Note No. 1) SIGNIFICANT ACCOUNTING POLICES:

Company Overview

LN Industries India Limited (LNIIL) is a Public Limited Company incorporated and domiciled in India and has its Registered Office at Hyderabad, Telangana, India. The Company has its primary listings on the BSE Limited. The Company deals in manufacturing and trading of different dyed yarns.

1.1. Basis of Preparations of Financial Statements:

The Financial Statements are brpared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the Historical Cost Convention methods in accordance with the generally accepted accounting standards as brscribed under Section 133 of the Companies Act, 2013 ("Act") read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

1.2. Use of Estimates:

The brsentation of Financial Statements requires estimates and assumptions to be made that effect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenue and expense during the reporting period. Difference between the actual results and estimated are recognizes in the period in which the results are known / materialized.

1.3. Revenue Recognition:

Revenue is recognized from Sale of Goods where significant risks and rewards of ownership in respect of the goods are transferred to the buyer, and further no significant uncertainties exists regarding the amount of consideration that would be received from the sale of goods. Interest income is recognized on time end accrued basis.

1.4. Provision and Contingent Liabilities:

A provision is recognized if, as a result of a past event, the Company has a brsent legal obligation that is reasonably estimable and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a brsent obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a brsent obligation in respect of which the likelihood of out flow of resources is remote, no provision or disclosure is made.

1.5. Tangible assets and capital work - in - progress:

Tangible assets are stated at cost, less accumulated debrciation and impairment, if any. Direct costs are capitalized until such assets are ready for use. Capital work - in - progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.

1.6. Intangible assets:

Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortization and impairment.

.7. Debrciation and amortization:

Debrciation on tangible assets is provided on the straight line method over the useful lives of assets estimated by the Management. Debrciation for assets purchased / sold during a period is proportionately charged. Intangible are amortized over their respective individual estimated useful lives on a straight line basis, commencing from the date the assets is available to the Company for its use. The Management estimates the useful lives for the other fixed assets.

1.8. Impairment of Assets:

An asset is treated as impaired, when carrying cost of assets exceeds its recoverable amount. An impairment loss is charged to the Profit and Loss Account in the year in which an asset is identified as impaired. The Impairment loss recognized in prior accounting periods is reversed if there has been a change in the estimate of the recoverable amount.

1.9. Investments:

Investments are classified into current investments and long-term investments. Current Investments are valued, scrip wise, at cost or fair value, whichever is lower. Long-term investments are valued at cost. Provision for diminution is made script wise to recognize a decline, other than temporary.

1.10.Inventories:

Items of inventories are measured lower of cost or net realizable value. Cost of inventories comprises of Cost of purchase, cost of conversions and other cost incurred in bringing them to their brsent location and condition I) Raw Materials, consumable, stores and packing material are valued at Cost. II) Stock - in - process are valued at estimated Cost. III) Finished Stocks are valued at estimate Cost or net realizable value whichever is less.

1.11. Employee Retirement Benefits:

Company's contribution to Provident Fund and Superannuation Fund are charged to Profit and Loss Account, Gratuity and Leave Encashment benefits are charged to Profit and Loss Account on the basis of actuarial valuation.

1.12. Foreign Currency Transactions:

(a) Transactions denominated in foreign currencies are normally recorded at the exchange rate brvailing at the time of the transaction.

(b) Any income or expense on account of exchange difference either on settlement or on translation is recognized in the profit and loss account except in cases where they relate to acquisition of fixed assets in which case they are adjusted to the carrying cost of such assets.

1.13. Borrowing Costs:

Borrowing costs, which are directly attributable to the acquisition/ construction of fixed assets. Till the time such asset are ready for intended use are capitalized as part of the cost of the assets. Other borrowing costs are recognized as an expense in the year in which they are incurred.

1.14.Provisions, Contingent Liabilities and Contingent Assets:

Provisions involving substantial degree of estimation in measurement are recognized when there is a brsent obligation as a result of past events and it is portable that there will be out flow of resources. Contingent Liabilities are not recognized but are disclosed in the notes. Contingent Assets are neither recognized nor disclosed in the financial statements.

2 CONTINGENT LIABILITIES:

All known and undisputed liabilities have been duly provided for, except the following: a. Capital Commitments: Estimated amount of contacts remaining to be executed on capital account (net of advances) not provide for, amounts to Rs.1,400 Lacs - (brvious Year Rs.1,400 Lacs).

3 Secured Loans:

a. Dues to JMF ARC Pvt. Ltd., are secured by Joint - Equitable mortgage of tile deeds relating to the Company's immovable properties and are further secured by the personal guarantees of the Directors of the Company, and pledge of Shares of the Promoters.

b. The Credit facilities from State Bank of Hyderabad are secured by way of hypothecation of brsent and future stock of raw materials, work - in - process, all finished and manufactured goods, stores, component and spares (not relating to Plant and Machinery) and book debts of the Company. The Working Capital facilities are further secured by Second charge on the fixed assets of the Company to the extent of Rs.840 Lakhs and the personal guarantees of the Directors of the Company.

c. Vehicles acquired under Hire - Purchase agreement from, ICICI Bank Limited are secured by hypothecation of the respective vehicles. The Loans are further secured by the personal guarantee of the Directors.

4 Unsecured Loans:

a. The Government of Andhra Pradesh, Commissiorate of Industries, has vide its letter no. 20 / 2 / 6 / 01826, dated 16th February ' 1996, fixed eligibility towards Sales Tax Deferment on the Sales Tax Payable by the Company for a period of 10 years with effect from July ' 28, 1995. As the Company has shifted its Manufacturing Facilities from Andhra Pradesh, the Company has to repay the said Sales Tax Deferrement unsecured loan in full. As at 31st March ' 2015 out of the total Rs.502.84 Lacs availed an amount of Rs. 384.21 is paid back. The Sales Tax amount due as at March, 31st 2015 is shown under the head of account Unsecured Loans.

5. The Company has only one segment of activity of dealing in textile products during the period, hence segment wise reporting as defined in Accounting Standard - 17 is not furnished.

6 The benefit of tax losses has not been brought to account, as the related benefits are not considered virtually certain. Hence the value of Deferred Tax is not determined and accounted as per the Provisions of Accounting Standard - 22 on Accounting for Taxes on Income, issued by the Institute of Chartered Accountants of India.

7 Figures have been rounded off to the nearest rupee.

8 Previous year figures have been regrouped where necessary. The brvious year fiqures and current year figures are not comparable since financial year 2010-11 data repesents operations for 6 (Six) Months, whereas current year data is for a period of 12 (Twelve) Months.

As per our report of even date

For and behalf of the Board

For M/s KUMAR & GIRI

Chartered Accountants FRN : 01584 S

J. BHADRA KUMAR Partner M.No. 025480

G. SURENDER REDDY Managing Director

L. MADHU KUMAR REDDY Director

Place : Hyderabad.

Date : 15th May, 2015.