DIRECTORS' REPORT

Dear Members,

The Directors of your Company have pleasure in presenting their 42nd Annual Report on the affairs of the Company together with the Audited Accounts of the Company for the year ended, 31st March, 2015.

2. FINANCIAL ANALYSIS AND REVIEW OF OPERATIONS:

Production & Sales Review:

During the year under review, your Company has registered Revenue from Operations of Rs.5,742.03 crore as compared to Rs.5,171.31 crore in the previous year. The export of the Company increased from Rs.2,007.91 crore to Rs.2,442.48 showing a increase of 21.64%  over the previous year. The business wise performance is as under:-

a) Yarn:

The production of Yarn increased from 1,68,285 MT to 1,91,046 MT during the year 2014-15. The sales revenue of yarn increased from Rs.2,980.01 crore to Rs.3,365.60 crore during the year under review showing an increase of 12.94%.

b) Fabric:

During the year, the production of grey fabric increased from 154 million meter to 170 million meter, showing an increase of 10.39% over the previous year. The production of processed fabric increased from 107 million meter to 110 million meter. The sales revenue of the fabric (grey and processed) also increased from Rs.1,885.25 crore to Rs.2,032.48 crore showing an increase of 7.81% over the previous year.  

a) Fixed Assets:

The net fixed assets (including Capital work-in-progress) as at 31st March, 2015 were Rs.2,573.05 crore as compared to Rs.2,859.26 crore in the previous year.

b) Current Assets:

The current assets as on 31st March, 2015 were Rs.2,960.84 crore as against Rs.3,408.75 crore in the previous year. Inventory level was at Rs.1,636.73 crore as compared to the previous year level of Rs.1871.54 crore.

Financial Conditions & Liquidity:

The Company enjoys a rating of "AA/stable" from Credit Rating Information Services of India (CRISIL) for long term borrowings and "A1+" for short term borrowings respectively. Management believes that the Company's liquidity and capital resources should be sufficient to meet its expected working capital needs and other anticipated cash requirements. The position of liquidity and capital resources of the Company is given below:

3. DIVIDEND:

The Board of Directors of your Company has recommended dividend of Rs.10.00/- per share  on the Fully Paid-up Equity Shares of the Company. . ‘

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND:

In terms of Section 125 of the Companies Act, 2013, unclaimed or unpaid Dividend relating to the financial year 2007-08 is due for remittance by the end of September, 2015 to the Investor Education and Protection Fund established by the Central Government.

5. CONSOLIDATED FINANCIAL STATEMENT:

In accordance with the Companies Act, 2013 and Accounting Standard (AS)- 21 on consolidated Financial Statements read with AS- 23 on Accounting for Investments in Associates and AS- 27 on Financial Reporting of Interests in Joint Ventures, the Audited Consolidated Financial Statement is provided in the Annual Report.

6. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE  COMPANIES:

During the year under review, no Company has become or ceased to be Company's subsidiaries, joint ventures or associate companies. Further, the Company does not have any material subsidiary. The Company has following subsidiaries and associate companies, the details of their financials for 2014-15 are given below:

VMT Spinning Company Limited (VMT)

This subsidiary of the Company is a Joint Venture with Marubeni Corporation and Marubeni Hong Kong and South China Limited of Japan. The Revenue from operations of the Company has increased to Rs.167.23 crore from Rs.157.65 crore in the last year. The Company earned a net profit of Rs.2.79 crore as against the profit of Rs.17.04 crore in the previous year administering a decrease of 83.63% due to depressed margins. Out of the total present paid-up capital of Rs.20.70 crore, your Company holds 89.44%. The Board of Directors of VMT has recommended a dividend @ 10% for the year 2014-15.

VTL Investments Limited (VTL)

This 100% subsidiary of your Company is engaged in the business of investments in shares etc. The earnings of the Company mainly comes from the dividend/interest earned on its investments and profits made on sale of investments. During the year, the Company has earned a net profit of Rs.3.07 crore.

Vardhman Acrylics Limited (VAL)

This subsidiary of the Company is engaged in the business of manufacturing of Acrylic Fibre. Presently, the Company holds 70.75% shares in this subsidiary. During the Financial Year  2014-15, VAL recorded Revenue from operations of Rs.498.08  crore (including Trading of goods of Rs.153.08 crore) as against Rs.468.49 crore (including trading of goods Rs.133.97 crore). The net profit for the year has decreased to Rs.33.42 crore from  Rs.43.67 crore in the previous year administering a decrease of 23.47%. The Board of Directors of VAL has recommended a  dividend @ 10% for the year 2014-15.   

Vardhman Yarns & Threads Limited (VYTL)

This subsidiary of the Company, a Joint Venture with American & Efird Global LLC. (A&E), is engaged in the business of Threads Manufacturing and Distribution. The Company has a Joint Venture partnership of 51:49 with A&E, which is the second largest player in Threads Manufacturing and Distribution across the world. During the year under review, the Revenue from Operations were Rs.696.62 crore as against Rs.643.05 crore in the previous year registering an increase of 8.33%. The Net Profit for the year was Rs.72.04 crore as compared to H69.99 crore during last year registering an increase of 2.93%. This has been possible because of increase in production and sales revenue in all the verticals i.e. Consumers, Industrial and Specialty products. The Board of Directors of this Company has recommended a dividend @ 60% on it's paid up equity share  capital for the year 2014-15.

Vardhman Nisshinbo Garments Company Limited (VNGL)

This subsidiary of the Company is a Joint Venture partnership of 51:49 with Nisshinbo Textiles Inc., Japan for manufacturing world class men's shirts. During the year, the Revenue from Operations of the Company was Rs.47.07 crore as compared to Rs.36.94 crore in the previous year. The Company earned a Net Profit of Rs. 0.15 crore as against a net loss of Rs.4.13 crore in the previous year.

Vardhman Special Steels Limited (VSSL)

Vardhman Special Steels Limited (VSSL) is an Associate Company of the Company.The Company holds 31.39% shares of VSSL. During the year, the Revenue from Operations of the Company was H661.60 crore as compared to Rs.370.60 crore in the previous year. The Company incurred a Net loss of v15.13 crore as against a net loss of Rs.9.42 crore in the previous year.

Vardhman Spinning & General Mills Limited (VSGM)

Vardhman Spinning & General Mills Limited (VSGM) is an Associate Company of the Company. The Company holds 50% shares of VSGM. It is a trading Company dealing in trading of Cotton and Fibre. During the year, the Company has not traded any goods. So, the Revenue from Operations is Nil for the financial year 2014-15. The Company incurred a Net Loss of Rs.38,062.00 as against a net loss of H26,155.68 in the previous year.

7. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING  THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT:

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate and the date of this report.

8. CORPORATE SOCIAL RESPONSIBILITY:

Your Company is committed to and fully aware of its Corporate Social Responsibility (CSR), the guidelines in respect of which were more clearly laid down in the recently overhauled Companies Act. The Company's vision is to pursue a corporate strategy that enables shareholder value enhancement and societal value creation in a mutually reinforcing and synergistic manner.

The Corporate Social Responsibility Committee of the Company has formulated and recommended to the Board, a Corporate Social Responsibility (CSR) Policy indicating the activities to be undertaken by the Company, which has been approved by the Board.

The CSR policy may be accessed on the Company's website at the link: <http://www.vardhman.com/user_files/> d622b1c8d626fabfcecf09e145cb1b4e9f488476143626456  3.pdf.

The Company has identified following thrust areas for CSR:-

¦ PROMOTION OF EDUCATION: To continue our endeavour for promoting education by setting up schools, colleges to deliver high quality education to students of all strata of society including wards of employees of the Company.

¦ ENVIRONMENT PROTECTION AND ENERGY CONSERVATION: To protect environment and to sustain and continuously improve standards of Environment, Health and Safety through the collective endeavour of Company and its employees at all levels towards attaining world class  standards.

¦ DEVELOPMENT OF HUMAN CAPITAL: To encourage the development of human capital through skills development, vocational training programmes.

¦ RURAL DEVELOPMENT: To contribute to development in rural areas through agricultural research and knowledge sharing, promoting superior farm practices, improving cotton production, productivity and quality and other agri-extension practices such as soil and moisture conservation and watershed management etc.

¦ OTHER INITIATIVES:

• To contribute to empowering women economically, supplementing primary and secondary education and participating in rural capacity building programmes and such other schemes.

• To respond to emergency situations & disasters by providing timely help to affected victims and their families.

• Any other project/ programme pertaining to activities listed in Schedule VII of the Companies Act, 2013 read with Companies (Corporate Social Responsibility) Rules,  2014.

During the year, the Company has spent Rs.6.00 crores on CSR activities.

The disclosures related to CSR activities pursuant to Section  134(3) of the Companies Act, 2013 read with Rule 9 of  Companies (Accounts) Rules, 2014 and Companies (Corporate Social Responsibility) Rules, 2014 is annexed hereto and form part of this report as Annexure - I.

9. RISK MANAGEMENT:

The Board of Directors in their meeting held on 7th November, 2014 had constituted Risk Management Committee of the Company. The Committee has formulated Risk Management Policy of the Company which has been subsequently approved by the Board of Directors of the Company. The aim of risk management policy is to maximise opportunities in all activities and to minimise adversity. The policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting, which in the opinion of the Board may threaten the existence of the Company.

The Risk Management policy may be accessed on the Company's website at the link: <http://www.vardhman>. com/user_files/a4c0a8b00e407cd5075 53ea7db7 f06e89de1272a1436265025. pdf

10. INTERNAL FINANCIAL CONTROLS:

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed.

11. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the provisions of Clause 49 of the Listing Agreement.

The Policy on dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link:

<http://www.vardhman.com/user_files/96c45534e3ab096d> 9bc682f8eebade0344f915151436264609.pdf

Your Directors draw attention of the members to Note 42 to the standalone financial statement which sets out related party disclosures.

12. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013:

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in the standalone financial statement (Please refer to Note 14, 15, 16 and 17 to the standalone financial statement).

13. DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Mr. Neeraj Jain, Director of the Company, retires by rotation at the conclusion of the forthcoming Annual General Meeting, pursuant to the provisions of the Articles of Association of the

Company and being eligible, offers himself for re-appointment. The Board recommended his re-appointment for the consideration of the members of the Company at the ensuing Annual General Meeting.

During the year under review, the members approved the appointments of Mr. Prafull Anubhai, Mr. A.K. Purwar, Dr. S.K. Bijlani, Mr. A.K. Kundra, Mr. Shravan Talwar and Mr. D.B. Jain as Independent Directors of the Company who are not liable to retire by rotation. The members also re-appointed Mr. S.P. Oswal as Chairman & Managing Director of the Company. Mr. Sachit Jain and Mr. Neeraj Jain were appointed as Joint Managing Directors of the Company.

Declaration under Section 149(6):

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules thereof.

Company's Policy relating to Directors appointment, payment of remuneration and discharge of their duties:

The Nomination & Remuneration Committee of the Company has formulated the Nomination & Remuneration Policy on Director's appointment and remuneration includes the criteria for determining qualifications, positive attributes, independence of a director and other matters as provided under Section  178(3) of the Companies Act, 2013.

The Nomination & Remuneration Policy is annexed hereto and form part of this report as Annexure - II.

Familiarisation programmes for Board Members:

The Board members are provided with necessary documents/ brochures, reports and internal policies to enable them to familiarise with the Company's procedures and practices. Periodic presentations are made at the Board and Board Committee Meetings on business and performance updates of the Company, global business environment, business strategy and risks involved. Quarterly updates on relevant statutory changes and landmark judicial pronouncements encompassing important laws are regularly circulated to the Directors.

Annual Evaluation of the Board Performance:

The meeting of Independent Directors of the Company was held on 30th March, 2015 to evaluate the performance of Non-Independent Directors, Chairman of the Company and the Board as a whole for the financial year 2014-15. The evaluation was done by way of discussions on the performance of the Non- Independent Directors, Chairman and Board as a whole and the minutes of the meeting was submitted to the Chairman of the Company.

A policy on the performance evaluation of Independent Directors, Board, Committees and other individual Directors which includes criteria for performance evaluation of Non­Executive Directors and Executive Directors have been formulated by the Company.

14. AUDITORS AND AUDITORS REPORT:

Statutory Auditors:

At the Annual General Meeting held on 24th September, 2014,  M/s. S.C. Vasudeva & Company, Chartered Accountants, New Delhi were appointed as Statutory Auditors of the Company to hold office till the conclusion of 44th Annual General Meeting of the Company. In terms of provisions of Section 139 (1) of the Companies Act, 2013, the appointment of Statutory Auditors shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. S.C. Vasudeva & Company as Statutory Auditors is placed for ratification by the members.

Further, the Statutory Auditors of the Company have submitted Auditors' Report on the Accounts of the Company for the accounting year ended 31st March, 2015. This Auditors' Report is self-explanatory and requires no comments.

Secretarial Auditor:

M/s. B.K. Gupta & Associates, Company Secretary in Practice, were appointed as Secretarial Auditors of the Company by the Board of Directors of the Company in their meeting held on 23rd  May, 2014 for the financial year 2014-15.

The Secretarial Auditors of the Company have submitted their Report in Form No. MR-3 as required under Section 204, of the Companies Act, 2013 for the financial year ended 31st March, 2015. This Report is self-explanatory and requires no comments. The Report forms part of this report as Annexure - III.

Cost Auditor:

The Board of Directors has appointed M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, as the Cost Auditors of the Company to conduct Cost Audit of the Accounts for the financial year ended 2015-16. However, as per provisions of Section 148 of the Companies Act, 2013, read with Companies (Cost Records and Audit) Rules, 2014, the remuneration to be paid to the Cost Auditors is subject to ratification by members at the Annual General Meeting. Accordingly, the remuneration to be paid to M/s Ramanath Iyer & Company, Cost Accountants, New Delhi, for financial year 2015-16 is placed for ratification by the members.

15. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW:

Four meetings of the Board were held during the year.

16. AUDIT COMMITTEE DISCLOSURES: Composition:

The Audit Committee consists of Mr. Prafull Anubhai, Independent Director, Dr. S.K. Bijlani, Independent Director, Mr. Shravan Talwar, Independent Director, Mr. D.B. Jain, Independent Director, Mr. A.K. Kundra, Independent Director and Mr. D.L. Sharma, Non-Independent Director. Mr. Prafull Anubhai is the Chairman of the Committee and Ms. Karan Kamal Walia is the Secretary of the Committee. All the recommendations made by the Audit Committee were accepted by the Board.

Vigil Mechanism:

The Vigil Mechanism of the Company, which also incorporates a Whistle Blower Policy in terms of the Listing Agreement aims to provide a channel to the employees and Directors to report to the management concerns about unethical behaviour, actual or suspected fraud or violation of the Codes of conduct or policy. The mechanism provides for adequate safeguards against victimisation of employees and Directors to avail of the mechanism and also provide for direct access to the Chairman/ Chairman of the Audit Committee in exceptional cases.

The Policy on Vigil Mechanism and Whistle Blower Policy as approved by the Board may be accessed on the Company's website at the link: 8e7d392d93573769de1941436265078.pdf.

17. CORPORATE GOVERNANCE:

The Company has in place a system of Corporate Governance. A separate report on Corporate Governance forming part of the Annual Report of the Company is annexed hereto. A certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Corporate Governance Clause of the Listing Agreement is annexed to the report on Corporate Governance.

18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO:

Energy conservation continues to be an area of major emphasis in our Company. Efforts are made to optimise the energy cost while carrying out the manufacturing operations. Particulars with respect to conservation of energy and other areas as per  Section 134(3)(m) of the Companies Act, 2013 read with the  Companies (Accounts) Rules, 2014, are annexed hereto and form part of this report as Annexure - IV.

19. ANNUAL RETURN:

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 for the financial year 2014-15 in Form No. MGT-9 is annexed hereto and form part of this report as Annexure - V.

20. HUMAN RESOURCES /INDUSTRIAL RELATIONS:

The Company continues to lay emphasis on building and sustaining an excellent organisation climate based on human performance. Performance management is the key word for the Company. During the year, the Company employed around 17,393 employees on permanent rolls.

Pursuit of proactive policies for industrial relations has resulted in a peaceful and harmonious situation on the shop floors of the various plants.

21. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

The disclosures in respect of managerial remuneration as required under section 197(12) read with Rule 5(1) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

A statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in Rule 5 (2) and 5 (3) Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is annexed hereto and form part of this report.

In terms of section 197(14) of the Companies Act, 2013, the

Company does not have any Holding Company. However, the details regarding remuneration or commission received from any holding or subsidiary company of Company by any Managing or Whole Time Director is annexed hereto and form part of this report.

All the above details are provided in Annexure - VI.

22. DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to provisions of Section 134 (5) of the Companies Act, 2013 the Board hereby submit its responsibility Statement:—

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

b. appropriate accounting policies have been selected and applied consistently and have made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2015 and of the profit of the Company for the year ended on 31st March, 2015;

c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

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

e. the internal financial controls has been laid down to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f. the proper systems has been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

22. GENERAL DISCLOSURES:

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the

Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme.

4. No significant or material orders were passed by the  Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)  Act, 2013.

24. ACKNOWLEDGEMENT:

Your Directors are pleased to place on record their sincere gratitude to the Government, Financial Institutions, Bankers and Business Constituents for their continued and valuable co-operation and support to the Company. They also take this opportunity to express their deep appreciation for the devoted and sincere services rendered by the employees at all levels of the operations of the Company during the year.

FOR AND ON BEHALF OF THE BOARD

(S.P. Oswal)

Chairman & Managing Director

 Place : Ludhiana

Dated: 8th May, 2015