Nitco Ltd

Dear members,

Your Directors are pleased to present the Annual Report with the audited statement of accounts of the Company for the year ended March 31, 2015.

FINANCIAL RESULTS

The highlights of the financial results for the year ended March 31, 2015 are as follows:

(Rs. in crore)

Review of operation

The Company's business model until FY 2011-12, was predominantly based on outsourcing of tiles from China. Due to sharp depreciation of Indian Rupee against US Dollar during later part of 2011, this model based on imports suddenly became unviable. The Company thereafter took steps to shift the business model to local outsourcing/ joint venture arrangement. This sudden change in the model has taken a toll on the financial performance of the Company during the last three years.

Despite the several challenges faced by the Company, the Company during the year increased its net operating revenue from Rs. 761.17 crore to Rs. 826.99 crore, an increase of 8.65% which reflects the strong brand equity enjoyed by the Company. Due to several steps taken by the Company and tight control on costs, EBITDA losses reduced to Rs. 15.81 crore from Rs. 25.55 crore. At a consolidated level, the Company has achieved for the first time during last three years a positive EBITDA of Rs. 4.17 Crore. The management is confident that the strategy now being pursued by the Company is appropriate for achieving the desired result.

Considering the brand equity enjoyed by the Company and the performance of the Company during the current year in a tough environment, and several steps taken for improving the performance of the Company, the management is hopeful of a turnaround in near future. The management therefore believes, it is appropriate to prepare the financial statement on a going concern basis.

Joint Venture with New Vardhman Vitrified Tiles Pvt. Ltd.

As a part of the business strategy, your Company had acquired 51% equity stake in New Vardhman Vitrified Tiles Pvt. Ltd (NVVPL) during FY 2011-12. The said company had set up a plant near Morbi, Gujarat for manufacturing 8 million sq. mtrs (approximately) of vitrified and wall tiles. The plant commenced production towards the end of the FY 2012-13. The production of this plant is marketed by the Company under its brand name. With this arrangement, Company's dependence on China for tiles sourcing has significantly reduced. NVVPL, in its second full year of operation, has achieved net turnover of Rs. 170.43 crore, EBITDA of Rs. 20.15 crore and Profit Before Tax of Rs. 4.55 crore. The Company is regular in servicing its commitment to its lenders and has repaid term loan installments of Rs. 23 crore since commencement of its operation. The Company is in the process of enhancing its capacity by another 2 million sq meter and production is expected to commence during the first half of FY 2015-16.

Corporate Debt Restructuring

The Company's debts were restructured under Corporate Debt Restructuring (CDR) mechanism effective April 2012. The CDR package included fresh funding commitment by Banks of Rs. 177 crore (both fund and non-fund) which the Banks failed to release. As per the approved CDR package, certain non core assets of the Company were to be disposed of which could not materialize due to adverse market conditions. During the year FY 2014-15, eight lenders having exposure of approximately 40% of the total CDR debt have assigned their debts in favour of JM Financial Assets Reconstruction Co. Pvt. Ltd. Consequently, CDR Empowered Group has approved the exit of the Company from CDR mechanism.

Reference to BIFR

Due to significant losses incurred during last three financial years, the net worth of the Company has been fully eroded and being a mandatory requirement, the Company had filed a reference u/s 15(1) of Sick Industrial Companies (Special Provisions) Act, 1985 before the Hon'ble Board for Industrial & Financial Reconstruction (BIFR). The above reference has been duly registered vide BIFR order dated 12th May 2015. As the Company is registered with BIFR, the Company has not provided for unpaid interest to the respective Banks from the date the account has become a non performing asset with the respective banks.

Credit Rating

The last Credit Rating issued to the Company by CARE Limited was on 1st October, 2012. However, the credit rating is under suspension at present as the Company was under Corporate Debt Restructuring and now under BIFR.

Dividend

In view of the losses incurred during the year, your Board is not able to recommend any dividend for the financial year ended March 31, 2015.

Subsidiary Companies and Consolidated Financial Statements

In accordance with the Companies Act 2013, and Accounting Standard (AS-21) on consolidated financial Statement, the audited consolidated financial statement is provided in the Annual Report.

The Statement required under Section 129(3) of the Companies Act, 2013 in respect of the subsidiary companies is provided in Annexure II of this report.

The annual accounts of the subsidiary companies and the related detailed information will be made available to any member of the Company / its subsidiaries who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept for inspection by any member at the Company's Registered Office and Corporate Office and that of the respective subsidiary companies.

The Directors confirm that:

a) In the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed with proper explanation relating to material departures;

b) Appropriate accounting policies have been selected and applied consistently and have 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, 2015 and of the loss of the Company for the year ended March 31, 2015;

c) Proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) The a nnual accounts have been prepared on a going concern basis.

e) The Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Directors

Mr Vishal Malik, Independent Director resigned from the Board of Directors of the Company on June 23, 2014 due to his preoccupation. The Board wishes to place on record its appreciation of the valuable contribution made by Mr Vishal Malik during his tenure as a Director.

During the year under review, the members approved the appointment of Shri Pradeep Saxena as Independent Director who is not liable to retire by rotation. The members have also re-appointed Shri Vivek Talwar as the Managing Director for period of three years effective April 1, 2014.

The Board pursuant to the provisions of Section 149 and 152 of the Companies Act 2013 and subject to the approval of shareholders in the ensuing Annual General Meeting has appointed Mr Sharath Bolar and Mrs. Bharti Dhar as Independent Directors for a period not exceeding 5 years and not liable to retire by rotation.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement. The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which include criteria for performance evaluation of the nonexecutive directors and executive directors.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration the various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligation and governance.

The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors.

Key Managerial Personnel

The Company has following Key Managerial Personnel:

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed report on Corporate Governance forms a part of this Annual Report. A certificate from the auditors of the Company confirming compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this Report.

Management Discussion and Analysis

Management Discussion and Analysis on matters related to business performance, as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, is given in a separate statement which forms part of the Annual Report.

Contracts and Arrangements With Related Parties

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had not entered into any new contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Material related party transactions which are at arm's lenght are disclosed in form AOC-2 annexed as Annexure III.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: http://www.nitco.in/investors/nitco-policy.aspx

Your Directors draw attention of the members to Note 32 to the financial statement which sets out related party disclosures.

Transfer To Investor Education And Protection Fund (IEPF)

The Company has, during the year under review, transferred a sum of Rs. 24720/- to Investor Education and Protection Fund, in compliance with the provisions of Section 205C of the Companies Act, 1956. The said amount represents dividend due for refund which remained unpaid/ unclaimed by the shareholders of the Company for a period exceeding 7 years from its due date of payment.

Corporate Social Responsibility

In view of losses being incurred by the Company, the provisions of Corporate Social Responsibilities under the Act is not applicable.

Risk and Concern

Changes in macro economic factors like inflation, energy cost, interest rate, world trade, exchange rate, etc. also play an important role in our industry thereby affecting the operations of business. Any adverse change in the above may affect the performance of your Company. Your Company periodically reviews the risk associated with the business and takes steps to mitigate and minimize the impact of risk.

Internal control framework

Your Company conducts its business with integrity and high standards of ethical behavior and in compliance with the laws and regulations that govern its business. Your Company has a well established framework of internal controls in operation, including suitable monitoring procedures. In addition to the external audit, the financial and operating controls of your Company at various locations are reviewed by Internal Auditors, who report their observations to the Audit Committee of the Board.

Public Deposits

The Company has neither accepted nor renewed any deposit from the public within the meaning of Section 58A and 58AA of the Companies Act 1956 read with Companies (Acceptance of Deposits) Rules, 1975 during the year ended 31st March 2015.

Auditors

The present auditors of the Company, M/s. A. Husein Noumanali & Co., Chartered Accountants, retire at the conclusion of the Annual General Meeting and being eligible, offer themselves for re-appointment. Your Directors recommend their reappointment. The Company has received their written consent and certificate from the statutory auditors to the effect that their re-appointment, if made, would be within the limits prescribed under section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment within the meaning of Section 141(3) of the said Act. They further confirmed that they are not providing any non-audit services under section 144 of the said Act. The Board commends their re-appointment as statutory auditors.

AuditorS' Report

The Board has duly examined the statutory auditor's report to accounts and clarifications, wherever necessary, have been included in the Notes to Accounts section of the Annual Report.

With regards to the observations from the Statutory Auditors in their report on Standalone Financials of the Company, your directors would like to state that:

"The Company on the basis of the application filed u/s 15(1) of the Sick Industrial Companies (Special Provision) Act 1985, before the Hon'ble Board for Industrial & Financial Reconstructions, has not provided for interest on financing facilities amount to Rs. 107.40 crore for the year ended March 31,2015. Had the same been provided, the loss for the year ended March 31, 2015 would have increased by Rs. 107.40 crore and corresponding liabilities would have increased by Rs. 107.40 crore as at March 31,2015."

Since the net worth of the Company has been fully eroded and being mandatory requirement, a reference was filed under section 15(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 before the Hon'ble Board For Industrial and Financial Reconstruction (BIFR) and the same was registered with BIFR vide their letter dated 12th May 2015. In view of the above position, the Company has not provided for unpaid interest after the date the loans have been classified as NPA with the respective Banks in view of the uncertainties with regard to the ultimate outflow.

Secretarial Audit

The Board appointed M/s Mayur More & Associates, Practising Company Secretary, to conduct Secretarial audit for the financial year FY 2014-15. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure V to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Cost Audit

The Board has appointed M/s. R.K. Bhandari & Co, Cost Accountants, as cost auditor for conducting the audit of cost records of the Company for the applicable segment for the financial year FY 2014-15.

Audit Committee

The Audit Committee comprises Independent Directors namely Shri Pradeep Saxena (Chairman), Shri Sharath Bolar and Shri Vivek Talwar as other members.

Vigil Mechanism

The Policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: http://nitco. in/investors/nitco-policy.aspx

Meetings of the Board

Four meetings of the Board of Directors were held during the year For further details, please refer report on Corporate Governance.

Particulars of Loans given, Investments made, Guarantees given and Securities provided

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (Please refer to Note 3, 11, 12, 13 and 37 to the standalone financial statement).

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure I.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith as Annexure IV to this Report.

Particulars of Employees and related disclosures

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Compliance Officer and the same will be furnished on request. The Annual Report is being sent electronically to all those members who have registered their email addresses and is available on the Company's website.

General

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

4. The Managing Director of the Company does not receive any remuneration or commission from any of its subsidiaries.

5. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future.

Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Appreciation and acknowledgement

Your Directors acknowledges with gratitude and wish to place on record, their deep appreciation of continued support and cooperation received by the Company from the Banks, various Government Authorities, Shareholders, Bankers, Lenders, Business Associates, Dealers, Customers, and Investors during the year.

For and on behalf of the Board

Vivek Talwar

Chairman & Managing Director

Mumbai, May 29, 2015 Place: Mumbai