POLYPLEX CORPORATION LTD.

Transcription

1 TWENTYTHIRD ANNUAL REPORT

2 23rd Annual Report POLYPLEX Board of Directors Shri Sanjiv Saraf Chairman Shri S.G. Subrahmanyan Vice Chairman Shri Brij Kishore Soni Shri Mukesh Kumar Jain Nominee Director IDBI Bank Ltd. Air Chief Marshal O.P. Mehra (Retd.) Shri Sanjiv Chadha Dr. Suresh Inderchand Surana Shri Ranjit Singh Whole Time Director Shri Pranay Kothari Executive Director Company Secretary Shri A.K. Gurnani Auditors Lodha & Co., Chartered Accountants, New Delhi Bankers State Bank of Patiala HDFC Bank Ltd. IDBI Bank Ltd. State Bank of Hyderabad State Bank of Mysore The Federal Bank Ltd. Chinatrust Commercial Bank Corporate Office B37, Sector1 NOIDA, Gautam Budh Nagar, Uttar Pradesh Registered Office & Works Lohia Head Road, Khatima , Distt. Udham Singh Nagar, Uttarakhand Annual Report

3 CONTENTS Notice (Separate Insert) Directors' Report 3 Management Discussion and Analysis Report 9 Report on Corporate Governance 39 General Shareholders Information 47 Auditors' Certificate 52 Auditors' Report 53 Balance Sheet 57 Profit & Loss Account 58 Cash Flow Statement 59 Schedules 61 Auditors' Report on Consolidated Accounts 85 Consolidated Balance Sheet 86 Consolidated Profit & Loss Account 87 Consolidated Cash Flow Statement 88 Schedules to Consolidated Accounts 90 Details of Subsidiary Companies 105 Annual Report

4 DIRECTORS' REPORT Your Directors have pleasure in submitting the Twentythird Annual Report and 1. Financial Highlights and Operations POLYPLEX Audited Accounts for the year ended March 31, (Rs in Lacs) Earnings before Interest, Depreciation and Tax (EBIDTA) Less : Interest & Finance Charges (Net) Less : Depreciation Profit before Tax Less: Exceptional Item Loss / (Gain) Profit before tax but after exceptional item Less : Provision for Current Tax Less : Fringe Benefit Tax Less : Provision for Deferred Tax Total Tax Prior Period adjustments (Tax) (Add) / Less Profit after Tax Add : Surplus brought forward Add : Debenture Redemption Reserve written back Profit available for Appropriations Appropriations Transfer to General Reserve Proposed Dividend Corporate Dividend Tax Balance surplus carried to Balance Sheet Total , , , (180.25) (2.08) 1, , , , , , (4.59) , , , , An improvement in the overall demandsupply situation in the country led to better margins and overall profitability. The increase in "other income" is primarily on account of restatement of foreign exchange loans. Following sampling and product approvals there has been a buildup in silicone coating volumes. This business was affected adversely by the housing downturn in the US and Indian Rupee (INR) appreciation against the US Dollar (USD). A substantial improvement in the current year is anticipated. Annual Report

5 2. Consolidated Working Results (Under Indian GAAP) factor of %. Financial highlights of Polyplex Thailand are given hereunder: Net Sales and other income Profit before Interest, Depreciation and Amortisation Profit before tax Provision for tax ,01, , , , , , Net Sales & Other Income Profit Before Interest, Depreciation and Tax (Bant/ Million) 3, (Rs. in Lacs) 46, , (Bahf Million) 3, (Rs. in Lacs) 41, , Prior period adjustment (Tax) (36.77) Profit after Tax , , Profit after Tax Less : Minority Interest Profit after Tax and Minority Interest Earnings Per Share of Rs.10/ Each (Rs.) (Basic) Earnings Per Share of Rs.10/ Each (Rs.) (Diluted) 11, , , , , , More details on operations and a view on the outlook for the current year are given in the 'Management Discussion & Analysis Report', which forms part of the Annual Report. 3. Dividend The Board has recommended Dividend of Rs. 6/ per share (tax free in the hands of shareholders), which would be paid after its approval by the shareholders in the ensuing Annual General Meeting. 4. Subsidiary Companies a) Polyplex (Thailand) Public Company Limited, Thailand (Polyplex Thailand) Your Company, together with its wholly owned subsidiary PAPL owns Polyplex Thailand to the extent of 70%. Polyplex Thailand is listed on The Stock Exchange of Thailand. During the year under review Polyplex Thailand produced MT (36847 MT in ) of Polyester Film with a capacity utilization Net Worth Borrowings Less Current Portion of Long Term Liabilities Earnings Per Share (Basic) 3, , , Bant , Rs , Bant , , Rs.0.28 Improved profitability was a function of: Higher production Better realizations on film Higher contribution from sales of chips Higher proportion of value added products The Board of Polyplex Thailand has recommended a dividend of Baht 0.40 per share. As reported last year, in order to improve its product mix towards more value added products, Polyplex Thailand has set up an Extrusion Coating line, which started commercial production in April The second Metalliser commenced commercial operations in May, Also a Cast Polypropylene line with a capacity of 10,000 TPA has been ordered which will be commissioned in first half of b) Polyplex (Asia) Pte. Ltd., Singapore (PAPL) PAPL is a wholly owned subsidiary of the Company. Your Company holds the entire ordinary share capital of PAPL comprising of 1,00,000 ordinary shares of U.S. Dollars 10 each at par. The movement in Preference share capital structure of the company is as under: Annual Report

6 Number of Shares Face Value per share Premium per Share Total Value (in million) POLYPLEX d) Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, Turkey (Polyplex Europa) As on March 31, 2007 Less: Redemption during the year As on March 31, ,300 7,650 1,650 $ 10 $ 10 $ 10 $270 $270 $270 $2.60 $2.14 $0.46 Polyplex Europa, a wholly owned subsidiary of Polyplex Thailand is operating a PET Film Line (Line5) with a capacity of 29,000 TPA, a Metallizer with a capacity of 5,000 TPA and a Continuous Process Chips plant with a capacity of 57,600 TPA at Corlu, Turkey. PAPL continues to hold 428 million equity shares of Baht 1 each of Polyplex Thailand acquired at a cost of U.S. Dollars million. The market value of this investment as on March 31, 2008 was U.S. Dollars million. The key financials of Polyplex Europa are indicated hereunder: ('000 Euros) (Rs. in Lacs) ('000 Euros) (Rs. in Lacs) c) PAPL earned a net profit of U.S. Dollars 2.12 million during the year by way of dividend on its investment in Polyplex Thailand. Polyplex (Singapore) Pte. Ltd., Singapore (PSPL) Net Sales Profit Before Interest, Depreciation and Tax Profit before Tax 60, , , , , , , , , , , , PSPL is a wholly owned subsidiary of Polyplex Thailand by virtue of investment in 1,00,000 ordinary shares of U.S. Dollars 10 each at par. The movement in Preference share capital structure of the company is as under: As on March 31, 2007 Add: Issued during the year As on March 31, 2008 Number of Shares 140,200 53, ,500 Face Value per share $10 $ 10 $ 10 Premium per Share $270 $270 $270 Total Value (in million) $ $ $ Profit after Tax Net Worth* Borrowings** 8, , , , , , , , , , , , * Including Subordinate loan from PSPL of Euro 33,418,752 (Previous period Euro 24,958,052) " Including Working capital loan and excluding Subordinate loan from PSPL The second film line in Turkey (Line6) successfully started commercial operations in May The capacity of this line is 29,000 TPA. The second Metalliser with capacity of 6,000 TPA was commissioned in the same month. PSPL is the investment vehicle of Polyplex Thailand for Polyplex Europa. PSPL continues to hold entire equity capital comprising of 1.5 million equity shares of YTL 5 each of Polyplex Europa issued at par at a cost of U.S. Dollar 4.19 million. e) Polyplex (Americas) Inc., USA (Polyplex America) Polyplex America is a marketing arm of the Polyplex Group for the North American Annual Report

7 markets. The total investment of the Polyplex Group in Polyplex America is US Dollars 1.28 million, aggregating to 90.12% of its Common Stock. The key financials of Polyplex America are indicated hereunder: Net Sales & Other Income Profit Before Interest, Depreciation and Tax Profit before Tax Profit after Tax Net Worth excluding Preference Stock Borrowings ('000 U.S. Dollars) 19, , (Rs. in Lacs) 8, ('000 U.S. Dollars) 15, , Consolidated Financial Statements Nil (Rs. in Lacs) 7, Audited Consolidated Financial Statements for the year ended March 31, 2008 under Indian GAAP are attached. Directors' Responsibility Statement As required under Section 217 (2AA), which was introduced by the Companies (Amendment) Act, 2000 your Directors confirm that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed; ii) The Directors had 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 as on March 31, 2008 and of the Profit of the Company for the year ended on March 31, iii) The Directors have taken proper and sufficient care for the maintenance of Nil iv) 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. The Directors have prepared the annual accounts on a 'going concern' basis. 7. Other Statutory Information Information as required by 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 attached. Particulars of employees as required to be furnished pursuant to Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules 1975, form part of this report. As per provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the reports and accounts are being sent to all the shareholders of the Company excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy may write to the Company Secretary of the Company. 8. Directors Shri O.P. Mehra and Dr. Suresh I. Surana retire by rotation and being eligible have offered themselves for reappointment. 9. Auditors The Company's Auditors M/s. Lodha & Co., Chartered Accountants, retire at the forthcoming Annual General Meeting and being eligible, are willing to be reappointed. 10. Depository System Your Company's equity shares are being traded in 'demat' form by all investors since April 30, Shareholders of the Company who are still holding shares in physical form are advised to get their physical shares dematerialised by opening an account with one of the Depository Participants. Annual Report

8 11. Acknowledgement Your Directors wish to place on record their appreciation of the wholehearted and sincere cooperation the Company has received from the various departments of Central/State Governments, Financial Institutions and the Bankers to the Company. Your Directors also wish to place on record their appreciation of the dedicated and sincere services rendered by the employees of the Company. For and on behalf of the Board ANNEXURE TO THE DIRECTORS' REPORT (Additional information given in terms of Notification 1029 of issued by the Department of Company Affairs) A. CONSERVATION OF ENERGY: Following initiatives taken during the year resulted in saving of power. Energy efficient air compressor commissioned. Place : NOIDA Date : July 31, 2008 Sanjiv Saraf Chairman Air Washer pump capacity optimized. Energy Efficient chilled water pump commissioned. Line B TOO fresh air fan optimized. Air consumption in thermic fluid boilers optimized. B. RESEARCH & DEVELOPMENT (R&D) Following R&D activities carried out during year led to improved Quality, better Productivity and new products : Specialty products for industrial applications developed. Special coatings for improved metal adhesion developed. C. TECHNOLOGY ABSORPTION, ADOPTION AND INNOVATION: Off line silicone coating facility was added. State of art, energy efficient silicone coating machine was commissioned. D. FOREIGN EXCHANGE EARNINGS AND OUTGO : Earned : Rs Lacs (Previous Year Rs Lacs) Used : Rs Lacs (Previous Year Rs Lacs) Annual Report

9 Statement pursuant to Section 212 of the Companies Act, 1956, relating to Subsidiary Companies : 1 Name of the Subsidiary Company Polyplex (Asia) Pte. Ltd., Singapore Polyplex (Thailand) Public Company Limited, Thailand Polyplex (Singapore) Pte. Ltd., Singapore Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi, Turkey Polyplex (Americas) Inc., USA 2 Financial Year of Subsidiary Company ended on March 31, 2008 March 31, 2008 March 31, 2008 March 31, 2008 March 31, a No. of shares held at the end of the financial year 1,00,000 Equity Shares of US Dollars 10 each and 1650 Preference Shares of US Dollars 10 each. 13,20,00,000 Equity Shares of Bant 1 each directly held by Polyplex Corporation Limited and; 1,00,000 Ordinary Shares of US Dollars 10 each and 1,93,500 Preference Shares of US Dollars 10 each. 15,00,000 shares of New Turkish Lira 5 each. 25,000 Shares (Common Stock with no face value) held by Polyplex Corporation Limited; and Entire share capital is held by Polyplex Corporation Ltd. 42,80,00,000 Equity Shares of Bant 1 each held by Polyplex (Asia) Pte. Ltd., Singapore Entire Share capital held by Polyplex (Thailand) Public Company Limited Entire Share capital held by Polyplex (Singapore) Pte. Limited 203,000 shares (Common Stock with no face value) held by Polyplex (Thailand) Public Company Limited b Extent of Interest at the end of the financial year 100% 70% 70% 70% 66.05% 4 a Net Aggregate amount of Profit/(Loss) of the Subsidiary Company so far as it concerns the Members of the Holding Company Not dealt with in the accounts of the Holding Company for the subsidiary's Financial Year ended March 31, 2008 Rs Lacs Rs Lacs Rs Lacs Rs Lacs Rs Lacs for the previous Financial Years Rs Lacs Rs Lacs Rs Lacs Rs Lacs Rs Lacs b Dealt with in the accounts of the Holding Company for the subsidiary's Financial Year ended March 31, 2008 Nil Nil Nil Nil Nil for the previous Financial Years Nil Nil Nil Nil Nil Annual Report

10 MANAGEMENT DISCUSSION AND ANALYSIS P O L Y P L E X 1. INTRODUCTION (a) Group Structure The Polyplex Group (the Group) comprises of following companies as of July 31, 2008: Name of Company Location Year of Incorporation Nature of Business Ownership structure Polyplex Corporation Limited (PCL/Polyplex India/Company) India 1984 ' Manufacturing of PET Film Parent Company Promoters 46.93% Others 53.07% Polyplex (Asia) Pte. Limited (PAPL) Singapore 2004 Investment Company 100% subsidiary of Polyplex India Polyplex (Thailand) Public Company Limited (PTL/Polyplex Thailand) Thailand 2002 Manufacturing of PET Film Polyplex India 16.50% PAPL 53.50% Public & Institutional Investors 30% Polyplex (Singapore) Pte. Limited (PSPL) Singapore 2004 Investment Company 100% subsidiary of Polyplex Thailand Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE/ Polyplex Europa) Turkey 2004 Manufacturing of PET Film 100% subsidiary of PSPL Polyplex (Americas) Inc. (PAVPolyplex America) USA 1995 Sales & Distribution Company Polyplex India 9.88% Polyplex Thailand 80.24% Private Investor 9.88% A graphical representation of the Group structure is given hereunder : Polyptex Corporation Ltd. ^*^Pf!^PKSlPN!p Vv4.,?, o,*f 100% Polyplex (Asia) Pte. Ltd. {PAPL) SINGAPORE 9.88t/ol 16.5% Private 9.8B% Polyplex 80.24% Krivaie ^^^ (Americas) tnc ^tn^ Investor ^ (PA) Public/ Institutional Shareholders Polyplex {Singapore) Pte. Ltd. (PSPL) SINGAPORE Outside Interest Investment Company I 100% EflrOitfiMOX Turkey i Distribution Company Annual Report

11 (b) (i) (ii) Group capacities & operations India Polyplex India is engaged in the manufacture and sale of Polyester (PET) Film with an installed capacity of 20,000 Tons per annum (TPA) at its works located at Khatima, Distt. Udham Singh Nagar, Uttarakhand. In addition, it has an installed capacity of 20,000 TPA of PET Chips for captive consumption, 4,800 TPA of Metallised Film and an offline silicone coating facility with a capacity of 160 million square meters (sqm). Further, it is in the process of installing following capacities at a new location (Bajpur) near its existing facilities in Uttarakhand: Production Facility PET Film (Line 7) Continuous Process Chips Plant Biaxially Oriented Polypropylene (BOPP Film) (Line 8) Metalliser PET BOPP Thailand Capacity (TPA) 31,000 57,600 35,000 7,000 4,500 Commercial Start Up H1, H1, H1, H1, H1, Polyplex Thailand, the Company's subsidiary operates two Thin film lines with the first line having been commissioned in April 2003 and the second one in November During , two Polyester chips plants were commissioned successfully a batch process plant with a capacity of 7000 TPA in September 2004 and a continuous process plant with a capacity of 45,500 TPA in February In August 2005, Polyplex Thailand successfully commissioned a Metalliser with a capacity of 5,000 TPA. It has also successfully commissioned an Extrusion Coating line in April 2008 with a capacity of 150 million square meters and a 2.85 meter wide Metalliser with a capacity of 6,000 TPA in May Polyplex Thailand has ordered a Cast Polypropylene (CPP) line with capacity of 10,000 TPA and an associated Metalliser having a capacity of 4,200 TPA, which will be commissioned by first half of In addition, as mentioned elsewhere in this report, it is in the process of ordering one more PET Film line (Line9) along with associated capacities of PET Chips and Metallising. A summarized view of production capacities under implementation at Polyplex Thailand is as under: Production Facility CPP Film Line Metalliser CPP (iii) Turkey Capacity (TPA) 10,000 4,200 Commercial Start Up H1, H1, In December 2005 Polyplex Europa, Polyplex Thailand's wholly owned subsidiary commissioned its first PET Film line with an annual capacity of 24,000 TPA (restated to 29,000 TPA as mentioned hereinafter) along with a 4 MW captive cogeneration power plant. It installed a Metalliser with a capacity of 5,000 TPA which commenced commercial production in March In December 2006, a continuous process chips plant started commercial production. The capacity of this plant is being enhanced from 45,500 TPA to 57,600 TPA by incurring a minor capital expenditure. Another film line (Line6) with a capacity of 29,000 TPA and a 2.85 meter wide Metalliser of 6,000 TPA capacity commenced commercial operations in May Capacity utilization is being ramped up and high utilization rates are expected to be reached by second half of (iv) USA Consequent upon the subscription of additional common stock by Polyplex Thailand, Spectrum Marketing Inc. (Spectrum) which distributes PET film for the Polyplex group has become a Group subsidiary with effect from January 1, 2006 and has been renamed as Polyplex (Americas) Inc. (Polyplex America). Annual Report

12 (v) Global During the year under review, the Group improved its processes and made enhancements to its production equipments resulting in higher productivity than the previous years. This along with continuous focus on productivity improvements will lead to increase in film and chips production over and above its stated capacities. Hence, the Group has decided to restate its capacities as per the following chart. Location wise production facilities and capacities Company Location Product (Calendar Year) PET Film (MT) PET Chips (MT) BOPP (MT) CPP (MT) Metalliser (MT) Coating (Million Sqm) Polyplex Corporation Ltd (PCL/Polyplex India) Khatima (India) Line 1 6,000 (1988) Line 2 14,000 (1996) Line? 31,000 (2009) 2 20,000 (1997) (2009) Line 8 35,000 2 (2009) 1st 4,800 (2003) 2nd (2009) 3rd 4,500 2 (2009) 160 (2007) SubTotal 51,000 77,600 35,000 16, Polyplex (Thailand) Public Company Ltd. (PTL/Polyplex Thailand) Rayong (Thailand) Line (2003) Line (2003) 7,000 1 (2004) (2005) 10 2 (2009) 1st (2005) 2nd (2008) 3rd (2009) (2008) SubTotal 42,000 52,500 10,000 15, Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE/Polyplex Europa) Qorlu (Turkey) Line 5 29,000 (2005) Line 6 29,000 (2008) 57,600 (2006) 1st 5,000 (2006) 2nd 6,000 (2008) SubTotal 58,000 57,600 11,000 Total 151, ,700 35,000 10,000 42, As per approval received from Board of Investment (BOI) in Thailand, the licensed capacity is as under: Project Line 3 Line 4 PET Chips Metalliser 1 Metalliser 2 Coating Project (For two lines) Under Implementation as on July 31, Capacity 24,000 MT 24,000 MT 52,500 MT ( ,500) 7,500 MT 8,700 MT 18,000 MT or 600 Mn sq mtrs Annual Report

13 2. PRODUCT BiaxiallyOriented Polyethylene Terephthalate (BOPET) film or PET film or Polyester film is a high performance film made from Polyethylene Terephthalate resin (generally known as Polyester Chips), which in turn is produced from Dimethyl Terephthalate (DMT)/ Purified Terephthalic Acid (PTA) & Mono Ethylene Glycol (MEG). The five main categories of PET film applications are as under: a) Packaging: Commodity films and speciality films used primarily for flexible packaging. b) Imaging: Printing films layout base, masking film and printing plates, as well as reprographic, microfilms etc. c) Electrical: Wire and cable wrap, membrane switches, flexible printed circuits, capacitors and motor insulation. d) Magnetic media: Audio and video tape, as well as computer tape and floppy discs. e) Others (Industrial): Comprising Hot stamping foils, Thermal Lamination, Release films, Air conditioning ducts, photoresist, labels, and many more. Another broad categorization made by the industry is Thin (including Magnetic media) and Thick films. The Group operates in the Thin film segment focusing on the Packaging, Industrial and Electrical (PIE) segments. Currently the Group is producing PET Film. As stated in the previous year's Management Discussion and Analysis (MDA), it has decided to diversify its product portfolio to include BOPP & CPP Films beside value added products like Metallised films, Silicone Coating and Extrusion Coating, to provide better value to the customer and to achieve a higher rate of growth. A brief value chain of the products is as under: 12 Annual Report

14 Crude Oil I Natural Gas NAPTHA PARAXYLENE PX Acetic Acid T ETHYLENE ETHYLENE OXIDE Vinyl Acetate Monomer EVA PROPYLENE I POLYPROPYLENE (PP) PTA MEG LDPE \ PET CHIPS BOPET BOPP 1 1 l\ li SILICONE MPTAI 1 IRIwr. E> CTRUSION. UPTA COATING «" ««COATINGS METALLISING METALLISING 1 1 I CPP BOPET Packaging: Flexible packaging such as Tea, Coffee, Chewing Tobacco, Snacks, Personal care products etc. Imaging : Printing films layout base, masking film and printing plates as well as reprographic, microfilms etc. Electrical: Wire and cable wrap, membrane switches, flexible printing circuits, capacitors and motor insulation. Industrial: Hot stamping foils, Thermal lamination, Release films, Air Conditioning ducts etc. BOPP Packaging: Flexible packaging for applications such as Food, Confectionary, Bakery, Snacks, Labels. Textile bags, Cigarette overwrap etc. Industrial: Thermal Lamination, Tapes, Bundling, and Release Film. ""N /"" CPP Flexible packaging for applications such as Snacks, Biscuits/ Cookies, Nuts & wafers, Noodles & Pasta, Potato Chips, Pet foods etc. J V Annual Report

15 3. INDUSTRY SCENARIO (a) GLOBAL (1) Demand The worldwide merchant market of PET film in 2007 was estimated at 1.71 million tons, up from 1.29 million tons in 2002, which represents a CAGR of 5.79%. Of this more than 80% is estimated to be accounted by Thin films. The sector with highest demand for Thin PET film is Packaging, followed by Industrial and Electrical films respectively. The combined demand for these segments accounted for 77% of the total demand in 2002 which has gone up to 93% in This represents an absolute growth of 59% during Electrical segment recorded the highest growth (97%) followed by Packaging (55%) and Industrial (48%). The CAGR for these segments together between 2002 and 2007 has been 9.66%. Global Demand by End Use 30% Packaging 26% B Magnetic Media Source: Company Data KMT Industrial Electrical 40% 46% KMT Imaging Classified by region, demand for PET film was the highest in America, West Europe and Japan, accounting for 25%, 19% and 17% of world consumption respectively in Because of higher growth rates between , 'Other Asia' (Asia other than India, Japan & Korea) has emerged as the largest market in 2007, with a share of 25% followed by America and Japan with 20% and 18% respectively. Global Demand by Region % 1713 KMT Americas Japan B India RoW otner Asia B W. Europe Korea j Source: Company Data (2) Supply 2,000 1,600 1,200 p 800 The global merchant capacity for PET film in 2007 was approximately 2.38 million tons up from 1.55 million tons in 2002, which represents a CAGR of 8.95%. Thin film capacity was estimated at 1.76 million tons in 2007, about 74% of the total capacity. Since 2002, there has been a shift of production towards Asia (excluding Japan and Korea) whereas the capacity in all the other markets has remained largely unchanged. Global Capacity of PET Film I Thin Film : <36 microns Thick Film : > 36 microns 14 Annual Report

16 Classified by region, 'Other Asia' had the highest capacity in 2007 accounting for 50%, followed by America and Korea (13% each), and Japan (12% each). During , 'Other Asia' had the highest growth rate of PET film production capacity with growth of 169% during due to the setting up of new lines by existing and new manufacturers in India, China and other developing countries in Asia. (3) Industry Structure and Evolution After a period of PET film shortage in the mid90's, which led to high profitability for all producers worldwide, the industry saw a huge capacity build up resulting in a significant oversupply situation. Competitive pressure further aggravated by the East Asian currency crisis in mid 1997 led to a severe erosion of prices to unprecedented levels and all producers of PET film went through an extremely difficult period between 1997 and Limited capacity creation, largescale consolidation and also the rationalization of capacity by closure of uneconomic old lines by some players, helped restore a semblance of stability to the PET film markets worldwide towards the end of With proliferation of technology and capacity, the emphasis has moved to evolving a competitive cost structure. This, along with increasing concerns on optimizing return on capital has led to consolidation among the World 'Majors' and has created businesses which are truly global in scope in terms of capacity, geographical reach and product offering. Several new lines have been setup in China in the recent past as a consequence of which it is estimated that the capacity in this country has more than quadrupled in four years time from around 154,000 tons in 2003 to 630,000 tons in However, till date, the impact of producers from China in the international markets is not pronounced, perhaps as a reflection of typical startup / quality problems faced by several firsttime producers as also the high domestic demand growth rates. Given that the capacity addition has slowed down considerably over the past few years and continued demand growth rates of more than 10% in China and South East Asia, the demand supply gap has shrunk somewhat. Sustained improvement in pricing in China is reflecting the underlying correction in the demand supply balance. Further, the appreciation of the local currency, reduction in export incentives and imposition of preliminary Anti Dumping (AD) duties on exports to U.S.A. in the current year has constrained the ability of Chinese manufacturers to undersell in the international markets. The current demand is estimated at about 380,000 MT with an estimated capacity utilization of around 60% in Thin film. While the capacity overhang is a matter of continued concern the actual experience of the past few years would seem to indicate that the 'threat' from China is not as severe as it would appear to be from the data on demand and capacities. The new entrants are also limited by their ability to achieve good quality, high operating levels and build up distribution capabilities. It is understood that there are ongoing discussions for adding several new lines in China. There are currently three broad classes of PET film manufacturers classified by size of production: World majors with production levels of over 120,000 tons per year (e.g. DupontTeijin, Mitsubishi, Toray and SKC); Midsize players with production between 50, ,000 tons per year (e.g. Kolon, Polyplex, Cifu, UFlex and Jindal); and Small / local producers with production of less than 50,000 tons per year. Demand for PET film for magnetic media application had been high in the past, prompting major producers to focus on this segment. Competition in the Magnetic media segment is thus confined among these majors based on their long and Annual Report I

17 well established expertise and experience. However, with the reducing demand resulting from digitization, many lines are being converted to either Thick film or Speciality films. For other PET films including Thin film, competition is seen among all groups. Due to consistently rising demand, especially for Thin film which is used in Packaging, Industrial and Electrical segments, small and mid sized producers (including Polyplex Group) have expanded their capacities which has led to a higher market share for them. (4) Current Scenario Operating rates in Thin film have declined from above 90% in 2003 to around 80% currently as a consequence of large capacity built up in Asia (especially China). Global operating rates mask significant regional and company specific variations. Looking ahead, while in the short term the outlook is clouded by the announced capacity additions, in the medium to long run utilization rates are expected to move up gradually with continued growth in demand of 5% 10%. (5) Trade Actions International trade in PET film has been prone to trade actions particularly in the European Union, U.S.A. and Korea, where there are large imports. In recent times, such measures have been resorted to by other countries including Brazil, India and Turkey. A chronological list of such actions and their current status is given hereunder: Year Action By Against Results 1988 Dumping EU Korea Terminated without any measures Dumping EU Korea Terminated without any measures Dumping USA Korea & Japan Duties imposed, but over years are now minimal for Korea and the order was revoked with respect to Japan in Dumping EU Korea Terminated without any measures GSP Removal USA India Preferential status removed and normal duty of 4.2% imposed Subsidy EU India CV duties between 319% imposed Dumping China Korea Duties between 1346% imposed Dumping EU India & Korea Duties between 067% on Indians and 312% on Koreans imposed, Price Undertaking from Indian exporters accepted at margin elimination level Dumping India Korea & Indonesia Final Duties between US $ US $ /Kg. imposed which expired on Dumping & Subsidy USA India & Taiwan Duties between 1930% on Indians and 23% on Taiwanese imposed Subsidy Brazil India No duties imposed due to lack of injury Dumping Brazil India Case withdrawn GSP Removal USA Thailand Removal of Preferential status results in imposition of normal duty of 4.2% GSP EU Thailand GSP benefit extended. Imports from Thailand are being charged a normal duty of 3% instead of 6.5% effective from Jan 1, Subsidy EU India Sunset review of CV duties completed. Duties extended for another 5 years. 16 Annual Report

18 2005 Dumping EU India Price undertaking from Indian exporters withdrawn Dumping EU India Dumping Margin recomputed for Indian exporters from whom Undertaking was accepted initially. Duties imposed between 018% Dumping EU India Expiry Review of Dumping duties initiated Dumping EU India Final duty rates 018% imposed Dumping Brazil India & Thailand Initiation of proceedings by Brazilian Government Subsidy EU India CV duties last amended between % Subsidy EU India Initiation of Interim Review Dumping USA Korea Preliminary duties 6% in regard to Kolon Industries Dumping USA Thailand / UAE/Brazil/ China Initiation of proceeding by DOC Dumping & Subsidy USA India & Taiwan In the sunset review, the DOC determined continuation of countervailing duty order in regard to India & Taiwan & antidumping duty order with regard to India and Taiwan Dumping Brazil India Preliminary Duties imposed between $/ ton Subsidy Brazil India Preliminary CV duties imposed between $/ton Dumping Brazil Thailand Preliminary Duties imposed between $/ ton Subsidy Turkey India Initiation of investigation Dumping Korea India Preliminary Duties imposed between % Dumping USA UAE, Brazil, China & Thailand Preliminary duties 2.45 % on UAE, between % on Brazil, between % on China and Nil from Thailand Dumping Korea China Preliminary Duties imposed between % Dumping USA Korea Final duties in regard to Kolon industries reduced to 1.53% GSP Removal USA Brazil Petition to remove GSP benefit on import of PET film from Brazil rejected. Details on the impact of these developments on the Group's working are given later in this Report. An analysis of the history of the various cases till date shows that while initial duty rates may be high, exporters tend to incorporate the appropriate monitoring mechanisms and modify sales practices, following which these duty rates are substantially reduced, if not eliminated altogether. (6) Conclusion The overall global market scenario can be summed up as under: As per industry information, new Thin Film lines likely to commence production in the next 2 years are Iran (1), Middle East (2), Mexico (1), China (5) and India (3) with an aggregate capacity of about 350,000 tons including one film line of Polyplex in India. In addition, as mentioned elsewhere in this report, the Group has decided to install another film line in Thailand. While the total PET film demand of about 1.71 Million TPA a growth of 5% per annum, would require Additional Production of TPA 3 to 4 lines every year. Annual Report

19 CORPORATION LTD Historically, demand for Thin film has grown at much higher rates. With Asia and particularly China and India accounting for an increasing share of the global demand with higher growth rates than the developed world, it would be reasonable to assume that in the medium term global demand should grow faster than historic rates. While the cyclical nature of the industry would continue, recent experience indicates that the amplitude and duration of the cycles have reduced. Dominance of the four Majors who currently control about 30% of the market is likely to continue though with a reducing share of the global capacity. However, decline in their traditional market segments as also relatively slower growth in their home markets has constrained their ability to improve viability of their PET film operations in their traditional segments. Lowering manufacturing costs through acquisitions and joint ventures in the low cost Asian countries, rationalization of capacity and continued emphasis on technology intensive niche products would appear to be the strategic response. As an illustration, Flat Panel Display (FPD's) is now a major and focus growth area for these producers. This segment has seen dramatic growth in the past few years. Because of the technology intensive nature of this segment, participation has been limited to only a few producers in Japan and Korea. Most of the new capacity will be built in Asia because of lower capital and manufacturing costs and higher growth rates in this region. China, however, has started to discourage setting up of non hitech manufacturing industries. The transitioning of the industry to Asia will increase competitive pressure in the years to come. Demand is likely to continue to grow (b) between 8% and 10% in the Packaging, Industrial and Electrical segments. Overall global demandsupply balances have varying impacts on a regional basis because of: o o o Trade defense measures and customs duties. Fragmented customer base, varying requirements and the resultant inability to import all of their requirement on a sustained basis. Freight and Logistics costs. o Varying levels of cost structure, productivity and quality. o Currency volatility. Thus, increasingly, markets have to be viewed and assessed at a regional level. The current state of the Demand Supply balance presents growth opportunities for companies which are: o Cost competitive and can match quality requirements in the Packaging and Industrial segments. o Focused with a good understanding of the markets. o o DOMESTIC Have a global outlook. Have a good distribution reach. The domestic market is currently estimated to be 200,000 tons mainly comprising of Thin films (excluding magnetic media). It is estimated that the domestic market has grown at an annual rate of about 15% in the last five years, largely on account of the increase in demand for Thin films, with Packaging being the dominant application and driver of growth. In addition to the domestic demand, the Indian manufacturers have historically 18 Annual Report

20 exported 50,000 60,000 tons of PET film annually. However, the exports to US and EU from India have declined over the last 56 years due to the growth in the domestic markets and the imposition of AD/CVD duties. The total installed capacity in India is estimated at about 290,000 tons, which comprises 32,000 tons of thick film and 258,000 tons of Thin film. (c) POLYPLEX It is relevant to point out that Polyplex's exposure to the Indian markets during the year under review is limited to around 20% of its consolidated sales by volume. POLYPLEX STRUCTURE GROUP SALES The geographical distribution of sales (by volume) is represented in the following chart: SEAsia 23% North America South 11% America 4% Other Asia 25% S. America 3% S EAsia 22% Other Asia 21% R.9 W Mddle East 3% 2% N.America Europe 13% 36% Middle East 3% Europe 31% Total Total : MT In addition, the segment wise breakup of sales volume is as under : Packaging 81% Distributor 29% Electrical 1% Total MT Industrial 18% End user 71% Total MT Annual Report

21 4. POLYPLEX'S POSITION The Group has built its competitiveness over the years based on the following: Geographically diversified manufacturing locations enhancing market reach, servicing capabilities and accessing the benefits of regional trading blocs. High operating rates. Low overheads. Strong customer relationships. Focus on the high growth segments. Stable management team. Integrated manufacturing facilities. 5. REVIEW OF OPERATIONS (a) (i) INCOME STATEMENT Consolidated Operations The abridged Consolidated Profit and Loss statement for the financial year ended March 31, 2008 is given : Particulars Net Sales Other Income Earnings before Interest, Depreciation & Tax (EBITDA) Interest Costs Depreciation/ Amortization Profit before Tax and Exceptional items Exceptional Items Profit before Tax Provision for Current Tax Provision for Deferred Tax Fringe Benefit Tax Previous Year adjustmenttax Profit after Tax (PAT) Rs. in Lacs 1,00, ,757 1,941 3,883 11, , (180) 39 (37) 11, Rs. in Lacs 76,768 1,066 10,351 2,036 3,514 4,801 (5) 4, ,458 YoY Change (%) 30% (7)% 72% (5)% 10% 149% 145% 303% (725)% 0% (133)% 153% A snapshot on a consolidated value and unit basis is given hereunder: Particulars Change (%) Rs. In Lacs RsJKg. of film sales Rs. in Lacs Rs./Kg. of film sales Rs. in Lacs Rs./Kg. of film sales Film Sales Volume (MT) 87,504 80,586 9% Sales Value: Film Sales 84, , % 15% Chips Sales ,004 74% Total Sales 1,00,128 76,769 30% Value Addition (incl. contribution from Chips sales) 35, , % 24% Fixed Cost (other than interest and Depreciation) 18, , % 0% EBIDTA 16, , % 66% % 17% 12% Other Income , % 14% % 1% 1% 20 Annual Report

22 EBIDTA (incl. other income) 17, , % 58% % 18% 14% Interest 1, , % 12% % 2% 3% Depreciation 3, , % 2% % 4% 5% Profit before Tax and Exceptional Items 11, , % 129% % 12% 6% Exceptional Items % 0% 0% PBT 11, , % 126% % 12% 6% Total Tax (Incl. prior period tax adjustment) % 34% % 1% 0% PAT 11, , % 133% % 11% 6% On the operational side better productivity at all the plant locations has resulted in a 9% increase in the Group sales volume, whereby Group sales turnover has exceeded Rs crore mark for the first time. Value Addition on film on an aggregate basis during the year under review has increased by 34% over previous year. This is mainly attributable to improved market conditions despite increase in raw material cost and depreciation in the export currencies of USD & EURO against local reporting currencies (THB and INR). Higher proportion of value added Metallised film sales, benefit of chips plant operations in Turkey for the full year as also utilization of surplus chips plant capacity in Thailand/Turkey for merchant sales have also contributed to the improved profitability during the year under review. Consequent to stabilization of business at all locations, absolute fixed costs have increased by 9%. However, per unit fixed costs are same as previous year due to higher production levels which has offset the impact of cost inflation and rising energy cost. Utilities costs were also contained during the year under review due to full benefit arising from shift towards cheaper source of fuel like Natural gas in Thailand and better consumption efficiencies. Interest and finance charges dropped by 5% during the year under review due to normal repayment of term loans at all locations as also decline in interest cost on forex Loans due to lower interest rates. Interest cost incurred on additional loans availed for specific projects under implementation during have been capitalized. Annual Report

23 C CD D Oa. CO 05 eg 1 " 5 a o CO 05 CO CT CD CD «Provision f Current Tax "CD 10 O "S S? o» CD ^3& s3 a co CD O Q. 8oo 03 Q. ^ 05 O CD I!l _J t _J "^ J O CD CT 05' D CD o < a < CD 3. S CD O a CD CO Q. CO ndia mi TJ0 H <il O CD = ai^ CD 1 O (D < a> CD 05 CD CD CD 1. 3 CO O =: 35? CD CD o)' 03 C wcd»i 3 Q. c I g ^COQ *s x 3> O r; CD s i3 S. 0) zr =r <, 3 =* = &s O aii CD «. IK "D ~ co (D O o (D Q) i^ 6' o> ion t t ffl 8 ^ J 5 8 a s!»<!&t = 3 O < Q. JS O 05 co o? 52 co ct 0) Cb Q. CD CD (D 03 CO " _L 0) 3 C &S 03 3 "o CO 3 CD O^ =t Q. CO eva en ng a CD CD CD O 03 ' CO ' o ro i ot "S CO CD o CD W < ^» ff< a^ < TV O 2.^3 CO (D CD * X * CD f 05 c ^ = 50^5; CQ] rt. Q. 3 ^ i m d 05 CD CD CD ro 10 o 05 ot > W 3 i < CD CO CD " CO T3 Q. CD C = S =>' CD o' 05 ^^ C ^ 03 3 ~ S Q O CD «s i I CD S. CQ 3. CD 3 (Q n (D u Q. 2. (D a o' CO S 3 g Sales Qty (MT) 2L (D (0 volume terms. CD Q. O CD Q. CT S? 0 CD t 1 6" c. (/) CD &> i 5' over exports. 05 CD CO CD 73 O CO 05 CD CO strong demand increasingly sf 11 O 3" Q. O ro 21 o" 3 fl) aco 3" o 3" o c CO 03 CO O i ) ro a CD c CO Q. < 03' 03 D c ro 0 Sales volumes showed 05 n\ W 5' 05. Q. Q. 3' ro Company was production vol increase of 0.5i O3 3 < o' ^f \ CO ro 05 r* c ro 0 i a ro rop Ul i CT ro o 05 o CD" ro CQ' 3" ^ a c 3 CQ 5 CD CD 05 ^ C 3 a. 03 ^ CD 5 CD oo o to o to o to en to o in o to o O) to o CD O Production (MT) 00 CD CD O O ^ 01 O Ul O CJ1 O o o o o o o o o o o o o Capacity Utilisation (%) O Q. C O^ o' 90 o Q) 0) O 3 C N 0)»* 5' 3 Q. S)' a o' 0) Q. 0) 03_ (D W g_ c (D

24 prices, value addition per unit was better by 13% as compared to previous year. Selling Price and Value Addition Trend t X! t 1 1 I ix x x x x x x (Rs per Kg) X 70 X 80 X 90 Value Addition (Net Sell ing price less Raw Material & Pa eking Material) I Selling Price (netof Freight) X 100 (3) Analysis of other income is given below: Nature Dividend received from subsidiary Profit on sale of Short term Investment Income from Let out property Others Misc. Receipts Excess Provision Written Back Provision for Doubtful Debt Written back Prior Period Income (Net) Foreign Exchange Fluctuation Total , ,259 As is evident, the increase in other income during can be primarily attributed to the FX Fluctuation Income on USD Loans due to appreciation of INR during the year. (4) Profitability Profitability on standalone operations of the Company rebounded with higher per unit value addition and other income which was partially offset by higher fixed costs. 30 0% 25 0% 29.7% Improvement in value addition is a reflection of the better demand supply balance and was achieved despite volatile raw material prices. Fixed cost (other than Interest and Depreciation) during the year increased by 2%, primarily due to increase in manpower costs. State grid power tariffs were also increased significantly towards the end of the year under review and would impact the current year energy cost. Interest costs decreased during the year by 26% primarily on account of repayments of loans. Depreciation increased by 6% during the year because of full year depreciation charged on Silicone Coating facility (SARACOTE) as against only one month depreciation during previous year. Deferred tax credit in the income statement was on account of difference in the depreciation as per books of accounts for Line1 where it has been substantially written off and depreciation as per Income Tax Act together with a change in structure of rental income. As a result of the above factors, Profit before Tax and Exceptional item (PBTE) increased to Rs.1812 Lacs as against Rs.620 Lacs in previous year, and Net profit after tax improved to Rs.1237 Lacs as against Rs.330 Lacs in the previous year. *"\ 20.2% N. Profitability Margins \ ^\ " ^11/1% 13.8% ^0% *". 6.1% %^. 3.1% 1.2% ;> 0.3% ' 17% r**~~ 16.07% 8.74% 5.96% Annual Report !23

25 /S674 Profitability corresponding number in previous year was Rs.2,882 Lacs). (b) S EBITDA PBTE PAT CASH FLOWS (i) Particulars Consolidated Operations The Consolidated cash flows for the Group for the year are as follows: A) INFLOWS Operating Profit Increase in Share Capital Net changes in loan funds TOTAL (A) B) OUTFLOWS Increase in Investments (incl. Minority interest) Net Additions to Fixed Assets (incl. CWIP) Working Capital Increase/ (Decrease) Net Interest Dividend Payments (incl. Dividend Distribution Tax) Tax Payments Change in Currency Fluctuation reserve on account of consolidation Net lncrease/(decrease) in Cash Balance TOTAL (B) Rs. in Lacs 17,383 2,303 12,174 31,860 (2,734) 25,648 7,726 1, (810) (883) 31, Rs. in Lacs 9, ,878 13,860 1,626 9,782 (2,309) 1, , ,860 Total cash available (including cash equivalents) as on March 31, 2008, was Rs.1,999 Lacs (the (ii) Increase in share capital is on account of preferential allotment of equity & warrants to the sponsors in Polyplex India. a) Lacs Equity Shares of Rs.10 each at Rs.152 per share (including premium of Rs.142) and, b) Lacs warrants of Rs. 152 each (including premium of Rs.142) on which upfront payment of Rs per warrant has been received. Loan funds went up in Thailand & Turkey to finance ongoing capital expenditure / working capital requirements. Increase in fixed assets was also on account of expenditure of ongoing projects Line 6 & Metalliser in Turkey, Extrusion Coating Line & Metalliser in Thailand besides capital advances for the India expansion. Decline in investment is on account of sales of liquid investments to meet project expenditure and capex advances in India. Increase in Net Current assets is on account of increase in inventory which is mainly attributed to build up of stock pending startup of several projects and natural increase on enhanced turnover during the year as also increase in the level of receivables because of higher turnover and higher average credit period. India Standalone Operations The standalone cash flows of the Company during the period under review were as under: 24 Annual Report

26 Particulars Rs. in Lacs Rs. in Lacs Particulars Rs. in Lacs Rs. in Lacs (c) A) INFLOWS Operating Profit Redemption of Investment in Subsidiary Increase in Share Capital TOTAL (A) B) OUTFLOWS lncrease/(decrease) in Investments Net changes in loan funds Net Additions to Fixed Assets (incl. CWIP) Working Capital Increase/ (Decrease) Net Interest Dividend Payments (incl. Dividend Distribution Tax) Tax Payments Net Increase in Cash TOTAL (B) 2, ,303 5,766 (3,934) 3,799 3,050 1, (100) 5,766 1,520 1, ,979 2, (1,408) ,979 Total cash available (including cash equivalents) as on March 31, 2008, was Rs.1,044 Lacs (the corresponding number in previous year was Rs.1,144 Lacs). During the year, the Company issued shares and warrants to the sponsors on a preferential basis. This has been discussed earlier in the report. Net repayments of Loans amounted to Rs.3,799 Lacs during the year. The investment in the expansion project in India has been funded primarily through internal accruals and by sale of liquid investments held by the Company. BALANCE SHEET (i) Consolidated Operations The Consolidated Balance Sheet for the year is given below: CAPITAL & LIABILITIES: Shareholders' Fund Minority Interest Loan Fund Deferred Tax Liability (Net) TOTAL ASSETS: Net Block (incl. CWIP) Investments Long Term Short Term Net Current Assets Cash & Bank balance Other Goodwill Misc. Exp.(Net to be w/off) TOTAL (ii) Particulars 50,006 15,755 45,502 1,411 1,12,674 86, ,522 1,999 22, ,12,674 40,747 13,768 33,548 1,591 89,654 66, ,224 2,882 15, ,654 The debtequity ratio as at March 31, 2008 was 0.62: 1. India Standalone Operations The summarized standalone Balance Sheet of the Company for the last two financial years is given below: CAPITAL & LIABILITIES: Shareholders' Fund Loan Fund Deferred Tax Liability (Net) TOTAL ASSETS: Net Block (incl. CWIP) Investments Long Term Short Term Net Current Assets Cash & Bank balance Other TOTAL Rs. in Lacs 13,018 7,980 1,411 22,409 13,308 2,191 1,522 1,044 4,344 22, Rs. in Lacs 10,555 11,999 1,591 24,145 11,086 3,138 5,224 1,144 3,553 24,145 The debtequity ratio of the Company continues to be comfortable at 0.38: 1. Annual Report

27 (d) KEY FINANCIAL RATIOS (i) Consolidated Operations The key financial ratios on a consolidated basis for are given below: Particulars Debt Equity Ratio * Term Debt/EBITDA Interest Cover (PBIT/ Interest) ROCE RONW (Net Profit after Minority Interest/Average Net worth excluding Minority Interest) Year % 17.6% Year % 8.2% Equity includes Minority interest and Deferred Tax Liability. Debt represents total debt after reducing cash and short term investments. Interest includes finance charges. The increase in Return on Capital Employed (ROCE) and Return on Net worth (RONW) has resulted from increase in profitability in the year under review. (ii) Particulars India Standalone Operations Some of the key financial ratios of the standalone operations for the last 2 financial years are given below: Debt Equity Ratio* Term Debt/EBITDA Interest Cover (PBIT7 Interest) ROCE RONW* Year % 9.3% Year % 2.7% * Net Worth includes Deferred Tax Liability. Debt represents total debt after reducing cash and short term investments, interest includes finance charges. 6. HEALTH, SAFTEY AND ENVIRONMENT The principles and guidelines adopted by the Group to conform with health, environmental and safety issues are playing a central role for all Group companies and require their ongoing attention and commitment. The status of certification for the Group companies is as under: Certification Polyplex India Polyplex Thailand Polyplex Europa ISO 9001:2000 Quality Management System Certified since 1996 Certified since 2004 Certified since Nov' 2006 ISO 14001:2004 Environment Management System Certified since 2002 Certified since 2004 Under implementation stage, Certification Plan by Sept' 08 OHSAS 18001:2007 Occupational Health & Safety Management System Certified since 2004 Certified in Jun' 08 Under implementation stage, Certification plan by Sept' 08 BRC Food Safety Management System NA NA Certified since Nov' 2006 ISO 22001:2005 Food Safety Management System Certification audit passed in May' 08 Awaiting Certificate Under implementation stage NA 261 Annual Report

28 7. HUMAN RESOURCES AND IT (b) IT Initiative a) Human Resources Rapid growth in the past years together with ongoing expansions and planned investments has thrown up several challenges accentuated by the fact that the Group now has manufacturing operations in India, Thailand and Turkey and a sales and distribution network in the US. These are sought to be accomplished by: Stability and continuity in the senior management team. Localization of management substantial progress has been made in this regard in Thailand and Turkey. Initiatives to effectively integrate a culturally diverse work force. Formalization and standardization of HR processes across units keeping in mind the local culture and environment. With a view to optimizing operations further, a project on "Process Based Organization" is currently underway in India with the assistance of an external agency. This would be deployed in the first instance at the new manufacturing facility at Bajpur, India and thereafter extended to other locations. Industrial relationships have been cordial across all manufacturing locations. A new agreement with a validity of four years was entered into with the union at Khatima. The distribution of manpower (including outsourced personnel) at a Group level at March 31, 2008 was as under: Location India US Turkey Thailand Total No ,134 With a view to increase efficiency, cost control, improve customer focus and responsiveness, and enable speedy execution of its expansion and growth plans the Company undertook implementation of an IT initiative called "Tiein". Under the initiative different operating locations and head office are being connected through a secure MPLS (Multiprotocol Label Switching) network and the latest version of SAP ERP software is being implemented in India in as a precursor to a global roll out. A sales CRM system and a data warehouse to aid analysis for better decision making are also being put in place. 8. ANTIDUMPING/ANTISUBSIDY ACTIONS (a) European Union (EU) Against India 1) The current normal import duty level on PET film imported into the EU countries from India is effectively 3% under GSP concessional duty regime. 2) Based on complaints by European PET film producers the European Commission (EC) carried out investigations against Indian exporters and levied Countervailing duties towards the end of In the case of Polyplex, a Countervailing duty of 19.1% was imposed. 3) These countervailing duties are applicable for a period of 5 years. On December 10, 2004, the European Commission (EC) initiated an expiry review of the countervailing measures. The scope of expiry review is limited to the determination of the continuation of likelihood of the recurrence of subsidization. EC decided to do an investigation based on Annual Report

29 sampling. On January 27, 2005 four companies (viz. Ester Industries Limited, Flex Industries Limited, Garware Polyester Limited & Jindal Poly Films Limited) were selected for an examination of the continuation or recurrence of subsidization. On March 8, 2006, the European commission issued the final results in the Official Journal whereby it concluded that the expiry of the duties would lead to continuance of subsidization & injury; hence the existing measures should be continued for another period of 5 years. Thus, Polyplex continues to be subject to antisubsidy duties at the rate of 19.1% on its exports to European Union (EU) from India. 4) On the basis of prima facie evidence available with the EC that there is change in circumstances with regard to subsidization on the basis of which current measures were established, on October 12, 2007 it issued a notice of initiation of a partial interim review of the countervailing measures. In March 2008 the EC carried out on site verification, further developments are awaited. 5) In May 2000, the EC also initiated an Antidumping investigation against imports of PET films from India and South Korea and imposed Antidumping duties on Indian and Korean exporters. The antidumping duty applicable to Polyplex was 38.6%. 6) Subsequently, Price Undertakings were given by the Indian manufacturers, which seek to neutralize the dumping duties established for each exporter by stipulating minimum prices (at the Exfactory levels) on a productwise basis to be achieved by each exporter on its export sales to the EU. It must be added that the CVD/Normal duties were still required to be paid on exports to the EU. 7) In February 2004, the EC initiated an investigation into the possible circumvention of AD and CVD measures on the import of PET film originating in India, by import of PET film consigned from Brazil and Israel. In November 2004, the Commission made its final determination and antidumping measures on imports of PET film from India were extended to imports of PET film consigned from Brazil or Israel, whether declared as originating in Brazil or in Israel or not, with the exception of two companies in Brazil & Israel for which onsite verification was conducted. 8) On January 4, 2005 following a complaint filed by Dupont Teijin Films, Mitsubishi Polyester film & Nuroll SpA, the European Commission initiated a partial interim review of AD measures. The scope of this review has been limited to five Indian exporting producers including Polyplex from whom price undertaking were accepted by the Commission and to the level of residual duty. In December 2005, the EC issued a General disclosure document (which precedes the formal final determination) whereby it computed a dumping margin of 3.7% for Polyplex India. Since the dumping margin is less than the export subsidy margin (of 19.1%), hence effectively Polyplex India is not required to pay any dumping Annual Report

30 duties on its exports to the EU from the date of publishing of the final determination in the Official Journal i.e. March 8, ) On March 8, 2006 the Company's request to extend the Price Undertaking to CVD was formally rejected by the EC. 10) The EC had, in November 2003, initiated a partial interim review of the AD measures, which could lead to a revocation of the provision for price undertaking. On March 8, 2006 the EC announced its decision in the Official Journal to withdraw the price undertakings. 11) The AD and CVD measures against the Company are limited to exports from India and are not applicable for exports by the Company's subsidiary in Thailand & Turkey. 12) Effective January 1, 2006 GSP benefit for export of PET film from Thailand to EU has been granted. Thus, exports from Thailand to EU would be subjected to a duty of 3% instead of 6.5% earlier. 13) On August 22, 2006 following a request by DuPont Teijin Films, Mitsubishi film & Nuroll, the EC initiated an expiry review of AD measures. EC decided to apply sampling in this case and issued questionnaire for sampling. The Company duly filed its responses in time. On September 25, 2006, EC through its letter informed Polyplex that it has not been short listed for the AD sample. CompaniQS selected for the AD sample were Jindal, (b) U.S.A. POLYPLEX Garware and Ester. On November 6, 2007 EC published the result of expiry review and imposed definitive antidumping duty on Pet Film originating in India between 0 18%. Thus the duties will continue for another five years. Against Thailand / Turkey No AD measures are applicable as yet on exports from Polyplex Europa and Polyplex Thailand to US. 1) Against India: In June 2002, the US Department of Commerce (DOC) issued a notice in the Federal Register imposing final Antidumping and Countervailing Duties against import of PET film from India as follows: Countervailing Duties (CVD): Between 18.43% & 24.48%. The applicable rate for your Company was 18.66%. In the Final determination of the First Administrative review, the DOC had computed CVD rates of 20.62% for calendar year 2001 and 19.62% for calendar year In August 2004, the DOC initiated Second Administrative review of the CVD order. Period of review (POR) for this review was calendar year In the final determination of this review, DOC computed CVD rates of 9.24% for PCL. On July 29, 2005 Petitioners filed a request for the administrative review for calendar year In August 2005, the DOC initiated Third Administrative review of the CVD order. In the final determination of this review, DOC computed CVD rate of Annual Report

31 9.20%. Since the income tax exemption (u/s 80 HHC) has expired, hence the DOC has adjusted the Cash Deposit Rate downwards from 9.20% to 7.60%. On July 3, 2006 a notice of opportunity to request fourth administrative review of the CVD order covering the period January 01, 2005 to December 31, 2005 was published in the Federal Register. Petitioners did not file a request for review. Polyplex requested for this review on its own on July 31, 2006 but later withdrew its request on August 22, Hence the case was not initiated. Since the case was not initiated the custom entries for imports falling within this period would be finally assessed at the cash deposit rate paid at the time of their clearance at the US customs. Also the cash deposit rate would continue based on the most recent completed review (i.e. 7.60%). This rate is applicable from February 12, 2007, the date of publication of the Final results of the Third Administrative Review in the Federal Register. No fresh Administrative review has been initiated since then and the applicable rate is 7.60%. On June 1, 2007 DOC and International Trade Commission (ITC) initiated the Sunset Review of the CVD measures. The scope of expiry review is limited to the likelihood of continuation of the recurrence of subsidies. On April 10,2008 the U.S. ITC in its five year sunset review determined that revocation of existing countervailing duty order on imports of PET film from India would likely to lead continuation or recurrence of material injury to the domestic industry in United States. And as a result of aforesaid determination, DOC issued order on May 8, 2008 stating continuation of countervailing duty order on imports of PET film from India. Antidumping (AD) duties: Between 0% & 5.71 %. No antidumping duty had been levied on imports from your Company. The Petitioners had appealed to the Court of International Trade (CIT) against DOC's treatment of the subsidy margins in arriving at the AD duty and thereby the exclusion of the Company from the AD order. Subsequently the court twice remanded the case to the DOC. In June 2004, CIT made its final decision in favor of the Petitioners and Polyplex was included in the AD order with 0% AD duties. Polyplex filed an appeal against the CIT decision to Court of Appeals of the Federal Circuit (CAFC) in August, On May 12, 2005 final results were announced by the CAFC. The court affirmed the decision of CIT sustaining the inclusion of Polyplex within the scope of the DOC AD duty order. The impact of the Order shall only be prospective in nature. On July 29, 2005 Petitioners filed a request for administrative review for the period July, 04 to June, 05. In August, 2005, the DOC initiated Administrative Review of the AD order. In April, Annual Report

32 the DOC published preliminary results for this administrative review in the Federal Register and calculated a weighted average dumping margin of 0.01 % for Polyplex which is de minimis. In August 2006, the DOC issued a notice in Federal register confirming the Preliminary results. No new review has been initiated subsequently and the applicable cash deposit rate for Polyplex is 0%. On June 1, 2007 DOC and International Trade Commission (ITC) initiated the Sunset Review of the AD measures. The scope of expiry review is limited to the likelihood of continuation of the recurrence of dumping. On July 2, 2007 DOC received substantive responses from the PET Film Group within the deadline and DOC notified to ITC that responses from respondent interested parties were inadequate and DOC conducted the expedited review of the orders. And On October 9, 2007 DOC determined that revocation of the antidumping duty orders would be likely to lead to continuation or recurrence of dumping. On April 10, 2008 the U.S. International Trade Commission in its five year sunset review determined that revoking of existing antidumping duty order on imports of PET film from India and Taiwan would likely to lead continuation or recurrence of material injury to an industry in United States within a reasonable time. And as a result of aforesaid determination DOC issued order on May 8, 2008 stating continuation of antidumping duty order on imports of PET film from India and Taiwan. 2) Against Thailand / Turkey: No CVD measures are applicable on exports from Polyplex Thailand and Polyplex Europa to U.S. No AD measures are applicable as yet on exports from Polyplex Europa and Polyplex Thailand to U.S. However; Following a petition filed by the domestic industry in the US in September 2003, the United States Trade Representative had initiated an investigation for removal of preferential status to Thailand. The decision went in favor of the domestic industry and effective July 1, 2004 GSP benefit has been removed on the import of PET film from Thailand. Thus exports from Thailand to US are subjected to a duty of 4.2% as against a nil rate earlier. On September 28, 2007, DuPont Teijin Films, Mitsubishi Polyester Film, SKC and Toray Plastics filed petitions with the DOC for initiating anti dumping investigation against import of PET film from People Republic of China (PRC), Brazil, UAE and Thailand. On October 26, 2007, after examining the said petition and other information reasonably available DOC initiated antidumping investigation on all above four countries. In October 2007, the US Department of Commerce (DOC) issued a notice in the Federal Register initiating Antidumping investigation against import of PET film from Thailand, China, UAE and Brazil. Annual Report

33 (c) On May 5, 2008 DOC issued notice of preliminary determination stating 0% dumping on exports from Thailand. On June 5, 2008 DOC postponed the final determination until September 17, 2008 in regard to PRC, UAE, Brazil and Thailand. Further developments are awaited. 3) The impact of these duties, if any, is likely to be limited since in the U.S. as distinct from the E.U., the duties announced following the investigation only set the cash deposit rate with the actual duties being recomputed based on the actual level of dumping or availing of subsidies as established in subsequent annual reviews, with the shortfall/excess to be collected/ refunded with interest. Past experience shows (in the Korean and Japanese PET film case in the US) that exporters implement effective monitoring mechanism, which brings down the dumping / subsidy margins progressively and in a very substantial manner. Brazil 1) Against India: In March 2007, in response to petition filed by Terphane, the Brazilian Department of Commercial Defence (DECOM) issued a notice of initiation of AD and CVD reviews against imports of PET film (up to 50 micron thickness) from India. Proceedings are currently underway and all the responses were filed in time. In April, 2008 DECOM published preliminary results and imposed antidumping duty between 0 to $/ton, and countervailing duty between to $/ton wherein antidumping duty rate for Polyplex is $72.98 /ton and countervailing duty rate for Polyplex is $69.98 /ton. 2) Against Thailand: Based on the same petition the DECOM has also initiatited an AD review against imports of PET film (up to 50 micron thickness) from Thailand. Proceedings are currently underway and all the responses were filed in time. In April, 2008 DECOM published preliminary results and imposed antidumping duty between to $ /ton, wherein antidumping duty rate for PTL is $ /ton. 3) No AD or CVD measures are applicable on exports from Polyplex Europa to Brazil. d) Turkey 1) Against India: In February 2008, in response to the petition filed Turkish Government issued a notice of initiation of antisubsidy investigation against imports of PET film from India. Further developments are awaited. 2) No AD or CVD measures are applicable on exports from Polyplex Thailand to Turkey. 9. PROJECTS UNDER IMPLEMENTATION a) India India is one of the fastest growing markets in the world for flexible packaging. With the overall economy growing at about 8% per annum, the Flexible Packaging industry is likely to grow at around 1520%. The existing Packaging and Flexible Packaging markets are estimated as under: Region World Asia India Packaging (USD Billion) Flexible Packaging (USD Billion) Per Capita Consumption (USD) As can be observed from the above chart, the per capita consumption of flexible packaging is almost onefifth of the world 1.5!32 Annual Report

34 demand and around onethird of the Asian demand. With the strong anticipated growth of the Indian economy in the coming years the consumption pattern in India for flexible packaging should align with the general levels in Asia. The ongoing developments in organized retail formats, favorable demographics, urbanization and increasing disposable income should continue with double digit growth rates in Indian Flexible Packaging industry. Branding of staple foods is another application which would provide significant impetus to the growth of flexible packaging. The last expansion of Polyplex in India was in since when the market has grown from 30,000 TPA to 200,000 TPA with most of the growth being met by new entrants in the industry. Polyplex India's share of the domestic installed capacity for Thin film is about 8% at present, which will change substantially post expansion. As mentioned in the previous year's Annual report, the Company is going ahead with its plans of expansion and setting up a new state of the art 8.70 meter wide PET Film line with a continuous process chips plant and a Metalliser at a new location Bajpur, near Khatima. Further the scope of the project has been enlarged to include a 8.7 meter wide BOPP line along with a 2.85 meter wide Metalliser. The rationale for this project emerges from the following: Continued growth in demand for flexible packaging fuelled in large part by the organized retail boom. Gravitation of converting industry to Uttarakhand due to fiscal/other benefits. Integration with existing operations would reduce incidence of overheads significantly. Backward integration into Chips & forward integration in Metallising helps in capturing maximum portion of the value chain. A Continuous Process (CP) Chips plant would be the first for a film manufacturer in India and will reduce overall manufacturing cost. Fiscal benefits including Income Tax exemption. Lower power rates in Uttarakhand than in other parts of the country. The project is expected to start commercial production in first half of with an investment of around USD 110 million. The project would be financed by an appropriate mix of longterm loans and internal accruals. b) Thailand As a measure of growth and improving its product offering to its customers, a Cast Polypropylene (CPP) film line along with a Metalliser is under implementation at the existing site in Thailand. The project rationale is based on the following: Broadbase offerings for Packaging converting industry. Leverage existing Sales & Distribution Network. Capitalize on existing & projected demand growth in South East Asia. Fragmented capacities in the region 40% with 3 players, 10% for captive consumption and the balance 50% with older / inefficient lines. Low operating cost in Thailand. Integration with existing manufacturing operations resulting in optimization of operating and capital cost. Derisk current business by diversifying product portfolio. Thus, Polyplex Thailand will have advantage of wider width line, more productivity, low cost, higher volumes and better marketspread/reach over standalone CPP units, who are focused on local markets. The project is being set up at an estimated capital cost of USD 12.5 million Annual Report

35 and is likely to commence production by first half of The project has already achieved financial closure. 10. PROPOSALS APPROVED IMPLEMENTATION FOR As discussed earlier, the flexible packaging industry at a global level is large and offers opportunities for growth. After in depth deliberation, Polyplex Thailand is in the process of securing financial closure and commencing implementation of the following projects at its existing location in Thailand: An additional Thin PET film line. Another Continuous Process Chips Plant meter width Metalliser. The rationale for the expansion in Thailand is based on the following: Supply shortfall is forecast in the South East Asia (SEA) region in the medium term, as the last expansion in SEA was three years back. Asia as also the SEA region is among the fastest growing markets in the world for PET Films. Access to sophisticated markets of Japan and Korea (Packaging and Industrial Applications). Cost competitiveness would emerge from the following: o o o o o o A high capacity high speed line. Backward integration into Chips & forward integration in Metallising. A Continuous Process (CP) Chips plant which will reduce manufacturing cost. Integration with existing operations would reduce incidence of overheads. Option for Direct melt route would reduce power requirements substantially. Investment Incentives for locating the project in Rayong as per Board of Investment (BOI) schemes. o Utilization of existing surplus land at the same site. 11. BUSINESS ALLOCATION With a view to balancing the interests of the shareholders in Polyplex Thailand and Polyplex India in the PET film business, the Group has adopted the following policies: a) Market Segmentation Policy (b) Main factors affecting the allocation methodology of sales of PET films between Polyplex India, Polyplex Thailand & Polyplex Europa are as under: Product Range: Products which are not common can be sold by Polyplex India, Polyplex Thailand or Polyplex Europa anywhere. Logistics (delivery time, freight and duty costs): Proximity and quicker deliveries. Preferential Duties: Supplier decision would be based on preferential duty advantage of one country over other. Credit Limits of customers fixed by Export Credit Insurance companies in India, Thailand & Turkey: In case of inadequate coverage, sales to these customers can be maximized by utilizing the credit limits available in all locations. OffGrade material will be sold based on generation of such material at each plant in China/India/ other outlets. Availability of material to fulfill customer requirement, as an exception only, and on an equitable basis. Future Investment Policy Polyplex India will undertake investments in the core business of PET films in India/ SAARC region either directly or through its subsidiaries. All other investments in PET films will be done by Polyplex Thailand either directly or through its subsidiaries. 34 Annual Report

36 12. RISK MANAGEMENT (a) Industrial cycles The volatility in earnings resulting from the cyclical nature of the business is a concern. This stems from the fact that capacity additions tend to be bunched whereas the growth in demand is more even. The Group has sought to mitigate this risk through a number of actions and initiatives. Some of the steps are: i) The Group believes that it has an attractive value proposition for its customers with an appropriate balance of price, quality and service. The rapid acceptance of the Group's offerings in the South East Asian markets and its leadership in the region has validated the Group's strategy of providing services which are superior to those provided by the regional producers. ii) iii) iv) The Group's presence in Turkey has also been significant where it seeks to compete with the European producers who have a much higher cost structure including high legacy costs. The competition is also beset with disadvantages resulting from older and uneconomic lines given the evolution of technology and also because of the erosion of some of the traditional market segments which were important in the past e.g. magnetic media. The distributed manufacturing strategy ensures that the Group has a much deeper access to the markets than if all the capacity was at one single location. The Group seeks to ensure that its costs are lower than regional competitors through the sustained focus on improving productivity and keeping a tight leash on all elements of costs. Internal and external benchmarking is an ongoing focus activity. Illustratively, with no investments in fresh capacity, production at the plant at Khatima has increased from 12,398 MT in to 20,753 MT in the year under review, an increase of 68%. Further improvements in production are anticipated with marginal investments in enhancing existing capacities. Programs like TPM have been critical to this success. Important elements of the cost structure apart from raw material include packing, power and fuel and freight. Sustained efforts are underway to exercise control on these costs. Aggregating purchases of material and services, to the extent possible strengthens negotiating positions. v) Several initiatives are underway to broaden the product portfolio. This comprises of the following: vi) vii) New Product development through modifications in chips, processing conditions and inline coatings Downstream activities Extrusion Coatings in Thailand, Silicone Coating in India and Metallisers in all locations Expanding its product portfolio by entering related plastic films like CPP and BOPP films The Group is exploring feasibility of several new projects / acquisition proposals in order to enhance its capacity, geographical reach and cost competitiveness. Manufacturing facilities in Thailand enable quick access to the fast growing AsiaPacific region. There is a preferential duty treatment in some countries within the ASEAN region. viii) Similarly, the facility in Turkey ensures speedy deliveries to the markets in the hinterland EU, GEE, Russia/CIS and Mediterranean rim. Turkey has Customs union with EU Annual Report

37 ix) which enables duty free movement of material between Turkey and EU. Scaling up in each manufacturing location along with integration both backward and forward helps achieve economies as well as capturing a larger portion of the value chain. can be offset by increase in another. Illustratively, while the magnetic media has been witnessing a decline, the overall demand continues to increase as applications such as Packaging have exhibited a strong and sustained growth. x) Accessing customers operating across countries in the flexible Packaging and Industrial segments by presenting alternative sourcing options from India, Thailand & Turkey and thereby mitigating their risks. This enables a more stable pricing regime. xi) xii) Deepening of the distribution reach is an important objective, which is sought to be accomplished by an appropriate mix of channel partnerships, direct presence and dealer representation and strengthening of the sales team. The investment in distribution setup in US is another key step in this direction. The Group has, in the past, built strong relationships with customers, which has helped it in adverse market conditions. It intends to forcefully extend this strategy to new customers. xiii) Geographically diversified manufacturing should moderate the influence of varying market conditions in different regions. xiv) Diversification, as planned into other barrier films, would moderate the impact of cyclically given the different nature of the product markets. (c) iv) Further, recent initiatives in forward integration should minimize this risk. The Group has successfully developed new products for special applications like antistatic, low haze and special purpose coated films which will allow it to increase its margins. In addition, as mentioned elsewhere in the report, the Group has decided to invest in other substrates of the flexible packaging market including BOPP and CPP. A foray into these products would not only provide an impetus for next round of growth while building on existing synergies, but would also increase the strength of the Group in withstanding volatile market conditions. Financial Risk Foreign Exchange risk: The Group's activities have a high export orientation. In the first instance, the risk on account of currency mismatches is sought to be minimized by aligning inflows and outflows in the same currency at each location, so that the exposure is limited to the net flows. In addition, depending on the outlook of currency market, forward currency hedges are undertaken. (b) Product Concentration The Group currently operates only in one product line i.e. Polyester films and its substrates. This should be viewed in the context of the following factors: i) Polyester film has a range of applications and a decline in one While India and Thailand have a net US Dollar inflow, operations in Turkey would indicate a surplus in Euros and deficit in US Dollar. Should the trading currencies depreciate versus Indian Rupees (INR) there would be an adverse impact on consolidated profitability. 36 Annual Report

38 ii) iii) Year Interest rate risk: Loans in India are on a fixed as well as floating rate basis. US dollar denominated loans in India carry a LIBOR linked rate and therefore potentially higher outgoes are possible in the event there is an upward movement in LIBOR. Euro/ USD loans in Polyplex Thailand & Euro Loans in Polyplex Europa are on floating rate basis linked to EURIBOR/LIBOR. Appropriate swaps from floating to fixed rates have been done based on estimated movements in interest rates Onwards Total Leveraging risk: The consolidated total debt equity ratio was 0.62:1 at the end of as compared to 0.45:1 at the end of The standalone debtequity stood at 0.38:1 (previous year 0.46:1). With the committed/ planned level of investments in India & Thailand, this ratio is likely to go up substantially as most of the financing will be done from debt route and also all excess cash (currently placed in short term liquid investments) will be utilized. However, the debtequity ratio is still likely to be within comfortable range especially with the stronger earnings expected in the current year and enhanced earnings after the new projects start operations. The current contracted repayment obligation of the Term loans is as under: India 1,426 3,151 2, ,602 Thailand 1,458 2,013 2,539 2,732 2,624 3,770 15,138 Turkey 1,408 1,380 3,011 3,449 3,449 8,722 21,419 Total 4,293 6,544 7,569 6,187 6,075 12,492 43,159 (d) (e) POLYPLEX Although, debt service requirements are going up year by year and peaking in , higher volumes and expected improvement in market conditions will help the Group in reducing this risk. Project risk As mentioned earlier, the Group has recently completed the implementation of one Thin Film line (May, 2008), along with Metalliser plant (May, 2008) in Turkey, an Extrusion Coating project (April, 2008) and another Metalliser (May, 2008) in Thailand. The successful implementation of several plants outside India within budgeted cost and time has demonstrated its project execution skills and should mitigate the risk on similar projects under implementation. Raw Material risk The basic raw material for production of PET film is PET resin, which is in turn produced from Purified Terephthalic Acid (PTA) or DiMethyl Terephthalate (DMT) and Mono Ethylene Glycol (MEG). Since the cost of resin is the single largest component of the total production cost, the fluctuation in the resin price may hurt the Company's operating margins depending upon the ability of the Company to pass the increase in costs to its customers. Analysis of historical data shows high correlation between PTA/MEG polyester film prices. The spread between two would vary depending upon the demandsupply situation of these products. Also any sudden and sharp movements in raw material prices may affect the correlation for some time. The demandsupply balance of PET films could vary across regions and can impact margins. The spread between the raw material and PET films, especially over the last few years, has moved in a band. The Group contracts with some customers provide Annual Report

39 (f) (g) for a quarterly/periodic review in pricing which enables it to adjust for any raw material cost movement. The volatility in the spread in India gets significantly moderated when correlated at a Group level. The Company monitors world and local. input price trends carefully and determines its procurement plans accordingly. Country risk The installed capacity of films in Thailand is twice that of India. Further, Polyplex Thailand has undertaken major investments in Turkey whereby the current installed capacity in Turkey is the highest in the group. Therefore fortunes for the parent company in India are intricately interwoven with the success of the manufacturing operations in Thailand and Turkey. Based on the Group's experience so far, as well as, that of a whole spectrum of foreign owned businesses present in Thailand and Turkey for a long time, it would appear that the risks are not significant. Though some political problems were faced during the year both at Thailand and Turkey, it has had almost no impact on business activities. In the event these problems escalate, there may be some impact for a short duration. However, no adverse long term impact is envisaged. With exposure now being spread to three countries, the overall locational risk for the group stands well diversified. Trade defense measures As mentioned elsewhere in the discussion, international trade in PET film has been the subject of several antidumping and countervailing duty investigations and actions. The high export orientation of the industry makes this an important business risk. An understanding of these measures resulting from the past investigation against exports of PET film from India and a geographically welldiversified sales portfolio will help mitigate the adverse fallout of such an action. 13. FUTURE OUTLOOK Recent announcements of new lines could result in an oversupply situation in the short to medium term. However, the continued growth of demand should bring the demandsupply balance in equilibrium over time. As explained elsewhere, moderating the influence of cyclical nature of the industry is an important challenge. The Group is constantly striving to position itself in a manner that while following broad industry trends, it is also able to consistently deliver better performance than its competitors. The expansions in India, Thailand and Turkey, new investments in downstream projects and efforts towards enhancing the product portfolio and capacity are consistent with this strategy. 14. CAUTIONARY STATEMENT The statements contained in this discussion are forward looking statements, which are based on certain assumptions and expectation of future events. The statements which address expectations or projections about the future prospects of the Group related to strategic planning, market segmentation, and revenue management are in line with the vision of the Group and are forward looking in nature. The Company undertakes no obligation to publicly update or revise any forwardlooking statements, whether as a result of a new information, future events, or otherwise. Investors are cautioned that the discussion based on forwardlooking statements involve risks and uncertainties. Actual results, performances or achievements could differ materially from those expressed or implied in such forwardlooking statements. I 318! Annual Report

40 REPORT ON CORPORATE GOVERNANCE Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges in India, the details of Corporate Governance and processes including compliances by the Company with the provisions of Clause 49 are as follows: 1. Company's philosophy on Code of Governance The quintessential elements of Corporate Governance are fairness, transparency, accountability and responsibility. At Polyplex, the emphasis is on: a) Enhancement of Shareholder value. b) Protection of the interest of the other shareholders. c) Longterm financial health of the Company. d) Providing customers with quality products and services at competitive prices. e) Environment friendly production methods. f) Providing for fair wage and safe working condition for employees and inviting inputs from employees in decisionmaking. g) Contribution to the socioeconomic development of the local community. 2. Board of Directors a) Composition: The Board is well structured with an adequate blend of Executive and Non Executive Directors. The Board consists of 9 (Nine) Directors of which 2 (Two) POLYPLEX are Executive Directors and 7 (Seven) are NonExecutive Directors. Non Executive Directors include the Chairman and one nominee director of IDBI Bank Ltd. (IDBI), all of whom are Independent Directors except Shri Sanjiv Saraf and Shri Sanjiv Chadha who are from promoters' category. The NonExecutive Directors bring independent judgement in the Board's deliberations and decisions. Chairman of the Company is a Non Executive Director from the Promoters' Category. b) NonExecutive Directors' Compensation: NonExecutive Directors of the Company are paid sitting Rs. 20,0007 per meeting of the Board or any Committee thereof, in addition to reimbursement/ provision of traveling / stay expenses as per Rules of the Company. c) Board Meetings: During the financial year , Six Board Meetings were held on June 30, 2007 (adjourned to July 2, 2007), July 13, 2007, July 31, 2007, October, 31, 2007, January 31, 2008 and March 8, Attendance of each Director at the Board meetings and the last Annual General Meeting and number of other Boards or Board Committees in which he is a member or Chairperson across various companies is as follows: Name of Director Sarvashri Sanjiv Saraf (Chairman) Category of Directorship Promoter, Nonindependent NonExecutive No. of Board Meetings Attended 6 Attendance at the last AGM Yes No. of Other Directorships*** 5 Other Committee Memberships**** Member Chairman Sanjiv Chadha Promoter Nonindependent NonExecutive 1 No Pranay Kothari Executive Director Nonindependent, Executive 6 Yes 7 1 S.Q. Subrahmanyan (Vice Chairman) Independent, NonExecutive 5 No 2 1 Annual Report

41 O.P. Mehra Independent, NonExecutive 4 No B.K. Soni Independent, NonExecutive 5 No 1 Ramesh Bhatia* Independent, NonExecutive No M.K. Jain Nominee of IDBI, Independent NonExecutive 5 No Suresh 1. Surana Independent, Non Executive 1 No 2 Ranjit Singh** Whole Time Director Nonindependent, Executive 4 Yes Shri Ramesh Bhatia retired from the directorship of the Company w.e.f Shri Ranjit Singh was appointed as a Whole Time Director of the Company w.e.f No. of Directorship/Membership held in other Companies excludes Directorship/Membership in Private Companies, Foreign Companies and Section 25 Companies. For determining the membership of Committees only Audit Committee and Shareholder/Investor Grievance Committee have been considered. d) s. No None of the Directors of the Company is a member in more than 10 committees or acts as Chairman of more than five committees across all companies in which he is a director. Details of shares held by Directors in the Company are as follows: Name of Director Shri Ramesh Bhatia* Shri Sanjiv Saraf Shri Sanjiv Chadha Shri Suresh I. Surana Shri Ranjit Singh No. of shares held as on ,09,800 23,069 2, ,527 * Shri Ramesh Bhatia retired from the Directorship of the Company w.e.f e) Information placed before the Board includes: The Board is supplied with the necessary information as stipulated in Annexure IA of Clause 49 of the Listing Agreement, to the extent applicable. f) Review of Compliance Report: Compliance Report signed by the Executive Director is placed before the Board at every Board Meeting. g) Code of Conduct: The Board of Directors of the Company has approved a 'Code of Conduct' for all Board members and Senior Management. The Code has been circulated to all the members of the Board and Senior Management and they have affirmed the compliance of the same. A copy of the Code of Conduct is also posted on the website of the Company viz. A confirmation from the Executive Director /Chief Executive Officer affirming Compliance of the Code of Conduct by the members of the Board / Senior Management forms part of this report. 3. Finance Committee (a) Constitution: The Board has constituted a Finance Committee comprising of following Directors viz. Shri Sanjiv Saraf, 40 Annual Report

42 (b) Shri Pranay Kothari, Shri O.P. Mehra and Shri B.K. Soni to decide, interalia, financial matters of the Company by way of loans, working capital facilities and incidental matters. Shri Sanjiv Saraf is the Chairman of the Committee. Company Secretary of the Company acts as Secretary of the Finance Committee. Meetings of the Finance Committee: POLYPLEX and January 31, Attendance of the Members at the Audit Committee Meetings was as follows : Name of Member Shri S.G. Subrahmanyan Shri M.K. Jain Shri B.K. Soni Shri O. P. Mehra Meetings attended During the year three meetings of the Finance Committee were held on July 13, 2007, October 1, 2007 and March 8, Attendance of the Members at the Finance Committee Meetings was as follows : Name of Member Shri Sanjiv Saraf Shri Pranay Kothari Shri O. P. Mehra Shri B.K. Soni 4. Audit Committee a) Constitution: Meetings attended The Audit Committee comprises of following Independent and NonExecutive Directors viz. Shri S.G. Subrahmanyan, Shri O.P. Mehra, Shri B.K. Soni and Shri M.K. Jain. Shri S.G. Subrahmanyan is the Chairman of Audit Committee. All the members of Audit Committee are financially literate within the meaning of Clause 49 of the Listing Agreement. Company Secretary of the Company acts as Secretary of the Audit Committee. Statutory Auditor and Internal Auditor are invitees to Audit Committee meetings. b) Meetings of Audit Committee: During the financial year , four meetings of Audit Committee were held on June 30, 2007 (adjourned to July 2, 2007), July 31, 2007, October 31, c) Power and Role of Audit Committee: In terms of Clause 49 of the Listing Agreement, the Powers and Role of the Audit Committee include the following: i. Powers: ii. (a) (b) (c) (d) Role: (a) (b) To investigate any activity within its. terms of reference. To seek information from any employee. To obtain outside legal or other professional advice. To secure attendance of outsiders with relevant expertise, if it considers necessary. Oversight of the company's financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible. Recommending to the Board, the appointment, reappointment and, if required, the replacement or removal of the statutory auditor and the fixation of audit fees. (c) Approval of payment to statutory auditors for any other services rendered by the statutory auditors. Annual Report

43 (d) Reviewing, with the management, the annual financial statements before submission to the board for approval, with particular reference to: i. Matters required to be included in the Director's Responsibility Statement to be included in the Board's report in terms of Subsection (2AA) of Section 217 of the Companies Act, ii. Changes, if any, in accounting policies and practices and reasons for the same. iii. iv. Major accounting entries involving estimates based on the exercise of judgment by management. Significant adjustments made in the financial statements arising out of audit findings. v. Compliance with listing and other legal requirements relating to financial statements. vi. vii. Disclosure of any related party transactions. Qualifications in the draft audit report. (e) Reviewing with the management, the quarterly financial statements before submission to the Board for approval. (f) Reviewing with the management, performance of statutory and internal auditors, adequacy of the internal control systems. (g) Reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit. (h) Discussion with internal auditors any significant findings and follow up there on. (i) (j) (k) (I) Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board. Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as postaudit discussion to ascertain any area of concern. To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors. To review the functioning of the Whistle Blower mechanism, in case the same is existing. (m) Carrying out any other function as is mentioned in the terms of reference of the Audit Committee. d) Review of information by Audit Committee: The Audit Committee mandatorily reviews the following information: i. Management Discussion and Analysis of financial condition and results of operations; ii. Statement of significant related party transactions (as defined by the audit Annual Report

44 iii. iv. committee), submitted by management; Management letters / letters of internal control weaknesses issued Internal audit reports relating to internal control weaknesses; v. The appointment, removal and terms of remuneration of the Chief internal auditor is subject to review by the Audit Committee; vi. Financial Statements and in particular the investments made by the unlisted subsidiaries of the Company; and vii. Significant Related Party Transactions on quarterly basis. 5. Remuneration Committee and Remuneration to Directors a) Composition: The Board of Directors have constituted Remuneration Committee comprising of three Independent and one Promoter, all of whom are Non Executive Directors i.e. Shri Sanjiv Saraf, Shri S.G. Subrahmanyan, Shri O.P. Mehra and Shri B.K. Soni. Shri Sanjiv Saraf is the Chairman of the Committee. The remuneration committee has been constituted to recommend to the Board the remuneration for the whole time/ Executive Director(s) of the Company. During the year one meeting of the Remuneration Committee took place on July 13, All the members of the Remuneration Committee were present at the aforesaid meeting. b) Details of Remuneration and other terms of appointment of Directors i. Executive Directors: a. Shri Pranay Kothari Shri Pranay Kothari has been reappointed as Executive Director of the Company for a period of three years w.e.f. September 7, The details of the remuneration paid to Shri Pranay Kothari, Executive Of\f\7f\R Salary Perquisites Total Rs. 12,00,000 Rs. 26,84,658 Rs. 38,84,658 Service contract of Shri Pranay Kothari is for three years expiring on September 6, The appointment of Shri Pranay Kothari as Whole Time Director may be terminated by either party after giving to the other six calendar months notice in writing. No payment on account of severance fees has been stipulated. No performance linked incentive has been paid to Shri Pranay Kothari during the year. b. Shri Ranjit Singh Shri Ranjit Singh has been appointed as Whole Time Director/ Executive Director of the Company for a period of three years w.e.f. July 13, The details of the remuneration paid to Shri Ranjit Singh, during the year are given below: Salary Perquisites Total Rs. 28,49,668 Rs. 26,55,642 Rs. 55,05,310 Service contract of Shri Ranjit Singh is for three years expiring on July 12, The appointment of Shri Ranjit Singh as Whole Time Director may be terminated by either party after giving to the other six calendar months notice in writing. No payment on account of severance fees has been stipulated. No performance linked incentive has been paid to Shri Ranjit Singh during the year. Annual Report

45 ii. NonExecutive Directors: Remuneration by way of Sitting Fee for attending meetings of the Board or any Committee(s) thereof are paid to NonExecutive Directors. The details of payment of Sitting Fee to NonExecutive Directors during the year are given below: s. No Name of Non Executive Director Shri Sanjiv Saraf Shri B.K. Soni Shri O.P. Mehra Shri S.G. Subrahmanyan Shri M.K. Jain* Shri Sanjiv Chadha Shri Ramesh Bhatia" Shri Suresh I. Surana*** Sitting Fee (Rs.) 5,20,000 3,00,000 1,80,000 2,00,000 1,80,000 20,000 20,000 All NonExecutive Directors except Shri M.K. Jain, Nominee Director of IDBI, are liable to retire by rotation. * Sitting fee paid to nominating institution i.e. IDBI. Shri Ramesh Bhatia retired from the directorship of the Company w.e.f *** Amount aggregating to Rs. 15,81,8797 was paid to a firm in which Shri Suresh I. Surana is a partner towards professional fee and reimbursement of expenses. The Company has so far not issued any Stock options to any of the Directors. cum Shareholders' / Investors' Grievance Committee consisting of Shri Sanjiv Saraf, NonExecutive Director, Shri Pranay Kothari, Executive Director and Shri B.K. Soni, NonExecutive Director. The members of the Committee present elect the Chairman of the meeting. This Committee generally meets every fortnight. The Company's Shares Transfer Committee, inter alia, looks into the Investors/ Shareholders Grievances. Shri A.K. Gurnani, Company Secretary is the Compliance Officer. b) Meetings of Share Transfer Committee During the financial year , 19 such meetings were held. Attendance of the Members at the Share Transfer cum Investors / Shareholders Grievance Committee Meetings was as follows : Name of Member Shri Sanjiv Saraf Shri Pranay Kothari Shri B.K. Soni Meetings attended c) Investor Grievance Redressal Complaints received from Investors/ shareholders are promptly attended to. Status of complaints received, resolved and pending during the financial year is as follows: Opening : 0 Resolved : 19 3 Received Pending 21 2 As on March 31, 2008, 3 requests involving 300 shares were pending for transfer/dematerialisation, which were given effect to on April 11, Share Transfer cum Investors/Shareholders Grievance Committee a) Composition The Board has constituted Share Transfer 7. Subsidiary Monitoring Framework All the subsidiary companies of the Company are Board managed. As a majority shareholder, the Company reviews and monitors the performances of its subsidiaries by way of : [44P Annual Report

46 a) Approving, in principal, their capital expenditure, business expansion plans; b) Reviewing their operations vis a vis budgets, cash flows and Balance Sheets; c) Reviewing all significant/ material transactions and arrangements; d) Minutes / significant resolutions are placed before the Company's Board. 8. General Body Meetings AGM 22nd 21st 20th i. The details about the last three Annual General Meetings are given below: Financial Year Year / Date / / / iii. Date of Meeting Location of the Meeting Registered Office at Khatima Registered Office at Khatima Registered Office at Khatima Time a.m a.m a.m. During the previous financial year, one Extra Ordinary General Meeting was held on at which a Special Resolution was passed for the allotment of shares/warrants on preferential basis. Special Resolutions passed in the previous three Annual General Meetings Subject Appointment of Shri Ranjit Singh as a Whole Time Director/Chief Operating Officer of the Company for a period of three years w.e.f. July 13, Reappointment of Shri Pranay Kothari as an Executive Director of the Company for a period of three years w.e.f. September 7, None Whether special resolutions were put through postal ballot last year, details of voting pattern, person who conducted the postal ballot exercise, proposed to be conducted through postal ballot and procedures for postal ballot. There was no special resolution which was required to be passed by postal ballot. No special resolution is proposed to be passed at the ensuing Annual General Meeting, by postal ballot. 9. Disclosures a) Disclosure on materially significant related party transactions i.e. transactions of the Company of material nature, with its Promoters, the Directors or the Management, their subsidiaries or relatives etc. that may have potential conflict with the interest of the Company at large. During the year, there were no transactions of material nature with the directors or the management or their subsidiaries or relatives that had potential conflict with the interest of the Company. b) Details of noncompliance by the Company, penalties, strictures imposed on the Company by Stock Exchanges or SEBI or any statutory authority, on any matter related to capital markets, during the last three years. There are no penalties, strictures imposed on the Company by Stock Exchanges or SEBI or any statutory authority on any matter related to capital markets, during the last three years. c) Whistle Blower policy and affirmation that no personnel has been denied access to the audit committee. They Company has not yet formulated Whistle Blower policy. No employee of the Company has been denied access to the Audit Committee to make any representation. d) Details of compliance with mandatory requirements and adoption of the nonmandatory requirements of Clause 49 in all respect. Company has complied with the mandatory requirements of Clause 49 and as regards nonmandatory requirements these would be adopted in due course of time. e) Management Discussion and Analysis. This Annual Report has a detailed section on Management Discussion and Analysis. Annual Report

47 f) Reappointment of Directors As required by Clause 49 IV(G)(i), particulars of Directors seeking reappointment are given in the Notice of the Annual General Meeting to be held on September 26, CEO/ CFO Certification As required by the revised Clause 49 of the Listing Agreement, the Certificate from Shri Pranay Kothari, Executive Director was placed before the Board of Directors at their meeting held on July 31, Means of Communication a. Quarterly results/ returns and official news releases are furnished to Stock Exchanges and are also posted on the Company's Website b. The quarterly and half yearly results are generally published in the The Economic Times' and 'Uttar Ujala, Nainital'. c. Management Discussion and Analysis forms part of the Annual Report, which is posted to the shareholders of the Company. d. EDIFAR Filing As per the requirements of Clause 51 of the Listing Agreement, all the data relating to quarterly financial results, shareholding pattern etc. are electronically filed on the EDIFAR website within the timeframe prescribed in this regard. Declaration by the CEO under Clause 49 I (D) of the Listing Agreement regarding adherence to the Code of Conduct. I hereby confirm that: The Company has obtained from all the members of the Board and Senior Management, affirmation that they have complied with the Code of Conduct for Directors and Senior Management in respect of the Financial Year Place : NOIDA Date : July 31, 2008 Pranay Kothari Executive Director 46 Annual Report

48 GENERAL SHAREHOLDERS INFORMATION POLYPLEX 1. Annual General Meeting at 1 a.m. at the Date & Time : Registered Office at : Lohia Head Road, Khatima Distt. Udham Singh Nagar, UTTARAKHAND 2. Financial Year : April 1st to March 31st. 3. Book Closure Date : to (both days inclusive) 4. Dividend Payment Date : On or from Listing on Stock Exchanges : Equity Shares of the Company are listed on following Stock Exchanges: Bombay Stock Exchange Limited, Phiroze Jeejeebhoy Towers, Dalai Street, Mumbai The National Stock Exchange of India Limited, Bandra Kurla Complex, Mumbai Listing Fees for the year has been paid to above Stock Exchanges. Company's application for voluntary delisting of Shares from the Calcutta Stock Exchange Association Limited has been approved 'in principle' by the Exchange. 6. Scrip Code : The Company's equity shares have been allotted following scrip codes : Bombay Stock Exchange Limited Scrip Code National Stock Exchange of India Ltd. POLYPLEX Reuters Code PLYP.BO NSDL/ CDSL ISIN INE633B01018 Annual Report

49 7. Stock Market Data : Share prices on Bombay Stock Exchange Limited and the National Stock Exchange of India Ltd. during were as follows: Months April, 2007 Bombay Stock Exchange Limited High Rs Low Rs Volume Nos The National Stock Exchange of India Ltd. High Rs. 12 Low Rs Volume Nos May, June, July, August, September, October, November, December, January, February, March, Total Source : and Registrars and Share Transfer Agents : MCS Ltd., Sri Venkatesh Bhawan, W40, Okhla Industrial Area, Phase II, New Delhi Phone : (011) , Fax : (011) mcsdel@vsnl.com 9. Share Transfer System : All valid requests for transfer of shares are approved by Share Transfer Committee and given effect to within a period of 21 days. Annual Report

50 Annual Report POLYPLEX 10. Distribution of shareholdings as on : Share holding in Number of Shares Shareholders Number % of total Amount (in Rs.) % of Total 1 to to to to to to to & above Total Categories of shareholders as on : A Promoter's holding 1. Promoters Indian Promoters : Foreign Promoters : 2. Persons acting in concert Category Sub Total B. Non Promoters Holding 3. Institutional Investors a. Mutual Funds and DTI b. Banks, Financial Institutions, Insurance Companies c. Flls 4. Others a. Private Corporate Bodies b. Indian Public c. NRIs/OCBs d. Any other (Trusts) SubTotal SubTotal Grand Total No. of Shares held Percentage of Shareholding Note : Total Foreign shareholding as on March 31, 2008 is Shares 51.67% Above shareholding is as per shares held in physical form and details of Beneficial Owners received from NSDL/CDSL

51 50 Annual Report POLYPLEX 12. Stock Performance of the Company in comparison to NSE Nifty : Polyplex's Share Price Movement Vs. NSE Nifty Index (200708) 0) _o 'l_ Q. O re (O " o ila. o >, co o "5 CB r o Q. CD CO Period, O cp >o CD 6CD Q co CD CD oo 9.Q 0) oo o Ftolyplex Share Price NSE Nifty 13. Dematerialisation of shares and liquidity : Shares of the Company are available for dematerialisation and are being traded in dematerialised form by all investors w.e.f. April 30, Shareholders of the Company are advised to avail the facility of electronic shares through dematerialisation of physical scrips by opening an account with any of the recognized Depository Participants. Status of Dematerialisation as on March 31, 2008 Particulars No. of shares % of Total Capital No. of Accounts National Securities Depository Limited Central Depository Services (India) Limited Total Dematerialised Physical Grand Total The Company has not issued GDRs and there are no convertible bonds outstanding as at the yearend. 16,50,000 warrants issued by the Company to a promoter group Company on Preferential basis are outstanding at the year end. These warrants entitle the holder to apply for equal number of equity shares at a price of Rs.152/ per share at any time upto April, 30, 2009.

52 Annual Renort POLYPLEX 14. Plant Locations : The Company's Polyester Chips and Polyester / Coated Film manufacturing facility is located at Khatima , Distt. Udham Singh Nagar, Uttarakhand. 15. Investor Correspondence : For any assistance regarding share transfers, transmissions, issue of duplicate share certificate(s), change of address, nonreceipt of dividend, issue of duplicate dividend warrants, dematerialisation of shares etc., please contact / write to: Shares Department Polyplex Corporation Limited Lohia Head Road, Khatima Distt. Udham Singh Nagar, Uttarakhand Phone : (05943) Fax : (05943) investorrelations@polyplex.com 16. Financial Statistics : or.shares Department, Polyplex Corporation Limited B37, Sector 1, NOIDA , Gautam Budh Nagar, Uttar Pradesh Phone : (0120) to 19 Fax : (0120) & Share Capital Reserves Borrowing Capital employed Gross Block Depreciation Net Block Gross Revenue Expenses Depreciation Profit before Tax Taxes Distributable Profits for the Year Dividend (including Dividend Tax) Earnings Per Share (Rs.) (Basic) Dividend per share of Rs.10/ each (in Rs.)

53 Annual Report POLYPLEX TO THE MEMBERS OF POLYPLEX CORPORATION LIMITED We have examined the compliance of conditions of Corporate Governance procedures implemented by Polyplex Corporation Limited for the year ended on March 31, 2008, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to a review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. AUDITORS' CERTIFICATE period exceeding one month against the Company as per the records maintained by the Share Transfer and Shareholders Grievance Committee of the Board and the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreements with the Stock Exchanges have been complied with in all material respects by the Company. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the Management has conducted the affairs of the Company. For Lodha & Co., Chartered Accountants On the basis of our review and according to the information and explanations given to us, no investors grievance(s) is/are pending for a Place: New Delhi Dated: July 31, 2008 N.K. LODHA Partner M.No

54 Annual Report AUDITORS' REPORT TO THE MEMBERS OF POLYPLEX CORPORATION LIMITED We have audited the attached Balance Sheet of Polyplex Corporation Limited as at 31st March 2008, the Profit and Loss Account and 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. 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 presentation. We believe that our audit provides a reasonable basis for our opinion. We report that (a) (b) (c) (d) (e) 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; 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; The Balance Sheet, Profit & Loss Account and Cash Flow Statement referred to in this report are in agreement with the books of account; In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in Section 211(3C) of the Companies Act, 1956; On the basis of written representations received from the Directors of the Company and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31st March 2008 from being appointed as a Director in terms of clause (g) (f) (g) POLYPLEX of sub section (1) of Section 274 of the Companies Act, 1956; In our opinion and to the best of our information and according to the explanations given to us, the said accounts read together with notes appearing in Schedule 15 and other Notes on Accounts, 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, 2008; ii) iii) in the case of the Profit & Loss Account, of the profit for the year ended on that date; and in the case of Cash Flow Statement, of the Cash Flows for the year ended on that date. As required by the Companies (Auditor's Report) Order, 2003 (The Order') (As amended) issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956 (The Act'), on the matters specified in paragraphs 4 and 5 of the said Order and on the basis of such checks as we considered appropriate and in terms of information and explanations provided to us, we further report that : 1. (a) The Company has maintained proper records showing full particulars including quantitative details and situation of Fixed Assets. (b) We have been informed by the management that Fixed Assets have been physically verified by the management during the year according to the regular programme of periodical verification in phased manner which in our opinion is reasonable having regard to the size of the Company and the nature of its Fixed Assets. According to the information and explanations given to us, discrepancies noticed on such physical verification were not material.

55 54 Annual Report POLYPLEX (c) As per the records and information and explanations given to us, no substantial part of Fixed Assets has been disposed off during the year and therefore does not affect the going concern assumption. 2. (a) We have been explained by the management that the inventory of the Company at all its locations (except stocks lying with third parties and in transit) have been physically verified by the Management at reasonable intervals. (b) (c) In our opinion and according to information and explanations given to us, the procedures of physical verification of inventory followed by the Management are reasonable and adequate in relation to the size of the Company and nature of its business. In our opinion and according to information and explanations given to us, the Company is maintaining proper records of inventory and the discrepancies noticed on physical verification of inventory as compared to book records were not material. 3. (a) As informed to us, the Company has not granted any loan, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the clauses 4(iii)(b) to (e) of the Order are not applicable. (b) The Company has not taken any loan, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Act. Accordingly, the clauses 4(iii)(f) to (g) of the Order are not applicable. 4. In our opinion and according to the information and explanations given to us, having regard to the explanation that some of items purchased are of specialised nature, taking into consideration the quality, the usage and such other factors, comparative sources/ quotations are not available, the Company has adequate internal control systems commensurate with the size of the Company and nature of its business for the purchases of inventory, fixed assets and for the sale of goods and services. Further, on the basis of examination of the books and records of the Company and according to the information and explanations given to us and as per the checking carried out in accordance with the auditing standards generally accepted in India, neither we have observed nor we have been informed of any continuing failure to correct major weaknesses in internal control system. 5. (a) In our opinion and according to information and explanations given to us, the particulars of contract or arrangement that need to be entered into the register maintained under Section 301 of the Act have been so entered. (b) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements entered into the register maintained under Section 301 of the Act and exceeding the value of Rupees five lacs in respect of each party during the year have been made at prices which are reasonable having regard to the prevailing market prices at the relevant time. 6. In our opinion and according to the information and explanations given to us, the Company has not accepted any other deposits from the public within the meaning of Section 58A and 58AA or any other relevant provisions of the Act and rules framed thereunder. We have been informed that no order has been passed by Company Law Board or National Company Law Tribunal or Reserve Bank of India or any Court or any other Tribunal in this regard. 7. In our opinion, the Company has an

56 Annual Report internal audit system commensurate with the size of the Company and nature of its business. The Central Government has prescribed maintenance of cost records under Section 209(1 )(d) of the Act, in respect of Polyester Chips. On the basis of the records produced and broadly reviewed by us, we are of the opinion that, prima facie, the prescribed records have been made and maintained. However, we are not required to and have not carried out any detailed examination of the said records, with a view to determine whether they are accurate or complete. (a) In our opinion and according to the information and explanations given to us, undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise (b) POLYPLEX Duty, Cess and any other statutory dues have generally been deposited in time during the year with the appropriate authorities and there are no undisputed statutory dues payable for a period of more than six months from the date they became payable as at 31st March, 2008, except dues of Sales Tax to the extent of Rs Lacs. In our opinion and according to the information & explanations given to us, there are no dues in respect of Wealth Tax, Service Tax and Cess that have not been deposited with appropriate authority on account of any dispute and the dues in respect of Sales Tax, Customs Duty, Excise Duty, and Income Tax that have not been deposited with the appropriate authorities on account of dispute and the forum where the dispute is pending are given below: Name of the Statute Nature of dues Period to which the Amount Relates Amount (Rs. in Lacs) Forum where disputes are pending U.P. Tax on Entry of Goods Act Entry Tax High Court Tribunal Tribunal Joint Commissioner (Appeal) Joint Commissioner (Appeal) Sales Tax Act Sales Tax Joint Commissioner (Appeal) Deputy Commissioner (Assessment) Deputy Commissioner (Appeal) Deputy Commissioner (Appeal) Income Tax Act, 1961 Income Tax & Interest thereon CIT (Appeal) Central Excise Act, 1944 Excise Duty & Assistant Commissioner Assistant Commissioner Excise Duty and Penalty Commissioner (Appeal)

57 Annual Report POLYPLEX 10. The Company does not have accumulated losses as at the end of the financial year and has not incurred cash losses in the current financial year and in the immediately preceeding financial year. 11. In our opinion, on the basis of audit procedures and according to the information and explanations given to us, the Company has not defaulted in repayment of any dues to financial institutions or banks or debenture holders. 12. According to the information and explanations given to us, the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities. 13. The Company is not a chit fund or a nidhi/ mutual benefit fund/society, therefore, the clause 4 (xiii) of The Order is not applicable to the Company. 14. According to the information and explanations given to us, the Company is not dealing in or trading in shares, securities, debentures and other investments. 15. In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks and financial institutions. 16. In our opinion and on the basis of information and explanations given to us, the term loans were applied for the purposes for which the loans were obtained except pending utilization of certain loans, the funds obtained have been temporarily deployed in current investments. 17. On the basis of information and explanations given to us and on an overall examination of the Balance Sheet of the Company, no funds raised on shortterm basis have been used for longterm investment. 18. During the year, the Company has made preferential allotment of Equity Shares and Warrants to a Company covered in the register maintained under Section 301 of the Act. The price, which is in accordance with the SEBI (Disclosure & Investor Protection) Guidelines, 2000, in our opinion, is not prejudicial to the interest of the Company. 19. The Company has not issued any debentures. 20. The Company has not raised any money through a public issue during the year. 21. Based upon the audit procedures performed in accordance with accepted auditing practices in India, we have neither come across any instance of fraud on or by the Company, noticed or reported, during the year nor we have been informed of such case by the management. Place : New Delhi Dated : June 28, 2008 For Lodha & Co. Chartered Accountants N.K. Lodha Partner Membership No

58 Annual Reoort BALANCE SHEET AS AT MARCH 31, 2008 POLYPLEX I. SOURCES OF FUNDS II. SCHEDULE SHAREHOLDERS' FUNDS Share Capital 1 Equity Share Warrants (Refer note no. 11 (a) of Schedule 15A) Reserves & Surplus 2 LOAN FUNDS Secured Loans 3 Unsecured Loans 4 DEFERRED TAX LIABILITY (NET) 5 APPLICATION OF FUNDS TOTAL FIXED ASSETS 6 Gross Block Less: Depreciation Net Block Capital work in progress (incl Capital Advances) INVESTMENTS 7 CURRENT ASSETS, LOANS AND ADVANCES 8 Inventories Sundry Debtors Cash and Bank Balances Loans and Advances LESS: CURRENT LIABILITIES & PROVISIONS 9 Current Liabilities Provisions NET CURRENT ASSETS TOTAL Notes to Accounts and Significant Accounting Policies 15 As at March 31, , , , , , , , , , , , , , , , , , , , , , As at March 31, , , , , , , , , , , , , , , , , , , , , , As per our report of even date attached For Lodha & Co., Chartered Accountants Schedules referred to above form an integral part of the Balance Sheet N. K. Lodha Pranay Kothari S.G. Subrahmanyan Sanjiv Chadha Partner Executive Director ViceChairman M.K. Jain Membership No B.K. Soni O.P. Mehra Ranjit Singh A.K. Gurnani Directors Place : New Delhi Whole Time Director Company Secretary Date : June 28, 2008 Place : NOIDA

59 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2008 INCOME Sales (Net of Excise of Rs. 2, Lacs, Previous Year Rs. 2, Lacs) Other Income Stock Accretion/(Decretion) EXPENDITURE Manufacturing Expenses Operating and other Expenses Interest & Finance Charges SCHEDULE Profit before Depreciation Depreciation Profit after Depreciation Less : Exceptional Items (Gain)/Loss on Investment in Preference Shares (Refer Note 4 of Schedule 15A) Profit after Exceptional Items Less/(Add) : Provision For Tax Current Tax Fringe Benefit Tax Deferred Tax Less/(Add) : Prior Period Adjustment Tax Profit after Tax Add : Surplus brought forward Add : Debenture Redemption Reserve written back Balance Available for Appropriation Transferred to General Reserve Proposed Dividend Corporate Dividend Tax Surplus carried to Balance Sheet Basic earning per share (in Rs.) Diluted earning per share (in Rs.) (Refer Note 24 of Schedule 15A) Notes to Accounts and Significant Accounting Policies TOTAL TOTAL 15 CURRENT YEAR 19, , (181.60) 20, , , , ,632.77" , , (180.25) 1, (2.08) 1, , , , PREVIOUS YEAR 18, , , , , , , (4.59) , , , As per our report of even date attached For Lodha & Co., Chartered Accountants Schedules referred to above form an integral part of the Profit and Loss Account N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Soni O.P. Mehra Directors Place : NOIDA 58 Annual Report

60 Annual Report ! CASH FLOW STATEMENT rwn int. it«n i_miri_l/ mnn^ii 01, «.uvo POLYPLEX CORPORATION LTD A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit Before Tax Adjustments For : 1, Depreciation Provision for Doubtful Debtors/Bad Debts Written Off 1.28 Interest (Net) Exchange Loss on Redemption of Investments (4.59) Unrealised Foreign Exchange (Gain)/Loss (220.20) (177.32) Excess Provision/Sundry Balances Written Back (Net) Loss/Profit on Sale of Fixed Assets (Net) Asset Written Off Profit on Sale of Investments (231.84) (246.03) Dividend Received (277.14) (451.49) Operating Profit Before Working Capital Changes 2, , Adjustments For : Trade and Other Receivables (966.04) 1, Inventories (333.46) (143.99) Trade Payables (1,232.23) , Cash Generated From Operations 1, , Taxes Paid (549.91) (124.42) Cash Flow Before Extraordinary Items , Net Cash From Operating Activities , B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of Fixed Assets (384.31) (697.64) Capital Work in Progress (Incl Capital Advances) (2,672.22) Sale of Fixed Assets Purchase of Short Term Investments (21,526.70) (37,072.85) Sale/Redemption of Long Term Investments Sale of Short Term Investments 25, , Interest/Dividend Received Net Cash Used In Investing Activities (676.66)

61 60] Annual Report POLYPLEX C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds From Long Term Borrowings Repayment of Long Term Borrowings Net Proceeds From Short Term Borrowings Interest Paid Dividends Paid Tax on Distributed Profits Proceeds From Issue of Share Capital Proceeds From Issue of Share Warrants (3,127.70) (670.90) (897.22) (583.76) (99.54) 2, , (1,447.89) (1,002.64) (148.55) (20.54) Net Cash Used in Financing Activities Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents as at (Opening Balance) Cash and Cash Equivalents as at (Closing Balance) (3,076.32) (99.97) 1, , (1,363.19) , Notes : 1. Cash and Cash equivalents represents Cash and Bank balances as per Schedule Previous Year figures are regrouped wherever necessary. As per our report of even date attached For Lodha & Co., Chartered Accountants N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Son! O.P. Mehra Directors Place : NOIDA

62 SCHEDULE 1 SHARE CAPITAL As at As at March 31, 2008 March 31, 2007 AUTHORISED 3,00,00,000 Equity Shares of Rs.10 each ISSUED AND SUBSCRIBED PAIDUP 1,71,88,000 (Previous Year 1,58,38,000) Equity Shares of Rs.10 each 1,59,92,300 (Previous Year 1,46,42,300) Equity Shares of Rs.10 each fully paid up Add: Share Forfeiture Account OUT OF ABOVE : 13,50,000 Equity Shares have been issued during the year on preferential basis. TOTAL 3,00 1, , , ,00 1, , , Annual Report

63 SCHEDULE 2 RESERVES & SURPLUS CAPITAL RESERVE Central Investments subsidy Per last Balance Sheet SECURITIES PREMIUM Per last Balance Sheet Addition during the year DEBENTURE REDEMPTION RESERVE Per last Balance Sheet Transferred to Profit & Loss Account GENERAL RESERVE Per last Balance Sheet Transferred from Profit & Loss Account (A) As at March 31, , , , , , As at March 31, , , , , FOREIGN EXCHANGE TRANSLATION RESERVE Per last Balance Sheet Updation on translation adjustment (B) (A + B) SURPLUS AS PER PROFIT & LOSS ACCOUNT TOTAL (76.11) (29.03) 1, , , (101.89) (76.11) 1, , , Annual Report

64 SCHEDULE 3 SECURED LOANS As at As at March 31, 2008 March 31, 2007 Loans from Banks Rupee Term Loans 4, ,25 Foreign Currency Term Loans 2, , Working Capital Loans Foreign Currency Working Capital Demand Loans Cash Credit Export Packing Credit Foreign Currency Loans Vehicle Loan Interest accrued & due TOTAL , , , , (1) Foreign Currency (FC) Term Loan of Rs Lacs (Previous Year Rs Lacs) and Corporate Rupee Loan (incl. interest) of Rs Lacs (Previous Year Rs Lacs) are secured / to be secured on a pan passu basis by a first equitable mortgage in respect of Company's immovable properties at Khatima, both present and future, and a charge by way of hypothecation of Company's movables (save and except book debts) both present and future, subject to prior charges created and/or to be created in favour of the Company's bankers on specified movables for working capital facilities. (2) Vehicle Loan of Rs Lacs (Previous Year Rs Lacs) from Banks are secured by hypothecation of Vehicles purchased therefrom. (3) Foreign Currency Term Loan includes Nil (Previous Year Rs Lacs) being in the nature of External Commercial Borrowing availed from Chinatrust Commercial Bank which was secured by exclusive charge by way of equitable mortgage of land and building at Noida. (4) Working Capital Loans from Banks (incl interest) aggregating to Rs Lacs (Previous Year Rs Lacs) are secured / to be secured by way of hypothecation of inventories, book debts and other current assets both present and future, besides second charge on company's immovable properties at Khatima and are further secured by irrevocable guarantee of director/ promoter to the extent of Rs Lacs (Previous Year Rs Lacs). Annual Report

65 SCHEDULE 4 UNSECURED LOANS As at March 31, 2008 Foreign Currency Term Loan from a Bank TOTAL As at March 31, , , SCHEDULE 5 DEFERRED TAX ASSETS AND LIABILITIES (Arising out of timing differences) DEFERRED TAX ASSETS Disallowances as per Income Tax Act DEFERRED TAX LIABILITY Depreciation DEFERRED TAX LIABILITY (NET) As at March 31, (1,429.61) (1,429.61) (1,410.76) As at March 31, (1,609.67) (1,609.67) (1,591.00) Annual Report

66 SCHEDULE 6 FIXED ASSETS GROSS BLOCK DEPRECIATION NET BLOCK Particulars As at April 01, 2007 Additions during the year Sale/ adjustments As at March 31, 2008 As at April 01, 2007 For the year Sale/ adjustments As at March 31, 2008 As at March 31, 2008 As at March 31, 2007 Freehold Land Leasehold Land Buildings 2, , , , Plant & Machinery 17, , , , , , Electrical Installations Furniture & Fixtures Office Equipments Vehicles Total 22, , , , , , Previous Year 20, , , , , , , Notes : 1. Freehold Land costing Rs Lacs (Previous Year Rs Lacs) is under Power of Attorney. 2. Addition to Plant & Machinery includes Nil (Previous Year Rs Lac) on account of Foreign Exchange Fluctuation. 3. Plant & Machinery (Gross Block) includes Rs Lacs (Previous Year Rs Lacs) in respect of assets taken on financial lease. Annual Report

67 SCHEDULE 7 INVESTMENTS Face Value Nos. March 31, 2008 Nos. As at As at March 31, March 31, March 31, Long Term (At Cost less Provision) Other than Trade Unquoted Shares (Fully Paid up unless otherwise stated) (1) Equity / Ordinary Shares Investment in Other Companies Polyplex Infotech Private Limited Excel International Limited Bhilangana Hydro Power Limited Investment in Subsidiary Companies Polyplex (Asia) Pte Ltd. (common stock, no par value) Polyplex (Americas) Inc. (Cost USD ) (common stock, no par value) Rs.10 Rs.10 Rs.10 69,800 4,020 25,000 1,00,000 25,000 69,800 4,020 25,000 1,00,000 25, (2) Preference Shares Non Cumulative Redeemable Investment in Subsidiary Companies Polyplex (Asia) Pte Ltd (preference stock, no par value) 1,650 9, , Long Term Other than Trade Quoted Shares (Fully Paid up unless otherwise stated) (1) Equity / Ordinary Shares Investment in Subsidiary Companies Polyplex (Thailand) Public Company Limited * Baht 1 13,20,00,000 13,20,00,000 1, , Current Other than Trade Unquoted Other than Shares Mutual Funds Chola Institutional Liquid Plan Kotak FMP Series Deutsche Money Plus Growth Option DWS Instra Cash Plus Growth Reliance Liquidity Fund Growth Birla Cash Plus Insl., Growth Principal Cash Mangement instl. Growth DTI Liquid Cash Plan Inst. Growth Plan Reliance Fmp Series vi Tata Fixed Horizon Fund Series 8 Fmp SBI Debt Fund Series 90 days DWS Fixed Term Series 28 DSP Merrill lynch Fixed Term Plan Series 1 J Prudential ICICI FMP Monthly Plan CumulativeXXVII Birla FTP Quaterly Series 10 Growth UTI Fixed Maturity Plan Quaterly series QFMP/0307/II Rs.10 Rs.10 Rs.10 Rs.10 Rs.10 Rs.10 Rs.1'0 Rs.1000 Rs.10 Rs.1000 Rs.10 Rs.10 Rs.1000 Rs.10 Rs.10 Rs ,28,778 1,18,54, ,25,016 44,32,639 41,77,259 33,55,874 43,26,659 16,215 40,00,000 21,729 40,00,000 40,00,000 20,000 30,71,013 40,00,000 40,78, , Grand Total 3, , Aggregate of Unquoted Investments (At Cost Less Provision) Aggregate of Quoted Investments (At Book Value) (At Market Value) 2, , ,23, , , , Note: Includes 60 ordinary shares (Previous Year 60 ordinary shares) beneficially owned by the Company but not registered in the name of the Company. Annual Report

68 SCHEDULE 7 (Contd.) INVESTMENTS No of Units No of Units Investments purchased and sold during the year Mutual Funds SBI Premier Liquid Fund Inst Growth Prudential ICICI super inst Liquid Plan DSP Merrill Lynch Liquid Fund DSPML Liquid Plus FundlnstGrowth ING Vysya Liquid Fund SBI Debt Fund Series Kotak Flexi Debt Scheme Growth Deutsche Insta Cash Inst Plan Growth DWS Credit Oppurtunity Fund Deutsche Quarterly Interval Fund DWS Short Maturity Fund Birla Cash Plus Inst Premium Birla Liquid Plus Reliance Liquid Plus Growth UTI FMP Quarterly Series SBI Magnum Institutional RLFTreasury PlanLPGrowth Tata Liquid Super High Inv. Fund Birla Sunlife Cash MgrLPGrowth Kotak Liquid (Inst. Premium) HSBC LIQUID PLUS Chola Institutional Liquid Plan Reliance Liquid Growth Fund Principal Cash Management Fund Deutsche Mutual Growth Fund DEUTSCHE MONEY PLUS Growth option DEUTSCHE MONEY PLUS INST Growth option MAGNUM INSTITUTIONAL INCOME FUND(PMP) KOTAK FMP SERIES Chola FMP Series 3 (Qtrly Plan 1) DSPML FMP'S Prudential ICICI FMPMonthly Plan Cumulative XXVII BIRLA FMP'S TATA FMP'S RELIANCE FMP'S UTI Liquid Cash Plan Inst. Growth plan 38,83,893 32,51, ,00,000 45,14,725 2,73,22,903 41,08,934 30,50,158 51,92,413 1,62,25,243 20,96, ,134 41,95, , ,07,12, ,39,97, , ,03,41, ,92, ,04,084 19,80,924 70, ,18,21,221 1,76,627 1,28,406 59,35, ,72,407 6,94,387 2,43,847 3,00,44,595 4,32,69,516 49,31,842 69,92,228 2,48,09,322 49,63,669 85,87,763 39,66,300 55,62,739 50,19,858 42,58,527 83,32,740 40,063 30,11,506 40,66,925 58,31,764 36,35,158 41,28,434 Annual Report

69 SCHEDULE 8 CURRENT ASSETS, LOANS AND ADVANCES As at As at March 31, 2008 March 31, 2007 A. CURRENT ASSETS Inventories (as valued and certified by the Management) (at lower of cost and net realisable value) Stores & Spares Raw Materials (including in Transit Rs Lacs, Previous Year Rs Lacs) Stock in Process Finished Goods (including Scrap stock Rs Lacs, Previous Year Rs Lacs) (including in transit stock Rs Lacs, Previous Year Rs Lacs) Sub Total 2, , Sundry Debtors (Unsecured) Debts outstanding for a period exceeding six months Considered good Considered doubtful Other Debts Considered good 2, , , , Less: Provision for doubtful debts Sub Total 2, , Cash & Bank Balances Cash in hand Cheques in hand Bank balance with scheduled banks Current Accounts Dividend Account Fixed Deposits* Sub Total 1, , Total (A) 5, , B. LOANS AND ADVANCES (Unsecured Considered Good) Advances recoverable in cash or in kind or for value to be received Inter Corporate Deposits Deposits with Government Authorities & Others Advance Tax , Advance Fringe Benefit Tax Balance with Customs & Excise Total (B) 3, , TOTAL (A+B) 8, , Includes Rs Lacs (Previous Year Rs Lacs) pledged with banks towards margin against Guarantees, Letters of Credit and Foreign Bill Purchase limit.. "test" i L.. Annual Report _

70 SCHEDULE 9 CURRENT LIABILITIES & PROVISIONS CURRENT LIABILITIES Sundry Creditors Micro and Small Enterprises Sundry Creditors Others Security deposits / Advances from tenants Investor Education and Protection Fund shall be credited by the following amounts, when due : Unpaid Dividend Other liabilities Interest accrued but not due Sub Total PROVISIONS Provision for Wealth Tax Provision for Tax Provision for Fringe Benefit Tax Proposed Dividend (including Corporate Dividend Tax) Provision for Retirement Benefits Sub Total TOTAL As at March 31, , , , , , As at March 31, , , , , SCHEDULE 10 OTHER INCOME Rental Income (Tax deducted at source Rs Lacs, Previous Year Rs Lacs) Miscellaneous Receipts Profit on Sale of Current Investments Dividend Income (TDS Rs Lacs, Previous Year Nil) Excess Provision Written Back Provision for Doubtful Debts written back Prior Period Income (Net) Foreign Exchange Fluctuation (Net) TOTAL CURRENT YEAR , PREVIOUS YEAR , Annual Report i ;

71 SCHEDULE 11 STOCK ACCRETION / (DECRETION) Closing Stocks Finished Goods Stock in Process Others Stock in Process Chips Less : Stock at the start of commercial production Opening Stocks Finished Goods Stock in Process Others Stock in Process Chips Add : lncrease/(decrease) in Excise Duty on Stocks TOTAL CURRENT YEAR (7.90) (181.60) PREVIOUS YEAR (13.97) SCHEDULE 12 MANUFACTURING EXPENSES Raw Materials Consumed (Read together with Note 3 of Schedule 15A) Job Work Charges Stores & Spares Consumed Packing Material Consumed Power & Fuel Repairs and Maintenance Building Plant & Machinery TOTAL CURRENT YEAR 11, , , PREVIOUS YEAR 11, , , Annual Report

72 SCHEDULE 13 OPERATING AND OTHER EXPENSES PERSONNEL EXPENSES Salaries, Wages and Allowances Contribution to Provident and other Funds Staff Welfare Expenses ADMINISTRATIVE EXPENSES Rent (including lease rent Rs Lacs, Previous Year Rs Lacs) Electricity & Water Charges (Net) Repairs & Maintenance (Net) Rates and Taxes Postage and Telephone Printing and Stationery Travelling and Conveyance Vehicle Expenses Insurance Legal and Professional Fee Miscellaneous Expenses Directors' Sitting Fee SELLING EXPENSES Advertisement Sales Promotion Freight Commission on Sales OTHER EXPENSES Asset Written Off Loss on Sale of Fixed Assets (Net of Profit of Rs Lacs, Previous Year Rs Lacs) Excise Duty (Net of Recovery) Donation Foreign Exchange Fluctuation (Net) Prior Period Expenses Provision for Doubtful Debts Sundry Balances Written Off (Net) Bad Debts Written Off Sub Total Sub Total Sub Total Sub Total TOTAL CURRENT YEAR 1, , , , PREVIOUS YEAR 1, , , , Annual Report

73 SCHEDULE 14 INTEREST & FINANCE CHARGES CURRENT YEAR PREVIOUS YEAR Interest Interest Interest on Debentures on Term Loans on Working Capital Loans Less : Interest on deposits (Tax deducted at source Rs Lacs, Previous Year Rs Lacs ) Less : Interest on Others (Tax deducted at source Rs Lacs, Previous Year Nil) Bank & Other Financial Charges TOTAL Annual Report

74 SCHEDULE 15 NOTES TO ACCOUNTS AND SIGNIFICANT ACCOUNTING POLICIES A. NOTES TO ACCOUNTS 1) Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of Advances of Rs Lacs, Previous Year Rs Lacs) Rs Lacs (Previous Year Rs Lacs). 2) Contingent Liabilities not provided for, in respect of: a) b) c) d) Disputed matters under litigation: Particulars Sales Tax & Entry Tax Excise Duty & Customs Duty Income Tax Others Current Year Previous Year Bills discounted with banks Nil (Previous Year Rs Lacs). Custom duty (excluding interest and penalty) which may arise if obligation for exports is not fulfilled against import of machinery under Export Promotion Capital Goods (EPCG) Scheme: Particulars a) Gross of Modvat b) Net of Modvat Current Year Previous Year Counter Guarantees given to the banks Rs Lacs (Previous Year Rs Lacs), including Rs Lacs (Previous Year Rs Lacs) on behalf of other body corporates. 3) Export Benefits including the following are accounted for on accrual basis and have been credited to Raw Materials Consumed Account: a) Import duty benefit under Duty Entitlement Pass Book (DEPB) Scheme and profit/ loss on sale of DEPB aggregating to Rs Lacs (Previous Year Rs Lacs). b) Import duty benefit under Advance Licence Scheme Rs Lacs (Previous Year Rs Lacs). 4) The Company's investment in the preference share capital of its subsidiary Polyplex (Asia) Pte. Limited was partly redeemed during the year at the allotted price and there is an exchange loss of Rs Lacs (net) (Previous Year Gain of Rs Lacs) which is shown as exceptional item. 5) Expenditure on Research & Development have been debited to the respective heads of account since such expenses cannot be segregated in view of the peculiar nature of activities relating to such work. 6) Disclosure of Sundry Creditors under Current Liabilities is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006." Amount overdue as on 31st March, 2008, to Micro, Small and Medium Enterprises on account of principal amount together with interest, aggregate to Rs. Nil (Previous Year Rs. Nil). 7) Capital Work in Progress includes equipment not yet installed, construction/erection material, construction/erection work, machinery at site and/or in transit, advance to suppliers and other preoperative expenses pending allocation/capitalization. Preoperative expenses pending allocation/capitalization are as follows: Annual Report

75 Preoperative expenses brought forward Raw Material Consumed Stores & Spares Consumed Salary & Wages Contribution to PF Staff Welfare Expenses Consultancy Charges Insurance Travelling Expenses Vehicle Running Expenses Recruitment Expenses Bank Charges Interest on Term Loan Miscellaneous & Other Expenses Total Less : Sales Less : Stock at Commencement of Commercial production Less : Allocated and Capitalised during the year Balance pending allocation transfered to Balance Sheet As at March 31, As at March 31, ) Debtors & Advances recoverable in cash or in kind include the following : Balance as at March 31, 2008 Maximum Outstanding during the Current Year Balance as at March 31, 2007 Maximum Outstanding during Previous Year A) Subsidiary / Step down Subsidiaries Polyplex (Thailand) Public Company Limited Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S. Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S. Polyplex (Americas) Inc. Polyplex (Americas) Inc * * ** * ** * * ** * ** B) Others (Employees) Interest free advances * * Loans & Advances Debtors!74 Annual Report

76 Annual Report POLYPLEX 9) Advances recoverable in cash or in kind in Loans & Advances (Schedule 8) include Rs Lacs (Previous Year Rs Lacs) due from a director. Maximum amount due during the year Rs Lacs (Previous Year Rs Lacs). 10) Advance recoverable in cash or in kind under Loans & Advances (Schedule 8) include Rs Lacs (Previous Year Rs. 13 Lacs) on account of insurance claim receivable for break down of one of the machine (UPS) leading to increased power cost to the Company. The Company has filed a claim with insurance company and is confident for the realisation of the claim amount. 11) (a) The Company has issued 13,50,000 Equity Shares of Rs.10 each at Rs.152 per share (including premium of Rs.142) on preferential basis on Also, 12) (b) (a) 16,50,000 warrants of Rs. 152 each (including premium of Rs.142) have been issued on preferential basis on on which upfront of Rs per warrant has been received. Each warrant holder is entitled for equity share of Rs. 10 each (fully paid up) within 18 months from the date of allotment on payment of balance amount (Rs per share). If the option is not exercised, amount paid on warrants is liable to be forfeited. Proceeds received as per note 11 (a) above have been utilised for the upcoming project at Bajpur (Uttarakhand) and other general corporate purposes. The Foreign Currency Exposure that are not hedged by a derivative instrument or otherwise are as follows: Current Year Previous Year Particulars Document Currency Amount in Document Currency Amount (Rs. in Lacs) Amount in Document Currency Amount (Rs in Lacs) Loans Long Term USD 6,000, ,000,00 5, Loans FCNRB USD 500, ,000, Loans PCFC USD 1,720, ,016, Debtors EUR 12, , USD 3,137, ,263, , Advance to Creditors EUR 4,468, , USD 52, , GBP 5, , JPY 132, ,020, Sundry Creditors USD 250, , GBP EUR Other liabilities USD 34, , Investment in Preference Shares USD 462, ,604,00 1,131.70

77 (b) (c) The Company has taken derivative position for proposed capital expenditure/ capital commitment. Derivative contracts entered into by the Company and outstanding as on 31st March, 2008 (Previous Year Nil ) are as follows : Particulars Currency Amount (in Fx) Forward Contract EURO 30,00,000 During the year, the Company has complied with the amendment made in December 2006 by the Department of Company Affairs w.r.t. AS11 (Revised The Effect of changes in Foreign Exchange Rates). Accordingly, exchange gain / (loss) has been adjusted in Profit & Loss Account instead of the Cost of Assets acquired from outside India. This change has no material impact. (b) Production (a) Plain / Metallised Film Net Production** Packed Production"* (b) Polyester Chips*"* (c) Silicone Coated Film Net Production ***** Packed Production * As certified by management. Current Year (Qty in MT.) Previous Year ** Captive Consumption 790 MT (Previous Year 106 MT). Includes 62 MT (Previous Year 64 MT) purchased and reprocessed during the year. Captive consumption MT (Previous Year MT). ***** Includes Nil (Previous Year 60 MT) produced during trial run period. 15) Stock & Sales: ) Payments to Auditors: Current Year Previous Year Current Year (Rs. in Lacs) Previous Year (Rs. in Lacs) (a) Opening Stock Qty. (MT) Value (Rs. in Lacs) Qty. (MT) Value (Rs. in Lacs) a) Audit fee* Plain/Metallised Film b) Tax audit fee* Silicone Coated Film c) Certification & other fees* d) Out of pocket expenses (b) Closing Stock Plain/Metallised Film* Silicone Coated Film 288" 42" ** Total (c) Sales*** * including service tax. Plain/Metallised Film "" *" ' ) Particulars in respect of: Silicone Coated Film Others ***" a) Licensed & Installed Capacity* TOTAL Plain Film Metallised Film Polyester Chips Silicone Coated Film Current Year Licensed 1 Registered Installed (Qty in MT.) Previous Year Licensed / Registered Installed Includes 11 MT (Previous Year 7 MT ) material purchased and reprocessed. Includes 107 MT (Previous Year 18 MT) material in transit. Includes sale of byproduct, scrap, samples, shortages & claims, and reprocessed Film 58 MT (Previous Year 64 MT). Includes 873 MT ( Previous Year 49 MT ) of sales to Saracote Division. Includes Nil (Previous Year 57 MT ) of sales during trial period. 76 Annual Report

78 16) Particulars of Raw Materials consumed: 19) Earnings in Foreign Exchange: POLYPLEX Polyester Chips (Bought out) Current Year Qty. (MT) 2523 Value* (Rs. in Lacs) 1, Previous Year Qty. (MT) 1349 Value# (Rs. in Lacs) FOB Value of Exports (Including deemed exports Rs Lacs, Previous Year Rs Lacs) Current Year 3, Previous Year 3, PTA MEG , , , , Dividend (Gross) from Subsidiary Companies Polyester Film (Bought Out) Total 4, , Additives ) Dividend remitted in Foreign Currency: Total 11, # Net of export incentives etc. (read with Note No.3). 11, ) Value and percentage of imported and indigenous raw materials and stores & spares consumed: Raw Materials # Imported Indigenous Total Stores & Spares Imported Indigenous Total Current Year Value* (Rs. in Lacs) 1, , , % Previous Year Value* (Rs. in Lacs) , , % Particulars Final Dividend Amount of dividend Number of nonresident shareholders Number of shares held by these nonresidents 21) GIF Value of imports: Raw material Stores & Spares, Chemicals and Packing material Capital Goods Total w.r.t F.Y ,29,067 Current Year 1, , w.r.t F.Y ,29,067 Previous Year , # Net of export incentives etc. (read with Note No. Net of preoperative expenses (read with Note No. 7). 18) Expenditure in Foreign Currency: Travelling Consultation fees Interest Brokerage & Commission Others Total Current Year Previous Year ) Particulars of Remuneration to Executive / Whole Time Directors: Salary Contribution to Provident & other Funds Perquisites & other benefits* Total Current Year * Excluding provision for gratuity & leave encashment. Valuation as per Income Tax Rules Previous Year ) The disclosures required under Accounting Standard 15 "Employee Benefits" notified in Annual Report

79 the Companies (Accounting Standards) Rules 2006, are given below: Defined Contribution Plan Contribution to Defined Contribution Plan, recognised and charged off/ debited to Preoperative Expenses pending allocation are as under : Employer's Contribution to Provident Fund Employer's Contribution to Superannuation Fund Defined Benefit Plan The employees' gratuity fund scheme managed by Life Insurance Corporation of India is a defined 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. The obligation for leave encashment is recognised in the same manner as gratuity. a) Reconciliation of opening and closing balances of Defined Benefit obligation : Defined Benefit obligation at beginning of the year Current Service Cost Interest Cost Actuarial (gain)/loss Benefit paid Defined Benefit obligation at year end b) Reconciliation of opening and closing balances of fair value of plan assets : Fair value of plan assets at beginning of the year Expected return on plan assets Actuarial (gain) /loss Gratuity (Funded) Leave Encashment (Unfunded) Employer contribution Benefit paid Fair value of plan assets at year end c) Reconciliation of fair value of assets and obligations : Fair value of plan assets as at 31st March, 2008 Present value of obligation as at 31st March, 2008 Net Assets/ (Liability) d) Expenses recognized during the year : Current Service Cost Interest Cost Expected return on plan assets Actuarial (gain) /loss Expense recognised in P&L account e) Investment Details L.I.C. Group Gratuity (Cash Accumulation) Policy f) Actuarial assumptions g) Mortality Table (L.I.C.) Discount rate (per annum) Rate of escalation in salary (per annum) % invested As at 31st March, Ultimate) 8.00% 5.00% (30.74) (Ultimate) 8.00% 6.00% The estimates of rate of escalation in salary considered in actuarial valuation, take into account inflation, seniority, promotion and other relevant factors including supply and demand in the employment market. The above information is certified by the actuary. This being the first year of implementation, previous year figures have not been given. The company has complied with the Revised AS15 (Revised 2005) on "Employee Benefits". Pursuant to adoption there was no transitional obligation on the Company. 78 Annual Report

80 24) Earning Per Share (EPS) Net Profit for the year Weighted Avg. Number of equity shares used as denominator for calculating Basic EPS Weighted Avg. Number of equity shares used as denominator for calculating Diluted EPS Basic EPS (Rs.) Diluted EPS (Rs.) 25) Segment Reporting: Current Year 1, ,52,04,800 1,58,92, Previous Year ,46,42,300 1,46,42, i) The Company is in only one line of business namely Polyester Film. ii) The Segment Revenue in the geographical segments considered for disclosure is as follows: (a) (b) Revenues inside India include sales to customers located within India Revenues outside India include sales to customers located outside India. Information about Geographical Segments (by location of customer) Within India Outside India Total 1 External Revenue 16, , Sales & Other Income (15,630.58) (3,572.70) ( ) 2 Carrying Amount of Segment Assets by location of assets , , (excluding Investment) (16,754.72) (1,084.84) (17,839.56) 3 Capital Expenditure (587.92) Figures in brackets represent Previous Year figures () (587.92) 26) Related Party Disclosures (as identified by Management) Disclosures as required by AS18, "Related Party Disclosures" are given below: A. Parties where control exists Subsidiary/Step down Subsidiaries Polyplex (Thailand) Public Company Limited (PTL). Polyplex (Asia) Pte. Limited (PAPL) Polyplex (Singapore) Pte. Limited (PSPL) Polyplex Europa Polyester Film San. Ve Tic A.S.(PE) Polyplex (Americas) Inc. (PA) B. Other related parties with whom transactions have taken place during the year Key Management Personnel & their relatives Shri Sanjiv Saraf (Chairman) Shri Pranay Kothari (Executive Director) Shri Ranjit Singh (Whole Time Director) w.e.f C. Enterprises over which Key Management Personnel, their relatives and major shareholders have significant influence: Beehive Systems Private Limited. Manupatra Information Solutions Private Limited. Polyplex Infotech Private Limited. Altivolus Infotech Private Limited. Dalhousie Villa Private Limited. Annual Report [79

81 D. Nature of Transactions with related parties Purchase of Material/Services Sale of Material/Services Managerial Remuneration Directors' Sitting fee Advances given during the year Redemption of Shares Dividend Received Provision for diminution in Investment written back Outstanding as at year end Receivables Payables Investment in Equity/ Preference Shares Subsidiaries Key Enterprises over Total of the Management which significant Company Personnel Influence exists 6.17 (58.28) ( ) 1, (417.43) () ( ; ( ) 5.20 ( ; (4.00) (22.os; ( ; ( ) ( ) (451.49) ( ) ( ~) ( ~~) (180.30) (3.67) (~) (~) ( ) ( ) (3.75; (62.03; , (56. 30) (473.73) ( ; ( ) 5.20 ( ; (4.00; ( ; (22.os; ( ; ( ) ( ; ( ) ( ~~) ( ~) ( ; (183.97) (~~) (~) (6.98) ( ) 80 Annual Report

82 E. Disclosure of Material Transactions with related parties 1 Purchase of Material/Services Dalhousie Villa Private Ltd. Polyplex Europa Polyester Film San Ve Tic A.S. Polyplex (Americas) Inc. 2 Sale of Material/Services Polyplex (Americas) Inc. 3 Advances given during the year Polyplex (Thailand ) Public Co. Ltd. Polyplex Europa Polyester Film San Ve Tic A.S. 4 Redemption of Shares Polyplex (Asia) Pte. Ltd. 5 Dividend Received Polyplex (Thailand ) Public Co. Ltd. Notes: Subsidiaries of the Company () 6.17 () (58.28) (417.43) (14.58) (7.50) ( ) (451.49) Enterprises over which significant Influence exists 4.20 (2.10) () () () () () () (~) 1. Guarantees given by Key Management Personnel for loans from Banks /Financial Institutions (refer notes to Schedule 3). 2. Figures in bracket ( ) indicate previous year figures. 27) (a) Debtors over six months include overdue overseas debtors aggregating to Rs Lacs (Gross) (Provision for doubtful debts Rs. 2 Lacs, net debtors Rs Lacs) where company has initiated legal and other necessary action for recovery. (b) Balances of certain debtors, creditors and advances are in the process of confirmation and / or reconciliation. 28) (a) The provision for current income tax has been made considering various benefits and allowances available to the Company under the provisions of Income Tax Act, (b) Income Tax assessment in respect of certain years are in process and for certain years some additions have been made. In respect of additions made / disallowances, company has filed appeals with authorities, pending decisions no provisions has been considered necessary by the management. 29) In accordance with the provisions of Accounting Standard on Impairment of Assets (AS 28), the management has made assessment of assets considering the business prospects related thereto and, accordingly, no provision on account of impairment of assets is considered necessary in these accounts. Annual Report

83 30) Figures for previous year have been regrouped and / or rearranged, wherever considered necessary to conform to the current year's classification. 31) Figures in the Balance Sheet and Profit & Loss Account have been expressed in Rs. in Lacs with two decimals. B. SIGNIFICANT ACCOUNTING POLICIES 1. Basis of Accounting The Company follows the mercantile system of accounting and recognises Income and Expenditure on accrual basis. Insurance/Other Claims are recognised only when it is reasonably certain that the ultimate collection will be made. The accounts are prepared under the historical cost convention, in accordance with applicable accounting standards and generally accepted accounting principles. 2. Fixed Assets/Capital work in progress a) Fixed Assets are stated at cost of acquisition less accumulated depreciation and impairment loss, if any. b) Expenditure during construction / erection period is included under capital work in progress and are allocated to the respective fixed assets on completion of construction / erection. 3. Intangible Assets Intangible Assets are being recognised if the future economic benefits attributable to the assets are expected to flow to the Company and the cost of the asset can be measured reliably. The same are being amortised over the expected duration of benefits. 4. Borrowing Costs Borrowing costs attributable to acquisition / construction of qualifying assets are capitalised with the respective assets, till the date of commercial use of the assets and other borrowing costs are charged to the Profit and Loss Account. 5. Investments Longterm investments are stated at cost less provision for permanent diminution in the value of such investments. Current investments are stated at lower of cost and net realisable value. 6. Depreciation / Amortisation Depreciation on fixed assets (including assets acquired under finance lease) is provided on Straight Line Method, except on fixed assets at Khatima of the first Polyester Film Line on which depreciation is provided on Written Down Value Method, and at the rates and in the manner prescribed in Schedule XIV to the Companies Act, Additions to Fixed Assets on account of foreign exchange fluctuation are taken to Profit and Loss Account. Leasehold land is amortised over the period of lease. Plant & Machinery pertaining to the polyester film lines has been considered as continuous process as per technical assessment. 7. Foreign Currency Transactions Foreign currency transactions are accounted at exchange rate on the date of transaction. Exchange differences arising on settlement of foreign currency transactions are taken to the Profit and Loss Account. All foreign currency monetary assets and liabilities as at the Balance Sheet date are restated at the applicable exchange rate prevailing at that date. Such increase/decrease on account of exchange differences are taken to the Profit and Loss Account. In case of forward foreign exchange contracts, exchange differences are dealt with in the Profit and Loss Account over the life of the contract. Investment in equity shares of foreign subsidiary companies are stated at the exchange rate at on transaction date. Unrealised Gain/Loss relating to translation of net investment in form of monetary items in non integral operations are recognised in the Foreign Currency Translation Reserves. Premium on forward covers is amortised over the period of the cover. 8. Inventories Inventories are valued as follows : (i) Raw Materials and Stores & Spares At lower of cost and net realisable value. 1'82l Annual Report

84 (ii) Stock in Process and Finished Goods 12. Leases At lower of cost and net realisable value. Cost for the purpose of valuation has been determined as under: (i) Raw Material and Stores & Spares Weighted Average cost (ii) Stock in Process and Finished Goods At raw material cost, labour and related overheads including administrative overheads and depreciation. 9. Retirement Benefits Company's contribution to Provident Funds and Superannuation Fund are charged to Profit & Loss Account. Leave encashment benefit is provided as per actuarial valuation. Gratuity is accrued on actuarial valuation basis and funded through a trust for which a policy with Life Insurance Corporation of India has been taken. 10. Government Grants Grants relating to fixed assets are shown as deduction from the gross value of the fixed assets and those of the nature of Project Capital subsidy are credited to Capital Reserve. Other Government grants are credited to Profit and Loss account or deducted from the related expenses. 11. Provision for Tax POLYPLEX Assets acquired under finance lease, which effectively transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the lower of the fair value and the present value of the minimum lease payments at the inception of the lease term and are disclosed in the Fixed Assets. Lease payments are apportioned between the finance charges and the reduction of lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income. 13. Impairment The carrying amount of the Company's assets, are reviewed at each balance sheet date to determine whether there is any indication of impairment of asset. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is greater of Net selling price and value in use. Post impairment, depreciation is provided on the revised carrying value of the assets over the remaining useful life of asset. Reversal of Impairment loss recognised in prior periods is recorded when there is an indication that the impairment losses recognised from the assets no longer exists or have deseased. Current tax is determined as the amount of 14. tax payable in respect of estimated taxable income for the year and in accordance with the provisions as per Income Tax Act Deferred tax is recognised using the enacted/ subsequently enacted tax rates and laws as on the Balance Sheet date, subject to the consideration of virtual/reasonable certainity of realisation in respect of deferred tax assets, on all timing differences, between taxable income and accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Provisions, Contingent Liabilities and Contingent Assets A provision is made/ recognised, based on the management estimate required to settle the obligation at Balance Sheet date, when the Company has a present obligation as a result of past event and it is possible that an outflow embodying economic benefit will be required to settle the obligation. Contingent liabilities, if material, are disclosed by way of notes. Contingent assets are not recognised or disclosed in the financial statement. Annual Report J83

85 BALANCE SHEET ABSTRACT AND COMPANY'S GENERAL BUSINESS PROFILE I. Registration Details Registration No. Balance Sheet Date State Code 20 II. Capital Raised during the year (Amount Rs. in Thousands) Public Issue Nil Rights Issue Bonus Issue Nil Private Placement Nil III. Position of Mobilisation and Deployment of Funds (Amount Rs. in Thousands) Total Liabilities Total Assets Source of Funds Paid up Capital Secured Loans Deferred Tax Liability(net) Application of Funds Net Fixed Assets(incl CWIP) Net Current Assets Reserves & Surplus Unsecured Loans Equity Share Warrants Investments IV. Performance of Company (Amount Rs. in Thousands) Turnover Total Expenditure Profit Before Tax Profit After Tax Basic Earning per share (Rs.) 8.13 Dividend Diluted Earning per share (Rs.) % V. Generic Names of Three Principal Products of Company (as per monetary terms) Product Description Item Code no. (ITC Code) Polyester Film Polyester Chips As per our report of even date attached For Lodha & Co., Chartered Accountants Signatures to Schedule 1 to 15 N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Son! O.P. Mehra Directors Place : NOIDA 84 Annual Report

86 AUDITORS' REPORT POLYPLEX AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF POLYPLEX CORPORATION LIMITED ON THE CONSOLIDATED FINANCIAL STATEMENTS OF POLYPLEX CORPORATION LIMITED AND ITS SUBSIDIARIES We have examined the attached consolidated Balance Sheet of Polyplex Corporation Limited and its subsidiaries as at 31st March 2008, and the consolidated Profit and Loss Account and also the consolidated Cash Flow Statement for the year then ended. These financial statements are the responsibility of management of Polyplex Corporation Limited. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in India. These Standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are prepared, in all material respects, in accordance with an identified financial reporting framework and are free of material misstatements. 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. We believe that our audit provides a reasonable basis for our opinion. We did not audit the financial statements of the foreign subsidiaries M/s Polyplex (Asia) Pte. Ltd., Polyplex (Thailand) Public Company Ltd., Polyplex (Singapore) Pte. Ltd., Polyplex (Americas) Inc. and Polyplex Europa Polyster Film Sanayi Ve Ticaret A.S. whose financial statements reflect total assets of Rs. 1,08, Lacs as at 31st March 2008 and total revenues of Rs. 83, Lacs for the year then ended. These financial statements have been audited by other auditors, as per applicable GAAP in their respective country, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included in respect of the subsidiaries, is based solely on the report of the other auditors. We report that the consolidated financial statements have been prepared by the management of the Company in accordance with the requirements of Accounting Standard (AS 21), Consolidated Financial Statements and other applicable Accounting Standards issued by The Institute of Chartered Accountants of India. On the basis of the information and explanations given to us and on the consideration of the separate audit reports on individual audited financial statements of Polyplex Corporation Limited and its subsidiaries, read together with Notes on Accounts of Consolidated Financial Statements, we are of the opinion that: (a) the Consolidated Balance Sheet gives a true and fair view of the consolidated state of affairs of Polyplex Corporation Limited and its subsidiaries as at 31st March 2008; (b) the Consolidated Profit & Loss Account gives a true and fair view of the consolidated results of operations of Polyplex Corporation Limited and its subsidiaries for the year then ended; and (c) the Consolidated Cash Flow Statement gives a true and fair view of the consolidated cash flows of Polyplex Corporation Limited and subsidiaries for the year then ended. For Lodha & Co. Chartered Accountants Place : New Delhi N.K. Lodha Dated : June 28, 2008 Partner Membership No Annual Report

87 P O L Y P L E X CONSOLIDATED BALANCE SHEET MO M 1 IVIfinv^n o i, \i\jo SCHEDULE 1. SOURCES OF FUNDS SHAREHOLDERS' FUNDS Share Capital 1 Equity Share Warrant Reserves & Surplus 2 MINORITY INTEREST LOAN FUNDS Secured Loans 3 Unsecured Loans 4 DEFERRED TAX LIABILITY (NET) 5 II. TOTAL APPLICATION OF FUNDS FIXED ASSETS 6 Gross Block Less: Depreciation Net Block Capital work in progress (incl Capital Advances) INVESTMENTS 7 GOODWILL ON CONSOLIDATION CURRENT ASSETS, LOANS AND ADVANCES 8 Inventories Sundry Debtors Cash and Bank Balances Loans and Advances LESS: CURRENT LIABILITIES & PROVISIONS 9 Current Liabilities Provisions NET CURRENT ASSETS MISCELLANEOUS EXPENDITURE (to the extent not written off) TOTAL Notes to Accounts and Significant Accounting Policies 15 As at March 31, , , , , , ,12, , , , , , , , , , , , , , , , ,12, As at March 31, , , , , , , , , , , , , , , , , , , , , , , , As per our report of even date attached For Lodha & Co., Chartered Accountants Schedules referred to above form an integral part of the Balance Sheet N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Soni O.P. Mehra Directors Place : NOIDA I 86 Annual Report

88 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON MARCH 31, 2008 POLYPLEX SCHEDULE INCOME Sales & Operational Income (Net of Excise of Rs Lacs, Previous Year Rs Lacs) Other Income 10 Stock Accretion / (Decretion) 11 CURRENT YEAR 1,00, PREVIOUS YEAR 76, , EXPENDITURE Manufacturing Expenses Operating and other Expenses Interest & Finance Charges TOTAL ,01, , , , , , , , Profit before Depreciation Depreciation Amortisation of Goodwill TOTAL 85, , , , , , Profit after Depreciation/Amortization Less : Exceptional Items (Gain)/Loss on investment in Preference Shares 11, , (4.59) Profit after Exceptional Items Less/(Add): Provision For Tax Current Tax Fringe Benefit Tax Deferred Tax 11, (180.25) 4, Less : Prior Period Adjustment Tax 11, (36.77) 4, Profit After Tax Less : Minority Interest 11, , , , Profit after tax and Minority Interest Add : Surplus brought forward Add : Debenture Redemption Reserve written back 8, , , , Balance Available for Appropriation Transferred to General Reserve Transferred to Legal Reserve Proposed Dividend Corporate Dividend Tax Surplus carried to Balance Sheet 27, , , , Basic earning per share (in Rs.) Diluted earning per share (in Rs.) (Refer Note 11 of Schedule 15A) Notes to Accounts and Significant Accounting Policies 15 As per our report of even date attached For Lodha & Co., Chartered Accountants Schedules referred to above form an integral part of the Profit and Loss Account N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Son! O.P. Mehra Directors Place : NOIDA Annual Report

89 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, A. CASH FLOW FROM OPERATING ACTIVITIES : Net Profit Before Tax Adjusted for: Depreciation/ amortization Provision for doubtful debts/ bad debts written off Interest (Net) Exchange (gain)/loss on redemption of investments* Unrealised foreign exchange (gain)/loss Excess provision/sundry balances written back Provision for Doubtful Debts written back Sundry balances Written off Loss on sale of fixed assets (net) Asset written off Profit on sale of investments Dividend received Operating Profit before Working Capital Changes Adjusted for: Trade and other receivables Inventories Trade payables Cash Generated from Operations Taxes paid Net Cash From Operating Activities B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets Capital Work in Progress including Advances Sale of fixed assets Purchase of short term investments Sale of long term investments Sale of short term investments Increase in minority interest (net of dividend paid) Interest/dividend received Net Cash Used In Investing Activities C. CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of share capital Proceeds from issue of share warrants Proceeds from long term borrowings 3, , (220.20) (8.95) (11.42) (231.84) (5.19) (8,266.54) 11, , , , (1,601.31) 2, (7,725.55) (1,857.01) (23,808.78) (21,526.70) (151.87) 25, (1,048.42) , , (634.32) 9, , , (4.59) (177.32) (29.41) (246.03) (1,586.11) 1, , , , , (9,863.87) (37,072.85) (4.59) 35, , (178.59) 12, (22,738.93) (11,327.90) 20, , Annual Report

90 Repayment of long term borrowings Net proceeds from short term borrowings Interest paid Dividends paid Tax on distributed profits (5,054.91) (2,857.84) (1,770.24) (583.77) (99.54) (1,447.89) (1,920.34) (148.55) (20.54) Net Cash used In Financing Activities 12, , D. CHANGE IN CURRENCY FLUCTUATION RESERVE ARISING ON CONSOLIDATION Net Increase In Cash and Cash Equivalents Cash and Cash Equivalents as at (Opening Balance) (882.85) 2, (1,963.61) , Cash and Cash Equivalents as at (Closing Balance) 1, , * Represents exchange (Gain)/Loss on account of redemption of investment in subsidiary. NOTES : 1. Cash and Cash equivalent represents cash and bank balances as per Schedule Previous Year figures are regrouped wherever necessary. As per our report of even date attached For Lodha & Co., Chartered Accountants N. K. Lodha Partner Membership No Place : New Delhi Date : June 28, 2008 Pranay Kothari Executive Director Ranjit Singh Whole Time Director S.G. Subrahmanyan ViceChairman A.K. Gurnani Company Secretary Sanjiv Chadha M.K. Jain B.K. Son! O.P. Mehra Directors Place : NOIDA Annual Report

91 SCHEDULE 1 SHARE CAPITAL As at As at March 31, 2008 March 31, 2007 AUTHORISED 3,00,00,000 Equity Shares of Rs.10 each 3,00 3,00 ISSUED & SUBSCRIBED PAIDUP 1,71,88,000 (Previous Year 1,58,38,000) Equity Shares of Rs.10 each 1, , ,59,92,300 (Previous Year 1,46,42,300) Equity Shares of Rs.10 each fully paid up 1, , Add: Share Forfeiture Account TOTAL 1, , ! Annual Report

92 SCHEDULE 2 RESERVES & SURPLUS A. CAPITAL RESERVE Central Investments subsidy As per last Balance Sheet B. C. D. E. f. G. SHARE PREMIUM As per last Balance Sheet Additions during the year Updation on Translation Adjustment Less : Minority Interest LEGAL RESERVE* As per last Balance Sheet Addition during the year Updation on Translation Adjustment DEBENTURE REDEMPTION RESERVE As per last Balance Sheet Transferred to Profit & Loss Account GENERAL RESERVE As per last Balance Sheet Additions during the year PROFIT & LOSS ACCOUNT As per last Balance Sheet Addition during the year Less : Minority Interest FOREIGN EXCHANGE TRANSLATION RESERVE (Including on Consolidation) As per last Balance Sheet Addition during the year Less : Minority Interest TOTAL As at March 31, , , (910.40) (273.12) 16, , (36.90) 1, , , , , (3,035.81) 26, , (422.53) 2, , As at March 31, (786.18) 14, , , , , (1,268.12) 19, , (446.57) 2, , Legal Reserve is set up by Polyplex (Thailand) Public Company Limited (Subsidiary Company) as per applicable GAAP. Legal Reserve is not available for dividend distribution. Annual Report i9t

93 SCHEDULE 3 SECURED LOANS Loans from Banks As at As at March 31, 2008 March 31, 2007 Rupee Term Loans 4, ,25 Foreign Currency Term Loans 38, , Working Capital Loans Foreign Currency Working Capital Demand Loans , Cash Credit Export Packing Credit Foreign Currency Loans 1, , Vehicle Loan Interest accrued & due TOTAL 45, , Notes in respect of security clause, are disclosed in separate respective financial statements of the company and its subsidiaries. SCHEDULE 4 UNSECURED LOANS As at As at March 31, 2008 March 31, 2007 Foreign Currency Term Loan from Bank 1, TOTAL 1, Annual Report

94 SCHEDULE 5 DEFERRED TAX ASSETS AND LIABILITIES (Arising out of timing differences) As at As at March 31, 2008 March 31, 2007 DEFERRED TAX ASSETS Disallowances as per Income Tax Act DEFERRED TAX LIABILITY Depreciation DEFERRED TAX LIABILITY (NET) (1,429.61) (1,429.61) (1,410.76) (1,609.67) (1,609.67) (1,591.00) SCHEDULE 6 FIXED ASSETS GROSS BLOCK DEPRECIATION NET BLOCK Particulars As at April 01, 2007 Additions during the year Sale/ adjustments* As at March 31, 2008 As at April 01, 2007 For the year Sale/ adjustments As at March 31, 2008 As at March 31, 2008 As at March 31, 2007 Freehold Land 2, (57.20) 2, , , Leasehold Land Buildings 10, (40.62) 10, , (10.47) 1, , , Plant & Machinery 66, (1,100.86) 66, , , (207.56) 19, , , Electrical Installations _ Furniture & Fixtures (5.16) Office Equipments (118.77) (12.44) Vehicles (58.71) (41.23) Rights Total 82, , (1,272.19) 82, , , (276.44) 22, , , Previous Year 65, , , , , , , , "Note: Sale/Adjustment includes adjustment of foreign exchange fluctuation loss of Rs. 1, Lacs. (Previous Year gain of Rs.6, Lacs) Annual Report

95 SCHEDULE 7 INVESTMENTS Face Nos. Value March 31, 2008 Nos. March 31, 2007 As at March 31, 2008 As at March 31, 2007 LONG TERM (At Cost Less Provision) Other than Trade Unquoted Shares (Fully Paid up unless otherwise stated) EQUITY/ORDINARY SHARES Investment in Other Companies Polyplex Infotech Private Limited Rs.10 69,800 69, Excel International Limited Rs.10 4,020 4, Bhilangana Hydro Power Limited Rs.10 25,000 25, MUTUAL FUNDS Chola Institutional Liquid Plan DWS Instra Cash Plus Growth Reliance Liquidity Fund Growth Kotak FMP Series Deutsche Money Plus Growth Option Birla cash plus Insl., Growth Principal Cash Mangement Inst. Growth UTI Liquid Cash Plan Inst. Growth plan Reliance Fmp Series vi Tata Fixed Horizon Fund Series 8 Fmp SBI Debt Fund Series 90 days DWS Fixed Term Series 28 DSP Merrill lynch Fixed Term Plan Series 1 J Prudential ICICI FMP Monthly Plan Cumulative XXVII Birla FTP Quaterly Series 10 Growth UTI Fixed Maturity Plan Quaterly series QFMP/0307/II Rs.10 Rs.10 6,28,778 Rs.10 1,18,54,117 Rs.10 Rs.10 Rs.10 Rs.10 Rs.1000 Rs.10 Rs.1000 Rs.10 Rs.10 Rs.1000 Rs.10 Rs.10 Rs.10 26,25,016 44,32,639 41,77,259 33,55,874 43,26,659 16,215 40,00,000 21,729 40,00,000 40,00,000 20,000 30,71,013 40,00,000 40,78, , Less : Provision for diminution in value of Investments 1, , Grand Total 1, , Annual Report

96 SCHEDULE 8 CURRENT ASSETS, LOANS AND ADVANCES A. CURRENT ASSETS Inventories (as valued and certified by the Management) (at lower of cost and net realisable value) Stores & Spares Raw Materials (including in Transit Rs Lacs, Previous Year Rs Lacs) Stock in Process Finished Goods (including Scrap stock Rs Lacs, Previous Year Rs Lacs) (including in transit stock Rs Lacs, Previous Year Rs Lacs) Sub Total SUNDRY DEBTORS (Unsecured) Debtors outstanding for a period exceding six months Considered good Considered doubtful Other Debtors Considered good Less: Provision for doubtful debtors CASH & BANK BALANCES Cash in hand Cheques in hand Bank balance with scheduled banks Current Accounts Dividend Accounts Fixed Deposits* Bank balance with nonscheduled banks Current Accounts Sub Total Sub Total TOTAL (A) B. LOANS AND ADVANCES (Unsecured Considered Good) Advances recoverable in cash or in kind or for value to be received Inter Corporate Deposits Deposits with Government Authorities & Others Advance Tax Advance Fringe Benefit Tax Balance with Customs & Excise TOTAL (B) TOTAL (A+B) As at March 31, , , , , , , , , , , , , , As at March 31, , , , , , , , , , , , , , , Includes Rs Lacs (Previous Year Rs Lacs) pledged with banks towards margin against Guarantees, Letters of Credit and Foreign Bill Purchase limit. Annual Report T95

97 SCHEDULE 9 CURRENT LIABILITIES & PROVISIONS A. CURRENT LIABILITIES Sundry Creditors Security deposits / Advances from tenants Investor Education and Protection Fund shall be credited by the following amounts, when due : Unpaid Dividend Other liabilities Interest accrued & not due B. PROVISIONS Provision for Wealth Tax Provision for Tax Provision for fringe benefit tax Proposed Dividend (including Corporate Provision for Retirement Benefits Sub Total Dividend Tax) Sub Total TOTAL As at March 31, , , , , , As at March 31, , , , , , , SCHEDULE 10 OTHER INCOME Current Year Previous Year Income from let out Property Rent Maintenance and Other Charges Miscellaneous Receipts Profit on Sale of Current Investments Dividend Income Excess Provision Written Back Provision for Doubtful Debtors written back Foreign Exchange Fluctuation (Net) Prior Period Income TOTAL , t96t Annual Report

98 SCHEDULE 11 STOCK ACCRETION / (DECRETION) Current Year Previous Year CLOSING STOCKS Finished Goods Stock in Process Others Stock in Process Chips Stock in Process Thermal Lamination Less : Stock at the start of commercial production OPENING STOCKS Finished Goods Stock in Process Others Stock in Process Chips Add : Increase / (Decrease) in Excise Duty on Stocks TOTAL 1, , , , , , (7.90) , , , , , (13.97) SCHEDULE 12 MANUFACTURING EXPENSES Raw Materials Consumed Job Work Charges Stores & Spares Consumed Packing Material Consumed Power & Fuel Repairs and Maintenance Budding Plant & Machinery Current Year 57, ,668.M 3, , Previous Year 44, , , , TOTAL 69, , Annual Report I9T

99 SCHEDULE 13 OPERATING AND OTHER EXPENSES Current Year Previous Year A. PERSONNEL EXPENSES Salaries, Wages and Allowances Contribution to Provident and other Funds Staff Welfare Expenses 4, , Sub Total 5, , B. ADMINISTRATIVE EXPENSES Rent Electricity & Water Charges (Net) Repairs & Maintenance (Net) Rates and Taxes Postage and Telephone Printing and Stationery Travelling and Conveyance Vehicle Expenses Foreign Exchange Fluctuation (Net) Insurance Legal and Professional Fee Miscellaneous Expenses IT Maintenance Directors' Sitting Fee Sub Total 3, , C. SELLING EXPENSES Advertisement Sales Promotion Freight Sample to Customers Commission on Sales Other Selling Expenses , , Sub Total 5, , D. OTHER EXPENSES Asset Written Off Loss on Sale of Fixed Assets (Net of Profit of Rs Lacs, Previous Year Rs Lacs) Excise Duty (Net of Recovery) Donation Prior Period Expenses Amortisation for Pre operative expenses Provision for Doubtful Debtors Sundry Balances Written Off (Net) Bad Debts Written Off Sub Total TOTAL 14, , i i 98 1 Annual Report

100 SCHEDULE 14 INTEREST & FINANCE CHARGES Current Year Previous Year Interest on Debentures Interest on Term Loans Interest on Working Capital Loans Less : Interest on deposits Less : Interest on Others Bank & Other Financial Charges 1, , , , , , TOTAL 1, , Annual Report <

101 SCHEDULE15 SIGNIFICANT ACCOUNTING POLICIES 1. BASIS OF CONSOLIDATION (a) The financial statements of the Company and its subsidiary companies have been combined on a linebyline basis by adding together the book values of like items of assets, liabilities, income and expenses, after fully eliminating intragroup balances and intragroup transactions resulting in unrealised profits or losses as per Accounting Standard 21 Consolidated Financial Statements issued by The Institute of Chartered Accountants of India. (b) Accounting Assumption (c) (d) The Consolidated Financial Statements have been prepared using uniform accounting policies, in accordance with the Generally Accepted Accounting Principles (GAAP). However, in respect of the subsidiaries, these financial statements are prepared in conformity with generally accepted accounting principles in the respective countries on accrual basis. Accordingly, the financial statements are intended solely to present the financial position, results of operations and cash flows in accordance with the generally accepted accounting principles and practices. Operations of foreign subsidiaries have been considered nonintegral by the management; thus all Assets and Liabilities are converted at the rates prevailing at the end of the year and Revenue items have been consolidated at the average rate prevailing during the year. Exchange gain/loss arising on translation of financial statements of foreign subsidiaries is shown under the head 'Foreign Currency Translation Reserve' in the Consolidated Balance Sheet. The excess of cost to the Company, of its investment in the subsidiary company, over the Company's portion of equity is recognised in the financial statement as Goodwill. Goodwill on consolidation is amortized as an expense over a period of 5 years. Name of the Company Polyplex (Asia) Pte. Ltd. (PAPL) Polyplex (Thailand) Public Company Limited (PTL) Polyplex (Singapore) Pte. Ltd. (PSPL) Polyplex Europa Polyester Film Sanayi Ve Ticaret A.S. (PE) Polyplex (Americas) Inc. (PA) (f) (g) (h) Country of Incorporation Singapore Thailand Singapore Turkey U.S.A. % Shareholding & Voting Power 100% 70% * 100% " 100% *" 90.12% **** Includes 145 (Previous Year 145) ordinary shares not registered in the name of the Company, beneficial interest being held by PCL and PAPL. 100% subsidiary of PTL. 100% subsidiary of PSPL. Includes 4 shares not registered in the name of the PSPL, beneficial interest being held by PSPL % shares being held by PTL and 9.88% shares being held by PCL. Accounting Policies and Notes to Accounts of the financial statements of the Company and its Subsidiaries are set out in their respective financial statements. The policy adopted by different subsidiaries on depreciation is enumerated below: PTL (including subsidiaries): Land is stated at cost. Buildings and equipments are stated at cost less accumulated depreciation and allowance for loss on impairment assets (if any). Depreciation of plant & equipment is calculated by reference to their costs on the straight line basis over the following useful estimated lives: Building & Improvements Machinery & Equipment Furniture, Fixtures and Office Equipments Motor Vehicles 20, 50 years 18 years 510 years 5 years In case of PTL, frontend fee of the loan paid to financial institution is deferred and amortized on a straightline basis over the period of loan agreement. (e) The Consolidated Financial Statements (CFS) comprise the financial statements of Polyplex Corporation Limited (PCL) and its wholly owned and controlled subsidiaries as on , as given below: (i) Employees Benefits The policy on employees benefits differ in case of PE where in accordance with the existing social legislation in Turkey, the company is Annual Report

102 (j) required to make lumpsum payments to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The computation of liability is based upon the retirement pay ceiling announced by the Government. Such payments are calculated on the basis of 30 days' pay, (limited to a maximum of EUR 1,036 at March 31, 2008) per year of employment at the rate of pay applicable at the date of retirement or termination. Certain policies such as depreciation, deferred charges & employees benefits (as stated above), differ from those followed by the Holding Company. The impact of the above differences has not been computed. NOTES TO ACCOUNTS 2. Estimated amount of contracts remaining to be executed on capital account and not provided for (Net of Advances of PCL Rs. 2, Lacs, Previous Year Rs Lacs) Rs. 21, Lacs. (Previous Year Rs. 11, Lacs). 3. Contingent Liabilities not provided for in respect of: a) Disputed matters under litigation: Particulars Sales Tax & Entry Tax Excise Duty & Customs Duty Income Tax Others Current Year Previous Year b) Bills discounted with banks NIL (Previous Year Rs Lacs). c) Custom duty (excluding interest and penalty) which may arise if obligation for exports is not fulfilled against import of machinery under Export Promotion Capital Goods (EPCG) Scheme: Particulars a) Gross of Modvat b) Net of Modvat Current Year Previous Year d) Counter Guarantees given to the banks Rs. 29, Lacs (Previous Year Rs. 1, Lacs) on behalf of other bodies corporate. e) Unused Letters of credit with bank Nil (Previous Year Rs. 2, Lacs). f) Service Agreements Polyplex (Thailand) Limited Public Company As at 31st March, 2008, the company had commitments totalling Rs Lacs under various service agreements. These agreements terminate between June, 2008 and July, Polyplex (Thailand) Public Company Limited The company has received promotional privileges from the Board of Investments for the manufacture of polyester films, metallized films, laminated polyester films and PET resins. The company must comply with certain conditions and restrictions provided for in the promotional certificates. 5. Balances of debtors, creditors and advances are in the process of confirmation and/or reconciliation. 6. The Company has issued 13,50,000 Equity Shares of Rs. 10 each at Rs. 152 per share (including premium of Rs. 142) on preferential basis on Also, 16,50,000 warrants of Rs. 152 each (including premium of Rs. 142) have been issued on preferential basis on on which upfront of Rs per warrant has been received. Each warrant holder is entitled for equity share of Rs. 10 each (fully paid up) within 18 months from the date of allotment on payment of balance amount (Rs per share). If the option is not exercised, amount paid on warrants is liable to be forfeited. 7. The Company has taken derivative position for proposed capital expenditure/ capital commitment. Derivative contracts entered into by the company and outstanding as on 31st March, 2008 (Previous Year Nil) are as follows : Annual Report Toil