Birla Cotsyn India Ltd

To the Members,

The Directors have pleasure in presenting the Seventy Sixth Annual Report along with the Audited Accounts (Standalone & Consolidated) of the Company for the year ended 31st March, 2018.

FINANCIAL RESULTS

OPERATING AND FINANCIAL PERFORMANCE:

The revenue from operations for the year has been Rs. 10,294.28 Lakh as against Rs. 9,562.85 Lakh in the previous year. Revenue from operations affected due to continued stiff competition in the textile market and recessionary trend. The Company also operated at lower capacity utilization due to shortage of working capital which has also impacted the profitability of the Company for the year. Production cost also pushed up due to exorbitant increase in power and other input cost. Your Company has taken several remedial steps to meet the challenges viz. measures in saving cost at all front of operations, optimize use of available resources etc. In absence of profits, your directors are unable to declare any dividend for the year under review.

CHANGE IN NATURE OF BUSINESS

There is no change in the nature of business of the Company

ADOPTION OF INDIAN ACCOUNTING STANDARDS (IND AS) W.E.F 1ST APRIL, 2017.

The Company adopted Indian Accounting Standards (IND AS) w.e.f 1st April, 2017 under Section 133 of the Companies Act, 2013 read with relevant rules issued there under. Accordingly, the financial results of the Company from the quarter ended 30th June, 2017 to 31st March, 2018 have been prepared in accordance with IND AS and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI circular dated 5th July, 2015 further, the transaction date being 1st April, 2016.

TRANSFER OF AMOUNT TO RESERVE

The Company does not propose to transfer any amount to reserves.

TRAINING UNDER INTEGRATED SKILL DEVELOPMENT SCHEME OF GOVERNMENT OF INDIA

As reported last year, the company has been selected as training partner under "Integrated Skill Development Scheme of the Ministry of Textiles, Government of India for imparting training to 10,000 school dropout and illiterate youths from all over India to make them skilled and also uplift them economically & socially. Accordingly during the year under review, the company has trained 9,819 persons and booked training income of Rs. 91,159,596/- after obtaining their assessment certificates against which company has received so far total amount of Rs. 48,500,208/- till 31st March, 2018 including Rs. 27,852,300/- received during the year ended 31st March, 2017. Your company has planned to complete this project by the end of current financial year.

SHARE CAPITAL

The Company has issued 17935296 Equity Shares of Rs. 1/- each on Preferential Basis to Melstar Information Technologies Limited on conversion of loan into equity. Therefore, the issued share capital of the company has been increased from 2,668,635,154 shares to 2,686,570,450 shares.

EMPLOYEE STOCK OPTIONS PLAN

The Company has not granted any stock options during the financial year ended 31st March, 2018.

LISTING

The Equity Shares of the Company continue to remain listed on BSE and the shareholders of the Company shall continue to avail the benefits of listing and trading on BSE.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) DIRECTIONS W.R.T LISTED SHELL COMPANY

The Company had received notice from BSE Ltd dated 10th August, 2017 as directed by SEBI vide its letter reference SEBI/ HO/ISD/ISD/OW/P/2017/18926/1 dated 9th August, 2017 to the Company to produce documents duly certified by the Statutory Auditor of the Company. Accordingly the Company submitted all the documents as required by BSE. The investigation is carried out by BSE and accordingly the Company is complying with the same. The trading of the shares in the Company was restricted which is now reverted to the status as it stood prior to issuance of SEBI letter.

After submission of all the required documents to BSE, we received BSE's order dated 8th March, 2018 that an independent Auditor shall be appointed to conduct forensic audit of the Company for verification , including the credentials/financials of the Company.

Further aggrieved by that order, the company had filed representation letter to the BSE and also field an appeal to the Securities Appellant Tribunal and same is pending for hearing before SAT.

(i) Subsidiaries

The Company has one wholly owned subsidiary at UAE in the name of Birla Cotsyn (India) Limited FZE which has been setup to develop the overseas market for the Company.

The Audited Accounts of the wholly owned Subsidiary Company, Birla Cotsyn (India) Ltd FZE for the year ended 31st March, 2018 have been received by the Company and a statement pursuant to Section 129 of the Companies Act, 2013, forms part of this Annual Report. Your Directors have pleasure in enclosing the consolidated financial statements of the Company in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Accounting standards issued by the Institute of Chartered Accountants of India.

In compliance with the general circular issued by Ministry of Corporate Affairs (MCA), Government of India, the Balance Sheet, Statement of Profit & Loss and other documents of the subsidiary are not attached hereto. As per the general exemption, a statement containing brief financial details of the Company's subsidiary for the year ended 31st March, 2018, is included in this Annual Report in Form AOC - 1. The Annual Accounts of the subsidiary and the related detailed information will be made available to any Member of the Company/its subsidiary seeking such information at any point of time and are also available for inspection by any Member of the Company/its subsidiary at the Registered Office of the Company/its subsidiary.

(ii) Joint Ventures

The Company is not having any Joint Venture business and no Company has become its Joint Venture during the year under review.

(iii) Associate Company

The Company is not having any Associate Company during the year under review.

MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE REPORT

In compliance with Regulation 34 (2) (e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section on Management Discussion and Analysis Report which also includes further details on the state of affairs of the Company forms part of this Annual Report.

As per Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Corporate Governance report as approved by the Board of Directors, together with a certificate from the Practicing Company Secretary forms part of this Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT.

Pursuant to Section 134 (5) of the Companies Act, 2013, the Directors of the Company state as under that:

1. In the preparation of the annual accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures;

2. The selected accounting policies were applied consistently and the Directors made judgments and estimates that are reasonable and prudent so as to give true and fair view of the state of affairs of the Company for the financial year ended 31st March, 2018 and the Loss of the Company for the financial year ended 31st March, 2018;

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

4. The annual accounts have been prepared on a ‘going concern' basis;

5. Internal financial controls had been laid down to be followed by the company and that such internal financial controls are adequate and were operating effectively; and

6. Proper systems had been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

BOARD OF DIRECTORS AND ITS MEETINGS/ITS EVALUATION ETC. AND KEY MANAGERIAL PERSONNEL.

Company's Policy on Directors Appointment and Remuneration etc.

The Company has prepared a policy on Director's appointment and remuneration pursuant to Section 178 of the Act. The Company has also laid down criteria for determining qualifications, positive attributes and independence of Director.

Appointment/Resignation of Directors

In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company Shri Rakesh Kumar Dixit (DIN – 06655663) retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. Accordingly, his re-appointment forms part of the notice of the ensuing Annual General Meeting.

Smt. Soni Kanojia who was appointed as Non Executive Independent Director resigned from the Company w.e.f 17th January, 2018.

Smt. Deepti Jain is appointed as an Additional Director, Non Executive Independent by passing circular resolution w.e.f 5th March, 2018. Her Appointment was confirmed by the Board of Directors in the meeting held on 23rd May, 2018.

Code of Independent Directors - Schedule- IV

The Board has considered Code of Independent Directors as prescribed in Schedule IV of the Companies Act, 2013.

Key Managerial Personnel

Following are the key Managerial Personnel in the Company:

Satya Kishore Mathur, Manager Vipin Varkhawat, Chief Financial Officer

Vineeta Agarwal, Company Secretary & Compliance Officer (Appointed w.e.f 1st September, 2017)

The Formal Annual Evaluation has been made as follows:

a. The Company has laid down evaluation criteria separately for Board, Independent Directors, Directors other than Independent Directors and various committees of the Board. The criteria for evaluation of Directors included parameters such as willingness and commitment to fulfill duties, high level of professional ethics, and contribution during meetings and timely disclosure of all the notice/details required under various provisions of laws. Based on such criteria, the evaluation was done in a structured manner through peer consultation & discussion.

b. Evaluation of the Board was made by a Separate Meeting of Independent Directors held under Chairmanship of Shri. Satyanarayan Baheti, Independent Director (without attendance of non – Independent Director and members of management).

c. The performance evaluation of all committees were done by the Board of Directors namely:

i. Audit Committee ii. Nomination and Remuneration Committee iii. Stakeholders Relationship Committee

d. Performance evaluation of non – Independent Directors was done by Separate meeting of Independent Directors.

e. Evaluation of Independent Directors was done (excluding the Director who was evaluated) by the Board of Directors of the Company.

f. In addition, the Nomination and Remuneration Committee has carried out evaluation of every Director's performance as required under Section 178 (2) of Companies Act, 2013.

g. The Directors expressed their satisfaction with the evaluation process.

Board Meetings

The Board of Directors met on 27th May, 2017, 2nd September, 2017, 14th September, 2017, 24th November, 2017, 28th November, 2017 and 14th February, 2018.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS PURSUANT TO SECTION 149(6) OF THE COMPANIES ACT, 2013.

The Company has received declaration from all independent Directors of the Company to the effect that they meet the criteria of Independence as stipulated u/s.149 (6) of the Act and applicable regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

MANAGER/CHIEF FINANCIAL OFFICER (CFO) COMPLIANCE CERTIFICATE

Certificate by the Manager and Chief Financial Officer (CFO) pursuant to Regulation 17(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for the financial year ended 31st March, 2018 is provided in "Annexure A" to the Board's Report.

INTERNAL CONTROL SYSTEM

The Company has adequate internal control procedures commensurate with its size and nature of business. The objective of these procedures is to ensure efficient use and protection of the Company's resources, accuracy in financial reporting and due compliance of statues and corporate policies and procedures. The adequacy of internal financial control system are reviewed by the Audit Committee of the board in its periodical meetings.

INTERNAL FINANCIAL CONTROL SYSTEM

The Company has a comprehensive Internal Financial Control system commensurate with the size and scale of its operations. The system ensures the reliability of financial reporting, compliance with the policies, procedures, laws and regulations, safeguarding of assets and economical and efficient use of resources.

The policies and procedures adopted by the company ensures the orderly and efficient conduct of its business and adherence to the company's policies, prevention and detection of frauds and errors and timely preparation of reliable financial information.

PUBLIC DEPOSITS

The Hon'ble Company Law Board has passed an order dated 21st January, 2016 for rescheduling the repayment of the fixed deposits and interest thereon for a specified period on the petition filed by the Company. The Company has made substantial payment of Rs. 316.60 Lakhs to FD holders during the financial year 2017-18 which represent 84% of the outstanding amount of FD holders as on 1st April, 2017. The Company will make payment to remaining FD holders by the end of current financial year. There are no dues of FD holders in the category of deposits up to Rs. 20,000.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF) FOR THE DIVIDEND DECLARED AT THE ANNUAL GENERAL MEETING OF THE COMPANY HELD ON 23rd SEPTEMBER, 2009.

The amount of divided if not claimed within seven years i.e 19th October, 2017 will be transferred to Investor Education and Protection Fund (IEPF), accordingly unclaimed amount of Rs. 1,303,901/- has been transferred to Investor Education and Protection Fund during the financial year 2017-18.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT – 9 is attached as ‘Annexure B' to this Report.

Statutory Auditors

M/s. Samria & Co., Chartered Accountants, Mumbai, Statutory Auditors of the Company were appointed as Statutory Auditors of the Company for the period of five (5) years from conclusion of 73rd Annual General Meeting till the conclusion of 78th Annual General Meeting. As per the Companies Amendment Act, 2017, the Company's placement of the matter relating to Appointment of Auditors for ratification by members at every Annual General Meeting has been omitted.

Cost Auditors

The Board has subject to the approval of Central Government has approved the appointment M/s. M. Goyal & Co., Cost Accountants as Cost Auditors of the Company for conducting Cost Audit of Malkapur Textile unit for F.Y. 2018-19 as required pursuant to section 148 of the Companies Act, 2013 read with the rules made there under and the order No. F. No. 52/26/ CAB-2010 dated 24th January, 2012 of the Government of India, Ministry of Corporate Affairs and for issuance of Compliance Report, pursuant to the Companies (Cost Accounting Records) Rules, 2011.

Secretarial Auditors

Roy Jacob & Co., Practicing Company Secretary is appointed as Secretarial Auditor for F.Y 2018-19 pursuant to Section 204 of the Companies Act, 2013 read with rule no. 9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014.

The Secretarial Audit Report dated 23rd May, 2018 issued by Roy Jacob & Co., Practicing Company Secretary (CP no. 8220) for the financial year ended 31st March, 2018 is attached as ‘Annexure C' to this Report.

STATUTORY AUDITORS REMARKS

Note wise explanation for the Qualified Opinion of the Auditors Report in the opinion of the Board.

1. The Company has not obtained the confirmation from all the Inter Corporate Deposit (ICD) parties as all the ICD parties have filed legal cases against the Company including winding up petitions for recovery of their dues which the Company is contesting and also trying for out of court settlement. (Standalone Point No.1 & Consolidated Point No. 2)

The same has been audited as per the laws prevailing at the location of the subsidiary. (Consolidated Point No. 1)

2. Over the past few years the Company has been providing for interest payable on inter corporate and other deposits. However, the Company has not been paying interest on loan taken, in view of its default on repayment of dues to financial institution and the need to preserve the scare working capital resources. As such, the management has decided that it is prudent and conservative to not provide for such interest payable till such time they are settled. (Standalone Point No.2 and Consolidated Point No. 3)

3. The Company is in process of getting confirmation of dues of parties. However, parties are not co-operating due to fear of taking legal action that may be initiated by the Company. (Standalone Point No.3 and Consolidated Point No. 4)

4. Over past few years the Company has been providing for interest receivable on loans given to related parties. However, none of the related party has paid the interest amount to the Company resulting in unrealized income which further increases the receivable amount from the parties. Similarly, the Company has not been paying interest on loan taken from related parties in view of its default on repayment of dues to financial institutions and the need to preserve the scare working capital resources. As such, the management has decided that it is prudent and conservative to not provide for such interest receivable from and payable to the related parties till such time they are settled. (Standalone Point No.4 and Consolidated Point No. 5)

5. The Hon'ble Company Law Board has passed an order dated 21st January, 2016 for rescheduling the repayment of the fixed deposits and interest thereon for a specified period on the petition filed by the Company. The Company has made substantial payment of Rs. 316.60 Lakhs to FD holders during the financial year 2017-18 which represent 84% of the outstanding amount of FD holders as on 1st April, 2017. The Company will make payment to remaining FD holders by the end of current financial year. There are no dues of FD holders in the category of deposits up to Rs. 20,000. (Standalone Point No.5 and Consolidated Point No. 6)

6. The Company is trying to obtain confirmation/reconciliation of such loans. The Company is confident of recovery of the loan amount from all the related parties. (Standalone Point No.6 and Consolidated Point No. 7)

7. Some factory units of the Company are not operating due to shortage of need based working capital as bankers have stopped providing working capital facility as their working capital accounts have become Non Performing Assets. As per valuation carried out by bankers, there is no diminution in the value of fixed assets of these units. (Standalone Point No.7 and Consolidated Point No. 8)

8. This is a long term strategic investment made by the Company, restating the loan at the end of every reporting period unnecessarily increases/decreases the loan receivable amount and correspondingly the Foreign Currency Translation Reserve account. The Company shall realize the profit/loss on foreign currency fluctuation at the time of repayment of loan by the subsidiary. (Standalone Point No.8)

9. The Company is trying to obtain confirmation/ reconciliation of such advances from the parties. However, parties are not cooperating due to fear of taking legal action that may be initiated by the Company. (Standalone Point No.9 and Consolidated Point No. 9)

10. The Company is trying to obtain confirmation/ reconciliation of such trade receivables from the parties. However, parties are not co-operating due to fear of taking legal action that may be initiated by the Company. (Standalone Point No.10 and Consolidated Point No. 10)

Explanation to Emphasis of Matter:

1. The losses are due to interest provided on NPA loans otherwise the Company is having cash profit. We are in negotiation with lenders for one time settlement and once the settlement is done, the company will come on tract and the financial position of the Company will improve. The Company is always adhered in compliance with various statutory payments to Government viz., Provident Fund, ESIC, TDS, GST. The Company is also in compliance with Ministry of Corporate Affairs by filing its returns and Balancesheet on timely basis and complying with various regulation of SEBI. (Standalone Point & Consolidated Point No. 1)

2. The Company is in negotiation with lenders for one time settlement and once the settlement is done, the company will come on tract and the financial position of the Company will improve. (Standalone & Consolidated Point No.2)

3. The Company is in negotiation with Edelweiss Asset Reconstruction Company Ltd. for one time settlement and also contesting the matter in NCLT. (Standalone & consolidated Point No.3)

SECRETARIAL AUDITORS REMARK

Explanation for the Qualified Opinion of the Secretarial Auditors Report in the opinion of the Board.

1. The Hon'ble Company Law Board has passed an order dated 21st January, 2016 for rescheduling the repayment of the fixed deposits and interest thereon for a specified period on the petition filed by the Company. The Company has made substantial payment of Rs. 316.60 Lakhs to FD holders during the financial year 2017-18 which represent 84% of the outstanding amount of FD holders as on 1st April, 2017. The Company will make payment to remaining FD holders by the end of current financial year. There are no dues of FD holders in the category of deposits up to Rs. 20,000.

2. The Company has filed listing application for listing of 17935296 additional No. of Shares issued during the year under review on preferential basis to Melstar information Technologies Limited after twenty days from the date of allotment to the recognised stock exchange along with the documents specified by the exchange with applicable fine as levied by the exchange.

RELATED PARTY TRANSACTIONS

In accordance with the provisions of Section 188 of the Companies Act, 2013 and rules made there under, all related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business, the details of which are included in the notes forming part of the financial statements. There were no materially significant related party transactions which may have a potential conflict with the interests of the Company at large. Accordingly, information in Form AOC-2 is not required.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

During the year under review, the Company has not given loans, guarantees or investments under Section 186 of the Companies Act, 2013. The details of the investments made by the Company are provided in the accompanying financial statements.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy, technology absorption and foreign exchange earnings and outgo as required to be disclosed under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, are provided in ‘Annexure D' to Directors Report.

EMPLOYEES' SAFETY

The Company is continuously endeavoring to ensure safe working conditions for all its employees.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

During the year under review, your Company has not received any complaint under the Sexual harassment of Women at Workplace under the Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act, 2013.

DISCLOSURE UNDER RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL), RULES, 2014

The information required pursuant to Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel), Rules, 2014 in respect of employees of the Company and Directors is attached as ‘Annexure E'. There were no employees receiving remuneration above the prescribed limit in terms of Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel), Rules, 2014.

VIGIL MECHANISM

The company has a vigil mechanism named Whistle Blower Policy to deal with instances of fraud and mismanagement. There have been no instances of fraud reported by the Auditors either to the Company or to the Central Government during the year.

RISK MANAGEMENT

The Board has setup a Risk Management Committee in Compliance with Companies Act, 2013 and Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations.

PERSONNEL

Your Directors place on the record their appreciation to the contribution made by the employees at all levels who, through their competence, diligence, solidarity, co-operation and support, have enabled the Company to achieve the desired results during the period.

ACKNOWLEDGEMENTS

The Board of Directors wishes to acknowledge the invaluable support extended to the Company by the Government of Maharashtra, Bankers, Vendors, Suppliers, Shareholders and Customers.

ANNEXURE D

(Information under Section 134 (3) (m) of the Companies Act, 2013, read with Companies (the Companies (Accounts) Rules, 2014 and forming part of the Directors' Report for the year ended 31st March, 2018.)

A. CONSERVATION OF ENERGY :

i. The Steps taken or impact on conservation of energy.

Energy conservation continues to receive priority attention at all levels. Company ensures that the manufacturing operations are conducted in the manner whereby optimum utilization and maximum possible saving of energy is achieved.

ii. The steps taken by the Company for utilizing alternate sources of energy:

All efforts are made to conserve and optimize use of energy with continuous monitoring through improved operational techniques.

iii. The capital investment of energy conservation equipments:

No specific investment has been made in reduction in energy consumption.

During the year the company has utilized 19807242 units of energy through MSEDCL source amounting to Rs. 97,710,250/-

B. TECHNOLOGY ABSORPTION:

i. The efforts made towards technology absorption:

The Company is having research and development cell, headed by a senior and experiences textile technologist. The Company constantly strives for maintenance and Improvement in quality of its products.

ii. The benefits derived like product improvement, cost reduction, product development or import substitution-The Company has developed numerous qualities, which have been accepted by the market.

iii. In case of imported technology (import during the last three years reckoned from the beginning of the financial year) Nil

iv. The expenditure incurred on Research and Development- (a) Capital : Nil (b) Recurring : 480 Total : 480

Total R&D expenditure as % of total turnover: 0.00005%

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

The Company has earned foreign exchange Rs. NIL in financial year 2017-18 and Rs. NIL in financial year 2016-17.

DISCLOSURE UNDER RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION), RULES, 2014

1. The ratio of remuneration of each director to the median remuneration of the employee and percentage increase in remuneration of Director, CFO and CS.

2. Percentage increase in median remuneration

3. No. of permanent employees as on 31.3.2018 : 49

4. Relationship between average increase in remuneration and company's performance:

There is no direct linkage between average increase in remuneration and company's performance.

5. Comparison of remuneration of KMP remuneration against the performance of the Company The Company has three KMPs namely;

1. Shri Satya Kishore Mathur, Manager

2. Shri Vipin Varkhawat, Chief Financial Officer

3. Smt. Vineeta Agarwal, Company Secretary

The remuneration of the KMPs has no direct linkage with the Company's performance.

6. Variation in market capitalization, PE ratio;

7. Comparison between average percentile increase in salaries of employees (excluding managerial personnel) and percentile increase in managerial remuneration.

8. The key parameters for any variable component of remuneration availed by Directors – There is no variable component paid to the Directors.

9. There was no employee who received remuneration in excess of the highest paid director in FY 2017-18 10. This is to affirm that the above remuneration is paid as per the Remuneration Policy of the Company.