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Kemrock Industries and Exports Limited57

19th Annual Report 2012-13

BOARD OF DIRECTORS

Mr. Kalpesh PatelChairman & Managing Director

Mr. Kaushik BhattDirector

Capt. Manoj GaurDirector

Mr. Tushar DesaiDirector

COMPANY SECRETARYMr. Bharat Patel

AUDITORSR. A. Amin & Co.,Chartered Accountants, Vadodara

BANKERSAllahabad BankAndhra BankAxis Bank LimitedExim BankICICI Bank LimitedIndian BankPunjab National BankPNB (International) LimitedState Bank of IndiaSyndicate bankThe Karur Vysya Bank LimitedUnion Bank of India

REGISTERED OFFICE AND WORKSVillage Asoj, Vadodara-Halol Express WayTal. Waghodia, Dist. Vadodara - 391 510Gujarat, India.Email: [email protected]: www.kemrock.com

REGISTRAR & SHARE TRANSFER AGENTLink Intime India Pvt. LimitedB-102 & 103, Shangrila Complex, First FloorNear Radhakrishna Char Rasta, AkotaVadodara – 390020, Gujarat, IndiaTel.: (0265) 2356573 / 2356794; Fax: (0265) 2356791Email: [email protected]

ANNUAL GENERAL MEETINGMonday, the 31st March, 2014 at 11:00 a.m., at

Village Asoj, Vadodara-Halol Express Way,Tal.: Waghodia, Dist.: Vadodara-391510,

Gujarat State, India.

CORPORATE INFORMATION

CONTENTS

Particulars Page No.

Notice 01

Directors' Report 06

Management Discussion and Analysis 14

Corporate Governance Report 17

Standalone Financial Results

Independent Auditors' Report 25

Balance Sheet 30

Statement of Profit and Loss 31

Cash Flow Statement 32

Notes to the Financial Statement 33

Statement pursuant to Section 212of the Companies Act, 1956 57

Consolidated Financial Results

Auditors' Report 58

Balance Sheet 60

Statement of Profit and Loss 61

Cash Flow Statement 62

Notes to the Financial Statement 63



NOTICENOTICE is hereby given that the NINETEENTH ANNUAL GENERAL MEETING of KEMROCK INDUSTRIES AND EXPORTSLIMITED will be held at the registered office of the Company at Village Asoj, Vadodara-Halol Express Way, Tal.:Waghodia, Dist.: Vadodara-391510, Gujarat State, on Monday, the 31st March, 2014 at 11:00 a.m., to transactthe following business:

ORDINARY BUSINESS:

1. To receive, consider, approve and adopt the audited Balance Sheet as at 30th September, 2013, auditedStatement of Profit and Loss for the year ended on that date and the Reports of the Board of Directorsand Auditors thereon.

2. To appoint a Director in place of Mr. Kaushik Bhatt, who retires by rotation and being eligible, offershimself for re-appointment.

3. To appoint M/s. R. A. Amin & Co., Chartered Accountants, the retiring Auditors as Auditors, who shall holdoffice from the conclusion of this Annual General Meeting until the conclusion of the next Annual GeneralMeeting of the Company and to authorize the Board of Directors to fix their remuneration.

SPECIAL BUSINESS:

4. To consider and if thought fit, to pass with or without modification(s), the following resolution as anOrdinary Resolution:

"RESOLVED THAT, Capt. Manoj Gaur, who was appointed by the Board of Directors as an Additional Directorof the Company with effect from 14th August, 2013, and who holds office upto the date of this AnnualGeneral Meeting in terms of Section 161 of the Companies Act, 2013 but who is eligible for appointmentand in respect of whom the Company has received a notice in writing from a Member under the provisionsof Section 257 of the Companies Act, 1956 proposing his candidature for the office of a Director be andis hereby appointed as a Director of the Company and shall be liable to retire by rotation."

5. To consider and if thought fit, to pass with or without modification(s), the following resolution as anOrdinary Resolution:

"RESOLVED THAT, Mr. Tushar Desai, who was appointed by the Board of Directors as an Additional Directorof the Company with effect from 15th October, 2013, and who holds office upto the date of this AnnualGeneral Meeting in terms of Section 161 of the Companies Act, 2013 but who is eligible for appointmentand in respect of whom the Company has received a notice in writing from a Member under the provisionsof Section 257 of the Companies Act, 1956 proposing his candidature for the office of a Director be andis hereby appointed as a Director of the Company and shall be liable to retire by rotation."

6. To consider and, if thought fit, to pass with or without modification(s), the following resolution as aSpecial Resolution:

"RESOLVED THAT, pursuant to the Provisions of Sections 198, 269, 309, and 310 read with Schedule XIII andother applicable provisions, if any, of the Companies Act, 1956 and rules and regulations made thereunder(including any statutory modifications or re-enactment thereof for the time being in force) and subject tosuch other approval(s), consent(s) and permission(s), if any, as may be necessary, consent and approval ofthe members be and is hereby accorded for re-appointment of Mr. Kalpesh Patel, as the Managing Director(designated as Chairman and Managing Director) of the Company without any remuneration for a furtherperiod of three years with effect from 01st August, 2013 to 31st July, 2016, on the following terms andconditions as set out in the agreement executed between the Company and Mr. Kalpesh Patel.

1. Mr. Kalpesh Patel, shall subject to the control and supervision of the Board of Directors and subjectto the provisions of the Companies Act, have the powers for general conduct and management of theaffairs of the Company and he shall be entitled to exercise all such powers and to do all such actsand things as the Company is authorised to exercise and all such powers, acts or things which aredirected or required by the Companies Act, 1956, including any amendment or re-enactment thereofor any other Act or by the Memorandum or Articles of Association of the Company or otherwise,except those to be exercised or done by the Company in General Meeting or by the Board of Directorsat their meeting only.

2. Mr. Kalpesh Patel shall perform all such duties and exercise such powers as are additionally entrustedto him from time to time.

3. No remuneration shall be paid to Mr. Kalpesh Patel during his tenure/term as Managing Director ofthe Company.

Kemrock Industries and Exports Limited


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RESOLVED FURTHER THAT, the Board of Directors be and are hereby authorised to alter, vary and modifythe terms and conditions of the said agreement for re-appointment which is hereby specifically approvedin the conformity with the requirements in such a manner as agreed/may be agreed to between the Boardand Mr. Kalpesh Patel.

RESOLVED FURTHER THAT, the Board be and is hereby authorized to do and perform all such acts, deeds,matters and things as may be considered desirable or expedient to effect this resolution."

By order of the Board of Directors ofKemrock Industries and Exports Limited

Date: 16th January, 2014 Bharat PatelRegd Off.: Vill. Asoj Company SecretaryVadodara-Halol ExpresswayTal. Waghodia, Dist. Vadodara-391 510

NOTES:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT ONE OR MOREPROXIES TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER OF THECOMPANY.

2. The instrument appointing a proxy, in order to be valid and effective, must be deposited with the Companyat its registered office not less than 48 hours before the time fixed for holding the meeting.

3. Corporate members are requested to send a duly certified copy of the Board resolution authorizing theirrepresentative(s) to attend and vote on their behalf at the meeting.

4. The Explanatory Statement pursuant to Section 102 (corresponding to Section 173(2) of the Companies Act,1956) of the Companies Act, 2013, setting out all material facts in respect of item No. 4 to 6 of the Noticeis attached herewith.

5. Members/Proxies attending meeting should bring the Attendance Slip duly completed and may hand overthe same at the entrance to the meeting hall.

6. The Register of Members and Share Transfer Books of the Company will remain closed from 29th March,2014 to 31st March, 2014 (both days inclusive).

7. Members holding shares in physical form are requested to notify immediately any change in their addresseswith PIN Code to the Company's Share Transfer Agents, viz., Link Intime India Private Limited. Membersholding shares in electronic form, should inform directly the change in their addresses with PIN Code totheir respective Depository Participants.

8. Members who hold shares in dematerialized form are requested to bring their Client ID and DP ID numbersfor easy identification of attendance at the Meeting.

9. Details under Clause 49 of the Listing Agreement with the Stock Exchanges in respect of Directors seekingappointment/re-appointment at the ensuing Annual General Meeting are contained in Annexure-I hereto.

10. Members are requested to bring their copies of Annual Report at the Meeting. No copies will be providedat the Meeting as a measure of economy.

11. Queries on accounts and operations of the Company, if any, may please be sent to the Company ten daysin advance of the Meeting so that the answers may be made readily available at the Meeting.

12. Members can avail of the facility of Nomination in respect of shares held by them in physical form pursuantto the provision of Section 109A of the Companies Act, 1956. Members desiring to avail of this facility maysend their Nomination in the prescribed Form No. 2B duly filled in to the Registrar and Transfer Agent viz.,Link Intime India Private Limited. The Nomination Form 2B can be obtained from the Registrar and TransferAgent or the Secretarial Department of the Company at its Registered Office.

13. Members holding shares under multiple folios in the identical order of names are requested to consolidatetheir holdings into one folio.

14. It is informed that, as per Section 205A, any dividend amount which remains unpaid or unclaimed duringthe said 30 days are required to be deposited to an unclaimed dividend account within 7 days from the



date of expiry of 30 days. Any amount lying in the said account is termed as unclaimed dividend amount.Dividends that are not encashed or claimed, within seven years from the date of its transfer to the unpaiddividend account, will, in terms of the provisions of Section 205A of the Companies Act, 1956, be transferredto the Investor Education and Protection Fund (IEPF) established by the Government of India. In terms ofthe provisions of Section 205C of the Companies Act, 1956, no claim shall lie against the Company or IEPFafter the said transfer. The details of unclaimed/unpaid dividend/Interest as of the date of Annual GeneralMeeting are as follows:

Financial year ended Dividend per Share (Rs.) Date of Declaration Due for transfer on

31-03-2008 1.00 06-09-2008 05-10-2015

31-03-2009 1.50 28-08-2009 27-09-2016

Interim Dividend 1.00 30-01-2010 01-03-2017

30-06-2010 1.00 19-11-2010 18-12-2017

30-06-2011 2.00 16-12-2011 14-01-2019

EXPLANATORY STATEMENT AS REQUIRED UNDER SECTION 102 (CORRESPONDING TO SECTION 173(2) OF THECOMPANIES ACT, 1956) OF THE COMPANIES ACT, 2013

ITEM NO. 4APPOINTMENT OF CAPT. MANOJ GAUR AS AN ADDITIONAL DIRECTOR OF THE COMPANY

Capt. Manoj Gaur was appointed by the Board of Directors as an Additional Director of the Company with effectfrom 14th August, 2013. Pursuant to provisions of Section 161(1) of the Companies Act, 2013, Capt. Manoj Gaurholds office up to the date of this annual general meeting but is eligible for appointment as a director. TheCompany has received a notice along with a requisite deposit under Section 257 of the Companies Act, 1956,from a Member signifying his intention to propose the appointment of Capt. Manoj Gaur as a Director of theCompany.

Details regarding the person proposed to be appointed as Director and his brief resume has been given in theAnnexure-I.

None of the directors, Key Managerial Personnel and relatives thereof other than Capt. Manoj Gaur is interestedin the above resolution.

ITEM NO. 5APPOINTMENT OF MR. TUSHAR DESAI AS AN ADDITIONAL DIRECTOR OF THE COMPANY

Mr. Tushar Desai was appointed by the Board of Directors as an Additional Director of the Company with effectfrom 15th October, 2013. Pursuant to provisions of Section 161(1) of the Companies Act, 2013, Mr. Tushar Desaiholds office up to the date of this annual general meeting but is eligible for appointment as a director. TheCompany has received a notice along with a requisite deposit under Section 257 of the Companies Act, 1956,from a Member signifying his intention to propose the appointment of Mr. Tushar Desai as a Director of theCompany.

Details regarding the person proposed to be appointed as Director and his brief resume has been given in theAnnexure-I.

None of the directors, Key Managerial Personnel and relatives thereof other than Mr. Tushar Desai is interestedin the above resolution.

ITEM NO. 6RE-APPOINTMENT OF MR. KALPESH PATEL AS MANAGING DIRECTOR

The members of the Company had at the 14th Annual General Meeting held on 06th September, 2008 re-appointed Mr. Kalpesh Patel as Managing Director of the Company (designated as Chairman and ManagingDirector) for a period of five years w.e.f., 01st August, 2008 to 31st July, 2013 and authorised Board of Directorsto revise, amend, alter and vary the terms and conditions relating to remuneration payable to him in suchmanner as may be permissible in accordance with the provisions of the Companies, Act 1956 read with ScheduleXIII thereto.



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In accordance with the provisions of Sections 198, 269, 309 and 310 read with Schedule XIII and other applicableprovisions, if any, and subject to the approval of the Shareholders of the Company, and pursuant to the resolutionpassed by the Remuneration Committee of Directors and Board of Directors of the Company at their respectivemeeting held on 01st June, 2013 had approved the appointment of Mr. Kalpesh Patel as Managing Director(designated as Chairman and Managing Director) of the Company for a period of three years w.e.f., 01st August,2013 to 31st July, 2016, on material terms and conditions contained in the resolution.

Your Directors therefore recommended the resolution for your approval.

Copy of Agreement entered into by the Company with the Managing Director, Mr. Kalpesh Patel is available forinspection by the Members of the Company at the registered office of the Company, between 11.00 a.m to 1.00p.m till the date of Annual General Meeting of the Company.

The resolution with respect to Explanatory statement sets out an abstract of material terms of the contract withManaging Director and the same may be treated as an abstract of memorandum of interest in accordance withthe Section 302 of the Companies Act, 1956.

None of the directors, Key Managerial Personnel and relatives thereof other than Mr. Kalpesh Patel is interestedin the above resolution.

For and on behalf of the Board of Directors ofKemrock Industries and Exports Limited

Date: 16th January, 2014 Bharat PatelRegd Off.: Vill. Asoj Company SecretaryVadodara-Halol Express WayTal. Waghodia, Dist.Vadodara-391 510



Annexure-IInformation pursuant to Clause 49.IV(G)(i) of the Listing Agreement pertaining to Director seeking re-appointmentat the Annual General Meeting:

Name of Directors Mr. Kaushik Bhatt Capt. Manoj Gaur Mr. Tushar Desai Mr. Kalpesh Patel

Age 58 yrs. 53 yrs. 53. yrs. 54 yrs.

Qualification B. Com.; LL B (Spl)

Expertise Legal Matters

Name of the NONE NONE 1. Professional 1. Kemrock AdvanceCompanies in Placement Private Reinforcementswhich also holds Limited Limited;directorship 2. Vista Voyages 2. Kemrock Advanced

Private Limited Composites Limited;3. Kemrock Infratech

Limited;4. Kemrock Filament

Windings Limited;5. Kemrock Renewable

Energy Limited;6. Kemrock Hi

PerformanceComposites Limited;

7. Kemrock SpecialityPolymers Limited;

8. Kemrock AerospaceIndia Private Limited;

9. Kemrock ResinsPrivate Limited;

Name of the other NONE NONE NONE NONEpublic companiesin the committeesof which alsoholds membership/chairmanship

Number of Shares 2,000 NIL NIL 1,449,513held in theCompany as on30th September,2013

Relationship with NONE NONE NONE NONEDirectors

B.Sc, Diploma inA u t o m o b i l eEngineering, EDP

Defence Management/ WKSP MindTherapist CorporateTraining / Soft SkillsAdministration, HR,Security, Fire & Safety,Liaison, P.R., Events

MBA (Finance), LL.B,LL.M (Previous), Post-graduate inI n t e r n a t i o n a lHospitality & Tourism(Switzerland)Legal, andA d m i n i s t r a t i v eDepartments (DairySector) and theMarketing and FinanceDepartments (Oils andVegetable Oils wing),placement in foreigncountry, Counselor inNational (UPSC, GPSC,MBA, MCA, BBA, BCA)and International(GRE, GMAT, TOEFL,IELTS) Examinations

Diploma in MechanicalEngineering, ElectricalEngineering and PlasticTechnology

Pultrusion technology,moulded grating andmanufacturing ofPhenolic Resins



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DIRECTORS’ REPORTTo,The Members,

The Directors present the Nineteenth Annual Report, together with the Audited Statement of Accounts for thefinancial year ended on 30th September, 2013.

Standalone Financial Performance

The standalone financial performance of the Company for the year 2012-13 as compared to the previous year isbriefly highlighted hereunder.

(Rs. in Crore)

Particulars 2012-13 2011-12 (01.07.2012 to 30.09.2013) (01.07.2011 to 30.06.2012)

Gross Turnover 463.91 932.36

Total Income 526.16 1,014.72

Profit/(Loss) Before Interest, Depreciation and Tax (53.32) 269.21

Interest and Financial Expenses 285.61 162.72

Depreciation 59.49 45.56

Profit/(Loss) Before Tax (398.12) 60.93

Net Profit /(Loss) Profit after Tax (362.46) 24.20

Add: Balance brought forward from last year 206.90 182.69

Balance Carried to Balance Sheet (155.56) 206.90

Operations

During the year under review, the Company clocked a Gross Turnover of Rs. 463.91 Crore, on standalone basis,for the financial year ended on 30th September, 2013 as compared to turnover of Rs. 932.36 Crore achieved inthe previous year, showing a declining trend. Net Loss incurred during the period under review remained at Rs.362.46 Crore compared to net profit of Rs. 24.20 Crore in the previous year ended on 30th June, 2012.

Whereas Gross Turnover, clocked on consolidated basis, for the financial year ended on 30th September 2013remained at Rs. 597.26 Crore compared to Rs. 1,082.08 Crore achieved in the previous year. The bottom-line forthe year ended on 30th September, 2013 stood at Rs. 372.95 against the consolidated profit of Rs. 36.70 Crorein the previous year ended 30th June, 2012.

As you are aware, Company is engaged in the business of manufacturing and exporting fibre reinforced compositeproducts for major industrial sectors such as aerospace, defence, chemical processing etc. However, like mostIndian companies, in recent months, due to global slowdown, overseas customers have cut down their requirementsand deferred future plans, resulting in decrease in demand for the products. Due to this sudden and unprecedentedsetback in business, the Company is facing severe cash flow crisis. In spite of all these constraints, Company istaking effective steps to keep the Company in motion.

Moreover, Company’s all grade of aerospace grade carbon fiber is certified by Centre for Military Airworthinessand Certification (“CEMILAC”) for aeronautical application for use by important organizations of Government ofIndia such as Hindustan Aeronautics Limited (“HAL”), Vikram Sarabhai Space Centre (“VSSC”), Bhabha AtomicResearch Centre (“BARC”), Indian Space Research Organization (“ISRO”), Defense Research and DevelopmentOrganization (“DRDO”),

In the meantime, the Company is working with various advisors to identify investors to infuse money into theCompany and/or provide strategic realignment of Company’s structure, and thus to consolidate the Company’sendeavors.

Board of Directors

- The Export-Import Bank of India, Mumbai nominated Mr. David Rasquinha, as its nominee on the Company’sBoard of Directors with effect from 07th January, 2013. However, upon withdrawal of his nomination fromBoard of the Company, he ceased to be director of the Board w.e.f., 31st December, 2013.

- Mr. Tushar Patel resigned as a Director of the Company w.e.f., 12th April, 2013. The Board places on recordits sincere appreciation for the valuable contribution made by Mr. Tushar Patel during his tenure as Directorof the Company.



- With great sorrow, we report that Mr. Navin Patel, the Non- Executive Director of the Company, passed awayon 12th April, 2013, for heavenly abode. The Board places on record its sincere appreciation for the valuablecontribution made by Mr. Navin Patel during his tenure as Director of the Company.

- The Board of Directors at its meeting held on 01st June, 2013, has subject to the approval of the membersat the ensuing Annual General Meeting, re-appointed Mr. Kalpesh Patel as the Managing Director designatedas Chairman and Managing Director of the Company w.e.f., 01st August, 2013 for a further period of 3 years,without any remuneration.

- Mr. Kaushik Bhatt, the non-executive director of the Company will retire by rotation at the ensuing AnnualGeneral Meeting, and being eligible offer himself for re-appointment.

- Mr. Mahendra Patel resigned as a Director and Executive Director of the Company w.e.f., 02nd June, 2013.The Board places on record its sincere appreciation for the valuable contribution made by Mr. MahendraPatel during his tenure as Director of the Company.

- Capt. Manoj Gaur was appointed as an additional Director of the Company with effect from 14th August,2013 by the Board of Directors of the Company. Pursuant to provisions of Section 161(1) of the CompaniesAct, 2013, he hold office only upto the date of the forthcoming annual general meeting of the Company.The Company has received a notice along with a requisite deposit under Section 257 of the Companies Act,1956, from a Member signifying his intention to propose the appointment of Capt. Manoj Gaur as a Directorof the Company.

- Mr. Tushar Desai was appointed as an additional Director of the Company with effect from 15th October,2013 by the Board of Directors of the Company by way of circular resolution. Pursuant to provisions ofSection 161(1) of the Companies Act, 2013, he hold office only upto the date of the forthcoming annualgeneral meeting of the Company. The Company has received a notice along with a requisite deposit underSection 257 of the Companies Act, 1956, from a Member signifying his intention to propose the appointmentof Mr. Tushar Desai as a Director of the Company.

Brief details pursuant to Clause 49 of the Listing Agreement, about the above directors seeking appointment/re-appointment are given in the Annexure-I appended to the Notice convening the Annual General Meeting.

Directors’ Responsibility Statement

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, with respect to Directors’Responsibility Statement, it is hereby confirmed that:

a) in the preparation of the Annual Accounts for the year 2012-13, the applicable Accounting Standards havebeen followed by the Company;

b) the Directors have selected such accounting policies and applied them consistently and made judgments andestimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 30th September, 2013 and of the Loss of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records inaccordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company andfor preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts of the Company on a ‘going concern’ basis.

Wholly Owned & Overseas subsidiary and Joint Venture Companies

a) Wholly Owned domestic Subsidiary CompaniesThe Company has nine wholly owned Indian subsidiaries viz.Kemrock Renewable Energy Limited; Kemrock Hi-Performance Composites Limited; Kemrock Infratech Limited;Kemrock Advanced Composites Limited; Kemrock Advance Reinforcements Limited; Kemrock Filament WindingsLimited; Kemrock Speciality Polymers Limited and Kemrock Aerospace India Pvt. Ltd. These subsidiaries areyet to commence their business.During the year under report, the Company has acquired further 51% equity shares in Kemrock ResinsPrivate Limited. The 51:49 Joint Venture between “GP Chemicals International Holding S.a.r.l” and “KemrockIndustries and Exports Limited” set up under the name of “Georgia-Pacific Kemrock International PrivateLimited” (entity) has been discontinued w.e.f., 12th March, 2013, with the mutual agreement of both thepartners. The said entity, now being a wholly owned subsidiary of the Company, has been renamed as“Kemrock Resins Private Limited”.

b) Wholly Owned Overseas Subsidiary CompaniesThe Company has two wholly owned overseas subsidiaries viz., Kemrock UK Limited, in UK and KemrockInternational FZE, in DAFZA, Dubai. These subsidiaries are engaged in the business of international marketing



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in the fields of composite products and its parts and components including related materials like glass fiber,technical fabric, resins, polymers and chemicals.Besides, the Company continues to hold 80% stake in Top Glass S.p.A., Italy, which is one of the chief andhighly qualified producers of Pultruded Composite Profiles, situated 20 kms. North east of Milano, Italy.

As required by Accounting Standard AS21 on Consolidated Financial Statements, the audited Consolidated FinancialStatements of the Company and its Subsidiaries are attached.In accordance with the General Circular No: 2/2011 issued by Government of India, Ministry of Corporate Affairs,dated 8th February, 2011, the Balance Sheet, Statement of Profit & Loss and other documents of the Subsidiarycompanies are not being attached with the Balance Sheet of the Company.The Annual Accounts of the subsidiary Companies and the related detailed information shall be made availableto shareholders of the holding and subsidiary Companies seeking such information at any point. The AnnualAccounts of the subsidiary Companies shall be kept for inspection by any shareholders at registered office of theholding company and of the subsidiary companies concerned. A Statement containing prescribed particulars of theCompany’s subsidiaries are given in Annexure- II appended to this report.Corporate Governance & Management Discussion & AnalysisThe Corporate Governance Report, pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, isseparately given under the head titled as “Corporate Governance Report”, which forms part of this Annual Report.A certificate of the statutory auditors of the Company regarding compliance with the Corporate Governancerequirements as stipulated in Clause 49 of the Listing Agreement is annexed to this Report as Annexure-B formingpart of the report.The Management Discussion and Analysis forming part of this Report is separately given under the head titled as“Management Discussion and Analysis”.Change in Financial yearThe Board of Directors of the Company at their meeting held on 24th June, 2013, have approved and resolved toextend the financial year of the Company by 3 (three) months viz., the financial year 2012-13 (01st July, 2012 to30th June, 2013) has been extended upto 30th September, 2013 comprising of 15 months.Non-payment of interest on FCCBsDue to global meltdown and devaluation of rupee, the company is facing severe financial crisis and hence theCompany could not make the payment of first installment of interest with respect to Foreign Currency ConvertibleBonds (US$ 100,000,000 5.5% Convertible Bonds due 2017) which was due on 21st June, 2013. However, theCompany is making efforts to fulfil its obligations.Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and OutgoThe particulars required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosuresof Particulars in the Report of Board of Directors) Rules, 1988, are set out in Annexure-A to this report.Particulars of EmployeesAs required under the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies(Particulars of Employees) Rules, 1975, as amended, the particulars of employees are set out in Annexure andforms part of this report. However, having regard to the provisions of Section 219(1)(b)(iv) of the Companies Act,1956, this Annual Report is being sent to all shareholders and others entitled thereto excluding aforesaid particulars(Annexure). Any member interested in obtaining such particulars may write to the Company Secretary at theRegistered Office of the Company.Health, Safety and Environmental (HSE)Company had focused on continued training and awareness regarding Health, Safety & Environmental improvementsfor entire cross section of employees with emphasis on shop floor employees. This resulted in avoiding any majorunsafe incident and also reportable fire throughout the year. Company continues to have mutual aid arrangementwith neighboring industries and our fire protection network had helped to reduce damage substantially duringmajor unsafe incidents in nearby some of the industries. Company has in totality satisfied all specified statutorycompliances including solid, liquid and gaseous effluents. Company has prepared and updated disaster managementplan and also reviewed risk assessment of the entire site engaging services of outside agency and implementedrecommendation including reemphasizing awareness at some of the critical locations.Company had applied for amendment in the environmental clearance due to some of the subsequent changes andamendment in the environmental clearance is received.Our Company has successfully completed the trials for installation of effluent R.O. Plant, as an effort in achievingzero waste water discharge and hence reducing the consumption of raw water.Some of the required changes and modifications including installation of barometric condensers are implementedto improve efficiency of Multiple Effect Evaporation system.



Recognition to In-House R&D UnitOur R&D Center at Kemrock designs and develops various products in the field of thermosetting resins for variousComposites Applications. Kemrock R&D team is dedicated, well qualified and experienced in the field of Compositesand provides guidelines constantly, based on extensive research, in obtaining various approvals of productsmanufactured at Kemrock site, which profoundly helps in the development and growth of the organization. Thetechnologies and formulations researched and developed by the team meet the business challenges andopportunities domestically and globally. It also provides technical support services whenever required. The R&DCenter is working in the areas of developing new products, cost reduction in existing products, quality up-gradation and import raw-material substitution. We developed the 11 new products during the period of July2012 to September, 2013.The Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India,has recognized the Company’s In-house R & D unit vide letter dated 23rd August, 2012 recognizing the effortsmade by your Company in Research & Development Activities.Public DepositsThe Company has not accepted any deposits from the Public within the meaning of Section 58A of the CompaniesAct, 1956, and as such, no amount on account of principal or interest thereon was outstanding on the date ofBalance Sheet.Corporate Social ResponsibilityKemrock Industries and Exports Limited (KIEL) -- continues its association with Industrial Training Institute (ITI) Jabugam as Industry partner under Public

Private Partnership to improve ITI as Centre of Excellence;- continues to render necessary facilities and support to primary school located in village Asoj situated opposite

its premises;- provides fire, fighter facilities to nearby villages;- is associated with CSM-Gujarat skill enhancement society to improve skill levels of Engineers and Technicians

of Gujarat;- is associated with reputed nearby Institutes such as ITM Universe; &- Contributes in nearby villages of Vadodara city during various festivals etc.AuditorsDuring the year M/s. Talati & Talati, Chartered Accountants, Ahmedabad, tendered their resignation effective 12th

August, 2013, resulting into a casual vacancy in the office of Statutory Auditors of the Company as envisaged bySection 224(6) of the Companies Act, 1956 (“Act”). Subsequently, Board of Directors of the Company at theirmeeting held on 14th August, 2013, has appointed M/s. R. A. Amin & Co., Chartered Accountants, Vadodara, asthe Statutory Auditors of the Company to fill the casual vacancy caused by the resignation of M/s. Talati & Talati,Chartered Accountants, subject to approval of members at Extraordinary General Meeting. Subsequently, themembers, at the Extraordinary General Meeting held on 10th September, 2013 had appointed M/s. R. A. Amin &Co., as Auditors of the Company to hold office up to conclusion of ensuing Annual General Meeting of theCompany.M/s. R. A. Amin & Co., Chartered Accountants, the existing Auditors of the Company, will retire at the conclusionof the ensuing Annual General Meeting of the Company. The Shareholders of the Company are requested toappoint the auditors and fix their remuneration. The Company has received certificate from the Auditors to theeffect that their appointment, if made, would be within the limits prescribed under Section 224(1B) of theCompanies Act, 1956.AcknowledgmentYour Directors take this opportunity to express their gratitude to the Banks, Central and State Governments andtheir departments and the local authorities for their support.The Directors also place on record its sincere appreciation to customers, vendors, joint venture partners/subsidiaries,business associates and technology partners of the Company.Besides, the Directors place on record their sincere appreciation to the Shareholders, Clients, Regulatory Authorities,Stock Exchanges and Depositories for their continued support and assistance and look forward to have suchsupport in all future endeavors.Board sincerely appreciate and acknowledge the concerted efforts of employees at all levels.


Date: 16th January, 2014Reg. Off.: Vill. AsojVadodara-Halol Express Way Kalpesh PatelTal. Waghodia, Dist. Vadodara-391 510 Chairman & Managing Director



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‘Annexure – A’ to the Directors’ Report

Statement regarding Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo forthe year ended on 30th September, 2013 as required under Section 217(1)(e) of the Companies Act, 1956, whichforms part of the Directors Report.

A. CONSERVATION OF ENERGY:

(a) Energy conservation measures taken:

Conversion of 2TPH steam Boiler from wood fire to Natural Gas is completed. This will help to saveElectricity, improve productivity and quality of resin, and improve environment.

(b) Additional Investments and proposals, if any, being implemented for reduction of consumption ofenergy:

Operation of cooling tower fan Motor of chiller converted by Variable frequency Drive (VFD) to reducethe consumption of power of cooling tower fan motor.

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

Implementation of above measures helped to improve productivity and quality of resin.

(d) Total energy consumption and energy consumption per unit of production as per Form-A of the Annexurein respect of industries specified in the Schedule thereto is as under:

FORM – A (see Rule 2)

Form for Disclosure of Particulars with respect to Conservation of Energy(a) Power and fuel consumptionSr. Particulars Unit Year endedNo. 2012-13 2011-121. (a) Electricity Purchased

Unit KWH 8,884,785 17,997,700Total amount Rupees 83,502,350/- 131,784,923/-Rate/Unit Rs./ KWH 9.40/- 7.32/-

(b) Own Generationi) Through diesel generator

Unit KWH 48,644.0 122,234Units per ltr. of diesel oil KWH 3.00 3.0Cost / unit Rs./KWH 16.00 14.32

ii) Through steam turbine generatorUnitsUnits per ltr. of diesel oil/gas N. A. N. A. N.A.Cost / units

2. Coal (specify quality and where used)Quantity (tonnes) N.A. N.A. N. A.Total costAverage rate

3. Furnace oilQuantity (K. Ltrs.) KLTotal amount Rs. — —Average rate Rs./Ltrs

4. Wood Consumption-(Resin and Composite Section)Quantity (MT) Rs. 1,603.00 5,986.67 MTTotal Amount Rs./Ltrs 5,610,500 17,750,476.55Average Rate MT 3,500/MT 2,965/MTBriquettes Consumption - Resin SecQuantity (MT) MT 46.00 274.16 MTTotal Amount Rs. 2,02,400 11,17,202Average Rate MT 4,400/MT 4,075 /MT

5. Others/internal generation (CNG)Quantity M3- 50,622NM3 335,600NM3Total cost Rs. 1,902,773.59 10,739,200Rate/unit Rs./NM3 Rs.37 Rs.32



(b) Consumption per unit of production

The products of the Company are manufactured in different shapes and sizes and hence, consumptionper unit of production is not ascertainable.

B. TECHNOLOGY ABSORPTION:

(e) Efforts made in technology absorption as per Form-B (Disclosure of particulars with respect to TechnologyAbsorption) are as under:

FORM – B (See Rule 2)

Form for Disclosure of Particulars with respect to Technology Absorption

[a] Research and Development (R&D):

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

Development of thermosetting resin such as Unsaturated Polyesters, Epoxy and Phenolic Resins forcomposites applications.

2. Benefits derived as a result of the above R&D:

More than 10 products developed, such as epoxy resin and hardener for powder coating resin system, andhigh performance vinyl ester for making GRP pipes and successfully commercialize in field ofthermosetting resin. Commissioned in house Phenolic and UPR resins system for Prepreg which arehighly cost effective and as per international quality. Metha acrylate adhesive for very high peel strength,Food grade Urea formaldehyde Resin successively developed and commercialized.

3. Future plan of action:

Based on Internal and Market requirement, R & D shall design and develop the products in the areaof composites. Varieties of Prepregs are developed in-house during the year, which have been qualifiedby various global laboratories for the specialty applications like, Windmill blade and Railway interiorsand exteriors.

4. Expenditure on R&D:

a) Capital : Rs. NIL

b) Recurring : Rs. 45 Lacs

c) Total : Rs. 45 Lacs

d) Total R & D expenditure as a Percentage of Total Turnover : 0.09%

[b] Technology Absorption, Adaptation & Innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and innovation :

Kemrock has focused for use of in house resins and fabrics for manufacture of wind turbine blade,railway coach interior and exterior laminates/Prepregs instead of sourcing from outside companies athigher cost. This requires testing and approval of our in house resins and fabrics including laminate/Prepregs preparation and testing at approved laboratory of our major important customers and gettingconfirmation regarding acceptance of quality of our in house resins and fabrics.

2. Benefits derived as a result of the above efforts, e.g. product improvement, cost reduction, productdevelopment, import substitution etc.:

a) Carbon fiber was retested by government approved laboratories and submitted to CEMILAC and theyconfirm use of carbon fiber produced at Kemrock for various aeronautical applications. Further, Kemrockhas taken up conversion of carbon fiber produced for different value added products such as driveshaft for cooling tower, rods etc. This will help to achieve better value addition of carbon fiber producedat Kemrock.

b) Approval of in house resins and fabrics produced at Kemrock for manufacture of wind mill blades andrailway division will help to reduce manufacturing cost of wind mill blades and various projects ofrailway division. Further, this also will help to achieve higher sales realization of resins by selling toother manufacturers.



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3. In case of imported technology (imported during the last 5 years reckoned form the beginning of thefinancial year), following information may be furnished:

a) Technology imported : N. A.

b) Year of import : N. A.

c) Has technology been fully absorbed? : N. A.

d) If not fully absorbed, areas where this has not taken : N. A.place reasons therefore and future plans of action

[c] Foreign Exchange Earning and Outgo:

a) Activities relating to exports; initiatives taken to increase exports; development of new export marketfor products and services; and export plans:

The Company always strives to maintain its focus and presence in the global market being an exportoriented unit. The Company has a good network for marketing and export activities and it avails andexplores export opportunities based on economic considerations, international market analysis andembarking on new product applications.

b) Total Foreign Exchange Used:

(Rs. in Lacs)

Raw Material 18,176.58

Component & Spares Parts 14.01

Chemicals 830.47

Capital Goods 4.71

Total Foreign Exchange Earned:

Export of Goods on FOB Basis: 25,791.30

* * *



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MANAGEMENT DISCUSSION AND ANALYSISOverview and Outlook

During the year under review, the business sentiments remained subdued, depressed and under pressure largelyon account of inflation, shortage of power, weak rupee, weakness in domestic and global industrial activities, highinterest rates and low level of capital investments on account of fall in demand. The GDP growth remained at4.8% in the month of September, 2013. However, in view of the recent union budget, the GDP is likely to improveslightly or remain around the present level.

The population growth, new infrastructure projects, urbanization, increase in middle class population and thegreen movement will drive composites growth to new horizons in emerging economies.

Business Review:

Composites

This is the Company’s flagship business which accounts considerably of the Company’s topline. The company hasdeveloped the product in such a high caliber that it has expanded its reach to new consumers. This product hasexpressed remarkable performance hitherto, in spite of competitive foreign markets. Although the Company enjoyshealthy order book position, several other factors have hampered its growth at present. However, the Companyhas endeavored its best to strengthen its products in the overseas market and its acceptance is wide-spread.Further, the Company has focused on development of high value added composite products to avail advantageof improving profit margins.

Wind Energy

Imaging the world without the electricity is not at all possible, as it plays an important role in people’s lives. Windenergy is specie of the renewable energy which can be replenished in a short period of time. Wind power isleader in the renewable energy sector and growth rate of wind energy is increasing rapidly in the domestic andinternational markets. Kemrock has unique advantage of in-house availability of major raw material, resin andglass fabric for manufacture of wind turbine blade. Kemrock is the preferred supplier of wind turbine blade foralmost all the major wind energy customers.

Railways

The composite properties make the material resistant to climate factors and hence it tends to supersede conventionalmaterials, most applications of the new type of materials being addressed to transport industry. The industry hasalso begun to introduce such materials in railway coach, luxury buses and cars. The construction of the firstmilitary vehicles using composite materials stands proof of their quality.

The main advantage of composites compared to metals, considering the industrial production processes, is superiormanagement which significantly reduces manufacturing times. It is unlikely for rolling stock made of compositesto be rehabilitated but it is definitely more environmentally-friendly and significantly recyclable.

Composite materials can be used in many applications within the railway industry, viz., infrastructure, interior andexterior parts in rolling stocks. For infrastructure, the main advantages are better corrosion resistance as comparedto metal. It is for this that the composite poles or signaling equipment effectively has lower maintenance costs,longer lifetime than wood and hence composite sleepers, for instance, last more and bears lower weight thanconcrete which in turn enables faster and easier installation. In terms of rolling stocks, the main advantages arelower weight and key advantages to save energy. There is increasing consumption and acceptance of fire retardantgrade composite material in railway coach, interior laminates, luxury buses etc. due to advantage of fuel economy,low maintenance requirement, fire resistance, properties etc.

Kemrock has introduced Prepreg and Vacuum Bagging System to produce improved quality of high end products.

Pultrusion products

Pultrusion is the only manufacturing process for obtaining high quality composite profile continuously, with highmechanical properties. Pultruded products are composed of high performance fibres (glass, carbon, aramid)embedded in a polymer matrix. The process is characterized by, Complex shape and unlimited length, Low laborcontent, wide choice of reinforcement and resins, Low scrap rates, High raw material conversion efficiency andConsistent quality.

Pultrusion has rich characteristics such as low weight, chemical resistant, electrical and thermal insulating,temperature resistant, low thermal expansion, anti-magnetic, no sparks, electromagnetic transparent custom colours,corrosion resistant, high mechanical strength, easy to machine, low maintenance and reduced transport costs.



To increase speed of production of pultruded profile in Phenolic resin system, new catalyst system was developedand successfully implemented.

Aerospace

Approximately 50% of the airframe is made from composites; a very bold move in the commercial aircraft industry.Aerospace was the first wide-spread commercial application of Advanced Composites. The aerospace industry hascome a long way, from the early days when advanced composites were used for small “inconsequential” non-structural components in an aircraft - to today when entire fuselages and wings are constructed of advancedcomposite materials. In the new Airbus A380 and the Boeing 787 Dream liner-advanced composites account for25% to 50% by weight-a scenario unthinkable even 5 years ago.

Aerospace composites are extremely critical since many lives depend on a composite structure performing as itshould in an aircraft. Thus, this industry is leading the effort of establishing tough quality systems, includingtesting at each and every raw material before being used and a material trace can be carried out to the mostprimary level of the raw material for every composite component.

Filament winding (Piping & Tank)

The filament winding technology is accepted world wide as very efficient method to manufacture light weightcomposite products, meeting high strength requirements particularly to produce pipes and tanks. FRP/GRP pipesoffers significant advantage over metallic pipes due to much higher corrosion resistant, lighter weight, ease ofinstallation, much lower maintenance etc. These non-metallic pipes find preferred application in effluentmanagement, water management, chemicals, transportation etc. Similarly, tanks fabricated using filament windingtechnology is preferred replacement for metallic tanks due to similar advantages.

New high HDT (Heat distortion temperature) Vinyl ester resin was introduced successfully in pipe division for highthermal stability in corrosive application.

Thermo-setting Resins Industry

The Resin market will show a corresponding growth as the Composites market. Unsaturated (thermo set) polyesteris expected to remain the main resin and account for 80 percent of all demand because of its low cost andexcellent properties. Vinyl esters are expected to grow in importance where higher levels of corrosion andtemperature resistance are mandated. Epoxy resin usage is expected to be determined by the fact that they havethe highest mechanical properties of all major resin usage is expected to be in applications where enhanced fire,smoke and toxicity reduction is required. Hence, it can be expected that in the Indian market also, phenolic resinsfor FRP products would be used in specialized applications. The thermo-set resin market for Composites applicationis estimated to be 120,000 TPA in India, with a CAGR of more than 20 percent p.a. Unsaturated polyester resinmarket in India is the largest with a share of 80 percent in composites, followed by Epoxy resins and Phenolicresins.

The Company is a leading manufacturer of thermo-set resins and also a leading manufacturer of composites. Beingvertically integrated, it is in a unique position to offer customized solutions to other end-use industry as well, thusgiving it a competitive edge.

Carbon Fibre

After commissioning Aerospace grade carbon fiber facility during 2010-11, the stabilization of manufacturingfacility with focus on consistency in the productivity and improvement in quality was taken up during 2011-12.All the three grades of carbon fiber (3K, 6K, and 12K) were certified by M/s. CEMILAC, Bangalore during September,2011 and provisional clearance was released for use of three grades of carbon fiber for aeronautical applications.Consistency in the productivity and quality was achieved for poly-acrylonitrite powder, special acrylic fibre andcarbon fibre products.

Company is in process of commissioning commercial grade carbon fiber facility by procuring and installing someof the balancing equipments.

Awards and Accolades

Kemrock Industries and Exports Limited has Integrated Management System encompassing quality management,environment management and occupational health and safety management system. Kemrock has also acquiredISO/TS 16949:2009 for Transport department. Department of chemicals and Petrochemicals, Ministry of Chemicalsand Fertilizers, Government of India, has conferred second national award to M/s. Kemrock for technology innovationin the field of high-performance vinyl ester resins for composite applications.



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SWOT Analysis

Strength

Kemrock is largest manufacturer of new age composites in India; three decades of proven expertise and focus;access to credible intellectual capital; long term technological tie-ups resulting in superior quality and faster timeto market; Integrated business model, enabling through control over key input costs and availability; preferredsupplier to a world-renowned clientele; state of the art manufacturing unit, fully capable of executing complexclient demand having backward and vertical integration and skilled man-power.

Weakness

Operates in a business segment largely driven by infrastructure spending; therefore any slowdown in economymay result in lower demand Stiff resistance on account of consumer affordability and perception.

Opportunities

Defense and Aerospace; Mass Transport; Urban Infrastructure; Power; Renewable Energy; Automobiles and Telecom.

Threats

Probable competition from overseas players.

Human Resources

The Company employed 1615 people as on 30th September, 2013. The Company believes in the highest standardsof people management and personal growth. It instills in each of the members of the Kemrock family a feelingof ownership, responsibility and performance to the par of excellence in each of the operations pertaining toproduction and servicing. The Company aspires to set the highest standards of internationally benchmarkedhuman resource practices, which would be exemplary for other manufacturers. The industrial relations werecordial and the management acknowledges the support from the employees at all levels. There is continued focuson development of required skill to meet targeted productivity and quality of high-tech products at competitiveprice

Internal Control System

The internal control system of the company is commensurate with its size and operations and is adequate. Theinternal controls are being regularly upgraded in line with the changes in the regulatory and control requirements.The internal audit is conducted regularly by the external professionals. The observations of the auditors arereviewed periodically by the audit committee and the appropriate actions are taken by the management.

Risk and concerns

The company is exposed to normal industry risk factors of competition, economic cycle and uncertainties in theinternational and domestic markets and credit risks. The Company manages these risks, by maintaining a conservativefinancial profile and by following prudent business and risk management practices.

The statements in the management discussion and analysis report may be seen as forward looking statements.The actual results may differ materially for those expressed or implied in the statement depending on circumstances.

* * *



CORPORATE GOVERNANCE REPORT(Pursuant to Clause 49 of the Listing Agreement with Stock Exchanges)

The Report on Corporate Governance is set out below:1. MANDATORY REQUIREMENT

I. Company’s Philosophy on Code of Corporate GovernanceThe Company fully subscribes to the philosophy on Corporate Governance to ensure transparency,accountability, integrity, consistent value systems, delegation across all facets of its operations leadingto sharply focused and operationally efficient growth. The business operations are carried out to benefitall its stakeholders.

II. Board of DirectorsComposition of the Board:As of the year ended 30th September, 2013, the strength of Board of Directors has been constitutedwith optimum mix of Executive, Non-Executive and Independent Directors. As on date Board comprisesof four directors of which, one executive director and three were non-executive directors. Mr. KalpeshPatel is the promoter and Chairman & Managing Director. Thus, more than fifty percent of the boardof directors comprised of non-executive directors, and more than half of the board members wereIndependent Directors during the year under report. All the Directors, except one Executive Director,were rotational directors.None of the Directors of the Board was member of more than ten Committees or Chairman of morethan five Committees across all the Companies in which such directors were directors. Necessarydisclosures regarding Committee positions in other public companies as on 30th September, 2013 havebeen made by the Directors.The requisite particulars, for the year ended on 30th September, 2013, are given below.

Name of Directors Category No. of Outside No. of OutsideDirectorship Committee Position

(s) Held1 (s) Held2

Member Chairman

Mr. Kalpesh Patel Chairman & ManagingDirector - Executive 07 - -

Mr. Kaushik Bhatt ID & NED - - -Mr. Navin Patel3 NID & NED - - -Mr. Tushar Patel4 ID & NED 02 - -Mr. Mahendra Patel5 Executive Director 04 - -Mr. David Rasquinha6 ID & NED 03 - -Capt. Manoj Gaur7 ID & NED - - -Mr. Tushar Desai8 ID & NED - - -

Note: ID - Independent Director; NED - Non-executive Director; NID - Non-Independent Director;1 - Excluding private limited companies, foreign companies and Section 25 Companies;2 - Includes only Audit Committee and Shareholders’ Grievance Committee;3 - Passed away on 12th April, 2013; 4 - Resigned w.e.f. 12th April, 2013;5 - Resigned w.e.f., 02nd June, 2013; 6 - Nominated by EXIM Bank, w.e.f., 7th January, 2013;

(Nomination withdrawn w.e.f., 31st December, 2013);7 - Appointed as Additional Director w.e.f., 14th August, 2013;8 - Appointed as Additional Director w.e.f., 15th October, 2013;

Meetings and Attendance during the year

Name of Directors Category No. of Board Whether lastMeetings Attended AGM Attended

Mr. Kalpesh Patel Chairman & Managing 09 YesDirector - Executive

Mr. Kaushik Bhatt ID & NED 09 YesMr. Navin Patel1 NID & NED - NoMr. Tushar Patel2 ID & NED - NoMr. Mahendra Patel3 Executive Director 06 YesMr. David Rasquinha4 ID & NED 01 -Capt. Manoj Gaur5 ID & NED 01 -Mr. Tushar Desai6 ID & NED - -



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Note: ID - Independent Director; NED - Non-executive Director; NID - Non-Independent Director;1 - Passed away on 12th April, 2013; 2 - Resigned w.e.f., 12th April, 2013;3 - Resigned w.e.f., 02nd June, 2013; 4 - Nominated by EXIM Bank w.e.f., 07th January, 2013

(Nomination withdrawn w.e.f., 31st December, 2013)5 - Appointed as Additional Director w.e.f., 14th August, 2013;6 - Appointed as Additional Director w.e.f., 15th October, 2013;

Nine (09) Board Meetings were held during the year under report. i.e., on 14th August, 2012; 09th

November, 2012; 26th November, 2012; 05th December, 2012, 11th February, 2013, 01st June, 2013, 24th

June, 2013 and 14th August, 2013 (two meetings). The gap between two consecutive Board meetingswas well within the statutory requirements of four months.

III. Audit Committee

The Committee consisted of three (3) directors as on 30th September, 2013. The Chief Financial Officer,Internal Auditors and Statutory Auditors are invitees to the meeting. The Audit Committee of theCompany exercises the powers and discharge the functions as stipulated in Section 292A of theCompanies Act, 1956; Clause 49 of the Listing Agreement with the Stock Exchanges and other relevantstatutory/regulatory provisions. The Company Secretary of the Company acts as the secretary to theAudit Committee.

The composition of the Audit Committee and particulars of meetings attended by its members, duringthe year, are given below.


Name of Members Composition of Audit Committee Attendance

Mr. Kaushik Bhatt (Member) ID & NED 06Mr. Mahendra Patel1 (Member) Executive Director 04Mr. David Rasquinha2 ID & NED 02Capt. Manoj Gaur3 ID & NED 01Mr. Tushar Desai4 ID & NED -

Note: ID - Independent Director; NED - Non-executive Director;1 - Resigned w.e.f., 02nd June, 2013;2 - Nominated by EXIM Bank, w.e.f.,7th January, 2013(Nomination withdrawn w.e.f.,31st Dec., 2013)3 - Appointed as Additional Director w.e.f., 14th August, 2013;4 - Appointed as Additional Director w.e.f., 15th October, 2013;

Six (6) Audit Committee Meetings were held during the year under report. i.e., on 14th August, 2012;09th November, 2012; 26th November, 2012; 11th February, 2013, 24th June, 2013 and 14th August,2013.

The Audit Committee, in addition to other business, reviews the quarterly (unaudited) financial resultsand annual accounts before submitting to the Board of Directors. It also oversees the financial reportingprocess, reviews the financial statements and adequacy of internal control system and thus acts as alink amongst the management and the Auditors and the Board of Directors of the Company. TheCommittee discusses issues related to risk management and compliances.

IV. Remuneration Committee

The terms of the remuneration committee inter-alia include the determination of remuneration packagesof the Executive and Non-Executive Directors of the Company.


Name of Members Composition of Remuneration Committee Attendance

Mr. Kaushik Bhatt (Member) ID & NED 01Mr. Mahendra Patel1 (Member) Executive Director 01Capt. Manoj Gaur2 ID & NED -

Note: ID - Independent Director; NED - Non-executive Director;1 - Resigned w.e.f., 02nd June, 2013;2 - Appointed as Additional Director w.e.f., 14th August, 2013;

The Board of Directors of the Company at their meeting held on 01st June, 2013, re-appointed Mr.Kalpesh Patel, the Chairman and Managing Director of the Company for a further period of 03 years



from 01st August, 2013, as his term of appointment was due expire on 31st July, 2013, without anyremuneration, since the Company is incurring the losses since the commencement of the financial yearunder report.

The Executive Director Mr. Mahendra Patel - was paid remuneration as per his terms of remunerationof appointment approved by the Shareholders of the Company.

The aggregate remuneration paid to Mr. Mahendra Patel during the financial year under report was Rs.38,21,400 lakh.

The particulars of sitting fees paid to non-executive Directors are as under:

Mr. David Rasquinha - Rs. 40,000/-

Capt. Manoj Gaur - Rs. 60,000/-

The Company does engage Mr. Kaushik Bhatt, a lawyer, for availing his legal services. The servicesprovided by him are purely of professional nature and professional fees paid are not considered materialenough to affect the independence of Mr. Kaushik Bhatt.

V. Shareholders’/Investors’ Grievance Committee

During the year under review, the Shareholders’/Investors’ Grievance Committee, under the Chairmanshipof a non-executive director viz., Mr. Kaushik Bhatt, comprised of following directors viz., Mr. KaushikBhatt, Mr. Kalpesh Patel and Capt. Manoj Gaur.

The Committee is responsible, inter alia, for redressal of Shareholders’ complaints, approval of sharetransfers and transactions, issues of share certificates and duplicate share certificates etc.,

Five (5) Shareholders’/Investors’ Grievance Committee meetings were held during the year under report.i.e., on 14th August, 2012; 09th November, 2012; & 11th February, 2013, 24th June, 2013 and 14th

August, 2013.


Name of Members Composition of SIG Committee Attendance

Mr. Kaushik Bhatt (Chairman) ID & NED 04Mr. Mahendra Patel1 (Member) Executive Director 03Mr. Kalpesh Patel (Member) 05Capt. Manoj Gaur2 ID & NED 01

Note: ID - Independent Director; NED - Non-executive Director;1- Resigned w.e.f., 02nd June, 2013;2 - Appointed as Additional Director w.e.f., 14th August, 2013;

The Shareholders/Investor’s Grievance Committee looks into the redressal of shareholders’ and investors’complaints like transfer of shares, non-receipt of Annual Report, non-receipt of declared dividend,revalidation of dividend warrants etc.

The Committee also oversees the performance of the secretarial department and working of the Registrarand Share Transfer Agents and recommends measures for overall improvement in the quality of investorservices.

The Compliance Officer, the Company Secretary of the Company is Mr. Bharat Patel and his designatede-mail ID is: [email protected]

All the complaints received during the year were resolved and no complaint was pending for redressalas on the date of this report.

Reconciliation of Share Capital Audit

The Company conducts a share capital audit on a quarterly basis in accordance with requirements ofSecurities and Exchange Board of India (Depositories and Participants) Regulations 1996 and SEBI CircularNo. D&CC/FITTC/CIR-16/2002 dated 31st December, 2002 and SEBI Circular No. CIR/MRD/DP/30/2010dated 6th September, 2010. The Reconciliation of Share Capital Audit Report obtained from Mr. KashyapShah, Company Secretary in whole time practice, which has been submitted to the Stock Exchangeswithin the stipulated period, certifies that the equity shares of the Company held in the dematerializedform and in the physical form confirms to the issued and paid up equity shares capital of the Company.

Secretarial Compliance Certificate

As per provisions of the Clause 47(c) of the Listing Agreement entered into with the National Stock



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Exchange of India Limited and Bombay Stock Exchange Limited, the Company has obtained the SecretarialCompliance Certificate on half yearly basis from Mr. Kshyap Shah, a Company Secretary in whole timepractice to the effect that all transfer of shares are effected within stipulated time. The certificate hasbeen submitted to the Stock Exchanges within the prescribed time.

VI. General Body Meetings

The details of the last three Annual General Meetings (AGMs) of the Company and Special Resolutionspassed thereat are as under:

Date & Time Venue Number of SpecialResolutions passed

19th November, 2010 Village Asoj, Vadodara – Halol Express Way, No Special resolution passedat 10:30 a.m. Tal. Waghodia, Dist. Vadodara – 391 510

Gujarat State, India16th December, 2011 Village Asoj, Vadodara – Halol Express Way, No Special resolution passedat 11:00 a.m Tal. Waghodia, Dist. Vadodara – 391 510

Gujarat State, India31st December, 2012 Village Asoj, Vadodara – Halol Express Way, No Special resolution passedat 11:00 a.m. Tal. Waghodia, Dist. Vadodara – 391 510

Gujarat State, India

There was no special resolution passed during the financial year 2012-13 by Postal Ballot. As of datethere is no proposal to pass any resolution by postal ballot.

SUBSIDIARY COMPANIES

The Company does not have any material non-listed Indian subsidiary, whose turnover or net worth(paid-up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectivelyof the Company.

VII. Disclosures

a) In terms of Accounting Standard AS-18, details of related party transactions during the year havebeen set out under Note 17(b) of Schedule 19(B) annexed to the Balance Sheet and Statementof Profit and Loss. However, they are not having any potential conflict with the interest of theCompany at large.

b) During last three years, no penalties or strictures have been imposed on the Company by StockExchanges, SEBI or any other Statutory Authority on any matter related to capital markets.

c) Adoption of non-mandatory requirements under the Clause 49 of the Listing Agreement is reviewedfrom time to time.

VIII. Means of Communication

Quarterly, half yearly and annual results are usually and regularly published by the Company in widelycirculating national and local daily newspapers such as “Business Standard” in English and “Loksatta”in Gujarati and are also submitted to the Stock Exchanges in accordance with the Listing Agreementrequirements. Financial Results are sent through e-mail and by post to the shareholders on receipt ofrequests.

IX. General Shareholder Information(i) Annual General Meeting

Date & time - Monday, the 31st March, 2014 at 11.00 a.m.Venue - At the registered office of the Company at

Village Asoj, Vadodara-Halol Express Way, Tal. Waghodia,Dist. Vadodara – 391510, Gujarat State

(ii) Financial YearThe Company has changed the financial year from 30th June, 2012, ending to 30th September,2013.

Financial Calendar for the Year 2013-14 (Tentative)

Quarter ended December, 2013 (Unaudited Results) on or before 14th February, 2014Quarter ended March, 2014 (Unaudited Results) on or before 14th May, 2014Quarter ended June, 2014 (Unaudited Results) on or before 14th August, 2014Year ended on 30th September, 2014 (Audited Results) within 60 days from close of financial yearAnnual General Meeting (Scheduled on) 31st March, 2014



(iii) Details of Book Closure

The Register of Members and Share Transfer Register will remain closed from Saturday 29th

March, 2014 to Monday, 31st March, 2014 (both days inclusive).

(iv) Listing on Stock Exchanges

Name of Listing on Stock Exchange Stock Code/Scrip ID

Bombay Stock Exchange LimitedPhiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400 001 526015 / KEMIE

National Stock Exchange of India LimitedExchange plaza, Bandra Kurla Complex Bandra(East), Mumbai–400 051 KEMROCK

Luxembourg Stock ExchangeSociete Anonyme 11, av de la Porte-Neuve US4884721014

The Annual Listing Fees for the year 2013-14 have been paid to all the stock exchanges, wherethe Company’s securities are listed.

The Company has paid custodian fees to National Securities Depository Limited (NSDL) and CentralDepository Services (India) Limited (CDSL) for the financial year 2013-14.

(v) Stock Market Data

Monthly High and Low prices of Equity Shares of the Company quoted at the Bombay StockExchange Limited (BSE) and National Stock Exchange of India Limited (NSE) during the period 1st

July, 2012 to 30th September, 2013 were as under:

Bombay Stock Exchange Ltd. National Stock Exchange of India Ltd.Month Share Price (Rs.) Sensex Points Share Price (Rs.) Nifty Points

High Low High Low High Low High Low

Jul.-2012 522.00 350.00 17,631.19 16,598.48 497.55 341.00 5348.55 5032.40Aug.-2012 408.00 116.60 17,972.54 17,026.97 407.30 115.40 5448.60 5164.65Sep.-2012 110.85 70.00 18,869.94 17,250.80 109.65 69.30 5735.15 5215.70Oct.-2012 97.40 73.25 19,137.29 18,393.42 97.95 73.85 5815.35 4888.20Nov.-2012 77.20 55.85 19,372.70 18,255.69 77.25 55.80 5885.25 5548.35Dec.-2012 110.65 54.55 19,612.18 19,149.03 110.75 54.45 5965.15 5823.15Jan.-2013 94.00 64.50 20,203.66 19,508.93 96.75 64.60 6111.80 5935.20Feb.-2013 78.95 48.70 19,966.69 18,793.97 78.45 48.45 6052.95 5671.90Mar.-2013 63.05 42.00 19,754.66 18,568.43 63.25 41.60 5971.20 5604.85Apr.-2013 71.05 44.75 19,622.68 18,144.22 71.15 44.75 5962.30 5477.20May-2013 63.95 43.30 20,443.62 19,451.26 64.75 42.85 6229.45 5910.95Jun-2013 45.90 28.45 19,860.19 18,467.16 45.95 28.10 6011.00 5566.25Jul.-2013 35.75 21.30 20,351.06 19,126.82 36.00 21.05 6093.35 5675.75Aug.-2013 21.05 15.25 19,569.20 17,448.71 21.50 15.20 5808.50 5118.85Sep.-2013 20.80 14.90 20,739.69 18,166.17 20.45 15.65 6142.50 5318.90

Stock Performance of Share Price of the Company in comparison to the BSE Sensex



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(vi) Registrar and Share Transfer Agent : Link Intime India Private LimitedUnit : Kemrock Industries and Exports LimitedB-102 & 103, Shangrila Complex, 1st FloorNear Radhakrishna Char Rasta, AkotaVadodara – 390 020 (Gujarat)

(vii) Share Transfer System

The Share Transfer Committee of the Directors has been constituted by the Board. The Board hasalso delegated the power of share transfer, approvals for transmission, issue of duplicate certificatesetc., to the Share Transfer Committee of Directors. The delegated authority attends to sharetransfer formalities at least once in fortnight. The share transfers received in physical form areprocessed and the duly transferred share certificates are returned within the prescribed timelimit, subject to the documents being valid and complete in all respects. The Board of Directorshas appointed the Company Secretary as Compliance Officer of the Company to monitor theshare transfer process. Share transfers approved by the delegated authority are placed at theBoard Meeting from time to time. As on 30th September, 2013, no shares were pending fortransfer for more than 30 days.

M/s. Link Intime India Private Limited is the Share Transfer Agent for both physical and dematsegment of Equity Shares of the Company.

All requests for Dematerialization of shares are processed and confirmation is given to the respectivedepositories, i.e. National Securities Depository Limited (NSDL) and Central Depository Services(India) Limited (CDSL) within 21 days except sparingly in few cases.

(viii) Distribution of Shareholding as on 30th September, 2013

No. of Equity Shares Shareholders SharesNo. % No. %

Up to 500 8,976 88.95 1,008,518 4.96501 to 1000 539 5.34 424,115 2.091001 to 2000 267 2.65 400,199 1.972001 to 3000 89 0.88 219,492 1.083001 to 4000 48 0.48 169,187 0.834001 to 5000 37 0.37 175,604 0.865001 to 10000 58 0.57 413,746 2.0410001 and above 77 0.76 17,519,137 86.17

Total: 10,091 100.00 20,329,998 100.00

(ix) Dematerialization of Shares and Liquidity

The Company’s shares are compulsorily traded in dematerialized form and are available for tradingon both the depositories viz., National Securities Depository Limited (NSDL) and Central DepositoryServices (India) Limited (CDSL). Under the Depository System, the International SecuritiesIdentification Number (ISIN) allotted to the Company’s shares is INE990B01012.

The Company’s equity shares are regularly traded on the Bombay Stock Exchange Limited andNational Stock Exchange of India Limited in electronic form. As on 30th September, 2013, 20,107,020equity shares representing 98.90% of the total equity shares have been dematerialized by theshareholders.

(x) Outstanding GDRs / ADRs / Warrants or any Convertible Instruments

a) On 29th April, 2010, the Company issued 4,827,200 Global Depository Receipts (GDRs) (eachGDR represents one underlying equity Share of the face value of Rs.10/- each of the Company)and on 20th December, 2012, the Company issued 2,887,800 Global Depository Receipts(GDRs) (each GDR represents one underlying equity Share of the face value of Rs.10/- eachof the Company). The outstanding GDRs as on 30th September, 2013 stood at 7,475,000representing equal number of equity shares and are listed on the Luxembourg Stock Exchange.

b) 5.5% US$ denominated Foreign Currency Convertible Bonds (FCCBs) due 2017, for anaggregate value of US$ 100 million issued on 17th April, 2012, with an option to the holdersto convert them in to ordinary equity shares (at an initial conversion price of Rs. 529.04 pershare with a fixed rate of exchange on conversion of Rs. 50.60=US$ 1.00) having par valueof Rs. 10.00 per share or Global Depository Receipts (GDRs) each representing par value ofRs. 10.00 per share of the Company are outstanding.



The Company has not issued any ADRs/Warrants or convertible instruments other than above.

Registered Office & Plant Location Investor Correspondence

Kemrock Industries and Exports Limited Link Intime India Private LimitedVillage Asoj, Vadodara - Halol Express Way Unit: Kemrock Industries and Exports LtdTal. Waghodia, Dist. Vadodara - 391 510 B-102 & 103, Shangrila Complex,Gujarat State, India 1st Floor Near Radhakrishna Char Rasta,Email: [email protected] Akota, Vadodara - 390 020 (Gujarat)Website : www.kemrock.com Tel.: (0265) 2356573; Fax: (0265) 2356791

E-mail: [email protected]:www.linkintime.co.in

2. NON-MANDATORY REQUIREMENTS

(i) The Chairman of the Board

The Chairman of the Board is a Executive Chairman and hence the provisions of Non-executive Chairmanare not applicable. All other requirements of the Board have been complied with.

(ii) Remuneration Committee

All the requirements of the remuneration committee during the year have been complied with.

(iii) Code of prevention of Insider Trading

The Company has a comprehensive guidelines on preventive of insider trading, Known As ‘KemrockIndustries and Exports Limited Code of Conduct for Prevention of insider trading’, which is in compliancewith the SEBI (Prohibition of Insider Trading).





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Declaration for compliance with code of ethics of the company as per clause 49 (I) (D) (ii)of the listing agreementI, Kalpesh Patel, the Chairman and Managing Director of Kemrock Industries and Exports Limited hereby declarethat as on 30th September, 2013, all the board members and senior management personnel have affirmedcompliance with the Code of Ethics laid down by the Company.



ANNEXURE – BAUDITORS CERTIFICATE ON COMPLIANCE WITH THE CONDITIONS OF CORPORATE GOVERNANCE UNDER CLAUSE49 OF THE LISTING AGREEMENT

To,The Members ofKemrock Industries and Exports Limited

We have examined the compliance of conditions of Corporate Governance by Kemrock Industries and ExportsLimited for the financial year ended on 30th September, 2013 as stipulated in Clause 49 of the Listing Agreementof the said Company with relevant Stock Exchanges.

The Compliance of Conditions of Corporate Governance is the responsibility of the Management. Our examinationwas limited to procedures and implementation thereof, adopted by the Company for ensuring the complianceof the conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on thefinancial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify thatthe Company has complied with the conditions of Corporate Governance as stipulated in the above-mentionedListing Agreement.

We state that no investor grievances are pending for a period exceeding one month against the Company as perthe records maintained by the Shareholders’/Investors’ Grievance Committee.

We further state that, such compliance is neither an assurance as to the future viability of the Company nor theefficiency or effectiveness with which the Management has conducted the affairs of the Company.

For R. A. Amin & Co.Chartered Accountants

FRN: 100334W

Hiren AminPlace: Vadodara ProprietorDate: 16th January, 2014 M.N. 111009



INDEPENDENT AUDITORS’ REPORT on Financial StatementsToThe Members ofKemrock Industries and Exports Limited

REPORT ON THE FINANCIAL STATEMENTS

We have audited the attached Balance Sheet of KEMROCK INDUSTRIES AND EXPORTS LIMITED (the ‘Company’)as on 30th September 2013, the Statement of Profit and Loss and the Cash Flow Statement for the 15 monthperiod then ended and a summary of the significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation of these financial statements that give a true and fair view ofthe financial position, financial performance and cash flows of the Company in accordance with the AccountingStandards referred to in Section 211(3C) of the Companies Act, 1956 (the ‘Act’) and in accordance with theAccounting Principles generally accepted in India. This responsibility includes the design, implementation andmaintenance of internal control relevant to the preparation and presentation of the financial statements thatgive a true and fair view and are free from material misstatements, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with the Standards on auditing issued by the Institute of Chartered Accountants of India.Those Standards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the Company’s preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An auditalso includes evaluating the appropriateness of the accounting policies used and the reasonableness of theaccounting estimates made by the Management, as well as evaluating the overall presentation of the financialstatements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

OPINION

In our opinion and to the best of our information and according to the explanations given to us, the aforesaidfinancial statements give the information required by the Act in the manner so required and give a true and fairview in conformity with the accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of the state of affairs on the Company as at 30th September 2013.

(b) In the case of the Statement of Profit and Loss, of the loss of the Company for the 15 months period endedon that date; and

(c) In the case of the Cash Flow Statement, of the cash flows of the Company for the 15 months period endedon that date.

EMPHASIS OF MATTER

1. We draw attention to Note 5 of the accompanying financial statements in respect of material uncertaintyabout the Company’s ability to continue as a going concern which is in part dependent on the successfuloutcome of the discussions with Financial Institutions/Financers, regarding fresh funding, takeover of existingfunding, re-scheduling and/or restructuring of loans by existing Lenders. Our opinion is not qualified inrespect of this matter.

2. We draw attention to capitalization of Lease Hold Land (Period: 30 years), amounting to Rs. 295.31 Crores(Out of which Rs. 2.46 Crores were amortized during the audit period. The documents evidencing theallotment of the said land was received by the Company in July 2013. However, pending execution of alliedrequisite agreements/deeds, physical possession of the said land has not been handed over to the Company.We are of the opinion that the stipulated lease hold period of 30 years shall initiate upon execution of



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requisite documents and handover of physical possession of the said land. Hence, the Net Block isunderstated, Depreciation and Amortization is overstated and loss is overstated by an amount of Rs.2.46Crores.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Company’s (Auditor’s Report) Order, 2003 (the ‘Order’), as amended by Companies(Auditors’ Report) (Amendment) Order, 2004 issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act and according to the information and explanations given to us andon the basis of such checks as we considered appropriate, we enclose in the Annexure a statement on thematters specified in paragraphs 4 and 5 of the said Act.

2. As required in terms of sub-section (3) of Section 273 of the Act, we report that:

(i) We have obtained all information and explanations which, to the best of knowledge and belief, werenecessary for the purpose of our audit.

(ii) In our opinion, proper books of account, as required by law, have been kept by the Company so faras appears from our examination of these books.

(iii) The Balance Sheet and Profit and loss account dealt with by this report are in agreement with thebooks of account.

(iv) In our opinion, the Balance Sheet and Profit & Loss Account dealt with by this report comply withthe Accounting Standards referred to in Sub-section (3C) of Section 211 of the Act.

3. On the basis of the written representations received from the Directors, as on 30th September 2013 andtaken on record by the Board of Directors, we report that none of the Director is disqualified as on 30th

September 2013 from being appointed as a Director in terms of clause (g) of Sub-section (1) of Section 274of the Act.

For R. A. Amin & Co.Chartered Accountants

FRN: 100334W

Hiren AminPlace: Vadodara ProprietorDate: 16th January, 2014 M.N. 111009

Annexure Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ section ofour report of even date

Re: Kemrock Industries and Exports Limited (‘the Company’)

1. FIXED ASSETS

(a) The company has maintained proper records showing full particulars including quantitative details andsituations of fixed assets of the company. However, maintenance of further elaborate records inrespect of capitalization of materials utilized in Research and Developments, Trial runs, Prototypes andCertifications is advisable and recommended.

(b) As explained to us, the Company has a programme for physical verification of fixed assets in accordancewith which the fixed assets have been physically verified during the year by the Management. In ouropinion, the frequency of physical verification is reasonable. Having regard to the size of the operationsof the Company and on the basis of explanations received, in our opinion, the net discrepancies foundon physical verification were not material.

(c) The Company has not disposed off any fixed assets during the year.

(d) The disclosure requirements as required by AS-10 are made in the necessary area.

2. INVENTORIES

(a) As informed to us the stock of finished goods, stores and spare parts and raw material of theCompany have been physically verified by the management at reasonable intervals.

(b) In our opinion and according to the information and explanations given to us, the procedure ofphysical verification of inventor

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