Celebrity Fashion Annual report 2010

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Celebrity Fashions Limited


21st

ANNUAL REPORT 2009-2010


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Contents Page No

Board of Directors 3 Manufacturing Facilities 4

Notice Convening AGM 5

Section 302 Notice 7

Directors’ Report 8

Report on Corporate Governance 16

Management Discussion and Analysis 23

Auditors’ Report 26

Annexure to Auditors’ Report 27

Balance Sheet 29

Profit & Loss Account 30 Schedules forming part of the accounts 31

Cash Flow Statement 45

Balance Sheet Abstract 46

Subsidiary Companies 47

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Board of Directors Mr. V. Rajagopal Chairman and Managing Director Mrs. Rama Rajagopal Executive DirectorMr. S. Surya Narayanan Executive DirectorMr. P.S. RamanMr. N.K. RanganathMrs. Nidhi Reddy

Company Secretary

Mr. G. Balaji

Management Team

Executive Vice-PresidentMr.Suresh Rajagopal Strategic Sourcing & Marketing

Chief Executive OfficerMr. Charath Narasimhan Domestic - Indian Terrain

Senior Vice - PresidentsMr.John Dulip Kumar MerchandisingMr.J.V.J.Franklin OperationsMr.Amitabh Suri Marketing & Product Design & Development

General ManagersMr.V.Sridharan FinanceMr.Selin Reubalin C.C OperationsMr.A.M. Gopinath Commercial


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REGISTERED OFFICE & CORPORATE OFFICESDF - IV & C2, 3rd Main Road, MEPZ - SEZ, Tambaram, Chennai - 600 045.

LEGAL ADVISORSDua Associates, Chennai - 600 017.

STATUTORY AUDITORSM/s. Anil Nair & Associates,Egmore, Chennai - 600 008.

M/s. CNGSN & Associates,T.Nagar, Chennai - 600 017.

INTERNAL AUDITORSM/s. R.Venkatakrishnan & Associates,R.A.Puram, Chennai - 600 028.

BANKERSState Bank of India, Chennai - 600 001HDFC Bank Limited, Chennai - 600 002

MEDIA SOLUTIONS PARTNERBennett Coleman & Co Ltd (Times of India Group)“Times House”, 126/127, Chamiers Road,Nandanam, Chennai - 600 035

MANUFACTURING FACILITIES

No.72/1,Senneerkuppam Village,Poonamallee High Road,Poonamallee Chennai 600 054.

SDF- IV, 3rd Main Road,MEPZ - SEZ, Tambaram,Chennai 600 045.

No. 70/2 & 3A, Selaiyur Agaram Road,Thiruvanchery, Chennai 600 073.

No.208, Velachery Tambaram Road, Narayanapuram,Pallikaranai, Chennai 601 302.

Warehouse No.208, Velachery Tambaram Road, Narayanapuram,Pallikaranai, Chennai 601 302.

114/2, Anna Salai Extension,Nagalkeni, Chrompet, Chennai 600 044.

Washing PlantNo.70/2 & 3A, Selaiyur Agaram Road,Thiruvanchery, Chennai 600 073.

SDF- IV, 3rd Main Road,MEPZ - SEZ, Tambaram,Chennai 600 045.

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NOTICE CONVENING THE ANNUAL GENERAL MEETINGNOTICE is hereby given that the Twenty First Annual General Meeting of Celebrity Fashions Limited will be held on Friday the 24th September, 2010 at 10.30 A.M. at the Registered Office of the Company, situated at SDF-IV & C2, 3rd Main Road, MEPZ-SEZ, Tambaram, Chennai 600 045 to transact the following businesses:

ORDINARY BUSINESS

1. To receive, consider and adopt the audited Profit and Loss account for the year ended 31st March, 2010 and the Balance Sheet as on that date together with the report of the Directors and Auditors thereon.

2. To appoint a Director in place of Mr.N.K.Ranganath, who retires by rotation and being eligible offers himself for reappointment.

3. To appoint a Director in place of Mrs.Nidhi Reddy, who retires by rotation and being eligible offers herself for reappointment.

4. To appoint M/s. Anil Nair & Associates, Chartered Accountants, Chennai and M/s. CNGSN & Associates, Chartered Accountants, Chennai as Joint Auditors of the Company and to fix their remuneration.

SPECIAL BUSINESS

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

RESOLVED THAT pursuant to the provisions of sections 198, 269, 309 and other applicable provisions, if any, of the Companies Act 1956 (including any statutory modification(s) or re-enactment thereof, for the time being in force) read with Schedule XIII of the said Act, the company hereby accords its approval to the reappointment of Mr.V.Rajagopal as the Managing Director of the Company for a period of five years effective from 1st October, 2010 to 30th September, 2015 (both days inclusive).

RESOLVED FURTHER THAT the consent of the members be and is hereby accorded for the payment of remuneration as set out in the explanatory statement annexed hereto and forming part of this Notice, to Mr.V.Rajagopal, Managing Director of the company for the period from 1st October, 2010 to 30th September, 2015 (both days inclusive).

RESOLVED FURTHER THAT the Board of Directors of the Company be and are hereby authorized to fix and vary remuneration and perquisites including monetary value thereof to the extent the Board of Directors may

consider appropriate and as may be considered and permitted or authorized in accordance with the provisions of the Companies Act, 1956 for the time being in force and any statutory modifications or reenactment thereof, and/or any rules or regulations framed thereunder.

Date : 13-08-2010 For and On behalf of the BoardPlace: Chennai G.BALAJI Company SecretaryNOTES 1. A MEMBER ENTITLED TO ATTEND AND VOTE IS

ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER OF THE COMPANY. Proxies, in order to be effective must be received at the company’s Registered Office not less than 48 hours before the meeting. Proxies submitted on behalf of Companies, Societies and Partnership firms etc must be supported by appropriate resolution/authority as applicable issued on behalf of the nominating organization.

2. The Register of members and transfer books of the

Company will be closed from Monday, the 20th September, 2010 to Friday the 24th September, 2010 (both days inclusive).

3. In terms of Clause 49 of the Listing Agreement

entered with Stock Exchanges, a brief resume of the directors proposed to be reappointed in this meeting, nature of expertise in specific functional areas, their other directorship, committee membership and their Shareholdings in the Company are annexed to this notice.

ANNEXURE TO THE NOTICE CONVENING THE ANNUAL GENERAL MEETING

Additional information on directors seeking re-election at the Annual General Meeting

Mr.N.K.Ranganath

Profile and expertise in specific functional areas

Born on 13th March 1956, Mr.N.K.Ranganath is a mechanical engineer and holds a post graduate degree in Business Management from XLRI.

Mr.N.K.Ranganath is Managing Director of M/s.Grundfos Pumps India Private Limited. He had acquired valuable knowledge, experience and expertise in sales, marketing, finance, production and human resources disciplines.

He was inducted as a director by the Board on 6th September 2005. He does not hold any share in the Company.


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Mrs.Nidhi Reddy

Profile and expertise in specific functional areas Born on 13th April 1956, Mrs.Nidhi Reddy holds a Master degree in Economics from Delhi School of Economics and a Post Graduate diploma in Personnel Management and Industrial relations from XLRI.

Mrs.Nidhi Reddy is the sole proprietrix of Nidhi Reddy Consultants. She specializes in the field of human resource management, behavioral training and recruitment

She was co-opted as a director by the Board on 6th September 2005. She is not a director of any other company and does not hold any share in the Company.

ANNEXURE TO THE NOTICE

Explanatory Statement pursuant to section173(2) of the Companies Act 1956

Item No.5The Board of Directors of the Company at their meeting held on 13th August, 2010 have reappointed Mr.V.Rajagopal as Managing Director of the Company for a period of five years effective from 1st October, 2010 to 30th September, 2015. The remuneration committee of the Board of Directors had approved in its meeting held on 13th August, 2010 by its resolution the terms of the remuneration payable to Mr.V.Rajagopal and the same was in accordance with and within the ceiling of maximum remuneration permitted under Section II (1) (A) of Part II of Schedule XIII to the Act. The terms of appointment and disclosures pursuant to clause 49 of the listing agreement are given below:

i) Tenure For a period of 5 years with effect from 1st October, 2010 to 30th September, 2015

ii) SalaryBasic salary Rs.2,00,000/- per month.

iii) Medical BenefitsSuitable Mediclaim Policy for hospitalisation for himself and family. Reimbursement of all actual medical expenses for himself and family to the extent not reimbursed under Mediclaim Policy

iv) TelephoneTelephone, Telefax and other communication facilities at residence at Company’s cost.

v) AutomobileHe shall be entitled to a fully maintained Company car for company’s business.

vi) Reimbursement of expensesHe shall be entitled to the reimbursement of all actual expenses or charges, including travel, entertainment and other out of pocket expenses incurred by him for and on behalf of the Company, in furtherance of its business and objects.

vii) Sitting FeesHe will not be entitled to any sitting fees for attending the meetings of the Board or of any committee thereof.

Disclosure as per Clause 49 of the Listing Agreement

(a) Profile of Mr. V. Rajagopal Mr. V.Rajagopal aged 53 is a B.A. Honors in Economics

from Sri Ram College of Commerce, New Delhi and a Post Graduate in Master of Arts from Bangalore University. He joined the Indian Police Service during the year 1979 and he served the nation for a decade. During the year 1988, Mr. V.Rajagopal quit the Indian Police Service and entered into the business of garment exports. He is an avid reader and a sports person. Was a member of a Social Organisation called Round Table for 8 years till 1998. Was associated in organizing the International conference of Round Tablers in 1996, in Chennai in the capacity as Vice-Chairman of the conference.

He is currently a member of the young Presidents Organization, Madras Chapter.

(b) Expertise in specific functional areas Managerial, Financial, Marketing and Administration.

(c) Directorships of other Companies and the membership of Committees of the Board

Mr. V.Rajagopal is the director of the following companies:

Celebrity Clothing Limited : Director Indian Terrain Fashions Limited : Managing Director

Membership of the Committees of the BoardShareholders Grievance Committee : Member

Mr.V.Rajagopal holds 41,07,318 equity shares in the company.

None of the Directors except Mr.V.Rajagopal and Mrs. Rama Rajagopal are interested or concerned in the proposed resolution.

Date : 13th Aug, 2010 For and on behalf of the BoardPlace : Chennai G.BALAJI Company Secretary

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Section 302 Notice

To All Members

Sub: Memorandum under Section 302 of the Companies Act, 1956

I. Reappointment of Mr.V.Rajagopal as Managing Director

The Board of Directors of the Company at its meeting held on 13th August, 2010 reappointed Mr.V.Rajagopal as Managing Director of the Company for a period of five years from 1st October, 2010 to 30th September, 2015 subject to the approval of the shareholders at the ensuing 21st Annual General Meeting.

Mr. V. Rajagopal aged 53 is a B.A. Honors in Economics from Sri Ram College of Commerce, New Delhi and a Post Graduate in Master of Arts from Bangalore University. He joined the Indian Police Service during the year 1979 and he served the nation for a decade. During the year 1988, Mr. V.Rajagopal quit the Indian Police Service and entered into the business of garment exports. He is an avid reader and a sports person. Was a member of a Social Organisation called Round Table for 8 years till 1998. Was associated in organizing the International

conference of Round Tablers in 1996, in Chennai in the capacity as Vice-Chairman of the conference.

Mr.V.Rajagopal shall have the overall responsibility of managing the affairs of the Company, in particular the commercial and marketing activities of the Company subject to the supervision and control of the Board of Directors.

The proposed re-appointment of Mr.V.Rajagopal as Managing Director is subject to the approval of the shareholders by way of ordinary resolution at the ensuing 21st Annual General Meeting of the Company.

Mrs. Rama Rajagopal being the spouse of Mr.V.Rajagopal is concerned or interested in the aforesaid re-appointment as Managing Director.

Pursuant to Section 302 of the Companies Act 1956, the abstract of the terms of reappointment and remuneration of Mr.V.Rajagopal is furnished herewith.

For Celebrity Fashions Limited

G.BalajiCompany Secretary

Place: ChennaiDate: 13-08-2010

Abstract of the terms of reappointment and remuneration of Mr.V.Rajagopal as Managing Director

(Pursuant to section 302 of the Companies Act, 1956)

1 Tenure 1st October, 2010 to 30th September, 20152 Salary Rs.2,00,000/- per month3 Medical benefits Reimbursement of all actual medical expenses for himself and family to the extent not

reimbursed under Mediclaim Policy4 Telephone Telephone, telefax and other communication facilities at residence at Company’s cost.5 Automobile He shall be entitled to a fully maintained company car for company’s cost.6 Reimbursement of expenses He shall be entitled to the reimbursement of all actual expenses or charges, including travel,

entertainment and other out of pocket expenses incurred by him for and on behalf of the Company, in furtherance of its business and objects.

7 Sitting fees He will not be entitled to any sitting fees for attending the meetings of the Board or of any Committee thereof.

8 Power to vary The Board shall have power to vary or enhance the remuneration from time to time at its discretion on the recommendation of the Remuneration Committee within the limits specified in Schedule XIII to the Companies Act, 1956.

For Celebrity Fashions imited

G.Balaji Company Secretary

Place : ChennaiDate: 13-08-2010


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Directors’ ReportDear Shareholders,

Your Directors hereby present the 21st Annual Report along with the Audited Statement of the Company for the year ended 31st March 2010.

Industry Outlook

The global policy stimulus has gone a long way in finding an exit to the Great Recession. The economic recovery is underway.

The Country’s GDP growth in the third quarter of 2009-10 stood at 6.0% as against the growth of 6.2% registered in the same quarter of the previous year. The GDP growth for the whole fiscal 2009-10 was estimated to be 7.2%. India’s trade is observed to recover from depression, which existed up to the later half of 2009. In the end of 2009 the exporters again reported to get orders in good numbers. As per FICCI, the data from November 2009 was also seen to substantiate the same. In February 2010, exports rose by 34.0% as against the rise of 23.0% in February, previous year.

Buoyed by a robust 8.6 % expansion in the fourth quarter, the Indian economy witnessed a healthier growth of 7.4% in 2009-10 as compared to the 7.2% estimated by the Central Statistical Organization (CSO) earlier, primarily owing to a stimulus – aided rebound in manufacturing coupled with better than anticipated performance by the farm sector. With this India has maintained its position as the second fastest growing economy after China which posted an 11.9% growth in the same quarter.

Exports jumped by 36.2% to $16.88 billion in April, showing clear signs that the export sector was making a strong comeback. After continuous decline for 13 months from October 2008, exports turned positive in November 2009 and since then shipments have followed the growth path. Indian Rupee in February – March 2010 traded Rs.45 levels vis-a-vis the level in May 2009 at Rs.49-50. The sharp appreciation in Indian Rupee is an obvious cause of concern for the Indian exporters.

Indian textile industry is on revival path with production of fibre, yarn and cloth showing positive growth during April to November 2009. The production of cloth increased by 10.8 percent, man-made fibre and yarn production grew by 21.3% & 11.8%, respectively, and the total spun yarn production increased by 5.1% during the period.

The second quarter of the current fiscal saw a strong revival in sales growth and weaving companies posted a sales growth of 19.7%, spinning industry 8.9%, man-made Fibre industry 15.7% and readymade garments industry 14.2%. The Sector witnessed a favorable investment climate since last quarter of last fiscal. For the government, however the litmus test now would be whether the economic recovery continues to hold even after partial roll back of stimulus measures.

Garment exports formed 45 percent of total textile exports from the country. While in other industries, the third generation entrepreneurs expanded the horizon further, the same was not the case with garment industry in India. Fragmentation and absence of vertical integration affected the industry most. Establishment of clusters, common facility centres and development of brands held the key to success. If sustained efforts are made by the industry, the country can capture additional US$ 1.5 billion textile and clothing export in US market, which will also help to generate additional employment opportunities.

The domestic apparel market in India has shown a significant growth in the past by registering a Compounded Annual Growth Rate (CAGR) of 13%.

Despite the recent demand slump, the domestic market is expected to grow at around 9-10% in the next 5 years. Market is moving away from the traditional segmentation to a much deeper and wider segmentation based on consumer needs.

Indian domestic apparel market is currently pegged at between Rs 120-150 billion, with several high potential demographics still untapped such as teens, extra large sizes and children, among others.

As per the CSO data, the country’s per capita income stood at Rs.44,345 in 2009-10. It was higher by 10.5 % over Rs.40,141 a year ago. This means the potential buying capacity will go up in the domestic market. Financial Highlights – Rs. In Crs

FY 2009-10 FY 2008-09Income From operations 294.09 230.04Gross Profit / (Loss) before interest and depreciation

8.37 (89.27)

Interest 18.98 21.04Profit / (Loss) before depreciation and tax (10.61) (110.31)

Depreciation 9.94 8.74Profit / (Loss) before Extra-Ordinary Income (20.56) (119.05)

Extra-Ordinary Income 8.33 -Profit / (Loss) before tax (12.23) (119.05)Provision for Taxation 0.29Profit / (Loss) after tax (12.23) (119.34)

Balance brought forward from previous year (122.40) (3.06)

Balance carried to Balance Sheet (134.63) (122.40)

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Operational Highlights

The Income from operations has gone up by Rs.64.05 crs as compared to the previous year, an increase of 27.8% than the previous year. EBIDTA for the year is at Rs.8.37 crs (+ve) as against Rs. 89.27 crs (-ve) in the previous year. The loss for the year stood at Rs.12.23 crs after accounting for extra-ordinary item of Rs.8.33 crs of income as against the loss of the Rs.119.34 crs recorded in the previous year. The Company has ended the fourth quarter of the year on a high note with a Profit after Tax of Rs.1.64 crs.

The Company’s both the divisions, Exports and Domestic, have performed reasonably well this year with Exports recording over 37% growth over the previous year and domestic division, Indian Terrain with 8% increase in turnover. Revenues from Exports stood at over Rs.214 crs and Indian Terrain at Rs.80 crs.

Exports Division has recorded significant improvements in terms of productivity in operations. The fall in Rupee against the USD until the third quarter of the financial year has helped the Exports Market to swing back. But with the European Crisis, the Indian currency started its recovery in the last quarter and has signaled cautious attitude for the Exporters. The Company with an Expert Management Team in place is exploring the various risk mitigation strategies and has also initiated a Productivity Improvement Program which will serve as a catalyst in achieving the set goals.

Indian Terrain has been performing extra-ordinarily and has currently 53 Exclusive Branded Outlets. Indian Terrain has recorded its fabulous presence in over 700 outlets across the nation. The brand is just bullish in its expansion and has chosen the franchisee route as its expansion strategy for administrative and economic reasons. With the rise in per capita income, Indian Terrain is staged well for its wide-spread expansion both geographically and product wise.

The Company has let out its property at Chrompet to one of the Hospitals from 1st April 2010 at a rental income of Rs.1.50 crs per annum. The rental income is being utilized to repay the bank borrowings. Further the Company is also proposing to sell / lease-out another property at Pallikaranai.

The Company has implemented various initiatives to improve on the efficiencies and control the losses. The Company has recorded positive EBITDA and there are strong signs of revival.

As at the year end, the accumulated losses have resulted in substantial erosion of the networth of the Company. However,

in view of the various strategic initiatives that the Company is exploring, the Company is confident of being able to continue and operate the business on a “going concern” basis and accordingly the financial statements have been prepared on the same lines.The Company has not provided for the service tax liability of Rs.103.36 lakhs, which has been qualified by the auditors in their report. The Company is confident of getting stay order against the levy as advised by the legal counsel.

Financial Re-structuring

The Company in view of the losses incurred has approached its Bankers during September 2008 for re-structuring its corporate debts. State Bank of India (SBI), the Company’s primary banker has sanctioned the financial re-structuring scheme on 23rd December 2008 with retrospective effect from 1st October 2008. HDFC Bank has sanctioned the re-structuring scheme during June 2009 with retrospective effect from 1st April 2009.

The Re-structuring Scheme includes interalia carving out Clean Term Loan from Working Capital Facilities, reduction of Interest Rates on loans, re-scheduling of all Term Loan Repayments with repayments starting from October 2011, deferment of interest repayments through Funded Interest Termloan of 2 years from October 2008 / April 2009 (for SBI and HDFC).

The Company has to comply with conditions laid by the Scheme which includes fresh infusion of additional equity by the Promoters to the extent of Rs.5 crores, deployment of funds in investments into Business, pledge of Equity Shares of Promoters and Personal Guarantee of the Promoters viz. Mr. V. Rajagopal, Chairman and Managing Director and Mrs. Rama Rajagopal, Executive Director.

The Company has complied with the various conditions stipulated by the Banks.

The other bankers have opted to enter into a One-Time Settlement with the Company. Accordingly, the Company has settled its other Bankers by paying 35% of the Outstanding dues. The balance 65%, viz. 8.33 crs, of the total dues has been written back as gain on One-Time Settlement and the same has been classified as Extra-Ordinary Income in the Profit and Loss Statement.

Business Re-structuring Proposal

The Company is broadly segmented into Exports and Domestic Divisions. Exports Division is further sub-divided into Tops and Bottoms Division. The Domestic Division (brand Indian Terrain) and Bottoms Division cater to different markets / products. The


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company sensing the need to manage them as independent entities for enhancement of their capabilities and to have greater focus on their operations, has decided to hive-off the divisions. Further, the hive-off would provide greater flexibility to the entities, to meet the needs for carrying out its operations. The hived-off divisions will realize true values when separated and also will maximize their returns and efficiency. The Company has filed a scheme of arrangement with the Hon’ble High Court of Madras for the demerger of Indian Terrain Division into Indian Terrain Fashions Limited (ITFL) and transfer of Bottoms Division on a going concern basis to Celebrity Clothing Limited (CCL), a 100% subsidiary, through slump sale.Further, the Company intends to fair value the assets of the company and write off the accumulated losses against the existing reserves. The Scheme of Arrangement is under Section 391 to 394 read with Section 78 and Section 100 to 103 of the Companies Act.

Upon demerger, ITFL would be a listed entity, with its shares listed in National Stock Exchange of India Limited (NSE) and Bombay Stock Exchange Limited (BSE). Every shareholder of the Company would be issued 2 shares of ITFL for every 7 shares held in the company. CCL will remain unlisted.

The Company has got the in-principal approval for the Scheme from NSE and BSE. The Scheme was filed with the High Court of Madras on 15th April 2010.

The Hon’ble High Court of Madars vide its order dated 26th April 2010 has ordered for a meeting of the Equity Share holders of the Company on 9th June 2010. The entire Scheme is subject to the approval of the Shareholders and Creditors of the Company.

This scheme facilitates the entities involved, to explore new avenues and would enhance the future growth prospects for the people and organizations connected with them. The restructuring activities under the scheme would unlock shareholders value and create long term value for all the stakeholders.

Finance and Accounts

The company has incurred Loss for the year and hence there is no provision for Income Tax.

The company has not availed any credit facility from any institutions during the year. The company has not accepted any deposits within the meaning of Section 58A and 58AA of the Companies Act 1956.

Share Capital

State Bank of India, in its Sanction letter dated 23rd December 2008 has stipulated that the Promoters will have to bring in Rs.5 crs in phases as contribution towards equity. Accordingly, the promoters have brought in Rs.50 lakhs during March 2009.

The Company has gone for a preferential allotment of 2,94,118 equity shares at Rs.17.03 per share to one of the promoters, Mr. V. Rajagopal during August 2009. The allotment was approved by the Shareholders in the Annual General Meeting held in July 2009.

Further, pursuant to ESOP Scheme, the Company has allotted 7,500 equity shares on conversion of options exercised by employees.

Consequent to the above, the Share Capital of the Company has increased by Rs.30.16 lakhs.

The promoters have brought in next tranche of their contribution towards equity to an extent of Rs.25 lakhs and the same is classified under Share Application Money as on 31st March 2010. The promoters / directors have further brought in Rs.2.83 crs during April 2010 towards equity of the Company.

Dividend

In view of the business loss for the year, no dividend is being recommended

Personnel

The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions in the current Challenging Scenario.

Directors

The whole time Directors have been accorded approval for payment of minimum remuneration under Section 198(4) read with Section II of Part II of Schedule XIII of the Companies Act, 1956, consequent to which the terms of appointment has been fixed for 3 years effective from 1st April 2006. Due to inadequacy of profits, the Board of Directors at its Meeting held on 13th December 2007 approved on recommendation of the Remuneration and Compensation Committee and as approved by the Members in the Annual General Meeting held on 28th August 2008, modified the remuneration of the whole time Directors of the Company with effect from 01st January 2008 as Rs.24.00 lakhs per annum for each of the whole time

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Director as against Rs.42.00 lakhs per annum earlier.Pursuant to Section 255 of the Companies Act, 1956, Mr. N.K. Ranganath and Mrs. Nidhi Reddy, retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Subsidiary companiesAs required under Section 212 of the Companies Act, 1956, the Annual Reports for the year 2009-2010 and Accounts for the year ended on March 31, 2010, of the subsidiary companies Indian Terrain Fashions Limited and Celebrity Clothing Limited are attached.

Auditors

M/s Anil Nair & Associates, Chartered Accountants, Chennai and M/s CNGSN & Associates, Chartered Accountants, Chennai, the Joint Auditors of the Company, retire at the ensuing Annual General Meeting and are eligible for re-appointment.

Corporate Governance Report and Management Discussion and Analysis Statement

A report on Corporate Governance is attached to this Report as also a Management Discussion and Analysis statement.

Particulars as per Section 217 of the Companies Act, 1956 A) Pursuant to the requirement of Section 217 (2AA) of the

Companies Act, 1956 and based on the representations received, your Directors hereby confirm that:

i. In the preparation of the Annual Accounts for the year ended 31st March 2010, the applicable Accounting Standards have been followed and there are no material departures;

ii. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

iii. The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. The Directors have prepared the Annual Accounts on a going concern basis.

B) The Particulars of employees, as required under Section 217 (2A) of the Companies Act, 1956 are given in a separate statement attached to this Report and forms part of it.

C) The information pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given below:

i. Conservation of Energy: The operations of the Company are not energy-intensive.

However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption: Not applicable.

iii. Foreign Exchange Earning and Outgo:

Total Foreign exchange earned (FOB Value) Rs.20,827.75 lakhs Total Foreign exchange outgo Rs. 6,966.85 lakhs

Employee Stock Option PlanThe particulars of ESOP Scheme 2005, ESOP 2007 and ESOP 2007 (2) which are provided as per the SEBI ESOP Guidelines, forms part of this report.

Appreciation

The Directors are sincerely thankful to you – the esteemed shareholders, customers, business partners, financial / investment institutions and commercial banks for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround.

For and on Behalf of the Board

V Rajagopal Chairman & Managing Director

Place:ChennaiDate : 04-06-2010


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ANNEXURE TO THE DIRECTORS’ REPORT

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors’ Report for the year ended March 31, 2010

Name Designation Qualification Age Date of Joining

Experience in years

Gross Remuner-

ation (Rs. in lakhs)

Previous Employer

V.Rajagopal Chairman and Managing director M.A., I.P.S 53 28.04.1988 32 24.00

Indian Police Service

Rama Rajagopal Executive Director M.A. 53 04.01.1994 15 24.00 -

S.Surya Narayanan Executive Director B.Com, FCA 45 01.07.1996 22 24.00

Manager - Finance, Harita Finance Limited

Suresh Rajagopal Executive Vice President - Sourcing

B.A. Economics 59 01.04.2000 36 24.00

Marketing - Czech Republic

Charath Narsimhan

Chief Executive Officer – Domestic Division

B.Tech, MBA 37 07.11.2005 14 24.00

General Manager - Sales & Marketing, Raymond Apparel Limited

Notes :

1. Remuneration comprises basic salary, allowances, retirement benefits and taxable value of perquisites.

2. Nature of employment - The above employees are whole time employees of the Company except Mr. V. Rajagopal, Mrs. Rama Rajagopal, Mr. S .Surya Narayanan whose employment are contractual in nature.

3. Mr. V. Rajagopal, Chairman and Managing Director and Mrs. Rama Rajagopal, Executive Director are related to each other.

4. Mr. Suresh Rajagopal, Executive Vice President is related to Mr. V. Rajagopal, Director of the Company.

5. None of the employees own more than 2% of the shares of the Company as on March 31, 2010 except the promoter directors.

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ANNEXURE TO THE DIRECTORS’ REPORT Disclosure under SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

Employees Stock Option Plan 2005 In 2005, the Company has introduced Employee Stock option plan 2005 in order to motivate and retain the employees and details of which are appended below:

Particulars ESOP 2005 ESOP (2) 2005

Options granted 1,50,000 options 20,000 options

The Pricing formula 30% of the fair Market Value 16.67% of the fair market value

Options Vested 96,800 Options Nil

Options Exercised 53,000 Options Nil

Total number of shares arising as a result of exercise of options

1,50,000 options 20,000 Equity Shares

Options Lapsed 43,800 Options Nil

Variation of terms of options Nil Nil

Money realised by exercise of options Rs. 15,90,000 /- Nil

Total number of options in force 53,200 options 20,000

Employee wise details of options granted to a) Senior Managerial Personnel

b) Employees receiving 5% or more of the total number of options granted during the year

c) Identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital of the company at the time of grant

52,000 options, (details provided below)

86,000 options (details provided below)

Nil

20000 options to Charath Narsimhan

CEO - Domestic Division

Nil

Diluted EPS pursuant to issue of shares on exercise of options calculated in accordance with AS 20

The Options are antidilutive as the EPS is in negative


Senior Management (under ESOP 2005)

S. Surya Narayanan, Executive Director & CFO 25,000

Suresh Rajagopal, Executive Vice-President 21,000

V.V. Naresh, GM - Finance & Company Secretary 6,000


14

Employees receiving in excess of 5% - (under ESOP 2005)S. Surya Narayanan 25,000 16.67%

Suresh Rajagopal 21,000 14.00%

Josiah Franklin 20,000 13.33%

Amitabh Suri 20,000 13.33% Employees Stock Option

During the financial year 2006 - 07, the company has formulated two Schemes viz., Employees Stock Option Plan 2007 (ESOP 2007) and Employees Stock Option Plan (2) 2007 (“ESOP (2) 2007”) in accordance with the provisions of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, after obtaining the approval of the shareholders and the details of the same has been furnished below:

Particulars ESOP 2007 ESOP (2) 2007

Options granted 1,60,000 options 1,80,000 Options

The Pricing formula Rs.75/- per option Pricing as per SEBI Preferential guidelines

Options Vested Nil Nil

Options Exercised Nil Nil

Total number of shares arising as a result of exercise of options 1,60,000 Equity Shares 1,80,000 Equity Shares

Options Lapsed 1,20,000 Options 1,00,000 Options

Variation of terms of options Nil Nil

Money realised by exercise of options Nil Nil

Total number of options in force 40,000 options 80,000 options

Employee wise details of options granted to

a. Senior Managerial Personnel

b. Employees receiving 5% or more of the total number of options granted during the year

1,60,000 options, (details provided below)

160,000 options (details provided below)

1,60,000 options, (details provided below)

1,75,000 options (details provided below)

c. Identified employees who were granted option during any one year equal to or exceeding 1% of the issued capital of the company at the time of grant

Nil Nil

Diluted EPS pursuant to is-sue of shares on exercise of options calculated in accordance with AS 20



Senior Management (under ESOP 2007)Sandeep Walia, CEO - Exports Division 80,000 Charath Narsimhan, CEO - Domestic Division 80,000

15


Employees receiving in excess of 5% - (under ESOP 2007)

*Sandeep Walia, CEO - Exports Division 80,000 50%**Charath Narsimhan, CEO - Domestic Division 80,000 50%

* 80,000 Stock options granted to Mr.Sandeep Walia stands cancelled subsequent to his resignation in the financial year 2007-08.

** Out of 80,000 options granted to Mr.Charath Narasimhan, 40,000 options have not been granted since the required parameters have not been met.

Senior Management (under ESOP (2) 2007)

*Sandeep Walia, CEO - Exports Division 20,000John Dulip Kumar, GM - Merchandising 10,000*V.K.Vijayaraghavan, VP - Finance & Commercial 15,000*Sonya Arora, GM - Merchandising 10,000*S.Saravanan, GM - Projects 10,000*S.Shyam Sundar, GM - Human Resource 10,000V.V.Naresh, GM - Finance & Company Secretary 15,000*N.Ramakrishnan, GM - Sourcing 5,000V.Sridharan, GM - Finance 10,000Amitabh Suri, Senior VP- Marketing & Product Development 15,000A.M.Gopinath, GM - Commercial 10,000*Supratim Choudury, GM - Product Design & Development 10,000*Amit Rai, GM - Operations 10,000J.V.Josiah Franklin, Senior VP - Operations 10,000

*1,00,000 options granted to Sandeep Walia, Vijayaraghavan, Sonya Arora, S.Saravanan, S.Shyam Sundar, N.Ramakrishnan, Supratim Choudury, Amit Rai, Tapan Kumar Das stands lapsed, subsequent to their resignation. Employees receiving in excess of 5% - (under ESOP (2) 2007)

Sandeep Walia, CEO - Exports Division 20,000 11.11%John Dulip Kumar, GM - Merchandising 10,000 5.55%V.K.Vijayaraghavan, VP - Finance & Commercial 15,000 8.33%Sonya Arora, GM - Merchandising 10,000 5.55%S.Saravanan, GM - Projects 10,000 5.55%S.Shyam Sundar, GM - Human Resource 10,000 5.55%V.V.Naresh, GM - Finance & Company Secretary 15,000 8.33%V.Sridharan, GM - Finance 10,000 5.55%Amitabh Suri, Senior VP- Marketing & Product Development 15,000 8.33%A.M.Gopinath, GM - Commercial 10,000 5.55%L.Visalakshi, AGM - Finance 10,000 5.55% Tapan Kumar Das, AGM - Finance 10,000 5.55%Supratim Choudury, GM - Product Design & Development 10,000 5.55%Amit Rai, GM - Operations 10,000 5.55%J.V.Josiah Franklin, Senior VP - Operations 10,000 5.55%_______________________________________________________________________________________________

DECLARATION

As per provisions of clause 49 of the Listing Agreement entered with the Stock Exchanges, I hereby declare that all the Board Members and Senior Managerial Personnel have affirmed the compliance of the Code of Conduct of the Company for the financial year ended 31st March 2010.

Date : 04-06-2010 V RajagopalPlace: Chennai Chairman and Managing Director


16

REPORT ON CORPORATE GOVERNANCE

Company’s Philosophy on Code of Corporate Governance Celebrity Fashions Limited focuses Corporate Governance as a key driver of sustainable corporate growth and a powerful medium to achieve the company’s goal of maximizing value for all its stakeholders. A sound corporate governance strengthens investors’ trust and enables the company to fulfill its commitment towards the customers, employees and the society in general. Celebrity Fashions Limited believes that the primary objective is to create and adhere to a corporate culture of conscience and consciousness, empowerment, accountability and independent monitoring.

The company philosophy is based on the key elements in corporate governance viz., transparency, disclosure, supervision and internal controls, risk management, internal and external communications, high standard of safety, health, accounting fidelity, product and service quality. The company has a strong legacy of fair and ethical governance practices.

BOARD OF DIRECTORS

The Board of Directors of the Company possess highest personal and professional ethics, integrity and values, and provides leadership, strategic guidance and objective judgement on the affairs of the company. The Board is fully aware of its fiduciary responsibilities and is committed to represent the long-term interest of the Stakeholders. The Board adopted the principles of corporate governance and remains informed, participative, and independent to implement its broad policies and guidelines and has set up adequate review procedures.

The Key to good corporate governance is the optimum combination of the executive and non-executive directors

on the board and the extent of their independence. The Board consists of six members with knowledge and experience in diverse fields and professionally acclaimed to understand their role in addressing the issues raised by the management. The day-to-day affairs of the company are managed by the Managing Director and Executive Directors under the supervision of the Board.

Composition of the Board

The Board has constituted in the manner, which will result in an appropriate mix of Executive / non executive and independent directors to ensure proper governance and Management.

During the financial year 2009-10, the Board consisted of six Directors. Mr.V.Rajagopal is the Chairman and Managing Director and Mrs. Rama Rajagopal and Mr. Surya Narayanan are the Executive Directors.

Out of six Directors, three directors viz., Mr.P.S.Raman, Mr.N.K.Ranganath and Mrs. Nidhi Reddy are non executive Independent Directors. The number of independent directors on the Board is half of its strength. Thus the Company meets the requirements of composition of the Board according to the Listing agreement.

Board Meetings

During the financial year 2009-10, the Board met 7 times on 29th April 2009, 26th June 2009, 31st July 2009, 30th October 2009, 3rd November 2009, 28th January 2010 and 3rd March 2010.

Details of attendance of each director at the Board Meetings and in the last Annual General Meeting and number of directorships / committee memberships held by them as on 31st March 2010 are as follows:

Name of the Director Category Attendance at the Board

Meetings

Attendance at the Last

AGM

Number of other Director- ships held**

Other CommitteeMembership ***

Member ChairmanMr. V. Rajagopal Chairman and Managing Director

Executive / Promoter 6 Yes 2 1 -

Mrs.Rama RajagopalExecutive Director Executive / Promoter 4 Yes 2 - -

Mr.S.Surya NarayananExecutive Director Executive 7 Yes 3 2 -

Mr.P.S.RamanDirector

Independent Non Executive 2 No 1 2 1

Mr.N.K.RanganathDirector

IndependentNon Executive 6 Yes 1 2 1

Mrs.Nidhi ReddyDirector

IndependentNon Executive 5 Yes - - -

17


Notes:

** The Directorship held by the Directors, as mentioned above, includes the directorship held in Private Limited Companies

*** Only membership of audit committee and shareholders / investors grievance committee has been taken into consideration.

Access to information and updation to Directors

The required information as enumerated in Annexure 1A to Clause 49 of the Listing Agreement is made available to the Board of Directors for discussions and consideration at Board Meetings. The Board also reviews significant strategic, financial, operational and compliance matters in the meeting.

COMMITTEES OF THE BOARD

The Board in order to be effective had constituted an Audit Committee, a Shareholder / Investor Grievance Committee and a Remuneration and Compensation Committee.

AUDIT COMMITTEE

The Audit Committee plays an important role in financial reporting of performance and review of internal control procedure.

The Company consists of qualified and independent Audit Committee. The committee consists of three members Mr.N.K.Ranganath, Non-executive independent director as its Chairman, Mr.S.Surya Narayanan and Mr.P.S.Raman as its members. All the members of the Committee have excellent financial and accounting knowledge.

The role of the Audit Committee, in brief, is to review financial statements, internal controls, accounting policies and internal audit. The quarterly financial results are placed before the audit committee for its review, suggestions and recommendation(s), before taking the same to the Board. The Committee also reviews the management discussion and analysis of financial conditions and results of operations, related party transactions.

The Committee met 5 times on 29th April 2009, 26th June 2009, 31st July 2009, 30th October 2009 and 28th January 2010 during the financial year ended 31st March 2010, wherein all the Committee members were present for all the meetings.

REMUNERATION AND COMPENSATION COMMITTEE

The Board has set up Remuneration and Compensation Committee with a role to determine the remuneration payable to whole time directors and key managerial personnel of the Company, to recommend to the Board the appointment / reappointment of the Executive / Non-executive directors, to grant stock options and for framing of policies to attract, motivate and retain personnel. The Committee consists of three non-executive independent directors, Mrs.Nidhi Reddy as its Chairman, Mr.P.S.Raman and Mr.N.K.Ranganath as its members.

During the year ended 31st March 2010, the Remuneration and Compensation Committee has not met. Remuneration Policy

The Remuneration policy of the company has been structured to match the market trends of the industry, qualifications and experience of the employee and responsibilities handled by them.

Remuneration to Directors

The Non executive directors do not draw any remuneration from the Company other than the sitting fees for attending each meeting of the Board and committees thereof. The Company pays sitting fees of Rs. 2,500/- to all the non-executive directors for attending each meeting of the Board and Rs.1,500/- for each meeting of its committee thereof which is within the limits prescribed under the Companies Act, 1956. During the financial year 2009-10, the sitting fee paid to Non - Executive Directors were as under:

Name of the Director

Sitting Fees (includes the fees paid for Committee Meetings)

Rs.Mr. P.S.Raman 5,500Mr. N.K.Ranganath 10,500Mrs. Nidhi Reddy 5,000

There are no other particular pecuniary relationships or transactions of the non-executive directors’ vis-à-vis of the Company. The Company pays remuneration by way of Salary, perquisites and allowances to the Managing Director and Executive Directors. Details of the remuneration and perquisites paid to the whole time directors are as under:


18

connected with share transfers, issue of duplicate share certificates, etc. The Committee also looks into the redressal of investors’ grievances pertaining to transfer of shares and dematerialization, non-receipt of balance sheet, non-receipt of declared dividends, etc. The Committee consists of three members and Mr.P.S.Raman, Non executive independent director as its Chairman and Mr.V.Rajagopal and Mr.S.Suryanarayanan as its members. During the year, the committee met once on 6th April 2009, wherein all the members of the committee were present.

Mr.V.V.Naresh, GM - Finance and Company Secretary was appointed as Compliance Officer by the Board of Directors at their meeting held on 06th September, 2005 pursuant to Clause 47(a) of the Listing Agreement.Subsequent to his resignation on March 31, 2010, Mr. S. Surya Narayanan, Executive Director and Chief Financial Officer has assumed the role of Compliance Officer.The Board has approved the appointment of Mr. G. Balaji as Company Secretary in its meeting held 4th June 2010.

The Company received one complaint during the year and the same was resolved. There were no complaints pending to be resolved as on 31st March 2010.

Subsidiary Companies

The Company has floated two subsidiaries during the year – Indian Terrain Fashions Limited (ITFL) which was incorporated on 29th September 2009 and Celebrity Clothing Limited (CCL), which was incorporated on 30th September 2009. The Company holds 98.40% of the shares in ITFL and CCL is a 100% wholly owned subsidiary. Both ITFL and CCL were incorporated as in lieu of the Re-structuring Scheme the Company is proposing and both the Companies have not earned revenues nor incurred any expenditure (other than preliminary expenditure) for the year ended 31st March 2010.Clause 49 of the listing agreement defines a ‘material non-listed subsidiary company’ as an unlisted subsidiary, incorporated in India, whose turnover or net worth (i.e. paid up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively, of the listed holding company and its subsidiaries in the immediately preceding accounting year. Accordingly, ITFL and CCL are not material non-listed subsidiary companies.

General Body Meetings

The details of the last three Annual General Meetings (AGMs) held were as under:

Name of the Director Salary(Rs. in Lakhs)

Retirement Benefits

Total (Rs. in Lakhs)

Mr.V RajagopalChairman andManaging Director

24.00 Nil 24.00

Mrs.Rama RajagopalExecutive Director 24.00 Nil 24.00

Mr.S.Surya NarayananExecutive Director 24.00 Nil 24.00

In addition to the above, the whole time directors shall be entitled to suitable mediclaim policy for hospitalization and reimbursement of all actual medical expenses for themselves and their family to the extent not reimbursed under Mediclaim policy. They shall be entitled to telephone, fax and other communication facilities at their residence at company’s cost. They are entitled to a fully maintained company car for company’s business and the company shall pay the cost of vehicle, inclusive of driver. They shall also be entitled to reimbursement of all actual expenses or charges, including travel, entertainment and other out of pocket expenses incurred by them for and on behalf of the Company, in furtherance of its business and objects. During the year under review, Mr.S.Surya Narayanan, Executive Director had exercised 7,500 Stock options out of 25,000 Stock options granted to him under Employees Stock Option Plan 2005. On 17th September 2009, the Company had allotted the aforesaid 7500 Equity Shares at the exercise price of Rs.30/- per share.

As per the Employees Stock Option Plan 2005, the stock options granted can be exercised within three years from the date of vesting of options and the period of vesting and its proportion are hereunder:

Period Vesting proportionEnd of one year from the date of grant

20% of options granted

End of two years from the date of grant


End of three years from the date of grant


End of four years from the date of grant


Shareholders/Investors Grievance Committee

The Committee oversees and reviews all matters

19


Financial year

Day and Date Time Venue

2008 – 09Monday, 27th July 2009

10.30 A.M

Corporate Office,SDF- IV & C 2,3rd Main Road, MEPZ - SEZ, Tambaram, Chennai 600 045.

2007 - 08Thursday, 28th August 2008

10.30 A.M

Corporate Office, SDF- IV & C 2,3rd Main Road, MEPZ - SEZ, Tambaram,Chennai 600 045.

2006 - 07Thursday, 23rd August 2007

10.30 A.M.

Corporate Office, SDF - IV & C 2,3rd Main Road, MEPZ - SEZ, Tambaram,Chennai 600 045.

The following special resolutions were passed by the members during the last 3 annual general meetings:

AGM held on 27.07.09

Preferential allotment of Equity Shares to the Promoter, Mr. V. Rajagopal, Chairman and Managing Director in accordance with SEBI (DIP) guidelines


1. Appointment of Ms. Anjali Rajagopal, daughter of Mr. V. Rajagopal and Mrs. Rama Rajagopal, Directors of the Company as Management Trainee

2. Appointment of Mr. Vidyuth Rajagopal, son of Mr. V. Rajagopal and Mrs. Rama Rajagopal, Directors of the Company as Management Trainee

3. Reduction in Remuneration payable to Mr. V. Rajagopal, Managing Director, Mrs. Rama Rajagopal, Executive Director and Mr. S. Surya Narayanan, Executive Director in accordance with Sections 198, 269 and 309 read with the provisions of Schedule XIII and other applicable provisions of the Companies Act, 1956.


No special resolution passed

All Special resolutions moved in the last Annual General meetings were passed with requisite majority on show of hands by the shareholders present at the meeting.

Code of conduct

The Company has adopted a Code of Conduct for all board members and senior management of the Company.

The Code has been communicated to the directors and the members of the Senior Management of the Company. The code has been displayed on the Company’s website namely www.celebritygroup.com. All the members of the Board and senior management have confirmed compliance with the Code for the year ended, 31st March 2010. The annual report contains a declaration to this effect signed by the Chairman and Managing Director and the Executive Director as Compliance Officer of the Code.

The Company has also framed a Code of Conduct for prevention of Insider Trading incompliance with SEBI (Prohibition of Insider Trading) Regulations, 1992. This code is applicable to all directors/officers and designated employees of the company. The code regulates dealing in shares by the persons having access to the unpublished price sensitive information.

CEO/ CFO CERTIFICATION

CEO and CFO have given the certificate as given in Clause 49 of the Listing Agreement.

DISCLOSURES

There were no materially significant related party transactions that may have potential conflict with the interest of company at large. The details of the related party transactions are disclosed under the notes on accounts, as required under the Accounting standard 18 issued by the Institute of Chartered Accountants of India.

The Company has complied with the requirements of SEBI and stock exchanges on the matters relating to capital markets as applicable from time to time. There has been no instance of non-compliance by the company or penalty or strictures imposed on company by the stock exchanges or SEBI or any statutory authority, on any matter relating to capital markets, during last three years.

The company has complied with all the mandatory requirements of the code of corporate governance prescribed by the stock exchanges. In compliance with non-mandatory requirements, the company has constituted a Remuneration and Compensation Committee.

The company has not adopted the whistle blower mechanism, as it is a non-mandatory requirement.

Means of Communication

The quarterly and half-yearly / annual financial results are communicated to the Bombay Stock Exchange Limited (BSE) and National Stock Exchange of India Limited (NSE), where the shares of the Company are listed, as soon as they are approved and taken on record by the Board of Directors. The financial results are published in Business Standard All India Edition and in Dhina Bhoomi Tamil newspaper.


20

Celebrity Fashions Limited Share Price Performance in comparison with BSE Sensex

Registrar and Share Transfer Agents

M/s. Link Intime India Private Limited, Mumbai are the Registrar and Share Transfer agents for handling physical and electronic registry work. The Shareholders are requested to address their share related requests/ queries to the RTA. The contact address of the registrar and share transfer agent is as follows:

M/s. Link Intime India Private LimitedC - 13, Pannalal Silk Mills Compound,L.B.S.Marg, Bhandup (W),Mumbai 400 078Tel: + 91 22 2596 3838Fax : + 91 22 2596 2691Website : www.linkintime.co.inE-mail : [email protected]

Share Transfer System

The Board has delegated the powers to approve share transfers, transmissions, rematerialisation by constituting a Shareholders/ Investors Grievance Committee. As 99.99% of the shares were held in dematerialized mode, the transfers of those shares were done through the depositories with no involvement of the company.

The physical share transfer, transmissions are processed based on number of requests received. The shares lodged for transfers are processed and registered as per the requirements of the listing agreement if the documents are complete in all respects.

Distribution of Shareholding:

General Shareholders Information

Financial Year

1st April to 31st March

Annual General Meeting and Date of Book Closure

This Corporate Governance Report was taken on record by the Board in their meeting held on 4th June 2010. The date and venue of the Annual General Meeting was not finalized in the Board Meeting. Hence the details as to the Schedule of Annual General Meeting and the dates of Book Closure have not been provided.

Listing on Stock Exchanges

Bombay Stock Exchange

Limited Phiroze JeeJeebhoy

Towers, Dalal Street,

Mumbai 400 001

Stock Code: “532695”

National Stock Exchange

of India Limited Exchange

Plaza, Block G, Bandra

Kurla Complex, Bandra

(East), Mumbai 400 051

Stock Code: “CELEBRITY”

Market Price data (Share price in Rs.)

Month

BSE NSEHigh Low Volume

(In Nos.)

High Low Volume

(In

Nos.)Apr-09 14.00 9.30 58,338 13.90 9.90 65,456

May-09 19.79 11.05 169,177 19.50 11.10 120,551

Jun-09 24.60 15.60 143,419 24.90 15.35 166,955

Jul-09 17.70 14.25 43,912 17.75 14.25 36,372

Aug-09 19.80 15.05 136,050 19.90 15.15 103,630

Sep-09 21.45 18.50 155,797 21.25 18.55 133,236

Oct-09 22.55 16.65 110,247 22.85 16.75 144,580

Nov-09 20.65 15.65 77,670 20.60 15.70 88,473

Dec-09 20.40 17.90 94,965 20.60 18.00 111,806

Jan-10 27.80 18.70 304,324 28.40 18.85 360,487

Feb-10 21.40 17.65 51,111 22.00 17.95 59,912

Mar-10 25.90 19.60 139,603 26.00 19.90 190,001

21


Distribution of Shareholding as on 31st March 2010 is as under:

Range Holding Amount (Rs.)

% to Capital

No. of Hol- ders

% to Total

Holders

0001- 5000 3247992 32479920 17.90 15800 99.43

5001- 10000 349664 3496640 1.94 50 0.31

10001- 20000 298952 2989520 1.65 22 0.14

20001- 30000 138720 1387200 0.76 6 0.04

30001- 40000 31742 317420 0.17 1 0.01

40001- 50000 82550 825500 0.45 2 0.01

50001- 100000 131072 1310720 0.72 2 0.01

Greater than 100000

13862647 138626470 76.41 8 0.05

TOTAL 18143339 181433390 100.0000 15891 100.000

Shareholding Pattern as on 31st March 2010

Category No. of Shares

Percentage

Promoter and promoter groupPromoter and promoter group 7883779 43.45

Sub Total 7883779 43.45NRIs/OCBsForeign Company 3400000 18.74

Foreign Nationals 290 0.001

Non Resident Indians 58556 0.32

Sub Total 3458846 19.06Others

Clearing Members 84592 0.47

Private Corporate Bodies 3057221 16.85

Public 3658901 20.17

Sub Total 6800714 37.49Total 18143339 100

Graphical Representation of the Shareholding pattern

Dematerialisation of Shares and liquidity

The Equity Shares of the company were admitted in the following depositories under International Securities Identification number (ISIN) No. INE185H01016 considering the benefits embedded in holding and trading of the securities in electronic form.

During the year 2009-10, the Company received a rematerialization request for 700 shares. The Company rematerialized the shares and issued the Share Certificate accordingly.

Name of the depository AddressNational Securities Depository Limited

4th Floor, Kamala Mills Compound, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013.

Central Depository Services (India) Limited

28th Floor, Phiroze Jee Jeebhoy Towers, Dalal Street, Mumbai - 400 001.

As at 31st March 2010, 18142469 Equity shares aggregating to 99.99% were held in dematerialized form.

Outstanding GDRs/ADRs/Warrants or any convertible instruments, conversion date and likely impact on equity

The Company has not issued any GDRs/ADRs/Warrants or any convertible instruments during the financial year 2009 - 10 under review.

Plant Locations

No.70/2 & 3A, Selaiyur Agaram Road, Thiruvanchery, Chennai – 600 073

No.208, Velachery Tambaram Road, Narayanapuram, Pallikaranai, Chennai – 601302

No.72/1 and 72/2, Senneerkuppam Village, Poonamallee Bypass Road, Poonamallee, Chennai – 600 056

Plot C2, Survey Nos. 24, 25 and 54, Phase II, MEPZ – SEZ, Tambaram, Chennai - 600045.

Address for correspondence

Celebrity Fashions LimitedRegistered & Corporate OfficeSDF - IV & C2, 3rd Main Road, MEPZ - SEZ, Tambaram,Chennai 600 045.Tel : + 91 44 43432200Fax : +91 44 22622897, 22628184Email : [email protected] : www.celebritygroup.com


22

“GROUP COMING WITHIN THE DEFINITION OF GROUP AS DEFINED IN THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969.”

1. Mr.Venkatesh Rajagopal 2. Mrs.Rama Rajagopal 3. Mr.Suresh Rajagopal 4. Mr.K.A.Rajagopal 5. Ms.Anjali Rajagopal 6. Mr.Vidyuth Rajagopal 7. Celebrity Connections (Partnership Firm) 8. Indian Terrain Fashions Limited 9. Celebrity Clothing Limited

The above disclosure has been made interalia for the purpose of Regulation 3(1)(e) of the Securities Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

For Celebrity Fashions Limited

S.Surya Narayanan Executive Director

AUDITORS’ CERTIFICATE ON CORPORATE GOVERNANCE

To the MembersCelebrity Fashions Limited

We have examined the compliance of conditions of Corporate Governance by Celebrity Fashions Limited for the year ended on 31st March 2009, as stipulated in clause 49 of the listing Agreement of the said Company with Bombay Stock Exchange Limited and Na-tional Stock Exchange of India Limited.

The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited to procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Gover-nance. It is neither an audit nor an expression of opinion on the financial statement of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the company has com-plied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement .

We further state that such compliance is neither an assurance as to future viability of the Comoany nor the efficiency or effectiveness with which the management has conducted the affairs of the company.

For CNGSN & AssociatesChartered Accountants

C.N. Gangadaran Partner

Membership No.11205 F.R.No.004915SDated: 04-06-2010

Place: Chennai

23


Management Discussion and Analysis

Overview:

The Indian textile and apparel industry is very large and diverse, employing 35 million people and accounting for 27 per cent of the country’s exports. The apparel industry plays a pivotal role as a key driver of the national economy and has grown to be the most significant contributor to the country’s economy over nearly three decades of its existence. However, during last 10 years, the industry’s actions, government policies as well as market events have begun to converge, providing several growth opportunities for the sector domestically as well as in the global market. Textile industry besides being a big employment generating industry continues to be a major part of India’s export basket. This year was all about the exit from the Great Recession and it worked courtesy of massive global policy stimulus. The acute phase of the financial crisis has past and a global economic recovery is underway. However, the recovery remains fragile and is expected to slow in the second half of 2010 as the growth impact of fiscal and monetary measures wane and the current inventory cycle runs its course. A great deal of uncertainty clouds the outlook for the second half of 2010 and beyond. The waning growth impact of the fiscal stimulus, a progressive end to the inventory cycle, uncertainty as to the extent that private-sector confidence will step in and sustain the recovery and the possibility of a second round of bank failures – either in developed or developing countries could lead to a double-dip growth recession. On the other hand, with monetary policy as loose as it is currently in high-income countries there is a reasonable probability of a more buoyant private-sector reaction as household saving rates decline more quickly and investment react more forcefully to low interest rates and improved confidence.

India’s Q4 Export was the highest among the top economies in merchandise exports. It is over by 13% against its December quarter (Q3). In other words, India raked in 13 % more dollars from merchandise exports valued at $ 50,342 million as against $ 44,417 million in the December quarter. According to WTO data, it surpassed global majors such as China, US, Japan, France, the UK and Germany in growth rate during the quarter.

The data for about 70 economies representing about 90 % of world trade show that merchandise trade declined in January and February 2010, then sharply rose in March. Usually the December quarter with Christmas and New Year around used to be very busy, but surprisingly this time March quarter was better than the December quarter. In India, exports rose to $ 19,908 million in March as against $ 16,091 million in February and $ 14,343 million in January, according to WTO data.

Against this backround, if we look at our Indian garment exports, it dropped 2.64% to $10.64 billion in 2009-10, compared to $ 10.93 billion in the previous year. Data source

AEPC. In rupee terms, however there was negligible recovery of 0.37%. Apparel exports totaled Rs.50,479 crore in 2009-10 as against Rs.50,293 crore in 2008-09.

However, in dollar terms, all the months of 2009-10 except July, August and November showed a painful downslide.

Exports jumped by 36.2% to $16.88 billion in April, showing clear signs that the export sector was making a strong comeback. After continuous decline for 13 months from October 2008, exports turned positive in November 2009 and since then shipments have followed the growth path. Indian Rupee in February – March 2010 traded Rs.45 levels vis-a-vis the level in May 2009 at Rs.49-50. The sharp appreciation in Indian Rupee is an obvious cause of concern for the Indian exporters.

Indian textile industry is on revival path with production of fibre, yarn and cloth showing positive growth during April to November 2009. The production of cloth increased by 10.8 percent, man-made fibre and yarn production grew by 21.3% & 11.8%, respectively, and the total spun yarn production increased by 5.1% during the period.

The Company has recorded a total turnover of Rs.294 crores for the year, which is over by 27.83% compared to the previous year. The Company’s net loss is Rs.12.23 crores as against Rs.119.34 crores during previous year.

This was the results of the tough and hard initiatives of the Management and the awareness created by the Management with regard to productivity improvement.

Opportunities and concerns

The apparel export sector has shown signs of revival after falling y-o-y for eight months in a row, the value of India’s apparel exports to the US grew in September 2009, at 60% of Indian exports of textiles and over 70% of clothing are to USA and EU 27 markets, and there is an urgent need to broaden product mix and explore new markets, while maintaining and increasing Indian textiles and clothing (T&C) share in core markets through product innovation and diversification.

According to Mr Maran, Union Textile Minister, at FICCI conference during November 2009, if sustained efforts are made by the industry, the country can capture additional US$ 1.5 billion textile and clothing export in US market, which will also help to generate additional employment opportunities. He said that initiative of his Ministry to pool the resources of all the Export Promotion Council to mount mega shows in non-traditional markets like Japan, Brazil, Argentina and South Africa has been a success and this endeavour will continue.

According to the U.N report, economic growth next year will be strongest in developing countries, especially in Asia.


24

It predicts growth in developing nations will increase from 1.9 percent in 2009 to 5.3 percent in 2010, with China’s economy expected to grow by 8.8 percent in 2010 and India’s by 6.5 percent, both below their pre-crisis pace.

Russia is expected to lead the turnaround among economies in transition, with 1.5 percent growth in 2010 following a severe drop of 7 percent this year, the report said.

In recent years, the readymade garment sector has seen vertical growth. This industry is growing at the rate of 20%, with massive visibility and considerable margins. The potential buying segment of readymade garments is in the age group of 16-25, and it is very brand conscious and gives priority to high quality. Branded readymade garments account over 21 percent of the readymade garment industry.

The domestic apparel market in India has shown a significant growth in the past by registering a Compounded Annual Growth Rate (CAGR) of 13%.

Despite the recent demand slump, the domestic market is expected to grow at around 9-10% in the next 5 years. Market is moving away from the traditional segmentation to a much deeper and wider segmentation based on consumer needs. Indian domestic apparel market is currently pegged at between Rs 120-150 billion, with several high potential demographics still untapped such as teens, extra large sizes and children, among others.

As per the CSO data, the country’s per capita income stood at Rs.44,345 in 2009-10. It was higher by 10.5 % over Rs.40,141 a year ago. This means the potential buying capacity will go up in the domestic market.

The U.N. report said an increasing number of economies showed positive growth in the second quarter of 2009, with the recovery continuing in the third quarter. It pointed to increased industrial production, a rebound in global equity markets, and a rise in international trade. But the report, The World Economic Situation and Prospects 2010, warned that “the recovery is uneven and conditions for sustained growth remain fragile.”

The report said the failure to address two risks could cause the global economy to enter into a double-dip recession.

The first is the risk of prematurely abandoning financial stimulus measures and the second is the risk of a widening U.S. deficit and mounting external debt which could cause “a hard landing” for the U.S. dollar and set off a new wave of financial instability, it said.

In nutshell we can categorize the Opportunities and Concerns as follows:

Opportunities:

1. Growth rate of Domestic Textile Industry is 6-8% per annum.

2. Large, Potential Domestic and International Market. 3. Product development and Diversification to cater global

needs. 4. Market is gradually shifting towards Branded Readymade

Garment. 5. Increased Disposable Income and Purchasing Power of

Indian Customer opens New Market Development. 6. Emerging Retail Industry and Malls provide huge

opportunities for the Apparel, Handicraft and other segments of the industry.

7. Greater Investment and FDI opportunities are available.

Concerns:

1. Competition from other countries, especially China & Bangladesh

2. Continuous Quality Improvement is the need of the hour as there are different demand patterns all over the world.

3. Geographical Disadvantages. 4. International labor and Environmental Laws. 5. Imbalance the demand and supply. 6. Imbalance between price and quality.

Strengths:

1. Indian Textile Industry is an Independent & Self-Reliant industry.

2. Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across the operation.

3. Availability of Low Cost and Skilled Manpower provides competitive advantage to industry.

4. Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry.

5. India has great advantage in Spinning Sector and has a presence in all process of operation and value chain.

6. India is one of the largest exporters of Yarn in international market and contributes around 25% share of the global trade in Cotton Yarn.

7. The Apparel Industry is one of largest foreign revenue contributor and holds 12% of the country’s total export.

8. Industry has large and diversified segments that provide wide variety of products.

9. Growing Economy and Potential Domestic and International Market.

10. Industry has Manufacturing Flexibility that helps to increase the productivity.

Weaknesses:

1. Indian Textile Industry is highly Fragmented Industry. 2. Industry is highly dependent on Cotton.

25


3. Lower Productivity in various segments. 4. There is Declining in Mill Segment. 5. Lack of Technological Development that affect the

productivity and other activities in whole value chain. 6. Infrastructural Bottlenecks and Efficiency such as,

Transaction Time at Ports and transportation Time. 7. Unfavorable labor Laws. 8. Lack of Trade Membership, which restrict to tap other

potential market. 9. Lacking to generate Economies of Scale. 10. Higher Indirect Taxes, Power and Interest Rates.

Business Restructuring Proposal:

The Company has filed a scheme of arrangement with the Hon’ble High Court of Madras for the demerger of Indian Terrain Division into Indian Terrain Fashions Limited (ITFL) and transfer of Bottoms Division on a going concern basis to Celebrity Clothing Limited (CCL), a 100% subsidiary, through slump sale. The modalities of the scheme has been broadly outlined in Director’s Report.

This scheme facilitates the entities involved, to explore new avenues and would enhance the future growth prospects for the people and organizations connected with them. The restructuring activities under the scheme would unlock shareholders value and create long term value for all the stakeholders.

Internal Control Systems and their Adequacy

The Company has developed adequate internal control system commensurate to its size and business to ensure that all assets are safeguarded and protected against any loss from unauthorized use or disposition and that all transactions are authorized, recorded and reported correctly. The internal audit reports are periodically reviewed by the Management together with the Audit Committee of the Board.

The production planning is one of the Key Function in the garment manufacturing company. The Company has installed Fast React Software, a production planning software to plan and monitor the orders accepted by the Company for execution. The Company has a strong Management Information System as a part of Control Mechanism.

Risk ManagementThe Company is exposed to the following risks:

Foreign Exchange Risk

The Company’s policy is to systematically hedge its long term foreign exchange risks as well as short term exposures in line with its hedging policy. In addition to this, the company also has a natural hedge on the imports of the company which is almost 35% of the Exports. In addition to this the long term derivatives are also being used to hedge the currency risk.

Interest Rate Risk

The Interest rate on the borrowings of the Company is fixed at 10.5% as per the Re-structuring Package sanctioned by the Bankers to the Company.

Apart from the above, the Company is also exposed to certain operating business risks in the form of government regulations and others and the same is taken care through regular monitoring and corrective mechanisms.

Financial Performance

The financial statements have been prepared in compliance with the requirements of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP) in India.

The management accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates and judgments used therein. The estimates and judgment relating to the financial statements have been made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner the form and substance of transactions, and reasonably present our state of affairs and profits /(losses) for the year.

Your Company is proud to inform that the Company was awarded for “Outstanding Export Performance” for the year 2008-09 in the SEZ Category (Non-SSI Readymade Garments), for the second consecutive year.

Highlights Rs. In lakhs 2009-2010 2008-2009Income From operations 29,408.95 23,003.95 PBITD 1,669.38 (8,926.81)Interest 1,897.81 2,104.49PBDT (228.43) (11,031.30) Depreciation 994.35 873.89 Profit/ (Loss) Before Tax (1,222.78) (11,905.19)Provision for Taxation - 29.12 Net Profit / (Loss) after Tax (1,222.78) (11,934.31)Human Resources/Industrial Relations


26

Industrial relations have continued to be harmonious at all units throughout the year. No man-days were lost due to strike, lock out etc.

Measures for employees’ safety,their welfare and development receives top priorities. The Company had about 6274 employees as on 31st March 2010.

Cautionary Statement

Statement in this Management Discussion and Analysis describing the Company’s objectives, projections, estimates, expectations or predictions may be “forward looking statements” within the meaning of applicable securities, laws and regulations. Actual results could materially differ from those expressed or implied. Important factors that could make a difference to the Company’s operations include raw material availability and prices, global demand-supply conditions, changes in governmental regulations and tax structure, economic structure within India and the countries with which the Company has business contacts and other incidental factors.

AUDITORS’ REPORT

To the Members ofCELEBRITY FASHIONS LIMITED

We have audited the attached Balance Sheet of M/S CELEBRITY FASHIONS LIMITED as at 31st March 2010, the Profit and Loss Account and also the Cash Flow Statement for the year ended on that date annexed thereto. These Financial Statements are the responsibility of the Company’s Management. Our responsibility is to express an opinion on these Financial Statements based on our audit.

1. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement preparation. We believe that our audit provides a reasonable basis for our opinion.

2. As required by the Companies (Auditor’s Report) Order, 2003 as amended, issued by the Central Government of India in terms of Section 227(4A) of the Companies Act, 1956, and on the basis of such checks of the books and records of the Company as we considered appropriate and according to the information and

explanations given to us, we give in the Annexure, a statement on the matters specified in paragraphs 4 & 5 of the said Order.

3. Further to our comments in the annexure referred to in paragraph 1 above we report that.

a) We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b) In our opinion, proper books of account as required by law, have been kept by the Company, so far as appears from our examination of those books;

c) The Balance Sheet, Profit & Loss Account and

Cash Flow Statement dealt with by this report are in agreement with the books of account.

d) In our opinion the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred in sub section (3C) of Section 211 of the Companies Act, 1956, subject to Note No 2 of the Notes on Accounts, regarding “Contingent Liabilities not provided for”. The Company has not provided for Service Tax liability in respect of commercial spaces taken on lease. This is contrary to accrual basis of accounting. Consequently the loss for the year and the current liabilities are lower by Rs 103.36 lakhs.

e) In view of the losses incurred by the Company during the year under review and the accumulated losses of the Company as at the year end, we have evaluated the appropriateness of the “going concern” assumption in accordance with SA – 570. In our opinion and on the basis of the information and explanations given to us, we report that we have obtained sufficient audit evidence to establish continuance of the Company as a going concern. The mitigating factors have been outlined in Note No 11 of the Notes on Accounts.

f) On the basis of written representations received from the Directors as on 31st March, 2010 and taken on record by the Board of Directors, none of the directors is prima facie disqualified as on 31st March 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956; and

g) In our opinion and to the best of our information and according to the explanations given to us, the

27


said Financial Statements, subject to our remarks in para 3 (d) above, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

i) in the case of the Balance Sheet of the state of affairs of the Company as at 31st March 2010;

ii) in the case of the Profit and Loss Account of the loss for the year ended on that date ; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

for ANIL NAIR & ASSOCIATES for CNGSN & ASSOCIATESChartered Accountants Chartered Accountants(Registration No 175S) (Registration No 4915S)

G. ANIL C.N. GANGADARAN Partner PartnerMembership No 22450 Membership No 11205

Place: Chennai Date : 04-06-2010

Annexure to the Auditors’ Reports

(Referred to in paragraph 2 of the Auditor’s Report of even date to the members of Celebrity Fashions Limited on the accounts for the year ended March 31st, 2010)

(i). In respect of its Fixed Assets:

a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) As explained to us, the fixed assets of the Company have been physically verified by the Management during the year in a phased periodical manner, which in our opinion is reasonable, having regard to the size of the Company and nature of its assets. In accordance with the phased programme of verification, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification.

c) The fixed assets disposed of during the year do not constitute a substantial part of the fixed assets of the Company and such disposal in our opinion has not affected the going concern status of the Company.

(ii). In respect of its Inventories

a) As explained to us the inventories of the Company have been physically verified by the Management during the year. In respect of inventories lying with third parties, these have substantially been confirmed by them. In our opinion the frequency of verification is reasonable.

b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management are reasonable and adequate in relation to the size of the Company and the nature of its business.

c) The Company has maintained proper record of inventories. There were no material discrepancies noticed on physical verification of inventories as compared to the book records.

(iii).

a) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties listed in the Register maintained under Section 301 of the Act.

b) The Company has not taken any loans, secured or unsecured, from companies, firms or other parties listed in the Register maintained under Section 301 of the Act.

(iv). In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to the purchase of inventory and fixed assets and for the sale of goods. Further on the basis of our examination of the books and information and as per the explanations given to us, we have neither come across nor have we been informed of any instance of continuing failure to correct major weaknesses in the aforesaid internal control.

(v). Based on the audit procedures applied by us and according to the information and explanations given to us, we are of the opinion that there were no contracts or arrangements the particulars of which need to be entered in the register maintained under Section 301 of the Companies Act 1956. Hence the requirement of reporting regarding transactions of purchase and sale of goods, materials and services made in pursuance of such contracts aggregating during the year to Rs. 5,00,000/- or more in respect of each party does not arise.

(vi). The Company has not accepted any deposits from the public. Accordingly paragraph 4(vi) of the Order is not applicable.

(vii). The Company has an internal audit system, which in our opinion is commensurate with the size and nature of its business.

(viii). According to the information and explanations given to us, the Central Government has not prescribed for the maintenance of cost records under Section 209(1)(d) of the Companies Act, 1956. Accordingly paragraph 4(viii) of the Order is not applicable.

(ix). a. According to the information and explanations given

to us and the records of the Company examined by


28

us, in our opinion the Company is generally regular in depositing with the appropriate authorities undisputed statutory dues including Provident Fund, Employees State Insurance, Income Tax, Customs Duty, Cess and other material statutory dues as applicable. According to the information and explanations given to us, no undisputed amounts payable in respect of the aforesaid dues were in arrears as at 31st March 2010 for a period of more than six months from the date they became payable.

b. According to the information and explanations given to us the particulars of the outstanding dues that have not been deposited on account of disputed matters pending before the appropriate authorities are as under:

Name otf the Statute

Nature of Dues

Period to which the amount relate

Forum where dispute is pending

Amount(Rs. In Lacs)

Income Tax Act, 1961





Income Tax Demand

Income Tax Demand

Income Tax Demand

Income Tax Demand

Fringe Benefit Tax Demand

AY 2003-04

AY 2004-05

AY 2005-06

AY 2006 -07

AY 2007 – 08

Pending for re-assessment before the Assessing Officer

Commissioner of Income Tax (Appeals) & Appellate Tribunal

Commissioner of Income Tax (Appeals)

Commissioner of Income Tax (Appeals)

Pending for rectification before the Assessing Officer

5.26

77.96

2.07

76.84

6.99

(x). The accumulated losses of the Company are in excess of 50% of the net worth of the Company as per the Balance Sheet as at the end of the financial year covered by our audit. The company has incurred a cash loss in the current financial year, and also in the immediately preceding financial year.

(xi). The Company has defaulted in repayment of a loan of Rs 7.75 crores to M/s Standard Chartered Bank. The default in repayment occurred for a period of five months during the financial year under review. The said default has since been regularized and as at 31st March 2010 there were no dues to the said bank.

(xii). The Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. Accordingly paragraph 4(xii) of the Order is not applicable.

(xiii). In our opinion and according to the information and explanations given to us, the Company is not a chit fund or a nidhi/ mutual benefit fund/ society. Accordingly

paragraph 4 (xiii) of the Order is not applicable.

(xiv). The Company has maintained proper records of the transactions and contracts in respect of dealing in other investments and timely entries have been made therein. All investments have been held by the Company in its own name.

(xv). According to the information and explanations given to us the Company has not given any guarantee for loans taken by others from banks or financial institutions. Accordingly paragraph 4(xv) of the Order is not applicable.

(xvi). According to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained.

(xvii). According to the information and explanations given to us and an overall examination of the Balance Sheet of the Company, we are of the opinion that the funds raised on short term basis have not been used for long-term investment.

(xviii). The Company has during the year made preferential allotment of shares to a party, covered in the Register maintained under section 301 of the Companies Act, 1956. In our opinion and according to the information and explanations given to us, prices at which such shares have been issued is not prejudicial to the interests of the Company.

(xix). The company did not have any outstanding debentures during the year.

(xx). The company has not raised any money by public issue during the year. Accordingly paragraph 4(xx) of the Order is not applicable.

(xxi). During the course of our examination of the books and records of the Company carried out in accordance with the generally accepted auditing practices in India, and according to the information and explanations given to us, no material fraud on or by the Company has been noticed or reported during the course of our audit.

for ANIL NAIR & ASSOCIATES Chartered Accountants (Registration No 175S)

for CNGSN & ASSOCIATESChartered Accountants

(Registration No 4915S) C.N. GANGADARAN Partner Membership No 11205Place: Chennai Date : 04-06-2010

G. ANIL Partner Membership No 22450

29


To be read with our report of even date For and on Behalf of the Board For Anil Nair & Associates For CNGSN & Associates V. Rajagopal S. Surya Narayanan Chartered Accountants Chartered Accountants Chairman & Managing Director Executive Director Registration # 175S Registration # 4915S

G.Anil C.N.GangadaranPartner PartnerMembership # 22450 Membership # 11205

Chennai, 04-06-2010

Balance Sheet as at 31st March 2010As At

31-Mar 09As At

31-Mar 10

Rs. In lakhs

Sch #

SOURCES OF FUNDS Shareholders Funds Share Capital 1 1,814.33 1,784.17 Share Application Money 25.00 50.00 Reserves & Surplus 2 11,660.39 11,627.10 13,499.72 13,461.27 Loan FundsSecured Loans 3 19,547.93 18,310.63 19,547.93 18,310.63 Total 33,047.65 31,771.90 APPLICATION OF FUNDS

Fixed Assets 4Gross Block 14,445.76 15,012.71 Less: Depreciation 4,613.06 4,229.02 Net Fixed Assets 9,832.70 10,783.69 Investments 5 9.92 - Current Assets, Loans & Advances

A) Current AssetsInventories 6 4,995.80 4,767.92 Sundry Debtors 7 5,976.42 4,478.04 Cash and Bank Balances 8 1,909.54 1,315.75 Other Current Assets 9 226.98 150.37 Loans & Advances 10 2,218.80 2,294.02 15,327.54 13,006.10 B) Less: Current Liabilities & Provisions

Current Liabilities 11 4,587.74 3,260.34 Provisions 12 997.38 997.38 5,585.12 4,257.73

Net Current Assets 9,742.42 8,748.37 Profit & Loss Acount 13 13,462.61 12,239.83 Total 33,047.65 31,771.90 Significant Accounting Policies and Notes on Accounts 23


30

To be read with our report of even date For and on Behalf of the BoardFor Anil Nair & Associates For CNGSN & Associates Chartered Accountants Chartered Accountants Registration # 175S Registration # 4915S V. Rajagopal S. Surya Narayanan Chairman & Managing Director Executive Director G.Anil C.N.GangadaranPartner PartnerMembership # 22450 Membership # 11205

Chennai, 04-06-2010

INCOME

Income From Operations 14 29,408.95 23,003.95 Other Income 15 113.41 655.07 Increase / (Decrease) In Stock 16 (76.16) (841.13) Total 29,446.20 22,817.89 EXPENDITURE Cost of Materials 17 16,824.42 19,433.45 Employees Costs 18 4,522.83 4,786.40 Other Manufacturing Costs 19 3,367.59 2,844.66 Administrative & Other Costs 20 1,185.06 1,529.88 Selling & Distribution Costs 21 2,709.66 3,150.31 Interest & Other Finance Costs 22 1,897.81 2,104.49 Depreciation 994.35 873.89 Total 31,501.72 34,723.08

Profit before Extra-Ordinary Income (2,055.51) (11,905.19) Add / (Less): Extra - Ordinary Item (Refer 14 of Notes II) 832.74 - Profit Before Tax (1,222.77) (11,905.19) Provision for Income TaxCurrent Tax - - Deferred Tax -- liability / (asset) - - Fringe Benefit Tax - 29.12 Net Profit After Tax (1,222.78) (11,934.31) Balance brought forward (12,239.83) (305.52)

Profit available for Appropriation (13,462.61) (12,239.83) Appropriations Proposed Dividend - - Corporate Dividend Tax on Proposed Dividend - - General Reserve - - Total Appropriations - - Balance carried to Balance sheet (13,462.61) (12,239.83) Basic and Diluted Earnings Per Share - In Rs. -- Before Extra-Ordinary Item (11.40) (66.91) -- After Extra-Ordinary Item (6.78) (66.91)

Significant Accounting Policies and Notes on Accounts 23

Profit and Loss a/c for the Year Ending 31st March 201031-Mar 0931-Mar 10

Rs. In lakhs

Sch #

31


Schedules annexed to and forming part of the Accounts

SCHEDULE - 1SHARE CAPITAL : Authorized Capital: 2,00,00,000 (Prev. Yr. 2,00,00,000) Equity Shares of Rs.10/- each 2,000.00 2,000.00 Issued, Subscribed and Paid up Capital : 1,81,43,339 (Prev Yr 1,78,41,721) Equity Shares of Rs.10/- each 1,814.33 1,784.17 1,814.33 1,784.17 The above includes - 1) 8,74,500 shares issued as Bonus Shares during 1996-97 by capitalization of surplus in Profit and loss a/c; 2) 1,99,835 shares allotted as fully paid-up, pursuant to a contract for consideration other than cash in April 2005 and 3) 56,64,245 shares issued as Bonus Shares in August 2005, by capitalization of Surplus in Profit & Loss a/c SCHEDULE - 2 RESERVES & SURPLUS : Capital Reserves 7.83 7.83 Share Premium Account Opening Balance 11,518.88 11,518.88 Received during the year 27.43 - 11,546.31 11,518.88 General Reserve 43.51 43.51 Fair Value of Employee Option 62.74 56.88 11,660.39 11,627.10

SCHEDULE - 3 SECURED LOANS : Working Capital facilities 3,017.88 5,888.28 Term Loans 14,345.01 11,304.22 Export Bills Discounted 2,185.04 1,058.78 Hire Purchase Installments Payable ( net) - 59.35 19,547.93 18,310.63

As At 31-Mar 09

As At 31-Mar 10

Rs. In lakhs


32

Schedule 4 Fixed Assets

Sl.No.

ParticularsGross Block Depreciation Net Block

As on 01/04/09

Additions Deductions Adjustments

As on 31/03/10

As on 01/04/09

For the year

Deductions / Adjustments

As on 31/03/10

As on 31/03/10

As on 31/03/09

1 Land and Site Development 215.41 - - - 215.41 - - - - 215.41 215.41

2 Lease Hold Land - - - - - - - - - - -

3 Buildings 2,702.50 - - 126.83 2,829.32 703.68 94.18 56.91 740.95 2,088.37 1,998.82

4 Plant & Machinery 7,832.12 - 155.97 - 7,676.14 2,036.60 391.91 139.59 2,288.92 5,387.22 5,795.52

5 Electrical Installation 1,221.80 - 77.12 (126.83) 1,017.85 336.91 75.93 20.21 392.63 625.22 884.89

6 Office Equipments 280.97 23.95 94.28 - 210.64 88.37 49.44 94.28 43.54 167.11 192.59

7 Computers 763.35 4.83 2.25 - 765.92 523.66 74.75 2.11 596.30 169.62 239.68

8 Computer Software 216.51 5.66 - - 222.17 91.18 35.16 - 126.33 95.83 125.33

9 Vehicles 245.97 20.49 92.23 - 174.23 81.63 45.71 57.40 69.94 104.29 164.35

10 Furniture & Fixtures 1,534.10 50.80 250.84 - 1,334.06 366.99 227.26 239.81 354.44 979.63 1,167.11

Total 15,012.71 105.73 672.69 - 14,445.76 4,229.02 994.35 610.31 4,613.06 9,832.70 10,783.69

Previous Year 18,721.50 483.45 4,192.24 - 15,012.71 3,725.89 873.89 370.76 4,229.02 10,783.69 14,995.62

SCHEDULE 5 Investments

Face Value Rs. As At 31-Mar-10

As At 31-Mar-09

Number Rs. In lakhs Number Rs. In lakhs

Investment in Subsidiary CompaniesEquity Shares - UnQuotedIndian Terrain Fashions Limited 10.00 49,200 4.92 - - Celebrity Clothing Limited 10.00 50,000 5.00 - - Total 99,200 9.92 - -

SCHEDULE - 6 INVENTORIES : (As certified by the Management) Raw Materials 1,050.05 800.91 Trims and Packing Materials 560.36 650.52 Consumables 77.39 115.03 Work-in-Progress 327.71 187.28 Finished Goods / Traded Goods 2,797.59 3,014.18 Stock in Transit 182.70 - 4,995.80 4,767.92 SCHEDULE - 7 SUNDRY DEBTORS : More than six months - unsecured & considered good 382.71 340.19 Others 5,593.71 4,137.85 5,976.42 4,478.04


As At 31-Mar 09

As At 31-Mar 10

Rs. In lakhs

33


SCHEDULE - 8 CASH AND BANK BALANCES : Cash on hand 5.25 18.45 Balance with Scheduled Banks in Current Account 1,343.99 632.88 in Deposit Account 560.30 664.42 1,909.54 1,315.75 SCHEDULE - 9 OTHER CURRENT ASSETS : Duty Drawback receivable 93.80 24.81 Cenvat Receivable 26.58 26.58 Service Tax Receivable 71.55 57.85 Interest Receivable on Fixed Deposit 34.24 31.93 Prepaid Expenses 0.81 9.20 226.98 150.37 SCHEDULE - 10 LOANS AND ADVANCES : Advance Recoverable in cash or in kind for value to be received 324.36 352.92 Advance Income Tax & Fringe Benefit Tax 1,026.14 982.81 Tax Deducted at Source 56.50 50.23 Deposits-Government or Public Bodies 116.94 131.97 Deposits-others 694.86 776.09 2,218.80 2,294.02 SCHEDULE - 11 CURRENT LIABILITIES : Sundry Creditors - Trade 2,757.53 1,331.97 - Expenses & Others 820.25 973.77 Other Current Liabilities 1,009.96 954.60 4,587.74 3,260.34 SCHEDULE - 12 PROVISIONS : Provision for Income Tax & Fringe Benefit Tax 997.38 997.38 997.38 997.38 SCHEDULE - 13 PROFIT & LOSS ACCOUNT : Opening Balance 12,239.83 305.52 Add:Additions during the year 1,222.78 11,934.31 Closing Balance 13,462.61 12,239.83

As At 31-Mar 09

As At 31-Mar 10

Rs. In lakhs



34

SCHEDULE - 14 INCOME FROM OPERATIONS Export Sales 20,827.75 17,982.86 Domestic Sales 8,080.69 7,588.30 Export Incentives 624.39 610.32 Exchange Fluctuation Gain / (Loss) (123.88) (3,177.52) 29,408.95 23,003.95 SCHEDULE - 15 OTHER INCOME : Interest Accrued / Received on Fixed Deposits 34.94 45.08 Others 78.47 609.99 113.41 655.07 SCHEDULE - 16 INCREASE/(DECREASE) IN STOCK : Closing Stock - Finished Goods / Traded Goods 2,797.59 3,014.18 - Stock in Process 327.71 187.28 Opening Stock - Finished Goods / Traded Goods 3,014.18 3,689.77 - Stock in Process 187.28 352.82 INCREASE / (DECREASE) IN STOCK (76.16) (841.13) SCHEDULE - 17 COST OF MATERIALS : Opening Stock of Raw materials 1,451.43 8,970.23 Add: Purchases -- Rawmaterials (Including Packing Materials) 15,997.63 11,289.38 -- Finished Goods 985.77 625.26 Less: Closing Stock of Raw Materials 1,610.41 1,451.42 16,824.42 19,433.45 SCHEDULE - 18 EMPLOYEE COSTS : For Factory Staff Wages, Salaries, Bonus & Exgratia 3,280.58 3,196.34 Statutory Contributions 384.67 358.02 Welfare Expenses 158.01 138.37 For Other Staff Salaries, Bonus & Exgratia 628.08 1,010.61 Statutory Contributions 36.54 42.93 Welfare Expenses 34.97 40.15 4,522.83 4,786.40


As At 31-Mar 09

As At 31-Mar 10

Rs. In lakhs

35


SCHEDULE - 19 OTHER MANUFACTURING COSTS : Garment Processing & Washing Charges 1,237.81 931.87 Power & Fuel 563.87 498.02 Consumables Stores 190.72 116.11 Other Manufacturing and Operating Expenses 1,375.19 1,298.66 3,367.59 2,844.66 SCHEDULE - 20 ADMINISTRATIVE & OTHER COSTS : Rent, Rates and Taxes 445.49 586.96 Consultancy Charges 139.25 170.67 Traveling & Conveyance 212.51 228.69 Printing & Stationery 23.80 24.09 Repairs & Maintenance - (Office maintenance) 35.51 36.79 Vehicle Fuel & Repairs 22.49 33.28 Power & Fuel 50.19 70.01 Insurance 37.95 56.91 Communication Expenses 122.00 228.44 Auditors’ remuneration - Statutory Audit 8.00 8.82 - Tax audit fees 0.60 0.66 - Certification and Reimbursement of Expenses 3.62 3.80 Remuneration to Directors 72.00 72.00 Books, Periodicals & Subscriptions 5.24 3.41 Corporate Expenditure 6.40 5.34 1,185.06 1,529.88 SCHEDULE - 21 SELLING & DISTRIBUTION COSTS : Advertisement 581.30 1,029.93 Selling Commission & Discounts 1,206.03 1,251.98 Bad Debts 53.94 - Entertainment & Sales Promotion Expenses 119.00 143.01 Claims 45.87 68.54 ECGC Premium 134.02 14.02 Export Expenses 1.05 1.05 Showroom Maintenance 62.47 82.27 Shipping Charges 505.98 559.51 2,709.66 3,150.31 SCHEDULE - 22 FINANCE COSTS : Interest - Term Loan 1,084.34 504.59 Interest - Working Capital & Others 631.70 1,396.69 Bank Charges 181.77 203.21 1,897.81 2,104.49


As At 31-Mar 09

As At 31-Mar 10

Rs. In lakhs


36

Significant Accounting Policies and Notes on Accounts

I. SIGNIFICANT ACCOUNTING POLICIES:

1 Accounting Convention: The Financial Statements are prepared on accrual

basis and in accordance with the requirements of the Companies Act, 1956 and the applicable Accounting Standards.

2 Fixed Assets & Depreciation:

a Fixed Assets are stated at cost less accumulated depreciation.

b Depreciation on Fixed Assets acquired pto 31st March 2005 is calculated on Written Down Value Method at the rates specified in Schedule XIV to the Companies Act, 1956

c Depreciation on addition to Fixed Assets on or after 1st April 2005 has been provided on Straight Line Method at the rates specified in Schedule XIV to the Companies Act, 1956.

d Additional Depreciation is being provided to the extent required during the year of Sale of Assets.

e Borrowing Costs, (if any) attributable to acquisition and construction of qualifying assets are capitalized as a part of the cost of such asset. Other Borrowing Costs are charged to Profit and Loss Account.

3 Inventories:

a Raw Materials and Components are valued at lower of Cost or Net Realizable Value. Cost of the said is computed by applying Specific Identification Method.

b Work in Progress and Finished Goods are valued at lower of Cost or Net Realizable Value. Cost of these inventories includes Costs of Conversion and Other Costs incurred in bringing them to the present location and condition.

4 Foreign Currency Transactions

The Company uses derivative financial instruments such as forward exchange contracts, currency swaps and interest rate swaps to hedge its risks associated with foreign exchange fluctuations and interest rate. The Company does not use the foreign exchange forward contracts or options for trading or speculating purpose. Foreign Currency transactions are initially recorded at the exchange rates prevailing on the date of transactions. Current Assets and Current Liabilities are restated at the year end closing rates. The differences arising on such restatement are reflected in the Profit

and Loss Account as Exchange Gain / Loss. Premium / Discount on Forward Foreign Exchange Contracts are recognized over the life of the Contracts. The value of unperformed contracts is shown under Loans & Advances. The Company has the policy of accounting the profits and losses from Derivative Contracts on Cash basis.

5 Investments:

Invesments are either classified as current or long term based on Management’s intention at the time of purchase. Long term investments are stated at cost. Provision where necessary is made to recognize a decline other than temporary in the carrying value of each investments. Current investments are carried at lower of cost and quoted /fair value.

6 Accounting of Government Grants: Government grants are recognized where it is

reasonably certain that the ultimate collection will be made. We have not received any interest subsidy during the year (Previous Year - 14.32 lakhs under TUF Scheme). Capital Grants were neither received nor accrued.

7 Revenue Recognition: Sales net of trade discounts and rebates are recorded

when the significant risks and rewards of ownership are transferred. Consignment Sales are accounted on the basis of Sales Memo received from Consignees. Export Incentives are recognised where it is reasonably certain that the ultimate collection will be made and accordingly the Provision is made on accrual basis. Dividend Income, if any, is recognised on Cash Basis.

8 Retirement Benefits: Expenditure relating to Provident Fund are charged

to Profit & Loss A/c on accrual basis. Gratuity Liability under Payment of Gratuity Act is determined on the basis of an actuarial valuation made at the end of the financial year and in accordance with Revised Accounting Standard 15.

9 Employee Stock Option Scheme: The employee compensation costs for the Stock

Option Schemes is recognized in accordance with the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines, 1999 issued by the Securities and Exchange Board of India. The Company calculates the compensation costs based on the fair value method. Fair Value of the Shares means value determined by the Management during the period the Company was unlisted. The excess of fair value over the exercise price of the options given to employees under the employee stock option schemes of the Company, is recognized as deferred stock compensation cost and amortized over the vesting period on a straight line basis.

Schedule # 23 to the Balance Sheet Dated 31st March 2010

37


II. NOTES ON ACCOUNTS: Rs. In lakhs

Sl.No. Particulars 31- Mar-10 31- Mar-09

10 Taxation:

The computation of tax liability is made in accordance with the provisions of Income Tax Act,1961 and tax liability so computed is “Nil” and hence no provision has been made. The Income Tax assessments of the Company has been completed upto assessment year 2007-08. The disputed demands total in all to is Rs.169.12 lakhs. Based on the decisions of the appellate authorities for the earlier years and interpretations of other relevant provisions, the Company is of the opinion that the demands are likely to be deleted, and consequently no provision has been made for such demands. The Company has got a net deferred tax asset on account of accumulated losses and unabsorbed depreciation. In Compliance with the provisions of the Accounting Standard - 22, “Accounting for Taxes on Income” and based on General Prudence, the Company has not recognised Deferred Tax Asset.

11 Impairment of Assets:

An asset is treated as impaired when the carrying cost of assets exceeds its recoverable value. The Company has a policy of comparing the Recoverable Value of Assets with the Carrying Costs and recognizing impairment when required.

12 Provisions and Contingent Liabilities:

Provisions are recognized when the Company has a present obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made for the amount of obligation. Contingent liabilities are not recognized but are disclosed in the Notes.

Schedule # 23 to the Balance Sheet Dated 31st March 2010

1 Secured Loans:

The loans under the Multiple Banking Arrangement have been secured as under:

First Charge on Paripassu basis on Inventories in the form of Raw Materials, Stock In Process and Finished Goods, Receivables and other Current Assets of the Company both present and future for the loans in the form of Pre-Shipment / Post-Shipment Credits, Cash Credits, Export Bills Discounting facility extended by State Bank of India and HDFC Bank.

First Charge to State Bank of India and Second Charge on to HDFC Bank over the following assets: * Entire Plant and Machinery - present and future and Brand Value of Indian Terrain

* Factory land and building situated at 107-A, GST Road, Chrompet, Chennai * Factory land and building situated at Thiruvanchery, Agaram Road, Tambaram Taluk, Chennai

* Factory land and building situated at Pallikaranai, Chennai

* Factory land and building situated at 72/1, Poonamalle Bypass Road, Poonamalle, Chennai * Factory building situated at plot SDF - IV & C2,3rd Main Road, MEPZ/SEZ, Tambaram, Chennai - 600045

19,547.92 18,251.28


38

Loans from State Bank of India is further secured by Pledge of Promoters Shares in the Company to an extent of 53,52,516 Equity Shares and Personal Guarantee. Loans from HDFC Bank is further secured by Pledge of Promoters Shares in the Company to an extent of 6,00,000 Equity Shares and Personal Guarantee is limited to an extent of 6,00,000 Equity Shares in the Company. The Company has approached its Bankers during September 2008 for re-structuringits corporate debts on account of the huge losses incurred. State Bank of India, theCompany’s principal banker had sanctioned the re-structuring scheme in December2008. HDFC Bank has also sanctioned the re-structuring package in line with State Bank of India during June 2009 with retrospective effect from 1st April 2009.

The Company’s other Bankers had opted for One-Time Settlement and accordingly,the Company has paid Rs.4.45 crs as full and final settlement. The balance amountof Rs.8.33 crs has been recognised as Gain on One-Time Settlement and has beenclassified as Extra-Ordinary Income during the year.

Loans secured by way of Hypothecation of Vehicles (Net of Interest Suspense) 2 Contingent Liabilities not provided for:

Guarantees given by Banks and are counter guaranteed by the Company. 2.15 2.00 On account of Letters of credit issued by Bankers on behalf of the Company 2,041.16 1,039.21 Claims against Company not acknowledged as debts, being Income Tax demandpending before Commissioner of Income Tax (Appeals) and Income Tax Appellatetribunal. Of this a sum Rs.34.00 lakhs has been paid / Adjusted - categorized underAdvance Income Tax. 169.12 162.12

In Service Tax liability on commercial places taken on lease, in view of the legalopinion that there is no liability to pay Service Tax consequent to Delhi High Courtpronouncement on identical issue, Service Tax has not been provided. 103.36 The Delhi High Court vide its judgment dated 18th May 2010 in petition filed by one of the Retailers has restrained the Tax Authorities fromrecovering Service Tax on the act of renting of immovable properties on the basis that there is no value additionin this regard. The Company is in the process of filing a Stay petition for levy of Service Tax on renting of immovable properties.

3 Deferred Tax: Deferred Tax Liability on account of Depreciation 266.86 351.22

Deferred Tax Assets on account of Business loss (266.86) (351.22) Deferred Tax Liabilities (Net) - - Deferred Tax assets on account of business loss has been restricted to Deferredtax liability

4 The Company has not received any information/memorandum (as required to be filed by the supplier with the notified authority under the Micro, Small and Medium Enterprises Development Act,2006) claiming their status as on 31st March 2010 as Micro, Small or Medium Enterprises. Consequently the amount paid / payable to such parties during the year is disclosed as Nil.

Schedule # 23 to the Balance Sheet Dated 31st March 2010 Rs. In lakhs___________________________________________________________________________________________________ Sl.No. Particulars 31- Mar-10 31- Mar-09

39


5 No amount is paid / payable by the company U/s 441 A of the Companies Act,1956 (cess on turnover) since the rules specifying the manner in which the cess shall be paidhas not been notified yet by the Central Government. 6 Foreign Exchange Differences: Amount of Exchange Difference Gain / (Loss) included in Profit and Loss Account (128.46) (3,181.67) Premium / (Discount) on Forward Foreign Exchange Contracts recognized 4.58 4.14 7 Other Income - Others: Profit on Sale of Undertaking - 410.43 Interest received on employees Loan 0.50 0.06 Income from Investments in Mutual Funds 64.55 198.68 Miscellaneous Income 13.41 0.82

Total 78.47 609.99

8 Employee Stock Option Scheme - ESOP 2005, ESOP 2007 and ESOP (2) 2007 Pursuant to Employee Stock Option Scheme, 2005, 2007 and 2007 (2) employees have exercised their options and were allotted shares in 2009-10 as per the details given below:

Options outstanding at the beginning of the year 259,900 327,800

Add: Granted during the year Exercised during the year 7,500 9,300 Allotted during the year 7,500 9,300 Expired / lapsed during the year 59,200 58,600 Options outstanding at the end of the year 193,200 259,900

9 Earnings Per Share: Net Profit for the year before Extra-Ordinary Item (2,055.52) (11,934.31) Net Profit for the year after Extra-Ordinary Item (1,222.78) (11,934.31) Weighted average number of Equity Shares outstanding 18,034,306 17,837,084 Nominal Value per Share - Rs. 10.00 10.00 Earnings per Share - Basic and Diluted Before Extra-Ordinary Items - Rs. (11.40) (66.91) After Extra-Ordinary Items - Rs. (6.78) (66.91) The Company’s 193,200 outstanding options are anti-dilutive since the company has negative profits. Hence there is no differentiation between basic and diluted EPS 10 Managerial Remuneration:

The Shareholders have approved the payment of minimum remuneration underSection 198(4) read with Section II of Part II of Schedule XIII of the Companies Act, 1956 to the Whole-Time Directors of the Company for a period of threeyears from 1st April 2006 through Postal Ballot dated 23rd March 2007. The Board of Directors at their meeting held on 13th December 2007 have approvedto reduce the remuneration payable to Whole Time Directors with effect from 1stJanuary 2008. Accordingly a Special resolution was made and was approved inthe Annual General Meeting held on 28th August, 2008.



40

Computation of Profits as per Sec.349 of the Companies Act, 1956 for remunerationto the Whole Time Directors for the year ended 31st March 2010. Profit / (Loss) before Tax (1,222.78) (11,905.19)

Add: Directors Remuneration 72.00 72.00 Loss on Sale of Assets -

(1,150.78) (11,833.19) Less:

Profit on Sale of Undertaking - 410.43 Profit on sale of Investments 64.55 171.53

Loss arrived for the purpose of Managerial Remuneration (1,215.33) (12,415.15)

10% of the above Rs.Nil The details of remuneration paid to the directors is as below:

Salaries 72.00 72.00 Salaries Excludes: 1. Communication facilities at Residence of Directors 2. Company Car for Company’s business including the Cost of the Vehicle, maintenance and chauffer salary3. Reimbursement of Medical Expenses

11 Business Re-Structuring Proposal The Company has implemented various initiatives to improve on the efficiencies and control the losses. The Company has recorded positive EBITDA for the financial year.There are strong signals of revival. The Company has basically two major divisions - “Exports” and “Domestic”. “Exports” is further sub-divided into “Tops” and “Bottoms” Divisions and “Domestic” is operating under the brand “Indian Terrain”. The Companyhas a Business Re-structuring proposal whereby the respective divisions couldachieve their full potential and lead to maximization of Enterprise Value.The Market dynamics and key drivers, core competencies required and asset profileof these divisions are quite distinct. The industry outlook for Exports and DomesticDivisions are also different. The Company proposes to demerge the Domestic Division into Indian Terrain Fashions Limited and transfer Bottoms Division to Celebrity Clothing Limited through Slump sale. Indian Terrain Fashions Limited andCelebrity Clothing Limited were incorporated during September 2009 as subsidiaries of the Company. Upon Demerger, Indian Terrain FashionsLimited would be listed in the National Stock Exchange of India Limited and BombayStock Exchange of India Limited and Celebrity Clothing Limited will remain unlistedand 100% subsidiary of Celebrity Fashions Limited.Further, the Company proposes to write off the accumulated losses against the existing reserves under section 78 and 100 to 103 of the Companies Act,1956 andrevalue the immovable properties. The Company has obtained the in-principal approval from Stock Exchanges for there-structuring and has filed the Application in High Court of Madras during April 2010. The Court has ordered for a meeting of the Shareholders of the Company on 9th June 2010.As at the year end, the accumulated losses have resulted in substantial erosion of networth of the Company. However inview of the various strategic initiatives that thecompany is exploring the Company is confident of being able to continue and operatethe business on a “Going Concern” basis and accordingly the financial statements have been prepared on the same lines.


41


12 Defined Benefit Plan-Gratuity

The employees’ gratuity fund scheme managed by a Trust is a defined benefit plan. The present value of obligation is determined based on actuarial valuation using the Projected Unit Credit Method, which recognises each period of service as giving rise to additional unit of employee benefit entitlement and measures each unit separately to build up the final obligation.

Amount Recognised in the Balance Sheet in respect of gratuity Present Value of Defined Benefit Obligation at the end of the Year 89.76 116.88Fair Value of Plan Assets at the end of the Year 107.11 112.40

Net Liability / (Asset) (17.35) 4.48

Amount Recognised in Profit and Loss Account in respect of gratuityCurrent Service Cost 35.05 22.73 Interest on Defined Benefit Obligations 8.77 7.83 Expected Return on Plan Assets (8.43) (12.14) Net Actuarial (Gain) / Loss recognised during the Period (27.21) 94.95

Net Gratuity Cost 8.17 113.37

Actual Return on Plan Assets Expected Return on Plan Assets 8.43 12.14 Actuarial Gain / (Loss) on Plan Assets (2.12) (12.38) Actual Return on Plan Assets 6.31 (0.24) Reconciliation of present value of obligation and the fair value of the plan assets Opening Defined Benefit Obligation 116.88 97.87 Current Service Cost 35.05 22.73 Interest Cost 8.77 7.83 Actuarial (Gain) / Loss (29.33) 82.57 Benefits Paid (41.60) (94.13)Closing Defined Benefit Obligation 89.76 116.88

Opening Fair Value of Plan Assets 112.40 151.77Expected Return on Plan Assets 8.43 12.14 Actuarial Gain / (Loss) (2.12) (12.38) Employer Contributions 30.00 55.00Benefits paid (41.60) (94.13)

Closing Fair Value of Plan Assets 107.11 112.40 Closing balances of Defined Benefit Obligation Defined Benefit Obligation at the beginning of the Year 116.88 97.87 Interest Cost 8.77 7 . 8 3 Current Service Cost 35.05 22.73 Benefit Paid (41.60) (94.13)Actuarial (gain) / loss on obligations (29.33) 82.57Liability at the end of the Year 89.76 116.88

Closing balances of Fair Value of Plan AssetsFair Value of Plan Assets at the beginning of the Year 112.40 151.77Expected Return on Plan Assets 8.43 12.14



42

Employer Contributions 30.00 5 5 . 0 0 Benefits Paid (41.60) (94.13) Actuarial gain/(loss) on Plan Assets (2.12) (12.38)Fair Value of Plan Assets at the end of the Year 107.11 112 .40 Actual Return on plan assets 6.31 (0.24)

Investment Details of Plan AssetsMoney Market Instruments 100% 1 0 0 % Balanced Funds

Principal Actuarial Assumptions at the Balance Sheet DateDiscount Rate 8.0% 7.5%Estimated Rate of Return on Plan Assets 8.0% 7 . 5 % The estimates of future salary increases, considered in actuarial valuation take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

13 Disclosure in respect of Related Parties pursuant to Accounting Standard 18

a Key Managerial Personnel: Mr. V.Rajagopal Mrs. Rama Rajagopal Mr. S. Surya Narayanan

b Relatives of Key Managerial Personnel:

Mr. Suresh Rajagopal Mr. Vidyuth Rajagopal

c Enterprises under Control or Significant Influence of Key Managerial Personnel:

M/s Celebrity ConnectionsM/s Celebrity Clothing LimitedM/s Indian Terrain Fashions Limited

d Transactions carried out with Related Parties during the Year

Nature of the Transactions Note 13 (a) Above Note 13 (b) Above Note 13 (c) Above(i) Directors’ Remuneration

(ii) Remuneration to Relatives

(iii) Loans and Advances

72.00 (72.00)

29.60(28.96)

0.01 (0.78)

Figures in brackets represent corresponding amount of previous year.


43


14 Information pursuant to the provisions of Paragraphs 3, 4C and 4D of Part II of Schedule VI of the Companies Act, 1956:

Rent (Included under Other Manufacturing Costs) 326.28 280.97 Rent (Included under Administrative Costs) 438.50 564.88 Rates and Taxes (Included under Other Manufacturing Costs) 8.21 10.77 Rates and Taxes (Included under Administrative Costs) 6.99 22.08 Tax Deducted at Source on Interest Accrued / Received on Fixed Deposits / Others 6.27 10.24 Dividends received comprises of income from Non trade investments - 27.15 Profit / (Loss) on Sale of Investments 64.55 171.53

II Earnings in Foreign Currency:

Export of Goods - FOB Value 20,827.75 17,982.86

III Expenditure in Foreign Currency: a Selling Commission & Consultancy Charges 31.82 35.00 b Travel 30.81 43.98 c Claims 45.87 68.52 d Interest 39.38 133.79 e Others - 28.77

IV Raw Materials Consumed:

Fabrics Meters in Lakhs 151.62 200.24 Rs. In Lakhs 12,516.72 16,171.74

Others Rs. In Lakhs 4,307.70 3,261.71

V CIF Value of Imported materials : a Raw materials 6,818.97 5,312.98 b Capital Goods - 1.91

VI Value of Imported and Indigenous Raw materials consumed and percentage thereof to the total

Imported Rs. In lakhs 6,729.77 5,205.58 % to total 40.0% 26.8%

Indigenous Rs. In lakhs 10,094.65 14,227.87 % to total 60.0% 73.2%

Total 16,824.42 19,433.45 100.0% 100.0% VII Details on Production, Turnover and Stocks

Particulars Qty Amount (In Pieces) (Rs In Lakhs) Class of Goods: GarmentsLicensed Capacity * N.A.Installed Capacity ** 6,250,000 (6,250,000)Opening Stock 826,410 3,014.18 (919,340) (3,689.77) Production 6,375,710

(5,707,340)



44

Closing Stock 763,198 2,797.59 (826,410) (3,014.18) Sales 6,438,922 28,908.44 (5,800,270) (25,571.15)

* Licensed Capacity - N.A. since ready made garments are not within the purview of industrial licensing requirements under the Industries Development & Regulations Act, 1951. ** Installed Capacity is based on the standard product mix and is variable depending on the style and type garment and fabricFigures in brackets represent previous year

15 Segmental Information:

Primary Segment The Company’s activities of manufacture and sale of garments constitutes its single business segment Secondary Segment (by geographical distribution)Segment Revenue

-- India 8,080.69 7,588.30 -- Rest of the World 20,827.75 17,982.86 -- Total 28,908.44 25,571.15

-- India 7,319.03 6,097.44-- Rest of the World 17,851.12 17,692.35 -- Total 25,170.16 23,789.78

Addition to Fixed Asset -- India 54.33 419.30 -- Rest of the World 51.40 64.15 -- Total 105.73 483.45

16 Disclosure as per amendment to Clause 32 of the Listing Agreement

Loans and advances in the nature of Loans given to Subsidiaries, Associates and Others 0.01 -

17 Previous Year’s figures have been regrouped, rearranged and reclassified

whenever necessary.


To be read with our report of even date For Anil Nair & Associates For CNGSN & Associates For and on Behalf of the Board Chartered Accountants Chartered Accountants Registration # 175S Registration # 4915S

G.Anil C.N.Gangadaran V. Rajagopal S. Surya NarayananPartner Partner Chairman & Managing Director Executive Director Membership # 22450 Membership # 11205

Date : 04-06-2010 Place : Chennai,

45


To be read with our report of even date For Anil Nair & Associates For CNGSN & Associates For and on Behalf of the Board Chartered Accountants Chartered Accountants Registration # 175S Registration # 4915S

G.Anil C.N.Gangadaran V. Rajagopal S. Surya NarayananPartner Partner Chairman & Managing Director Executive Director Membership # 22450 Membership # 11205


Cashflow Statement for the year ending 31st March 2010 Sl. No.Particulars 2009-10 2008-09

A Cashflow from Operating ActivitiesNet Profit before Tax and before Extra-Ordinary Items (2,055.52) (11,905.19) Adjustments for: Depreciation for the Year 994.35 873.89 Amortisation of Stock Compensation 5.86 17.18 Unrealised (Gain) / Loss on Exchange Differences (78.48) (16.79) Interest & Finance Charges paid 1,716.04 1,901.28 Interest Income 34.94 45.08 Dividend Income - (27.15) (Profit) / Loss on Sale of Fixed Assets - (410.43) (Profit) / Loss on Sale of Investments (64.55) 2,608.17 171.53) 2,211.53 Operating Profit before Working Capital Changes 552.65 (9,693.65) Adjustments for: Decrease / (Increase) in debtors and other receivables (279.01) 594.23 Decrease / (Increase) in inventories (227.87) 8,378.44 Increase / (Decrease) in creditors and other payables 1,360.96 854.07 (5,006.44) 3,966.23 Cash generated from Operations 1,406.72 (5,727.43) Income Taxes Refund / (Paid) (net) (49.60) (35.98)Net Cash from Operating Activities 1,357.12 (5,763.41)

B Cashflow from Investing Activities Proceeds from Sale of Fixed Assets 62.38 4,231.92 (Purchase) of Fixed Assets (105.73) (463.70) (Purchase) / Sale of Investments (net) 54.63 3,286.96 Interest Received (34.94) (45.08) Dividend Received - (23.67) 27.15 7,037.25 Net Cash (Used In) / from Investing Activities (23.67) 7,037.25

C Cashflow from Financing Activities Proceeds from issue of Share Capital 30.16 0.93 Share Premium Received (Net of Issue Expenses) 27.43 8.37 Share Application Money Received (25.00) 50.00 Short Term Borrowings (1,591.16) (5,187.17)

Repayment of Working Capital Loans (446.50) - Term loan Receipts (Net) 3,040.79 6,624.56 H.P. Instalments (net) (59.35) (72.81) Interest and Finance Charges paid (1,716.04) (739.67) (1,901.28) (477.40) Net Cash (Used In) / from Financing Activities (739.67) (477.40)

Net Increase in Cash and Cash Equivalents 593.79 796.44 Cash and Cash Equivalents (Opening Balance) 1,315.75 519.31 Cash and Cash Equivalents (Closing Balance) 1,909.54 1,315.75

Note: 1 The above statement has been prepared on the basis of indirect method as stipulated in Accounting Standard 32 Cash and Cash equivalents represents -- Cash balances -- Bank balances 3 Previous Year’s figures have been regrouped / rearranged wherever necessary to confirm Current Year’s Presentation

Rs. In lakhs


46

To be read with our report of even date For and on Behalf of the Board For Anil Nair & Associates For CNGSN & Associates V. Rajagopal S. Surya Narayanan Chartered Accountants Chartered Accountants Chairman & Managing Director Executive Director Registration # 175S Registration # 4915S

G.Anil C.N.GangadaranPartner PartnerMembership # 22450 Membership # 11205


Balance Sheet Abstract and Company’s general business profile

1 5 6 5 5 1 8

I. Registration Details

Registration No State Code Balance Sheet Date

II. Capital raised during the year (Amount in thousands)Public IssueBonus IssueRights IssuePrivate PlacementShares allotted under Employee Stock Option Plan Scheme

III. Position of moblisation and deployment of funds (Amount in Lakhs)Total LiabilitiesTotal AssetsSource of FundsPaid up CapitalShare Application MoneyReserves & SurplusSecured LoansApplication of FundsNet Fixed AssetsInvestmentsNet Current AssetsMisc. ExpenditureAccumulated Lossess

IV. Performance of company (Amount in lakhs)TurnoverTotal ExpenditureExtra Ordinary IncomeProfit / Loss before taxProfit / loss after taxEarning per share in Rs.Dividend rate %

V. Generic names of three principal products/ services of Company (as per monetary terms)

Item Code No. (ITC Code) Product Description Men’s or boys’ shirts Women’s or girls’ shirts Men’s or boys’ shorts / Trousers Women’s or girls’ shorts / Trousers

3 1 0 3 1 0

3 3 0 4 83 3 0 4 8

6 2 0 56 2 0 66 2 0 36 2 0 3

2 9 4 4 6

- 1 2 2 3- 1 2 2 3- 6 . 7 8

3 1 5 0 2

N I L

8 3 3

1 1 6 6 11 9 5 4 8

1 8 1 42 5

1 3 4 6 3

9 8 3 3

9 7 4 2 N I L

1 0

2 9 4 17 5

N I L N I L N I L

47


SUBSIDIARY COMPANIES

Indian Terrain Fashions Limited

Director’s Report

Your Directors hereby present the First Annual Report along with Audited Balance Sheet of the Company for the year ended 31st March 2010.

The Company was incorporated on 29th September 2009 and the Balance Sheet is prepared for the period from 29th September 2009 to 31st March 2010.

The main object of the Company is to engage in the designing, manufacture, distribution and retailing of ready made garments. The Company has filed a petition In the High Court of Judicature at Madras for the scheme of Arrangement with M/S Celebrity Fashions Limited and Celebrity Clothing Limited for proposal of Demerger of M/s Celebrity Fashions Limited on 15th of April 2010. The scheme envisages the business of Celebrity Fashions Limited be split into Export and Domestic business. Domestic Division of Indian Terrain Division be demerged as Indian Terrain Fashions Limited. The Export division is further split into Tops division and Bottoms division. The Tops Division will be operated under the existing name and style of Celebrity Fashions Limited. All the assets & liabilities of Celebrity Fashions Limited related to Bottoms Division will be transferred to Celebrity Clothing Limited on going concern basis under slump sale. The appointed date for the purpose of above Demerger is on 1st April 2010.

The Directors feel that the Demerger of Indian Terrain Division of CFL to ITFL would be advantageous and beneficial to ITFL and all the stakeholders and that the terms thereof being fair and reasonable.

Upon sanction of the Scheme, by the Hon’ble High Court of Judicature at Madras, the equity shares of ITFL will be listed and / or admitted to trading on the Bombay Stock Exchange and the National Stock Exchange, as per the terms of sub rule 7 of Rule 19 of the Securities Contracts (Regulation) Rules, 1957.

Finance and Accounts:

This being the first year of Balance Sheet and that too for a period of six months, no transaction has taken place except for preliminary expenses.

Auditors:

M/s Anil Nair & Associates, Chartered Accountants, Chennai have been appointed as statutory auditors of the Company and they retire at the ensuing Annual General Meeting and are eligible for re-appointment.

Particulars as per Section 217 of the Companies Act, 1956

A) Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956 and based on the representations received, your Directors hereby confirm that:

i. In the preparation of the Annual Accounts for the year ended 31st March 2010, the applicable Accounting Standards have been followed and there are no material departures;




B) As there is no employee, the Particulars of employees, as required under Section 217 (2A) of the Companies Act, 1956 is not appended.


i. Conservation of Energy:The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption:Not applicable.


V Rajagopal Chairman and Managing Director

Date : 04-06-2010 Place : Chennai


48

AUDITOR’S REPORT

To the members ofINDIAN TERRAIN FASHIONS LIMITED

1. We have audited the attached balance sheet of M/S INDIAN TERRAIN FASHIONS LIMITED as at March 31, 2010, for the year ended on that date annexed thereto. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement preparation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section 4A of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 & 5 of the said Order (as amended) to the extent possible.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of accounts, as required by law, have been kept by the Company, so far as appears from our examination of those books.

c. The Balance Sheet dealt with by this report is in agreement with the books of account.

d. In our opinion the Balance Sheet dealt with by this report complies with the accounting standards referred in sub-section (3C) of Section 211 of the companies Act, 1956.

e. On the basis of written representations received from the Directors as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors is prima facie disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

f. In our opinion and to the best of our information and according to the explanations given to us, the said Balance Sheet give the information required by the Companies Act, 1956 in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2010:

for ANIL NAIR & ASSOCIATESChartered AccountantsRegistration No. 175S

G.ANILPartner

Membership No: 22450Date : 04-06-2010 Place : Chennai,

ANNEXURE TO THE AUDITOR’S REPORT(Referred to in the paragraph 3 of our report of even date)

1.According to the information and explanation given to us, the company did not own / hold any fixed assets during the period under review. Hence in our opinion paragraph 4(i) of the order (as amended) are not applicable to the company.

2.As informed to us , the company is yet to commence business operations and did not hold any inventory during the period under review. Hence in our opinion no comment is required with regard to the requirements of para 4(ii) of the Order (as amended).

3. According to the information and explanations given to us, the company has neither granted nor taken any loans, secured or unsecured to or from companies, firms or other parties covered in the register maintained under section 301 of the companies Act, 1956, Consequently Clauses (iii) (a) to (iii) (g) of paragraph 4 of the order (as amended) are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business. The company was yet to commence commercial operations during the period under review. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

5. According to the information and explanations given to us, the company has not entered into any contract or arrangement referred to in section 301 of the companies

49


Act, 1956, consequently Clause (v) (a) and (v) (b) of paragraph 4 of the order (as amended) are not applicable to the company for the current period.

6.According to the information and explanations given to us, the Company has not accepted any deposits from the public. Therefore the provisions of Clause (vi) of paragraph 4 of the order (as amended) are not applicable to the Company.

7. According to the information and explanations given to us, we are of the opinion that since the aggregate of the paid up capital and free reserves of the Company did not exceed Rupees Fifty Lakhs at the commencement of the financial year, this is the first period under review since incorporation and that the company is yet to commence business activities, no comment on the internal audit system is required. 8. To the best of our knowledge and as explained to us, the Central Government has not prescribed the maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 for the activities carried out by the Company. Consequently the provisions of Clause (viii) of paragraph 4 of the Order (as amended ) are not applicable to the Company.

9. According to the information and explanations given to us the Company is yet to commence any business operations, therefore in our opinion no comments are required with regard to the provisions of clause 4(ix) of the Order (as amended)

10.Since a period of five years has not elapsed since the date of incorporation and the fact that the company has not commenced revenue generation, we are of the opinion that no comment is required regarding the erosion of 50% or more of net worth and cash losses in the current year or in the immediately preceding financial years as required under clause(x) of para 4 of the order (as amended)

11.Based on our audit procedures and according to the information and explanations given to us, the company has not borrowed form financial institutions or banks till 31st March, 2010. Hence in our opinion, the question of reporting on defaults in repayment on dues to financial institutions or banks does not arise. The Company did not have any debentures outstanding during the year.

12.According to the information and explanations given to us during the period under review, the Company has not granted loans and advances on the basis of security by way of pledge of share, debentures and other securities.

13.In our opinion the Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund / Society. Therefore the provisions of Clause 4(xiii) of the Companies (Auditors Report) Order 2003 (as amended) do not apply to the Company.

14.As per the records of the Company and the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

16. To the best of our knowledge and belief and according to the information and explanations given to us, during the period under review the Company has not obtained any term loans. Hence, comments under clause (xvi) of the Order (as Amended) are not called for.

17. According to the information and explanations given to us and an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on a short term basis have not been used for long term investments.

18. The Company has not made any preferential allotment of shares to Companies/Firms/Parties covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company did not have any outstanding debentures during the period.

20. The Company has not raised any money by way of public issue during the period covered by our audit report. Hence in our opinion Clause 4(xx) of the Companies (Auditors Report) Order 2003 (as amended) is not applicable to the Company.

21.Based upon the audit procedures performed and information and explanations given by the management we report that no material fraud on or by the Company has been noticed or reported during the course of our audit.

For Anil Nair & AssociatesChartered Accountants

Registration No.175S

G.ANILPartner

Membership No: 22450



50

Indian Terrain Fashions Limited

Balance Sheet as at 31st Rs. In LakhsMarch 2010 As At 31-Mar-10SOURCES OF FUNDS Authorized Share Capital (5,00,000 Equity Shares of Rs.10/- each) 50.00 Shareholders Funds Issued,Subscribed and paid up Share Capital (50,000 Equity Shares of Rs.10/- each fully paid up) 5.00 Total 5.00 APPLICATION OF FUNDS\Current Assets, Loans & Advances A) Current AssetsCash and Bank Balances 3.76

3.76

B) Less: Current Liabilities & ProvisionsCurrent Liabilities 0.01 Provisions - 0.01 Net Current Assets 3.75 Preliminary Expenses written off 1.25 Total 5.00

Notes:1. The Company has not earned any income and incurred any expenditure.The expenses incurred are in the nature of preliminary expenses and hence Profit & Loss account not prepared.2. This being the first year previous year figures are not applicable.

For Anil Nair & AssociatesChartered Accountants Registration #175S

G.AnilPartnerMembership #22450



V. Rajagopal Chairman & Managing Director

S. Surya Narayanan Director

CELEBRITY CLOTHING LIMITED

Directors’ Report

Your Directors hereby present the First Annual Report along with Audited Balance Sheet of the Company for the year ended 31st March 2010.

The Company was incorporated on 30th September 2009 and the Balance Sheet is prepared for the period from 30th September 2009 to 31st March 2010.

The main object of the Company is to manufacture and export of ready made garments. The Company has filed a petition In the High Court of Judicature at Madras for the scheme of Arrangement with M/S Celebrity Fashions Limited and Indian Terrain Fashions Limited for proposal of Demerger of M/s Celebrity Fashions Limited on 15th of April 2010. The scheme envisages the business of Celebrity Fashions Limited be split into Export and Domestic business. Domestic Division of Indian Terrain Division be demerged as Indian Terrain Fashions Limited. The Export division is further split into Tops division and Bottoms division. The Tops Division will be operated under the existing name and style of Celebrity Fashions Limited. All the assets & liabilities of Celebrity Fashions Limited related to Bottoms Division will be transferred to Celebrity Clothing Limited on going concern basis under slump sale. The appointed date for the purpose of above Demerger is on 1st April 2010.

The Directors feel that the sale of Bottoms Division of CFL to CCL would be advantageous and beneficial to CCL and all the stakeholders and that the terms thereof being fair and reasonable.

Finance and Accounts:

This being the first year of Balance Sheet and that too for a period of six months, no transaction has taken place except for preliminary expenses.

Auditors:

M/s Anil Nair & Associates, Chartered Accountants, Chennai have been appointed as statutory auditors of the Company and they retire at the ensuing Annual General Meeting and are eligible for re-appointment.

Particulars as per Section 217 of the Companies Act, 1956

A) Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956 and based on the representations

51


received, your Directors hereby confirm that:i. In the preparation of the Annual Accounts for the year ended 31st March 2010, the applicable Accounting Standards have been followed and there are no material departures;




B) As there is no employee, the Particulars of employees, as required under Section 217 (2A) of the Companies Act, 1956 is not appended.


i. Conservation of Energy:The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption:Not applicable.


V. RajagopalChairman

Date : 04-06-2010 Place :Chennai

AUDITOR’S REPORT

To the members ofCELEBRITY CLOTHING LIMITED

1. We have audited the attached balance sheet of M/S CELEBRITY CLOTHING LIMITED as at March 31, 2010, for the year ended on that date annexed thereto. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement preparation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003 (as amended) issued by the Central Government of India in terms of sub-section 4A of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 & 5 of the said Order (as amended) to the extent possible.

4. Further to our comments in the Annexure referred to in paragraph 3 above, we report that:

a. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

b. In our opinion, proper books of accounts, as required by law, have been kept by the Company, so far as appears from our examination of those books.

c. The Balance Sheet dealt with by this report is in agreement with the books of account.

d. In our opinion the Balance Sheet dealt with by this report complies with the accounting standards referred in sub-section (3C) of Section 211 of the companies Act, 1956.

e. On the basis of written representations received from the Directors as on March 31, 2010 and taken on record by the Board of Directors, we report that none of the directors is prima facie disqualified as on March 31, 2010 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act,1956.

f. In our opinion and to the best of our information and according


52

to the explanations given to us, the said Balance Sheet give the information required by the Companies Act, 1956 in the manner so required and gives a true and fair view in conformity with the accounting principles generally accepted in India: i) in the case of the Balance Sheet, of the state of affairs of the company as at March 31, 2010:

for ANIL NAIR & ASSOCIATESChartered AccountantsRegistration No. 175S

G.ANILPartner

Membership No: 22450Date : 04-06-2010 Place : Chennai,

ANNEXURE TO THE AUDITOR’S REPORT(Referred to in the paragraph 3 of our report of even date)

1.According to the information and explanation given to us, the company did not own / hold any fixed assets during the period under review. Hence in our opinion paragraph 4(i) of the order (as amended) are not applicable to the company.

2.As informed to us , the company is yet to commence business operations and did not hold any inventory during the period under review. Hence in our opinion no comment is required with regard to the requirements of para 4(ii) of the Order (as amended).

3. According to the information and explanations given to us, the company has neither granted nor taken any loans, secured or unsecured to or from companies, firms or other parties covered in the register maintained under section 301 of the companies Act, 1956, Consequently Clauses (iii) (a) to (iii) (g) of paragraph 4 of the order (as amended) are not applicable.

4. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the company and the nature of its business. The company was yet to commence commercial operations during the period under review. During the course of our audit, we have not observed any continuing failure to correct major weaknesses in the internal control system.

5. According to the information and explanations given to us, the company has not entered into any contract or arrangement referred to in section 301 of the companies Act, 1956, consequently Clause (v) (a) and (v) (b) of paragraph 4 of the order (as amended) are not applicable to the company for the current period.

6.According to the information and explanations given to us, the Company has not accepted any deposits from the public.

Therefore the provisions of Clause (vi) of paragraph 4 of the order (as amended) are not applicable to the Company.

7. According to the information and explanations given to us, we are of the opinion that since the aggregate of the paid up capital and free reserves of the Company did not exceed Rupees Fifty Lakhs at the commencement of the financial year, this is the first period under review since incorporation and that the company is yet to commence business activities, no comment on the internal audit system is required. 8. To the best of our knowledge and as explained to us, the Central Government has not prescribed the maintenance of cost records under section 209(1) (d) of the Companies Act, 1956 for the activities carried out by the Company. Consequently the provisions of Clause (viii) of paragraph 4 of the Order (as amended ) are not applicable to the Company.

9. According to the information and explanations given to us the Company is yet to commence any business operations, therefore in our opinion no comments are required with regard to the provisions of clause 4(ix) of the Order (as amended)

10.Since a period of five years has not elapsed since the date of incorporation and the fact that the company has not commenced revenue generation, we are of the opinion that no comment is required regarding the erosion of 50% or more of net worth and cash losses in the current year or in the immediately preceding financial years as required under clause(x) of para 4 of the order (as amended)

11.Based on our audit procedures and according to the information and explanations given to us, the company has not borrowed form financial institutions or banks till 31st March, 2010. Hence in our opinion, the question of reporting on defaults in repayment on dues to financial institutions or banks does not arise. The Company did not have any debentures outstanding during the year.

12.According to the information and explanations given to us during the period under review, the Company has not granted loans and advances on the basis of security by way of pledge of share, debentures and other securities.

13.In our opinion the Company is not a Chit Fund or a Nidhi / Mutual Benefit Fund / Society. Therefore the provisions of Clause 4(xiii) of the Companies (Auditors Report) Order 2003 (as amended) do not apply to the Company.

14.As per the records of the Company and the information and explanations given to us, the company is not dealing or trading in shares, securities, debentures and other investments.

15. According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions.

16. To the best of our knowledge and belief and according

53


to the information and explanations given to us, during the period under review the Company has not obtained any term loans. Hence, comments under clause (xvi) of the Order (as Amended) are not called for.

17. According to the information and explanations given to us and an overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on a short term basis have not been used for long term investments.

18. The Company has not made any preferential allotment of shares to Companies/Firms/Parties covered in the register maintained under section 301 of the Companies Act, 1956.

19. The Company did not have any outstanding debentures during the period.

20. The Company has not raised any money by way of public issue during the period covered by our audit report. Hence in our opinion Clause 4(xx) of the Companies (Auditors Report) Order 2003 (as amended) is not applicable to the Company.

21.Based upon the audit procedures performed and information and explanations given by the management we report that no material fraud on or by the Company has been noticed or reported during the course of our audit.

For Anil Nair & AssociatesChartered Accountants

Registration No.175S

G.ANILPartner

Membership No: 22450


CELEBRITY CLOTHING LIMITED

Balance Sheet as at 31st Rs. In LakhsMarch 2010 As At 31-Mar-10SOURCES OF FUNDS Authorized Share Capital (50,000 Equity Shares of Rs.10/- each) 5.00 Shareholders Funds Issued,Subscribed and paid up Share Capital (50,000 Equity Shares of Rs.10/- each fully paid up) 5.00 Total 5.00 APPLICATION OF FUNDSCurrent Assets, Loans & Advances A) Current AssetsCash and Bank Balances 4.68

4.68

B) Less: Current Liabilities & ProvisionsCurrent Liabilities -Provisions - - Net Current Assets 4.68 Preliminary Expenses written off 0.32 Total 5.00

Notes:1. The Company has not earned any income and incurred any expenditure.The expenses incurred are in the nature of preliminary expenses and hence Profit & Loss account not prepared.2. This being the first year previous year figures are not applicable.

For Anil Nair & AssociatesChartered Accountants Registration #175S

G.AnilPartnerMembership #22450

Chennai 04-06-2010


V. Rajagopal Chairman

S. Surya Narayanan Director

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Regd. office:SDF - IV & C2, 3rdMain Road, MEPZ - SEZ, Tambaram, Chennai - 600 045

Proxy Form

Regd Folio No. /DP/ Client ID

I / We ..................................................................................of ................................................... being a member / members of the

Company hereby appoint ............................................................................................................................................................. of

............................................................................ or failing him / her ............................................................................................ of

.................................................................................. as my / our proxy, to vote for me / us on my behalf at the twenty first Annual

General Meeting of the Company to be held on Friday, the 24th day of September 2010, at 10.30 A.M. at Registered Office

situated at SDF- IV & C2, 3rd Main Road, MEPZ - SEZ, Tambaram, Chennai 600 045 and at any adjournment thereof.

Signed this .......................................................................... day of ........................................................... 2010.

Signature .........................................................

Notes : This form in order to be effective, should be duly stamped, completed, signed and deposited at the Registered Office of

the Company, not less than 48 hours before the meeting.


Regd. office:SDF IV & C2, 3rd Main Road, MEPZ - SEZ, Tambaram, Chennai - 600 045

ATTENDANCE SLIP

Regd Folio No. /DP/ Client ID

No.of Shares held

I certify that I am member / proxy for the member of the Company.

I hereby record my presence at the Twenty first Annual General Meeting of the Company at the Registered Office situated at

SDF - IV & C2, 3rd Main Road, MEPZ - SEZ, Tambaram, Chennai 600 045 at 10.30 A.M. on Friday, the 24th day of September

2010.

.............................................. ..............................................

Name of the Member / Proxy Signature of member / Proxy

Note : Please fill the Attendance slip and hand it over at the entrance of the meeting hall.

Members are requested to bring their copies of the Annual Report to the Meeting.

Re.1.00RevenueStamp

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If undelivered please return to

Celebrity Fashions LimitedSDF - IV & C2, 3rd Main Road,

MEPZ - SEZ, Tambaram, Chennai 600 045.Tel. : +91 44 4343 2200

Fax : +91 44 2262 2897, 2262 8184

Book - Post

Celebrity Fashion Annual report 2010

Documents

Transcript of Celebrity Fashion Annual report 2010