1. CORPORATE INFORMATION

Pantaloons Fashion & Retail Limited (Formerly Peter England Fashions and Retail Limited) (the 'Company') is a public Company domiciled in India and incorporated under the provisions of the Companies Act, 1956. In the year ended 31st March, 2013, pursuant to a scheme of arrangement as sanctioned by the Honourable High Court of Bombay, vide order dated 1st March, 2013, the 'Pantaloon format' of Pantaloon Retail (India) Limited (the 'Demerged Undertaking') has been vested into the Company with effect from 1st July, 2012 (the 'Appointed Date'). Pursuant to this scheme, the name of the Company has changed from Peter England Fashions and Retail Limited to Pantaloons Fashion & Retail Limited.

The Company operates a national chain of "Pantaloons" stores of apparels and fashion accessories.

2. BASIS OF brPARATION

The financial statements of the Company have been brpared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has brpared these financial statements to comply in all material respects with the accounting standards notified under Section 133 of the Companies Act, 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014. The financial statements have been brpared on an accrual basis and under the historical cost convention.

The accounting policies adopted in the brparation of financial statements are consistent with those of brvious year, except for the change in accounting policy explained below.

All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle. Based on the nature of products and the time between the acquisition of assets for sale and their realization in cash and cash equivalents, the Company has ascertained its operating cycle as upto twelve months for the purpose of current and non-current classification of assets and liabilities.

2.1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

Change in Accounting Policy

i) Debrciation on Fixed Assets

Till the year ended 31st March, 2014, Schedule XIV to the Companies Act, 1956, brscribed requirements concerning debrciation of fixed assets. From the current year, Schedule XIV has been replaced by Schedule II to the Companies Act, 2013. The applicability of Schedule II has resulted in the following changes related to debrciation of fixed assets. Unless stated otherwise, the impact mentioned for the current year is likely to hold good for future years also. Useful Lives/Debrciation Rates

Till the year ended 31st March, 2014, debrciation rates brscribed under Schedule XIV were treated as minimum rates and the Company was not allowed to charge debrciation at lower rates even if such lower rates were justified by the estimated useful life of the asset. Schedule II to the Companies Act, 2013, brscribes useful lives for fixed assets which, in many cases, are different from lives brscribed under the erstwhile Schedule XIV. However, Schedule II allows companies to use higher/lower useful lives and residual values if such useful lives and residual values can be technically supported and justification for difference is disclosed in the financial statements.

Considering the applicability of Schedule II, the management has re-estimated useful lives and residual values of all its fixed assets and have aligned the same with Schedule II, though the rates in few cases are different from lives brscribed under Schedule II.

Had the Company continued to use the earlier policy of debrciating fixed assets, the loss for the current year would have been lower by Rs. 1,226 lakh, retained earnings at the beginning of the current period would have been higher by Rs. 643 lakh and the fixed assets would correspondingly have been higher by Rs. 1,869 lakh.

ii) Employee Stock Compensation Cost

Till 27th October, 2014, the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, dealt with the grant of share-based payments to employees. Among other matters, these guidelines brscribed accounting for grant of share-based payments to employees. Hence, the Company, being a listed entity, was required to comply with these Guidelines as well as the Guidance Note on Accounting for Employee Share-based Payments with regard to accounting for employee share-based payments. Particularly, in case of conflict between the two requirements, the SEBI guidelines were brvailing over the ICAI Guidance Note. For example, in case of equity settled option expiring unexercised after vesting, the SEBI guidelines required expense to be reversed through the Statement of Profit and Loss whereas the reversal of expense through the Statement of Profit and Loss is prohibited under the ICAI Guidance Note. In these cases, the Company was brviously complying with the requirement of SEBI guidelines.

From 28th October 2014, the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, have been replaced by the SEBI (Share-based Employee Benefits) Regulations, 2014. The new regulations don't contain any specific accounting treatment; rather, they require ICAI Guidance Note to be followed. Consequent to the application of the new regulations, the Company has changed its accounting for equity settled option expiring unexercised after vesting in line with accounting brscribed in the Guidance Note, i.e., expense is not reversed through the Statement of Profit and Loss. The management has decided to apply the revised Accounting Policy prospectively from the date of notification of new regulation, i.e., 28th October, 2014.

Since there are no equity settled options expiring unexercised after 28th October, 2014, the change in Accounting Policy did not have any impact on Financial Statements of the Company for the current year.

(I) USE OF ESTIMATES

The brparation of financial statements in conformity with Indian GAAP requires the management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the disclosure of contingent liabilities, at the end of the reporting period. Although, these estimates are based on the management's best knowledge of current events and actions, uncertainty about these assumptions and estimates could result in the outcomes requiring a material adjustment to the carrying amounts of assets or liabilities in future periods.

(II) TANGIBLE FIXED ASSETS

Tangible Fixed Assets are stated at cost, net of accumulated debrciation and accumulated impairment losses, if any. Cost comprises the purchase price and directly attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts or rebates are deducted in arriving at the purchase price.

(III) DEbrCIATION ON TANGIBLE FIXED ASSETS

Leasehold improvement is amortised on a straight-line basis over the period of lease, i.e., 3 to 25 years.

Debrciation on fixed assets is calculated on a straight-line basis using the rates arrived at based on the useful lives estimated by the management which is in line with Schedule II useful life except for vehicles for which the management has estimated the useful life of 5 years, which is lower than those indicated in Schedule II. Items of value less than Rs. 5,000 are debrciated in full in the period of purchase/acquisition. Debrciation on the fixed assets added/disposed off/discarded during the year is provided on pro-rata basis with reference to the month of addition/disposal/discarding.

(IV) INTANGIBLE ASSETS

Intangible Assets are stated at acquisition cost, net of accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised on a straight-line basis over their estimated useful lives. A summary of amortisation policies applied to the Company's intangible assets is as below:

V) IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS

The carrying amounts of assets are reviewed at each Balance Sheet date, if there is any indication of impairment based on internal/external factors. An asset is treated as impaired when the carrying cost of the assets exceeds its recoverable value. An impairment loss, if any, is charged to the Statement of Profit and Loss in the year in which an asset is identified as impaired.

Reversal of impairment losses recognised in prior years is recorded when there is an indication that the impairment losses recognised for the assets no longer exist or have decreased.

(VI) BORROWING COSTS

Borrowing Costs include interest and amortisation of ancillary costs incurred in connection with the arrangement of borrowings.

Borrowing costs, directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use, are capitalised as part of the cost of the respective asset. All other borrowing costs are expensed in the period they occur in the Statement of Profit and Loss.

(VII) FOREIGN CURRENCY TRANSLATION

Foreign currency transactions and balances:

(i) Initial Recognition

Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

(ii) Conversion

Foreign currency monetary items are re-translated using the exchange rate brvailing at the reporting date. Non-monetary items, which are measured in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction. Non-monetary items which are measured at fair value or other similar valuation denominated in a foreign currency and are translated using the exchange rates that existed when the values were determined.

(iii) Exchange Differences

Exchange differences arising on the settlement of monetary items or on translating such monetary items of the Company at rates different from those at which they were initially recorded during the year, or reported in the brvious financial statements, are recognised as income or as expenses in the year in which they arise.

(iv) Forward exchange contracts entered into to hedge foreign currency risk of an existing asset/liability

The brmium or discount arising at the inception of forward exchange contract is amortised and recognised as an expense/income over the life of the contract. Any profit or loss arising on cancellation or renewal of such forward exchange contract is also recognised as income or as expense for the period.

(VIII) INVESTMENTS

Investments, which are readily realisable and intended to be held for not more than one year from the date on which such investments are made, are classified as current investments. All other investments are classified as long-term investments. Investments are recorded at cost on the date of purchase, which includes acquisition charges such as brokerage, stamp duty, taxes, etc.

Current investments are carried in the financial statements at lower of cost and fair value which is determined on individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. On disposal of an investment, the difference between its carrying amount and net disposal proceeds is charged or credited to the Statement of Profit and Loss.

(IX) INVENTORIES

Inventories comprising of traded goods are valued at cost or net realisable value, whichever is lower. Cost includes all costs incurred to bring them to their brsent location and condition. Cost is determined based on weighted-average basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

(X) REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised.

Retail sales are recognised on delivery of the merchandise to the customer, when the property in goods and significant risks and rewards are transferred for a price and no effective ownership control is retained. Revenue is net of returns, trade discounts and sales/value added tax.

The property in the merchandise of third party concession stores located within the main departmental store of the Company passes to the Company once a customer decides to purchase an item from the concession store. The Company in turns sells the item to the customer and is accordingly included under Retail Sales. Gift vouchers sales are recognised when the vouchers are redeemed and goods are sold to the customer. Income from services are recognised as they are rendered based on agreements/ arrangements with the concerned parties and recognised net of service tax.

Interest Income is recognised on a time-proportion basis taking into account the amount outstanding and applicable interest rate.

Dividend income on investments is accounted for when the right to receive the payment is established.

(XI) EMPLOYEE BENEFITS

(i) Short-term Employee Benefits

All short-term employee benefits such as salaries, wages, bonus, special awards, medical benefits which fall due within 12 months of the period in which the employee renders the related services which entitles him/her to avail such benefits and non-accumulating compensated absences like sick leave and maternity leave are recognised on an undiscounted basis and charged to the Statement of Profit and Loss.

(ii) Retirement and Other Employee Benefits

A) Defined Contribution Plan

The Company makes defined contribution to Government Employee Provident Fund, Government Employee Pension Fund, Employee Deposit-Linked Insurance and eSi, which are recognised in the Statement of Profit and Loss. The Company recognises contribution payable to the provident fund scheme as an expenditure, when an employee renders the related service. The Company has no obligation, other than the contribution payable to the provident fund.

B) Defined Benefit Plan

The Company's liabilities under Payment of Gratuity Act is determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense.

C) Compensated Absences and Long-term Service Awards

The Company's liabilities under for long-term compensated absences and long-term service awards are determined on the basis of actuarial valuation made at the end of each financial year using the projected unit credit method except for short-term compensated absences which are provided for based on estimates. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss as income or expense. The Company brsents the entire leave as a current liability in the Balance Sheet, since it does not have any unconditional right to defer its settlement for twelve months after the reporting date.

(XII) INCOME TAXES

Tax expense comprises of current and deferred tax. The tax impact of items directly charged to reserves is also adjusted in reserves.

Provision for current tax is made on the basis of estimated taxable income for the current accounting year in accordance with the Income-tax Act, 1961.

Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. The deferred tax for timing differences between the book and tax profits for the year is accounted for, using the tax rates and the tax laws enacted or substantively enacted as of the Balance Sheet date. Deferred tax assets arising from timing differences are recognised to the extent there is reasonable certainty that these would be realised in future. In case of unabsorbed losses and unabsorbed debrciation, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profit. The carrying amount of deferred tax assets are reviewed at each Balance Sheet date. The Company writes down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available, against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. At each Balance Sheet date, the Company reassesses unrecognised deferred tax assets. It recognises unrecognised deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available, against which such deferred tax assets can be realised.

Minimum Alternative Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. In the year, in which the MAT credit becomes eligible to be recognised as an asset in accordance with the recommendations contained in the Guidance Note issued by the ICAI, the said asset is created by way of a credit to the Profit and Loss Account and shown as MAT Credit Entitlement. The Company reviews the same at each Balance Sheet date and writes down the carrying amount of MAT Credit Entitlement to the extent there is no longer convincing evidence to the effect that the Company will pay normal Income Tax during the specified period.

(XIII) OPERATING LEASES

Where the Company is the Lessee:

Leases, where significant portion of risk and reward of ownership are retained by the Lessor, are classified as operating leases. Operating lease payments are recognised as an expense in the Statement of Profit and Loss on a straight-line basis over the lease term.

(XIV) CASH AND CASH EQUIVALENTS

Cash and Cash Equivalents for the purpose of cash flow statement comprise cash on hand and cash at bank including fixed deposit with original maturity period of three months and short-term highly liquid investments with an original maturity of three months or less.

(XV) CASH FLOW STATEMENT

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.

The net cash flow from operating activities is determined by adjusting net profit or loss for the effects of: (a) changes during the period in inventories and operating receivables and payables, (b) non-cash items such as debrciation, provisions, deferred taxes, and unrealised foreign exchange gains and losses, and (c) all other items for which the cash effects are investing or financing cash flows.

(XVI) EARNINGS PER SHARE

Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders by the weighted-average number of equity shares outstanding during the period. Earnings considered in ascertaining the Company's earnings per share are the net profit for the period after deducting brference dividends and any attributable tax thereto for the period. The weighted-average number of equity shares outstanding during the period and for all periods brsented is adjusted for events, such as bonus shares that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period attributable to equity shareholders and the weighted-average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

(XVII) CONTINGENT LIABILITIES AND PROVISIONS

Contingent Liabilities are possible but not probable obligations as on Balance Sheet date, that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a brsent obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation.

Provisions are recognised when there is a brsent obligation as a result of past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made.

Provisions are not discounted to its brsent value and are determined based on best estimate required to settle the obligation at the Balance Sheet date.

(XVIII) EMPLOYEE STOCK COMPENSATION COST

The stock options granted are accounted for as per the accounting treatment brscribed by Securities and Exchange Board of India (Share-Based Employee Benefits) Regulations, 2014, and the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI, whereby the cost of equity-settled transactions is measured using the intrinsic value method. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognised in the Statement of Profit and Loss for a period rebrsents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total intrinsic value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification.

Stock apbrciation rights (SAR) granted to employees under the Cash-settled Employee Share-based Payment Plan is recognised based on intrinsic value method. Intrinsic value of the SARs is determined as excess of closing market price on the reporting date over the exercise price of the unit and is charged as employee benefit over the vesting period in accordance with "Guidance Note on Accounting for Employee Share-based Payments" issued by the Institute of Chartered Accountants of India.

(XIX) MEASUREMENT OF PROFIT BEFORE DEbrCIATION/AMORTISATION, INTEREST AND TAX (PBDIT)

As permitted by the Guidance Note on the Revised Schedule VI to the Companies Act, 1956, the Company has elected to brsent PBDIT as a separate line item on the face of the Statement of Profit and Loss. The Company measures PBDIT on the basis of profit/loss from continuing operations. In its measurement, the Company does not include debrciation and amortisation expenses, finance costs and tax expenses.

NOTE: 2 DEbrCIATION

The Company in pursuant to the requirement of Schedule II to the Companies Act, 2013, effective from 1st April, 2014, has revised debrciation based on useful life of asset. As a result of this change and based on transitional provision provided in Schedule II, an amount of Rs. 643 lakh being the WDV of assets whose useful life has already exhausted thereon has been adjusted against retained earnings.

Debrciation for the year ended 31st March, 2014 includes prior period debrciation of Rs. 1,302 lakh. Debrciation for the year ended 31st March, 2015 includes accelerated debrciation of 9,229 lakh (31st March, 2014: Rs.1,439 lakh) on account of refurbishment and br-closure of certain stores.

NOTE: 3I. Employee Stock Option Plans

The Company provides Share-based Payment schemes to its employees. During the year ended 31st March, 2014, an Employee Stock Option Plan (ESOP) was introduced. The relevant details of the scheme and the grant are as below: On 22nd July, 2013, the ESOP Compensation Committee ("Committee") and the Board of Directors ("Board") approved the introduction of an ESOP Scheme, viz., Pantaloons Employee Stock Option Scheme - 2013 (Scheme) for issue of Stock Options (Options) and Restricted Stock Units ("RSUs") to the Key Employees and Directors of the Company, subject to the approval of the Shareholders of the Company. Shareholders of the Company, vide a resolution passed at the Sixth Annual General Meeting of the Company, held on 23rd August, 2013, approved the introduction of the Scheme and authorised the Board/Committee to finalise and implement the Scheme. Accordingly, pursuant to the resolution passed by the Committee on 25th October, 2013, the Committee finalised the Scheme and granted Options and RSUs to the Eligible Employees. The details of the Scheme, are as below: (a) Employee Stock Option Scheme Particulars

NOTE: 4 SEGMENT INFORMATION

In accordance with the principles given in Accounting Standard on Segment Reporting (AS-17) notified by Companies (Accounting Standards) Rules, 2006, the Company has determined its primary business segment as "retail". The Company has no other reportable segment. Further, the entire business of the Company is within India, hence there is no geographical segment. Accordingly, disclosure of information as per AS-17 is not required.

NOTE: 5 Board of Directors of the Company ("Board") at their meeting held on 3rd May, 2015, have considered and approved a Composite Scheme of Arrangement between the Company, Aditya Birla Nuvo Limited ("ABNL"), Madura Garments Lifestyle Retail Company Limited ("MGLRCL") and their respective shareholders and creditors, under Sections 391 to 394 of the Companies Act, 1956 ("Composite Scheme"). Pursuant to the composite scheme, the branded apparels businesses of the Company, ABNL and MGLRCL will be consolidated under the Company in order to capitalise on their large market brsence in the branded fashion space in India.

The composite scheme inter-alia involves:

(i) the transfer by way of a demerger of the Madura Undertaking of ABNL to the Company, consequent to which Equity Shareholders of ABNL will get 26 new Equity Shares of the Company for every 5 Equity Shares held by them in ABNL;

(ii) the transfer by way of a demerger of the MGL Retail Undertaking of MGLRCL to the Company, consequent to which Equity Shareholders of MGLRCL will get 7 new Equity Shares of the Company for every 500 Equity Shares held by them in MGLRCL and Preference Shareholder of MGLRCL will get 1 Equity Share of the Company; and

(iii) various other matters consequential or integrally connected therewith, including change of name and re-organisation of the share capital of the Company.

The Composite Scheme is subject to the necessary statutory and regulatory approvals, including approvals of the appropriate authorities including High Court(s), Stock Exchange(s), SEBI and respective shareholders and lenders and/or creditors of each of the companies involved in the Composite Scheme. The appointed date of the Composite Scheme will be 1st April, 2015.

NOTE: 6The Company, in the current year, has incurred losses, hence no amount has been transferred to the debenture redemption reserve.

NOTE: 7Previous Year Figures

The Company has reclassified brvious year figures to conform to this year's classification.

As per our report of even date

For and on behalf of the Board of Directors of

Pantaloons Fashion & Retail Limited (formerly known as Peter England Fashions and Retail Ltd.)

For S R B C & Co. LLP

ICAI Firm Registration No. 324982E

Chartered Accountants

For S R B C & Co. LLP

ICAI Firm Registration No. 324982E

Chartered Accountants

per Vijay Maniar

Partner

Membership No. 36738

Pranab Barua

(Managing Director)

Sushil Agarwal

(Director

Sukanya Kripalu

Director

Shital Mehta

(Chief Executive Officer

S. Visvanathan

Chief Financial Officer

Geetika Anand

(Company Secretary)

 Bharat Patel

(Director)

Place: Mumbai

Date: 13th May, 2015