upbeat trend.Your Company plans to exploit this opportunity through a disciplined policy of long-terminvestment thereby achieving higher returns and enhancing shareholder value. The Companywill especially address opportunities to leverage domains of market leadership.

Risks and Concerns:

The next 1 -2 years are likely to see a large expansion in PFY, both POY and FDY. Thismay result in a reduction in margins in the yarn business. The margins in chips may notdecline much, however, owing to the expected increase in yarn production. The Company'sgrowth in chip and yarn sales will help offset the reduction in margins. The Company'sthrust on specialties, high quality and customer relationships will help support margins.

The developed world faces the less likely but real risk of a double-dip recession whichwill have a slowing effect on the Indian economy as well. Yet this is unlikely to affectyour Company adversely as it has done well in probably far worse conditions.

To curb the high inflation in the country the RBI may increase interest rates. This mayhave a negative effect on your Company's cost of borrowing.

Your Company takes risk management very seriously. The risk management practice interalia provides for review of risk assessment and mitigation procedures, with guidelinesto regularly update the management and the Board of risk status.

During the year, the Audit Committee, which has been designated by the Board, reviewedthe adequacy of the risk management framework of the Company, the key risks associatedwith the businesses of the Company and the measures and steps in place to mitigate thesame. The details were thereafter presented to and discussed at the Board Meeting.

Project execution is largely dependent upon timely delivery by the equipment suppliers,project management skills, and adherence to schedule by civil contractors. Any delay inproject implementation will impact revenue and profit for that period.

The volatility witnessed in the global markets has reiterated the need for robust forexmanagement systems and prudent investment practices. Your Company has conservative forexmanagement processes, which ensure that forex exposures are hedged immediately upon theoccurrence of an exposure. Currently the Company uses only forward contracts to hedge bothits imports and exports and continues to maintain the philosophy of protecting cash flows.The Company does not speculate in the forex market.

Your Company is exposed to the risk of price fluctuation on major raw materials-PTA andMEG. While in regular course of business price fluctuations are passed on to customerssudden price reductions can result in freezing up of sales and consequent inventorylosses.

Finance and Investment:

The Company, during the year under review, has successfully mobilized additionalresources to fund its long-term and project-related financial requirements. The capexprogram of the Company is being funded by a combination of internal accruals and long-termborrowings from banks. The Company has spent an aggregate amount of Rs.186.49 crore onongoing projects until year-ended 31st March, 2010.

Your Company availed term loans of Rs. 195.53 crore during the year to part-finance thecapital expenditure program. The working capital requirements are met through borrowingsfrom a consortium of banks, and placement of Commercial Papers and availing buyers creditfrom raw material suppliers. The Company repaid long-term loans of Rs. 124.67 crore(including prepayment of Rs. 1.47 crore to a foreign bank) to the banks and institutionstowards its term loan obligations for the year 2009-10.

The Company continues to maintain adequate liquidity to meet unanticipated expendituresand accordingly invests surplus funds available in rated debt mutual funds and fixeddeposits of reputed banks. As in the past, the Company enjoyed the confidence of itsbankers and has been able to avail various banking facilities at favourable terms.

Interest cost has gone up during the year largely on account of additional borrowingsfor the new projects which commenced during the year. Your Company with better workingcapital management maintained lower interest costs inspite of higher working capitalutilization during the year as compared to previous year.

Banks have switched over to the system of Base Rate from 1st July, 2010. It is expectedthat the Base Rate system will enhance transparency in lending rates. The switchover tobase rate system will not have major impact on the Company.

Credit rating:

The Company continues to have the highest credit rating of PR1+ (PR OnePlus) from Credit Analysis & Research Ltd. (CARE) to the Commercial Paper (CP) / Miborlinked Short-Term unsecured NCD etc. of the Company, aggregating to Rs.185 crore for amaturity up to six months. Strong credit ratings by Credit Rating agencies reflect theCompany's financial discipline and performance.

Corporate Governance:

Your Company continues to be committed to good Corporate Governance aligned with goodpractices. Your Company is in compliance with the standards set out by Clause 49 of theListing Agreement with the Stock Exchanges. A separate Report on Corporate Governancealong with the Auditors' certificate on compliance with the Corporate Governance asstipulated in Clause 49 is set out in this Annual Report and forms part of this Report.

Directors:

In accordance with the provisions of the Companies Act, 1956 and the Company's Articlesof Association, Mrs. Shilpa P. Shah, Mr. Rajen P. Shah, Mr. Alok P. Shah and Mr. YatishParekh retire from the Board by rotation and are eligible for re-appointment at theforthcoming Annual General Meeting. The Board recommends their re-appointment. The Noticeconvening the Annual General Meeting includes the proposals for re-appointment ofDirectors,

Directors' responsibility statement:

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956, in relation tofinancial statement for the year 2009-10, the Board of Directors of the Company herebystate and confirm that:

i. in the preparation of the annual accounts, the applicable Accounting Standards havebeen followed and there has been no material departures;

ii. the selected accounting policies were applied consistently and the Directors madejudgements and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March, 2010 and of the profits ofthe Company for the year ended on that date;

iii. proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act, 1956 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and

iv. the annual accounts have been prepared on a going-concern basis.

Auditors:

The statutory auditors of the Company, M/s. Natvarlal Vepari & Co., CharteredAccountants, hold office until the conclusion of the ensuing Annual General Meeting.Certificate from the auditors has been received to the effect that their re-appointment,if made, would be within the limits prescribed under Section 224(1 B) of the CompaniesAct, 1956.

The Audit Committee and the Board of Directors therefore recommend their re-appointmentas statutory auditors of the Company for 2010-11 for the approval of shareholders.

Auditors' Report:

Notes to the accounts, as referred in the auditors' report, are self explanatory and apractice consistently followed, and therefore do not call for any further comments andexplanations.

Cost Audit:

As per the requirement of the Central Government and pursuant to Section 233B of theCompanies Act, 1956, your Company carries out an audit of cost accounts relating to theproduct Polyester every year. Subject to the approval of Central Government, the Companyhas appointed Mr. V. Srinivasan, cost accountants, as auditors to audit the cost accountsof the Company for the Financial Year 2010-11.

Internal Control Systems:

Your Company has adequate internal control procedures commensurate with the size ofoperations and the nature of the business. These controls ensure efficient use andprotection of Company's financial and non-financial resources. They also have ensuredcompliance of stipulated policies, procedures and statutes, ensuring accuracy ofaccounting records and corporate governance.

Regular internal audits and checks ensure that responsibilities are executedeffectively. The Audit Committee of the Board of Directors reviews the adequacy andeffectiveness of internal control systems and suggests improvement for strengthening them,from time to time.

Human Resources and Industrial Relations:

Good human resource management plays a key role in company performance. The employeerelations during the year have remained cordial and satisfactory. Attracting and retainingdedicated and skilled human resource, offering them a conducive work environment andexcellent career development opportunities are currently prime HR priorities.

Health, Safety and Environment Measures:

Your Company is aware of its responsibilities as a good corporate citizen, in health,safety and environmental management. Your Company contributes to community welfareactivity and takes up initiatives and measures related to education and health. TheCompany recognises protection and management of environment as one of its highestpriorities and every effort is made to conserve and protect the environment.

The Company continues to focus on maintenance and performance improvement of relatedpollution control facilities like effluent treatment plant and waste disposal facility atits manufacturing locations. The Company has put in place co-generation systems that keepcarbon emissions to the minimum.

Your Company continued its focus in creating an aesthetic, environment-friendlyindustrial habitat in its factory units, mobilizing support and generating interest amongstaff and labour for maintaining hygienic and green surroundings.

Cash Flow Analysis:

The Cash Flow Statement for the year under reference in terms of Clause 32 of theListing Agreement with the stock exchanges forms part of the Annual Report.

Investor Education & Protection Fund:

During the year, the Company has transferred a sum of Rs.12,63,825 to InvestorEducation & Protection Fund, the amount of Dividend pertaining to financial year2001-02 which remained unclaimed and unpaid for a period of seven years, as provided inSection 205C(2) of the Companies Act, 1956.

Reward, Recognition & Quality Systems Certification:

Your Company continues to have the status of Star Export House by theOffice of Joint Director General of Foreign Trade, Ministry of Commerce & Industry,Government of India on achieving the required Export targets.

The Company's Vareli Plant enjoys the unique distinction of being the first inpolyester weaving industry to achieve ISO 9002:1994 certification by Bureau VeritasQuality International (BVQI). The processes certified are Draw Warping and Texturising,Twisting, Sizing, Warping and Weaving. The scope of audit includes Manufacture ofWoven Greige Fabrics and Processed Yarns.

The manufacturing of Texturised, Flat Polyester Filament, Polyester Partially OrientedYarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.

Fixed Deposits:

Your Company has not accepted or renewed any fixed deposits under Section 58A of theCompanies Act, 1956 and as such no amount of principal or interest was outstanding as on31st March, 2010.

Disclosure of Particulars:

Information as per the Companies (Disclosure of Particulars in the Report of Board ofDirectors) Rules, 1988, relating to Conservation of Energy, Technology, Absorption,Foreign Exchange Earnings and Outgo is provided in Annexure 'A forming part of thisReport.

Personnel:

The information required under Section 217(2A) of the Companies Act, 1956 and the Rulesmade thereunder, is provided in an Annexure forming part of this Report. In terms ofSection 219(1 )(b)(iv) of the Act, the Report and Accounts are being sent to theshareholders excluding the aforesaid Annexure. Any shareholder interested in obtainingcopy of the same may write to the Company Secretary.

Depository System:

The Company's shares are compulsorily tradable in electronic form. As on 31st March,2010, 94.49% of the Company's total paid-up capital representing 36,17,9323 shares are indematerialised form. In view of the numerous advantages offered by the depository system,members holding shares in physical mode are advised to avail of the facility ofdematerialisation on either of the depositories.

Cautionary Statement:

Statement in this Directors' Report & Management Discussion and Analysis describingthe Company's objectives, projections, estimates, expectations or predictions may beforward looking statements within the meaning of applicable securities lawsand regulations. Actual results could differ materially from those expressed or implied.Important factors that could make a difference to the Company's operations include rawmaterial availability and prices, cyclical demand and pricing in the Company's principalmarket, changes in Government regulations, tax regimes, economic developments within Indiaand the countries in which the Company conducts business and other incidental factors.

The Company assumes no responsibility in respect of the forward-looking statementsherein, which may undergo changes in future on the basis of subsequent developmentsinformation or events.

Acknowledgement:

Your Directors take this opportunity to thank the Banks, Financial Institutions,Central and State Government authorities, Regulatory authorities, Customers, Suppliers,shareholders and investors at large for their continued support to the Company and lookforward to having the same support in the years to come.

Your Directors would like to express their appreciation to all employees for theiroutstanding contribution to the operations of the Company during the year.

Annexure'A'

Information under Section 217(1 )(e) of the Companies Act, 1956, read with theCompanies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988.

I. CONSERVATION OF ENERGY

The Company is committed to continually finding solutions to improve the energyefficiency of its manufacturing processes, while placing a premium on the pursuit oftechnological advancements leading to the creation of new and improved products.

(a) Energy Conservation measures taken:

The salient achievements in conservation of energy and the absorption of new technologyare as follows.

• The commissioning and operational stabilization of 24-end fully-drawn yarn (FDY)spinning machinery.

• Reduction of generating pressure for yam intermingling in spinning, reducingpower consumption.

• Reduction of polymer load in candle cleaning by draining excessive polymer fromhot candles, decreasing wastage and saving power.

• Switching off of pre-heater ovens in absence of spin pack load, reducingelectrical load.

• The commissioning and operational stabilization of coal-based heaters forcontinuous polymerization plants 1,2 and 3.

• In continuous-polymerization plant CP1/2, the recycling of soft water from CPpumps resulting in saving of cost for soft water generation.

• The impellers of chilled water trimmed to get optimum output and saving in powerdue to intermittent stoppage of pump.

• The compressor cooling water pump is made common resulting in power saving.

(b) Additional investments and proposals, if any, being implemented by the Company forreduction of consumption of energy

• Centrifuge provided in CP1/2 forTitanium Dioxide system.

(c) Impact of the above measures for reduction of energy consumption and consequentimpact on cost of production of goods:

• Energy saving

• Increase in productivity

• Reduction in power consumption

(d) Total energy consumption and energy consumption per unit of production as per FormA:

FORM A

II. TECHNOLOGY ABSORPTION:

(e) Efforts made in Technology Absorption as per Form 'B' given below:

1. Specific areas in which R&D carried out by the Company:

The R&D efforts of the Company are directed towards the following:

• System provided for production of Optical Brightener Chips in CP 1/2.

• New products started in CP2 Division:

(a) Hombright-Semi-Mod Chips

(b) Semi-Mod Chips

2. Benefits derived as a result of above efforts:

• Centrifuge provided in CP1/2 for Titanium Dioxide system resulted in followingimprovements:

(a) Increase in polymer filter life.

(b) Improvement in partially-oriented yarn (POY) spinning performance due to less wastegeneration.

• Opening up avenues for more business in future including export potential.

• Strengthened product portfolio and improved contribution margin.

3. Future plan of action:

(a) Development of new products and processes.

(b) Upgradation of new variants of existing products.

(c) Energy optimization for process plants.

(d) Further improvement in the Quality of Products and Processes.

4. Expenditure on R & D:

• Research & Development is carried out by the concerned departments in-houseand no separate accounts are maintained.

5. Particulars of Technology imported during the last 5 years:

III. FOREIGN EXCHANGE EARNINGS AND OUTGO

With India's growing importance as a low-cost manufacturing base with good health,safety and environment practices, your Company expects a substantial export potential inits products. During the year your Company achieved export sale of Rs. 158.62 crore.

The information on Foreign Exchange earnings and outgo is contained in Note 20(d) inSchedule 12 to the Accounts.