HHEC Annual Report English Annual_ Report_English.pdf · Chartered Accountant, New Delhi Mumbai Branch M/s. C.C. Dangi & Associate Chartered Accountants, Mumbai ... Society Ltd.,

2012-13

HHECANNUAL REPORT

HHEC

Board of Directors ................................................................................. 05

Chairman's Message ................................................................................. 12-13

Notice ........................................................................................................ 14

Directors' Report ................................................................................. 15-29

Corporate Governance Compliance Certificate ...................................... 27

Balance Sheet ....................................................................................... 30

Profit & Loss Account ............................................................................... 31

Cash Flow Statement for the year ended 31.03.2013 ........................... 32

Notes on Balance Sheet and Profit & Loss Accounts ........................... 33-51

Significant Accounting Policies ................................................................. 51-54

Notes on Accounts - Other Disclosure ..................................................... 55-65

Comments of the Comptroller & Auditor General of India ....................... 66-67

Auditors' Report and Management's replies of .......................................... 68-79the comments of the Statutory Auditors

C O N T E N T S

Shri Nirmal SinhaChairman-cum-Managing Director

(w.e.f. 20.07.2010)

Ms. Santha Thampi(w.e.f. 06.07.2009 to 14.03.2013)

Shri A.K. Sharma(w.e.f. 14.03.2013)

Shri S. S. Gupta, IAS(w.e.f. 16.12.2011)

GOVERNMENT NOMINEE DIRECTORS

Ms. Azra BanuDirector (Finance)(w.e.f. 11.07.2011)

Shri Sunil Sethi Independent Director(w.e.f. 01.08.2012)

FUNCTIONAL & INDEPENDENT DIRECTORS

Ms. Ritu SethiIndependent Director(w.e.f. 01.08.2012)

Ms. Kavita Prasad Chief Vigilance Officer

Dr. Arun Vir SinghGeneral Manager

(Marketing & Corp. Affairs)

KEY OFFICIALS

Board of Directors and Key Officials of the Corporation

Shri Ujjal DattaChief Finance Manager

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HHEC

BANKERS

REGISTERED OFFICE

State Bank of India

IDBI Bank Ltd.

Axis Bank Ltd.

th5 Floor, Jawahar Vyapar Bhawan, Annexe,

1, Tolstoy Marg, New Delhi – 110 001

Corporate Office

M/s. J.N.Mital & Co.,Chartered Accountant, New Delhi

Mumbai Branch

M/s. C.C. Dangi & Associate Chartered Accountants, Mumbai

Chennai Branch

M/s. R. Janakiraman & Co.Chartered Accountants, Chennai

Kolkata Branch

M/s. S.N. Chakrabarty & Co.Chartered Accountants, Kolkata

AUDITORS

Chairman - cum - Managing DirectorShri Nirmal Sinha ( 20.07.2010)

DirectorsShri S.S. Gupta, IAS ( 16.12.2011)

. Santha Thampi ( 06.07.2009 to 14.03.2013)Shri A.K.Sharma ( )Ms. Azra Banu ( 11.07.2011)

General ManagerDr. Arun Vir Singh, PCS

w.e.f.

w.e.f. Ms w.e.f.

w.e.f. 14.03.2013w.e.f.

Shri Sunil Sethi (w.e.f. 01.08.2012)Ms. Ritu Sethi (w.e.f. 01.08.2012)

BOARD OF DIRECTORS

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HHEC

REGISTERED OFFICE

The HHEC of India Ltd.

Jawahar Vyapar Bhawan Annexe,

1, Tolstoy Marg, New Delhi - 110 001

Phone : 011-23701086

Fax : 011-23701051

E-mail : [email protected]

Website : www.hhecworld.in

E-Shop : www.hheconline.in

CHENNAI REGIONAL OFFICE


Plot No. SP 31-32

Guindy Industrial Estate

Guindy, Chennai - 600 032

Phone : 044-22255653, 22255654

Fax : 044-22343979

E-mail : [email protected]/

[email protected]



MUMBAI REGIONAL OFFICE


Chowpatty Tejkiran Co-operative Housing

Society Ltd.,

2nd Dadi Seth Lane, Babulnath

Mumbai - 400 007

Phone : 022-23634326

Fax : 022-23640354




CORPORATE OFFICE


Noida Complex, A-2, Sector-2,

Udyog Marg, Noida - 201 301

Distt. Gautam Budh Nagar (UP)

Phone : 0120-22539155, 2539156

Fax : 011-91-2537003




KOLKATA REGIONAL OFFICE

The HHEC of India Ltd. nd2 Floor, Flat 1-A, Metropolitan Building,

7, Jawahar Lal Nehru Road,

Kolkata - 700 013

Phone : 033-22280931, 22280932

Fax : 033-22286864




AHMEDABAD OFFICE


103, Abhirath Complex,

Sardar Vallabhbhai Patel Statue,

Naranpura, Ahemdabad-380013

Telefax : 079-27680096




BRANCHES IN INDIA

7

HHEC

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Hon’ble Minister (Textiles) Dr. Kavuru Sambasiva Rao during his visit to HHEC’s Corporate Office and Showroom at Noida along with Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC

Hon’ble Minister of State for Textiles Smt. Panabaaka Lakshmi during her visit to HHEC’s Chennai Branch along with Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC

Ms. Zohra Chatterji, IAS, Secretary, Ministry of Textiles, Shi S. S. Gupta, IAS , Development Commissioner (Handicrafts) and Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC after signing MOU 2013-14.

HHEC

S h r i N i r m a l S i n h a , C h a i r m a n - c u m - Managing Director, HHEC at inauguration of Patna Museum Shop, Patna , Bihar

Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC showing products to Ms. Zohra Chatterji, IAS Secretary, Ministry of Textiles at our renovated shop at Crafts Museum, Delhi and renamed as “Lota Shop”

Hon’ble Minister (Textiles) Dr. Kavuru Sambasiva Rao during his visit to HHEC’s newly opened shop at Rajiv Gandhi Hastshilp Bhawan, Baba Kharak Singh Marg, Delhi along with Shri S. S. Gupta, IAS, Development Commissioner (Handicrafts) and Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC

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HHEC

Hon’ble Minister (Textiles) Dr. Kavuru Sambasiva Rao and Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC in Indian Handicrafts & Gift Fair held at Greater Noida, October, 2013

Shri K. Venkataraman, Sr. Manager (Technical), receiving award for regular participation and best display at Osaka Fairs from Ms. Rita Menon, IAS, Chairperson , ITPO

Ms. Zohra Chatterji, IAS, Secretary, Ministry of Textiles, Shri S. S. Gupta, IAS, Development Commissioner (Handicrafts) and Dr. Arun Vir Singh, General Manager (Marketing & Corporate Affairs), HHEC at Indian Handicrafts & Gift Fair held at Greater Noida in February 2013

10

HHEC

Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC Ms. Azra Banu, Director (Finance), HHEC and Dr. Arun Vir Singh, General Manager, HHEC on the inauguration of “Hindi Pakhwara” at HHEC Noida Complex (16th September, 2013 to 30th September, 2013)

Shri Nirmal Sinha, Chairman - cum - Managing Director, HHEC and Dr. Arun Vir Singh, General Manager, HHEC with officials of HHEC after hoisting the National flag on 15th August, 2013.

Ms. Azra Banu, Director (Finance), HHEC receiving “Rajbhasha Shield” from NARAKAS, Delhi for 2011-12 for excellent work in implementation of the official Language in HHEC

11

Shri Nirmal Sinha , Chairman - cum - Managing Director, HHEC taking pledge on the inauguration of “Vigilance Awareness Week”(28th October to 2nd November, 2013) at HHEC Noida Complex alongwith Mrs. Kavita Prasad, Chief Vigilance Officer, HHEC Ms. Azra Banu, Director (Finance) & Shri Ujjal Datta, Chief Finance Manager

HHEC

I am pleased to welcome you, on behalf of the Board of have opened two retail outlets. One at Patna Museum, Directors of your Corporation “The Handicrafts and Bihar and another at Rajiv Gandhi Hastshilp Bhawan, Baba Handlooms Exports Corporation of India Ltd" at its 55th Kharak Singh Marg, Delhi; We have also renovated and Annual General Meeting. I would like to convey our sincere rejuvenated the existing Shop at Craft Museum Pragati thanks to all of you for being with us on this occasion. Maidan and named it as “Lota Shop”; During the course of

our journey for the year we have added new buyers and also The notice of AGM, Directors’ Report and Audited Accounts

able to increase our business with existing buyer during our for the year ended 31st March, 2013 is already with you and

participation in various fairs and exhibition in India and with your permission I take them as read.

abroad. In addition to that HHEC has also developed The year 2012-13 has seen a significant reduction in the various new product range of eco-friendly, Natural series growth rate of the economy when compared to earlier years. and Museum series as well.The country has had to deal with the challenge of high

HHEC has been awarded with following two awards by India inflation rates and the impact of the global economic

Trade Promotion Organisation (ITPO)slowdown.

• Award for “REGULAR PARTICIPATION in India Garment Despite the economic slowdown and constraint in the

Fair & INDIA Home furnishing Fair, Osaka Japan. 2013market, ‘HHEC’ has moved as per the action plan and concentrated on the Core group activity resulting in the • The first place in the, “Design and Display” for the 24th increased net profits for the year at Rs. 2.49 crores as Home Furnishing Fair, Osaka Japan 2013against net profits of Rs. 2.16 crores in the previous year.

HHEC has planned to continue focusing on Core Group Our aggressive domestic and international marketing

activities and undertake aggressive International and strategy and initiatives has resulted increase in core group

domestic marketing strategies and this ambitious plan is turnover by 24.57 % year over year . The increased

proposed to be achieved through distinctive strategies :-profitability margins in core sector has compensated the decline in Bullion Imports. The Bullion Imports was To have a better visibility and branding of HHEC, it has been strategically reduced as per MoU signed with the planned to have retail outlets abroad on franchisee basis Government. Hence, the bottom line has not affected and accordingly, the Corporation has prepared a plan for a adversely. permanent visibility of our handicrafts and handlooms

products at various important markets across the Globe. Based on the financial performance for the year and

HHEC has also planned to re-capture the untapped carpet/ excellent performance on other dynamic MoU parameter,

floor covering market. HHEC, being in International market your Corporation is likely to be graded “Very Good” for MoU

and dealing with international buyers, hence required to be 2012-13.

at par with modern techniques and international standards HHEC has taken various initiatives to sustain its position and hence, has initiated for implementing Quality and its eagerness to march ahead on the growth path; we Management Systems in the Corporation.

Chairman's

Message

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Dear Shareholders,

HHEC

In order to increase our presence in Domestic Market, during the year for excellent work in implementation of the HHEC is in the process of opening more retail outlets Official Language: directly and on PPP model. It is proposed to open shops in

“Protsahan Puraskar” from NARAKAS, Noida for for Shilpramam, Hyderabad; Gaya Museum, Bihar; Kolkata 2010-11;Museum and Sarnath Museum. In addition to that HHEC

has planned to go along with new projects of Corporate “Rajbhasha Shield” from NARAKAS, Delhi for 2011-12; institutional Sales and E-Marketing. Further, it has also and been planned to have capacity expansion and another

project of SAARC Museum is in the pipeline for which HHEC “Vishesh Prasansha Puraskar” from NARAKAS,

will initiate work for construction and display this year.Delhi for 2011-12 for HHEC’s Journal “Badte

Besides above, HHEC has initiated a project, for developing Kadam”.

the infrastructures (Capital & technical) at Chennai Branch to explore and grab the better business opportunities for HHEC is committed to achieve the highest standard of which government support will also be sought for financial

the Corporate Governance to keep the confidence of assistance. The sub committee for implementing,

the stakeholders intact. The information as required monitoring and supervising the project has also been formed. to be placed as per DPE guidelines on Corporate

Governance have been placed in the Directors’ Report Joining hands with the Go GREEN concept and sustainability , HHEC is continuing to develop and market and the compliance certificate from the practicing the diverse Range of “Natural Products” and “Eco-friendly Company Secretary is annexed to the Directors’ Product” which are made from Banana Fiber, Jute, Sabai

Report. grass, Sea grass, coir, Soya-bean / Banana / Pineapple Elephant Grass, straw grass etc C&AG has issued no further comments after review of HHEC has been always emphasizing on empowerment of the Annual Accounts which is annexed to the weaker section of artisans, weavers and crafts persons by Directors’ Report along with Statutory Auditors’ Report promoting their products and providing a platform to market

and Management’s Reply thereof. their products and sourcing procurement from the textiles and craft clusters through its procurement centers. I would like to thank our valued customer, vendors, Corporate Social responsibility is at the core of our artisans, weavers and craftsmen and other business operations at HHEC as the Corporation had been associates who continue to support us and play a vital continuously contributing to the society at large both directly

role in continuous improvement in terms of our product and indirectly by providing international platforms to the Art offering, quality and services. I would like to and crafts of the artisans and weavers who mainly belongs

to Below Poverty Line, providing exposure to their ethnic acknowledge with deep sense of appreciation the co-arts and crafts at international level and providing free operation and support received from the Ministry of space to artisans and weavers in the events organized at

Textiles, Development Commissioner (Handicrafts), Noida Complex for display and sale of their products. During Development Commissioner (Handlooms), Ministry of the year 2012-13, the Corporation had successfully

undertaken two projects through Sulabh Sanitation Mission Commerce, Director General of Foreign Trade and Foundation i. e. creation of sanitation facilities by State Bank of India and other Bankers. I would like to constructing toilet Complex and creation of drinking

acknowledge with thanks constructive suggestions facilities by installing and setting up nine Mark II Hand received from the Comptroller & Auditor General of pumps in Block Pakridayal, District of East Champaran,

Bihar. India and the Statutory Auditor. I also take this

opportunity to express my gratitude to all executives HHEC continues to emphasize on use of Hindi for official work and to ensure implementation of official language and employees of the Corporation for their devotion policy of Government of India. The Corporation has and commitmentobserved “Hindi Pakhwara” starting from 16th September, 2013 to 30th September, 2013 to encourage use of Hindi by JAI HIND.every employee in the day-to-day working. And Your Corporation has been recognized with following awards

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Place: New DelhiDated: 30.09.2013

(Nirmal Sinha)Chairman-cum-Managing Director

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HHEC

NOTICENotice is hereby given that the 55th Annual General Meeting of The Handicrafts & Handlooms Exports Corporation of India Limited will

thbe held at the Registered Office of the Company at Jawahar Vyapar Bhawan Annexe, 1, Tolstoy Marg, New Delhi-110001 on 30

September 2013 (Monday) at 4.00 P.M. to transact the following business:

ORDINARY BUSINESSst1. To consider and adopt the Audited Balance Sheet as at 31 March 2013, Profit and Loss Account of the Company for the year ended

on that date together with the Auditors’ Report and Directors’ Report thereon.

2. To fix Auditors’ remuneration by passing the following resolution with or without modification (s)

“Resolved that pursuant to section 224 (8) (aa) of the Companies (Amendment) Act 2000, the remuneration of the auditors of

the Company for the financial year 2012-13 be fixed as tabulated below.

S. No. Name of the Chartered Station Audit Fee

Accountants Firms (Rupees)

1. M/s. J. N. Mital & Co. Statutory Auditors 3,15,000/-

2. M/s. C.C. Dangi & Associates Branch Auditors, Mumbai and 27,500/-

Ahmedabad

3. M/s. R. Janakiraman & Co. Branch Auditors, Chennai 45,000/-

4. M/s. S N Chakrabarty & Co. Branch Auditors, Kolkata 17,500/-

TOTAL 4,05,000/-

By Order of the Board of Directors

sd/-

Ujjal Datta

Chief Finance Manager

Place : New Delhi

Dated : 27.09.2013

Notes:

1. A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF AND THE PROXY NEED NOT BE A MEMBER.

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HHEC

thYour Directors have pleasure in presenting the 55 Annual Report on the business and operations of your Corporation together with the stAudited Statement of Accounts, Auditors’ Report and the Review of Accounts by C&AG of India for the Financial Year ended 31 March

2013.

1.0 FINANCIAL HIGHLIGHTS

1.1 Financial Performance

The financial performance for the year 2012-13 is summarized here under:

(Rs. in Crores)

2012-13 2011-12

Revenue 4157.40 12126.23

- Exports 35.79 30.66

- Imports 4109.85 12088.06

- Retail Less Excise 11.76 7.51

Other Operating Revenue 3.98 1.93

Other Receipts 8.30 7.48

Total Revenue 4169.68 12135.64

Expenditure 4167.03 12135.64

Operating Profit/(Loss) for the Year 2.65 8.47

(Before PPI, Extra Ordinary Items & Provision for Taxation)

Prior Period Items (0.22) 0.09

Net Profit /(Loss) 2.87 8.38

Exceptional Items - 11.48

Profit Before Tax (PBT) 2.87 (3.10)

Income tax- Current tax 57.50 0.36

Less: MAT credit entitlement (57.50) - (0.20) 0.16

Deferred Tax 0.38 (5.41)

Profit/(Loss) After Tax 2.49 2.16

DIRECTORS' REPORT

The Corporation has ended the year with a Net Profit after tax of Rs. 2.49 crores as against Net Profit after tax Rs 2.16 crores last year. The

increase is due to increase in turnover in core group exports and retail sales compensating the downfall in Bullion imports, improvement of

profit margin in core group, optimum utilization of the idle assets.

1.2 Operations Review

The Total Turnover of the Corporation has decreased from Rs 12126.23 crores in 2011-12 to Rs. 4157.40 crores during the year, a

decrease of 7968.83 (65.72 %). The decrease is mainly due to:-

• Bullion Business is an opportunity driven business. During the year Bullion Imports decreased by Rs.7978.21 crores (66%) as

it was pre-decided Rs. 3700.00 Crores as per MOU signed with Government for Bullion turnover so as to concentrate and

boost up the Core Business of the Corporation.

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HHEC

• Increase in Core Group Exports by Rs. 5.13 Crores (16.73%) as a result of aggressive Marketing initiative taken during the year.

• Increase in Retail Business by Rs. 4.25 crores (56.59 %) due to opening of new retail outlets and Corporate institutional sales and other Domestic Marketing Strategies adopted.

Overheads for the 2012-13 amounts to Rs. 23.78 crores (previous year Rs. 17.93 crores), increase due to implementation of revised pay scales.

The Operating profits have decreased to Rs.2.65 crores during the year as compared to Rs. 8.47 crores in the previous year, a decrease of Rs.5.82 crores (68.71%) as there is a decrease in turnover in the bullion imports.

Although, the increased margins earned from increased core group turnover have compensated the downfall in margins of Bullion Imports. Thus, resulting in the net profits for the year amounts to Rs. 2.49 crores as against net profits of Rs. 2.16 crores in the previous year.

1.3 Exports

In rupees terms, direct exports amounted to Rs. 35.79 crores ($ 6.62 millions) as against Rs. 30.66 crores ($ 6.38 millions) last year, an increase of Rs. 5.13 crores ($ 0.24 millions). The increase is mainly due to:

• Initiatives taken in the past for revival have started yielding results.

• Revival of old buyers and added new buyers.

• New product line added.

Product wise exports sales are given below:-

(Rs. in Crores)

Product 2012-13 2011-12

Handicrafts 9.77 10.09

Handlooms 12.60 9.09

Ready to Wear 13.41 11.32

Carpets 0.01 0.16

Sub total 35.79 30.66

Gold / Jewellery - -

Total 35.79 30.66

1.4 Imports sales

Bullion Imports have decreased from Rs. 12088.06 crores in 2011-12 to Rs. 4109.85 crores during the year, a decrease of Rs.7978.21 crores (66%).

1.5 Liquidity

The Corporation continues to be liquid. The Cash Flow Statement for the year is annexed to with the Annual Accounts.

1.6 Deposits

The Corporation has not accepted any deposits within the meaning of section 58A and 58AA of the Companies Act, 1956.

2.0 SHAREHOLDERS’ FUND

The authorized and paid up capital of the Corporation remained unchanged at Rs. 20.00 crores and Rs. 13.82 crores respectively

during the year 2012-2013. The entire paid-up capital has been subscribed by the Hon’ble President of India. The Board of Directors

had not recommended declaration of Dividend for the Financial Year 2012-13.

3.0 EXPORT PROMOTION AND TRADE DEVELOPMENT

3.1 The focus of the Corporation continues towards maintaining a harmonious blending of its developmental role with commercial

activities and greater emphasis is being made for development of business in the core business group of crafts and textiles in the

exports as well as the retail markets.

3.2 The Corporation has participated in various exhibitions in India and abroad to showcase the new samples developed from traditional

crafts and textiles clusters as well as to upgrade knowledge on designs and fashions abroad. During the year, the Corporation rd rdparticipated in a number of International Fairs viz., 23 India Home Furnishing Fair (Japan ), 33 India Garment Fair (Japan) ,

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HHEC

Heimtexil (Frankfurt), Hong Kong International Home Textiles & Furnishing Fair (Hong Kong), New York International Gift Show (New York) , Inter Gift Show (Madrid, Spain) , Combined Textile & Clothing Fair (Sydney), International Spring Fair (Birmingham, U. K.), Participation in domestic fairs includes IHGF (Autumn) Greater Noida, IHGF (Spring) Greater Noida, SAARC Exhibition (New Delhi), HGH India 2012, India International Handwoven Fair, Chennai .

3.3 HHEC has been awarded with following two awards by India Trade Promotion Organisation (ITPO):

• Award for “REGULAR PARTICIPATION in India Garment Fair & INDIA Home furnishing Fair, Osaka Japan

• The first place in the, “Design and Display” for the 24th Home Furnishing Fair, Osaka Japan.

4.0 CORPORATE GOVERNANCE

The Corporation is committed to following sound corporate practices and good Corporate Governance. The Board lays strong emphasis on transparency, fairness, accountability, integrity and professionalism for the sustainable development of all stakeholders. Management Discussion and Analysis Report is annexed as Annexure – I to this Report. A report on the Corporate Governance for the year 2012-13 in terms of the Department of Public enterprises Guidelines on Corporate Governance for CPSEs vide Order No. 18(18) 2005-GM dated 14.05.2010 is attached as Annexure-II to the Directors’ Report.

5.0 RIGHT TO INFORMATION ACT, 2005

In compliance with the provisions of the Right to Information Act, 2005 the Corporation has placed various documents / records at its website. Assistant Public Information Officers at each branch and Central Public Information Officer at Corporate Office have been designated and all the application received under this Act has been attended and suitable reply / information furnished to the applicants.

6.0 CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO

The activities undertaken by the Corporation do not fall under the preview of disclosures of particulars under section 217(1) (e) of the Companies Act, 1956, in so far as it relates to the conservation of energy and technology absorption. The particulars with regard to foreign exchange earnings and outgo appear at para nos. ix) b) and ix) c) of Note No. 2.31 Other Disclosures.

7.0 HUMAN RESOURCE DEVELOPMENT & INDUSTRIAL RELATIONS

7.1 The Corporation gives due importance to training to its employees at all levels to develop them to realize their true potentials, improve in the areas of lesser strengths and to work with a high sense of responsibility. Re-deployment and motivation are also given priority with a view to develop the inherent faculties and qualities of employees.

7.2 During the year under Report, industrial relations were cordial and harmonious at all Branches / Units. No man-days were lost due to strike or lockout. All the employees worked with a new vigour & zeal.

7.3 None of the employees of the Company received remuneration in excess of the limits prescribed in Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended from time-to-time.

7.4 The Corporation strictly follows the directives issued by the Government with regard to reservation of posts for the Scheduled Castes, Scheduled Tribes, and Other Backward Classes as also for handicapped persons. The roster for reservation of post for SC / ST/ OBCs is duly maintained to ensure that there is no violation of the rules / instruction in this regard. No posts reserved for SC/ ST/ OBC was got de-reserved for the period under report.

7.5 As per Guidelines on Human Resource Management issued by Department of Public Enterprises, during the year, various activities have been undertaken by the Corporation such as training programs on leadership , skill development and multi-skill up-gradation, recruitment , retention and talent Management , creativity and innovation , welfare HR Branding etc.

8.0 LOOKING AHEAD

8.1 HHEC has planned to continue focusing on Core Group activities and undertake aggressive International and domestic Market Strategies

8.2 Opening New outlets abroad: To increase the visibility of HHEC & to strengthen the core business it has been envisaged to have retail outlets abroad and accordingly, the Corporation has prepared a plan for a permanent visibility of our handicrafts and handlooms products at various important markets of globe. This will not only provide a marketing platform to the artisans & craftsmen of India but also increase our buyer base and presence which will lead to increased business. It is also important to have a brand image to survive in cut throat competition so that buyer can relate with us and HHEC can sustain the business, thus, these foreign outlets will help in this regard.

8.3 In order to increase the exports of handicrafts & handlooms products, the Corporation has been making efforts to rein in new buyers from the existing / untapped markets and also to bring back to its fold ex-buyers through competitive prices and dedicated services.

thBesides, regular participation in major international and local fairs, the Corporation has participated in 4 International Yarn & Fabric show (Colombo, Sri Lanka) Musiad International Fair Istanbul (Turkey), Intermoda (Mexico), House ware and Kazgift Exhibition (Kazakhstan). In addition to that HHEC has participated two new domestic fairs viz IFFTEX 2012 (Greater Noida) and VASTRA (Jaipur).

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HHEC

8.4 New Market Intervention: To expand our horizon and maintain whole time presence in the International Market and further development of business in potential global markets, General Sales Agents have been engaged during the year. In addition to that HHEC is planning to tap new markets in LAC & CIS Countries through participation in various Fairs and exhibition and also in countries like Panama, Maldives, Singapore and Mexico etc.

8.5 Quality Management Systems: HHEC has initiated new initiative for implementing Quality Management System for which feasibility study was conducted by Textile Committee in Financial Year 2012-13. During the current year i.e. Financial Year 2013-14, the Corporation has planned to take approvals of the execution plan and implementation thereof in near future.

8.6 In order to increase our presence in Domestic Market, HHEC is taking up the following aggressive Marketing Strategies

• Opening new Retail outlets: During the year two new retails outlets have been opened in Salarjung Museum, Hyderabad and Patna Museum, Patna, Bihar and renovated and rejuvenated the existing Shop at Craft Museum and named as “Lota Shop”. Further in the current year, retail outlet has been opened at Rajiv Gandhi Hastshilp Bhawan, Baba Kharak Singh Marg, Delhi, in continuation to that the Corporation is also planning to open few more retail outlets in Shilparamam, Hyderabad, Gaya, Bihar, Kolkata Museum, and Sarnath Museum.

• Corporate institutional Sale: The Corporation has planned keep focusing on corporate institutional sales with an eye on big organizations like ASI, ONGC, NTPC, IRCTC and other Corporations in Private Sector.

• E-Marketing: The Corporation would like to add new dimensions by positioning for brand imaging, SEO up-gradation, adding new product line, introduce user interface, social media partnerships etc.

• Capacity Expansion: The Corporation has planned to further expand our Garment factories in Chennai and Noida by adding new machine line to cater specific buyers’ demands and to meet international standards and technology and in turn increasing buyers & demand for Ready-to- Wear.

• SAARC Museum: HHEC will be initiating the work for construction and display work of SAARC museum this year.

8.7 With changing fashion, usages and concerns of buyers, HHEC has introduced a new diverse Range of “Natural Products” which are made from Banana Fiber, Jute, Sabaii grass, and Sea grass, Soya-bean / Banana / Pineapple /Elephant Grass, Istra Grass. Further, it is also planned to strengthen existing eco-friendly product line with adding new fruit fibers/grass. Fusion of fiber with fruit fiber will be explored.

8.8 HHEC has also planned to enter in to the untapped sector of Handicrafts & Handlooms Industry i. e. Carpet sector. In the past HHEC had performed well in carpet sector and again it is planned to revive and re-capture the Carpet Business of the Corporation.

8.9 HHEC Chennai Branch is set up at a plot area of approx 2 acres with existing crèche building, office building. Now, HHEC has planned to modernize the Chennai Branch by utilizing the vacant land and constructing a new building in the IST phase without demolishing the existing building for which government support will also be sought for financial assistance. The sub committee for implementing, monitoring and supervising the project has been formed and Architect selection is in process.

9.0 MEMORANDUM OF UNDERSTANDING (MOU)

MoU Performance Evaluation based on our performance during 2012-13, our Corporation likely to be graded “Very Good” keeping the factors as decided at the time of signing MOU. The Number of employees for calculating ratio / various parameters of MOU have been taken as 140.

A Memorandum of Understanding for the year 2013-14, duly approved by the High Power Committee in the Department of Public Enterprises, was signed between Ministry of Textiles and the Corporation on 4.03.2013.

10.0 GENERAL

10.1 Vigilance Activities

The Vigilance Division of the Corporation continued to perform the function of creating consciousness of the vigilance requirements among the employees as per guidelines provided by Central Vigilance Commission from time to time, investigation of complaints received from various agencies/sources and constant liaison for systems improvement. The Corporation observed Vigilance

th rdAwareness Week from 29 October 2012 to 3 November 2012 during which lectures/talks were organized jointly with CCIC on “ Anti-corruption and its relevance in public life”, “Issues related to Procurement - CVC’s Perspective”, “Procurement Rules: Government Perspective” and “ Transparency in Public Procurement- Risk Management” with a view to give holistic exposure to the officials for emphasizing transparency, accountability and probity in public procurement and acting with integrity, without any fear or favour.

10.2 Implementation of Official Language

Your Corporation continued to promote progressive use of Hindi for officials work and to ensure implementation of the official thlanguage policy of the Government of India. Celebration of “Hindi Pakhwara” (observed from 16 September, 2013 to

th 30 September, 2013), competitions in Hindi essay writing, Noting, Computer typing etc., incentives in cash and kind for motivation to employees and publication of house Journal “ Badte Kadam” are regular features to encourage usage of Hindi by every employee in

:-

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HHEC

the day-to-day working.

During the year, HHEC has been awarded following awards:

• “Protsahan Puraskar” from NARAKAS, Noida for excellent work in implementation of the Official Language for 2010-11;

• “Rajbhasha Shield” from NARAKAS, Delhi for 2011-12 for excellent work in implementation of the official Language; and

• HHEC’s Journal “Badte Kadam” has been awarded “Vishesh Prasansha Puraskar” from NARAKAS, Delhi for 2011-12.

11.0 CORPORATE SOCIAL RESPONSIBILITY

The Corporation is conscious of its Corporate Social Responsibility (CSR) and strives to implement societal betterment programmes.The Corporation endeavors to contribute suitably to the society both directly and indirectly through various means, viz. generating employment for the artisans and weavers who mainly belongs to Below Poverty Line, providing exposure to their ethnic arts and crafts at international level and providing free space to artisans and weavers in the events organized at Noida Complex for display and sale of their products. The Corporation has been always emphasizing on empowerment of weaker section of artisans and weavers by promoting and providing a platform to market their products and sourcing procurement from the textiles and craft clusters through its procurement centers.

During the year 2012-13, the Corporation had successfully undertaken two distinctive projects through Sulabh Sanitation Mission Foundation with a total expenditure of Rs. 11.74 lakhs:

• Creation of Sanitation Facility by constructing Toilet Complex with an expenditure of Rs. 6.46 Lakhs in Block Pakridayal, Bihar and

• Creation of Drinking Water facilities by installation of 9 Mark II Hand-pumps with an expenditure of Rs. 5.28 Lakhs in Block Pakridayal, in Bihar.

Further, during Current Financial Year 2013-14, the Corporation is going to continue to undertake the same projects of creation of Drinking Water Facility & Sanitation Facility at the Cluster of Bihar.

12.0 SUSTAINABLE DEVELOPMENT

Appreciating the need to contribute suitably to the society both directly and indirectly through various means, viz. generating employment for the artisans and weavers who mainly belongs to Below Poverty Line, providing exposure to their ethnic arts and crafts at international level, conservation and sustainability of natural resources, the Corporation undertook the following initiatives during the year in line with the DPE guidelines on Sustainable Development (SD):

• Development of 23 new Eco-friendly products made from Soya beans/Banana/Pine Apple/Elephant Grass etc with an expenditure of Rs. 37.80 Lakhs,

• Water Treatment Plant at the Chenkumar Weavers’ Co-operative Production and Sale Society ltd., Chennimalai, Tamil Nadu recommended and evaluated by Handlooms Exports Promotion Council (HEPC).

13.0 RESEARCH & DEVELOPMENT

In compliance with the guidelines on Research & Development (R&D) notified by the Department of Public Enterprises requiring all CPSEs to undertake R&D activities. The Corporation undertook the following projects:

• Cluster based new Samples Development / Supplies for Market Testing amounting to Rs. 57.24 Lakhs.

• Study on registration of “FAIR TRADE LABELLING” conducted by Textile Committee.

14.0 AUDITORS’ REPORT

M/s. J. N. Mital & Co., Statutory Auditors appointed by the Comptroller & Auditor General of India for the year 2012-13 have made stcertain comments in their report to the shareholders on the Annual Accounts of the Corporation for the year ended 31 March 2013.

The report along with the Management replies to these comments/observations as required under section 217 (3) of the Companies Act, 1956 are given at Annexure ‘B’.

15.0 COST AUDIT

Cost Audit has been applicable on HHEC w. e. f. 1.04.2012. Accordingly, M/s. H. Tara & Co. is appointed as the Cost Auditor of the Corporation for the Financial Year 2012-13 and the Cost Audit Report is being filed within the due date.

16.0 MICRO SMALL AND MEDIUM ENTERPRISES

The Corporation was formulated with mission to develop, promote and aggressively market the products of Indian crafts and skills abroad thereby providing a marketing channel for craftsmen and artisans and generate adequate returns to the stakeholder. But being a trading Company HHEC mostly procures its products as per requirements of our buyers mainly through artisans, weavers and societies. With respect to our major procurements HHEC observes the following:-

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HHEC

• Procurement of Bullion: As far as procurement for bullion business is concerned, being a nominated agency for import of Gold, the Corporation imports Gold from either a LBMA member or a Bank as per the approved scheme by the Board of Directors. Hence, these procurements cannot be covered under the Public Procurement Policy.

• Procurement of Core Group Merchandise: In case of Handicrafts, Handlooms, Ready-to-Wear and Carpets etc. samples of product are selected by the buyer and HHEC places orders to the suppliers as agreed and produced the samples.

However, during financial year 2012-13 our trading purchases (Core Group) are to the tune of Rs. 28.75 Crores against which the procurements from registered MSEs sourced to the to the extent of 48 %.

17.0 COMMENTS OF C & AG

The C & AG has no comments upon or supplement to the Auditors’ Report under Section 619 (4) of the Companies Act, 1956 on the stAnnual Accounts of the Corporation for the year ended 31 March, 2013. The comments of the C & AG are at Annexure ‘A’.

18.0 DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors responsibility statement as required under section 217 (2AA) of the Companies (Amendment) Act, 2000 are as under:

sti) In the preparation of Annual Accounts for the year ended 31 March 2013, the applicable Accounting Standards had been followed along with proper explanations relating to material departures and non-compliances have been furnished in the Notes on Account.

ii) The Directors had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2012-2013 and of the profit of the company for the year under review.

iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities.

stiv) The Directors had prepared the Annual Accounts for the year ended 31 March 2013 on a going concern basis.

19.0 ACKNOWLEDGEMENTS

19.1 The Board gratefully acknowledges the support and assistance received from the Ministry of Textiles, Ministry of Commerce, Ministry of Finance, Ministry of External Affairs, Ministry of Corporate Affairs, Development Commissioner for Handicrafts, Development Commissioner for Handlooms, Directorate General of Foreign Trade, Commissioner of Customs, Comptroller and Auditor General of India, the Auditors of the Company, Reserve Bank of India and State Bank of India.

19.2 Your Directors take this opportunity to place on record their appreciation for the invaluable contribution made and excellent co-operation extended by the employees and executives at all levels for the continued progress and property of the company .

19.3 The Board is grateful to its large family of international customers and thousands of crafts persons and weavers whose dedicated work and skill made it possible for the Corporation to perform its role.

For and on Behalf of Board of Directors

(Nirmal Sinha)

Chairman and Managing Director

Place : New Delhi

Date : 27.09.2013

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Annexure -'I' to the Directors' Report

1. FORMATION

HHEC was established in 1958 with the twin objective of development and export of Indian handlooms and handicrafts and products of the cottage industries. The Corporation has played a vital role in development and marketing of handlooms and handicrafts products from the various textiles and craft clusters in India by showcasing these products in the international markets through its showrooms, warehouses, retail outlets and offices. The promotional efforts of the Corporation has yielded the desired result and the international markets have accepted the Indian crafts (including carpets) and textiles (including made-ups, floor coverings, garments, etc.) and this sector is today one of the major foreign exchange earner as well as provider of employment to artisans and weavers representing the weaker section of the society.

The Corporation is presently is a star export house engaged in exports of handicraft and handloom products (including hand knotted woolen carpets and ready- made garments) besides undertaking export of gold and silver jewellery / articles. The Corporation was nominated in the year 1997-98 for import of bullion and sale in the domestic market.

2. STRENGTH AND WEAKNESS:

Strengths

a) Infrastructure: The Registered Office is located at New Delhi and the Corporate Office is located at Noida and is supported by three regional branches and 15 procurement centers under their control. The Noida and Chennai branches have in-house facility for production of ready-made garments. HHEC has 6 retail outlets all over India under its control viz. Craft Museum Shop, Delhi; Dilli Haat (INA), Delhi; National Museum Shop, Delhi; Salarjung Museum Shop, Hyderabad and two new shops opened at Patna Museum. Patna, Bihar and at Rajiv Gandhi Hastshilp Bhawan, Baba Kharak Singh Marg, Delhi.

b) Trade Related Skills: Range of sample collections in handloom fabrics & made-ups. Control over sampling, competitive procurement, production monitoring and quality inspection in handlooms through the procurement centers. Control over manufacturing in garments. Over 50 years in the trade of development & exports resulting in strong customer relationship with some dedicated buyers.

Weakness

a) Lack of control over manufacturing: No direct control on manufacturing of handicrafts products. Lack of built-up facilities for manufacturing / finishing high value items like made-ups, fashion accessories, etc.

b) Non-Availability of Key Personnel: HHEC is facing acute shortage of Key Manpower as experienced professional did not opt to join HHEC due to non-revised pay-scales and age of retirement being 58 years only. Now after pay revision, the Corporation is in process of engaging Key Officials.

c) Inter Branch –Networking: The Corporation is lacking Inter- Branch linking for which should have leased lines between branches. It will also strengthen for e-shop with new concepts and web-based application.

3. OPPORTUNITIES AND THREATS

Opportunities:

a) Global Market: Quotas on textile items dismantled w.e.f. 1.1.2005 thereby providing wide opportunities for export of textile and garments.

b) Opportunity Driven Business: Sustain the opportunity driven business available under the Foreign Trade Policy, viz., imports of bullion and exports of jewellery.

c) Buying Agents: In-house skills to perform the role of buying agents in product lines like carpets, jewellery & furniture

d) The Corporation can improve its results by installing new and upgraded manufacturing facilities.

MANAGEMENT DISCUSSION & ANALYSIS

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Threats:

a) Global Competition: Different countries are positioning themselves in specific product-lines by imitating machine made products as crafts. Dismantling of quotas to result in the competition being manifold.

b) Industry Structures: Competition from manufacturer exporter who have control over manufacturing / finishing. Competition from private players who have a lean structure and flexible policies.

c) Un-organized Supply Chain

d) Availability of Cheap labour in Neighbour countries

4. INDUSTRY STRUCTURE AND DEVELOPMENTS

a) Overview of Global Economy:

As per The United Nations World Economic Situation and Prospects (WESP), 2013 report, four years after the eruption of the global financial crisis, the global economy is still struggling to recover. During 2012, growth of the world economy has weakened further. The global economy is expected to grow at 2.2 per cent in 2012, at 2.4 per cent in 2013 and 3.2 per cent in 2014.

Weaknesses in the major developed economies are at the root of the global economic slowdown. Several European economies and the euro zone as a whole are already in recession and the US economy also slowed significantly during 2012 and growth is expected to remain meager at 1.7 per cent in 2013. Deflationary conditions continue to prevail in Japan. The economic woes in Europe, Japan and the United States are spilling over to developing countries through weaker demand for their exports and heightened volatility in capital flows and commodity prices.

Economies in developing Asia have weakened considerably during 2012, as the region’s growth engines, China and India, have shifted into lower gear. While a significant deceleration in exports has been a key factor behind the slowdown, both economies also face a number of structural challenges that hamper growth.

b) Overview of Indian Economy:

On domestic front the Indian Economy slowed down considerably during the year with GDP growth at 5% for FY 13 – lowest in a decade, as per the latest estimate of Central Statistical Organisation (CSO). This is mainly on account of poor performance of manufacturing, agriculture and service sector. India is expected to record 6.5% GDP growth in the current fiscal. The growth is expected to increase further to 6.7% in FY 15, according to World Bank latest Report.

The fiscal deficit which seemed like heading towards 6% of GDP in the middle of the year was reined in by the Government to 5.1% of GDP through aggressive compression in expenditure .Deteriorating current account deficit and fiscal deficit with weak domestic growth and excessive domestic credit expansion would further put pressure on depreciating currency.

The recent increase in interest subvention as per the Trade Policy is expected to provide an increase in exports of Handlooms, Handicrafts, Carpets, and Ready-to-Wear Garments in the forthcoming year.

c) Overview of the Corporation:

The handlooms and handicrafts industry is spread across all over the country and is pre-dominantly cottage industry located in semi-urban and rural areas. This industry is a major source of income for the artisans and weavers, who are mostly from the weaker section of the society, and provides employment opportunities to large number of people comprising mainly women and the weaker sections of the society.

During the year the Corporation has achieved a growth of 24.57 % in the core group; 16.73 % in Exports and 56.59 % in Domestic Business. The Corporation has geared up to meet higher turnover in core group through strong in-house designing, widening the product range, aggressive marketing, cutting costs and induction of officials in the managerial levels and look forward to a reasonable growth in the core group.

d) Segment Analysis and Review

The key business segments of the Corporation comprises of Handicrafts (including carpets), Handlooms, Gold Jewellery, Bullion & Others. The geographical segment comprises of inside India and outside India. The segment results are given in Note no. 2.31. (xvii) ‘Other Disclosure’.

5. OVERALL REVIEW

The Corporation is committed to increase the exports of handicraft and handloom products through development of new products with new designs and quality and exploring new markets. The overall performance of the Corporation during the financial year 2012-13, the core business group of textiles and crafts recording satisfactory growth both in export and retail market, is an indicator that the

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Corporation is in the process of turnaround. With a view to create maximum stakeholder value, the Corporation resources are aimed at:

a) Development of niche products and tapping new markets, where there is negligible presence.

b) Improvement in utilization of assets to achieve productivity gains.

c) Measures to consistently reduce costs for enhanced profitability.

d) Up gradation of facilities in manufacturing, design & development and other trade skills to be better prepared for the potential growth in demand for the Indian textiles and crafts.

6. RISKS AND CONCERNS

The Corporation is exposed to foreign currency risks since it is engaged in exports of handicrafts, handlooms, jewellery, etc. as well as import of bullion.

There are various policies / schemes by Government to promote the growth of the export sector viz. duty drawback schemes, interest rate subsidies, etc. Withdrawal of these policies / schemes may affect the profitability of the Corporation. In this regard, the Corporation is taking steps to improve on the procurement costs.

7. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Corporation has put in place all the necessary internal controls and checks and balances which are being reviewed on a continuous basis to ensure that the assets and resources of the Corporation are safeguarded.

The Corporation has appointed external firms of Chartered Accountants to conduct internal audit at its units / branches whose periodic reports are reviewed by the Management for bringing about possible improvement wherever necessary.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES

The Corporation in the process of filling the key positions so that right person can be placed at right place to fill up the vacuum and these posts are likely to be filled. In addition to that to retain the talent pool new policies are being worked out and management is in the process to formulate the plan. Performance appraisal has been taken in to the consideration as the key indication or the identification of the deserving employees. Hence, performance management system has been placed in the Corporation. The Corporation has been training its officials through various training program regularly.

HHEC has been planning with an eye on new parameters introduced in the field. HHEC would like to undergo Risk Management training programs, skill up gradation and training for acquiring Multi- Skills will also be planned.

9. CAUTIONARY STATEMENT

Certain statements contained in this Annual Report may constitute forward looking statements within the meaning of applicable laws and regulations. These statements are based on management’s views and assumptions at the time information was prepared and involve known and unknown risks and uncertainties that could cause actual results or performance to differ materially from those expressed or implied in such statements as discussed more fully elsewhere in this Annual Report. The corporation expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Corporation’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For and on behalf of Board of Directors

(Nirmal Sinha)

Chairman and Managing Director

Place : New Delhi

Dated : 27.09.2013

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Annexure II to Directors’ Report

CORPORATE GOVERNANCE PHILOSOPHY

The Corporation is committed to following sound corporate practices and good Corporate Governance. The Board lays strong emphasis on transparency, fairness, accountability, integrity and professionalism for the sustainable development of all stakeholders.

Company believes that good corporate governance is essential to achieve its long-term corporate goals and to enhance the shareholders value. Your Company believes in functioning in a transparent manner and believes in proper accountability, auditing, disclosure and reporting.

Company feels that the code of Corporate Governance is an excellent tool to secure the corporate excellence in the country. The company has complied with the code of Corporate Governance as required under DPE guidelines. I. BOARD OF DIRECTORS :-(A) Composition of Board

HHEC being a Government Company, appointment / nomination of all the Directors is done by the President of India, through the

Ministry of Textiles, Articles of Association of HHEC stipulate that the number of Directors shall not be less than five and more than steleven. As on 31 March, 2013, there were six Directors on Board comprising a Chairman cum Managing Director and a Director

(Finance) as Functional Directors; two part –time Official director as Government Nominees, and two Non-official Directors as

Independent Directors. The composition of the Board of Directors, numbers of the meetings held, attendance of the Directors at

Board meeting and last Annual General Meeting in respect of each Director is given herein below:-

During the year, the Board of HHEC was re-constituted with reference to letter received from Office of Development Commissioner

(Handicrafts), Ministry of Textiles Order No. M-11014/18(19)/2011-MSS (IM) dated 14.03.2013 and accordingly Shri A. K. Sharma,

Deputy Secretary (IFW) Ministry of Textiles has been appointed on the Board of HHEC as a Part time Official Director (Government

Nominee Director) in place of Smt Santha Thampi, Ex – Director, Ministry of Textiles w.e.f. 14.03.2013 until further orders. Shri A. K.

Sharma is also holding the directorships in National Handlooms Development Corporation (NHDC), Central Cottage Industries

Corporation of India Ltd. (CCIC) and British India Corporation Ltd. (BIC).

(B) Number of Board Meetings held and date:

Five (5) Meetings of the Board of Directors were held during the financial year 2012-13. The dates on which the meetings were held are 29.06.2012, 29.08.2012, 22.09.2012, 10.12.2012 and 20.03.2013.

thThe 54th Annual General Meeting of your Company was held on 28 September, 2012.

(C) Code of Conduct & Whistle Blower Policy

(i) The Board of directors has laid down Code of conduct for all Board members and Senior Management of the Company. The copies of Code of Conduct as applicable to the Executive Director (including Senior Management of the Company) and Non Executive Directors have been sent to all the Directors and Senior Management Personnel. The Code of Conduct & Whistle Blower Policy has been posted on the web site of the company.

CORPORATE GOVERNANCE REPORT

S. Name / Category Total no. of Board Attendance No. of meetings

No. meeting Meetings at the held in the

of BOD attended AGM tenure of concerned

held in during the held on Director in the

a year year 28.09.2012 Financial year

1. Shri Nirmal Sinha 5 5 1 5

Chairman cum Managing Director

2. Shri S. S. Gupta IAS, 5 4 1 5

Govt. Nominee Director

3. Ms. Santha Thampi Govt. Nominee Directo 5 2 NA 4

4. Ms A. K Sharma, Govt. Nominee Director 5 1 NA 1

5. Ms. Azra Banu, Director(Finance) 5 5 1 5

6. Mr. Sunil Sethi, Independent Director 5 3 NA 4

7. Ms. Ritu Sethi, Independent Director 5 2 NA 4

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(ii) All the members of the Board of Directors and Senior Management personnel have affirmed compliance with the Code as applicable to them during year ended March 31, 2013.

(iii) Further, it is also affirmed that as per Whistle Blower policy none of employees has been denied to access the Audit Committee.

II. DISCLOSURES:-

(A) Basis of related party transactions

There were no material transactions with related parties during the year the details of “Related Party Disclosures” are being disclosed in Note no. 2.31.(xiii) ‘Other Disclosure’.

(B) Disclosure of Accounting Treatment

The Company follows Accounting Standards issued by the Institute of Chartered Accountants of India and in the preparation of Financial Statements, the Company has not adopted a treatment different from that prescribed in any Accounting Standard as stated in Note no. 2.31.(I) ‘Other Disclosure’.

(C) Board Members and Senior Management Personnel affirmed compliance with the Code of Conduct of the company for the financial year ending on 31st March, 2013.

(D) Remuneration Committee

The revised pay scales as per DPE Guidelines dated 26.11.2008 had been implemented w.e.f. 1.04.2011 in accordance with Presidential Directive dated 28.12.2012. Keeping in view the affordability of the Corporation only revised scales are being implemented for the present and other benefits/schemes will be implemented in due course as per the affordability of the Corporation. As the other schemes as per revised Pay scales like Performance related Pay etc. are not yet implemented in the Corporation, hence, the Remuneration Committees is not yet constituted.

(E) Remuneration to Directors:

The HHEC of India Ltd. being a Government Company, terms and conditions of appointment and remuneration of whole-time Functional Directors are determined by the Government through the Administrative Ministry, Ministry of Textiles. Non-Executive part-time official Directors (Government Nominees and Independent Directors) do not draw any remuneration.

Remuneration of Functional Directors for the year ended on 31/03/2013 is as under:

(F) Board appointed sub- Committees:

The Audit Committee of your Corporation was constituted w. e. f. 10.12.2012 in accordance with the Department of Public Enterprises guidelines issued on Corporate Governance. The terms of reference, scope and the role of Audit Committee is as per the Chapter IV of DPE Guidelines on Corporate Governance for CPSEs.

During the financial year 2012-13, the Audit Committee Meetings were held on 31.12.2012 and 30.03.2013 which was adjourned due to incomplete quorum and re-convened on 12.04.2013.

Composition of the Audit committee, name of members, Meetings and attendance during the year are as under:

(G) The Board of Directors reviews the status on compliances of Statutory dues on quarterly basis and accordingly, the Corporation has neither made any non-Compliance, nor are any penalties, strictures imposed on the Company by any statutory authority on any matter related to any guidelines issued by Government, during the last three years.

S. Particulars Shri Nirmal Sinha Ms. Azra Banu

No. Chairman-cum-Managing Director Director (Finance)

1. Salary including DA 22.04 14.70

2. Other benefits / allowances paid 6.31 3.18

3. Performance Incentive - -

4. Contribution to PF and other fund 2.58 1.69

5. Provision for leave as per AS- 15 1.99 0.27

6. Provision for Gratuity as per AS- 15 0.57 0.87

Grand Total 33.49 20.71

(Rupees in Lakhs)

S. Particulars Name of the Members Category No. of

No. Meetings attended

1. Shri Nirmal Sinha,

Chairman-cum-Managing Director Member 2

2 Shri Sunil Sethi, Independent Director Member 1

3. Ms. Ritu Sethi, Independent Director Member 1

4. Ms. Azra Banu, Director(Finance) Coordinator 2

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(H) Revised pay scales have been implemented in the Corporation as per the Presidential directive issued by Office Development Commissioner (Handicrafts). Further, all other presidential Directives issued with respect to reconstitution of the Board are also complied with.

III. GENERAL BODY MEETINGS:-

Location and time of General Meetings held in the last 3 years:

Year Type Date Venue Time

2012 AGM 28. 09.2012 Jawahar Vyapar Bhawan Annexe , 4:00 PM

1 Tolstoy Marg, New Delhi 1

2011 AGM 29.12.2011 -do- 12.30 PM

2010 AGM 15.11.2010 -do- 4:00 PM

IV. SHAREHOLDING PATTERN:-

As at 31.03.2013

(In Rupees)

S. NO. Name of the Shareholder No. of Share Face Value Amount

1. President of India 1381998 100 13,81,99,800/-

2. Shri Nirmal Sinha Jointly with

President of India 1 100 100

3. Shri Gaurav Kumar Jointly with

President of India 1 100 100/-

Total 1382000 13,82,00,000/-

As at 31.03.2012

(In Rupees)

S. NO. Name of the Shareholder No. of Share Face Value Amount

1. President of India 1381998 100 13,81,99,800/-

2. Shri Nirmal Sinha Jointly with

President of India 1 100 100

3. Smt. Mukta Nidha Samnotra

Jointly with President of India 1 100 100/-

Total 1382000 13,82,00,000/-

V. ADDRESS FOR CORRESPONDENCE:-

The Handicrafts & Handlooms Exports Corporation of India Ltd

Jawahar Vyapar Bhawan Annexe , 1 Tolstoy Marg, New Delhi 1

Phone No. 011-23701086

Fax No. 011-23701051

E mail- [email protected]

VI. GUIDELINES ON CORPORATE GOVERNANCE BY DPE:-

In May, 2010 the Department of Public Enterprises has notified mandatory Guidelines on Corporate Governance, 2010 for Central

Public Sector Enterprises (CPSEs). The Board of Directors of HHEC has adopted these guidelines as the policy on Corporate

Governance.

For & on behalf of the Board

(Nirmal Sinha)

Chairman cum Managing Director

Date :27.09.2013

Place : New Delhi

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27

STATEMENT OF ACCOUNTS

STATEMENT OF ACCOUNTS

HHEC

THE HANDICRAFTS AND HANDLOOMS EXPORTS CORPORATION OF INDIA LTD.ST

BALANCE SHEET AS AT 31 MARCH, 2013

st stParticulars Note 31 March, 2013 31 March, 2012No. Rs. in Lakhs Rs. in Lakhs

I. EQUITY AND LIABILITIES(1) Shareholder's Funds(a) Share Capital 2.1 1,382.00 1,382.00 (b) Reserves and Surplus 2.2 449.62 212.38 (c) Money received against share warrants - - (2) Share application money pending allotment - -

(3) Non-Current Liabilities(a) Long-term borrowings - (b) Deferred tax liabilities (Net) 2.29 - - (c) Other Long term liabilities 2.3 357.51 447.58(d) Long term provisions 2.4 1,763.07 609.92

(4) Current Liabilities(a) Short-term borrowings 2.5 7.30 167.44 (b) Trade payables 2.6 2,866.25 8,255.43 (c) Other current liabilities 2.7 78,909.59 362,271.78 (d) Short-term provisions 2.8 37.54 1,175.29

Total 85,772.88 374,521.82 II.Assets(1) Non-current assets(a) Fixed assets(i) Tangible assets 2.9 964.96 944.49(ii) Intangible assets 2.69 2.08 (iii) Capital work-in-progress -

(iv) Intangible assets under development -

(b) Non-current investments 2.10 0.06 0.06 (c) Deferred tax assets (net) 2.29 503.02 541.43 (d) Long term loans and advances 2.11 643.19 576.34 (e) Other non-current assets 2.12 608.01 500.83

(2) Current assets(a) Current investments - - (b) Inventories 2.13 2,050.37 9,957.64 (c) Trade receivables 2.14 4,983.60 3,228.82 (d) Cash and cash equivalents 2.15 2,719.88 5,758.67 (e) Short-term loans and advances 2.16 498.77 473.04 (f) Other current assets 2.17 72,798.33 352,538.42

Total 85,772.88 374,521.82

Contingent Liabilities 2.18Significant Accounting Policies 1Notes on Account 2

As per our report of even date

Sd/- Sd/- for J. N. Mital & Co. (Ujjal Datta) (Azra Banu) Chartered Accountants Chief Finance Manager Director (Finance) Firm Regd. No: 003587N

Sd/- Sd/-( CA R. Mittal ) (Nirmal Sinha)Partner Chairman & Managing Director Membership No: 084470 Place : New Delhi Dated : 27 AUG 2013

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THE HANDICRAFT AND HANDLOOMS EXPORTS CORPORATION OF INDIA LTD.STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH, 2013

st stParticulars Note 31 March, 2013 31 March, 2012

No. Rs. in Lakhs Rs. in Lakhs

I. Revenue from operations 2.19 416,137.66 1,212,816.17

II. Other Income 2.20 829.87 747.46

III. Total Revenue (I +II) 416,967.53 1,213,563.63

IV. Expenses:

Cost of materials consumed 2.21 2,042.71 2,435.46

Purchase of Stock-in-Trade 2.22 404,372.71 1,214,911.35

Changes in inventories of finished goods,

work-in-progress and Stock-in-Trade 2.23 7,908.54 (6,423.31)

Employee benefit expense 2.24 1,010.86 721.16

Financial costs 2.25 83.07 2.26

Depreciation and amortization expense 2.9 67.26 52.68

Other expenses 2.26 1,217.29 1,017.17

Total Expenses 416,702.44 1,212,716.77

V. Profit before prior period, exceptional and

extraordinary items and tax (III - IV) 265.09 846.86

VI. Prior Period Items 2.27 (22.30) 8.90

VII. Profit before exceptional, extraordinary items

and tax (V - VI) 287.39 837.96

VIII. Exceptional Items 2.28 - 1,147.63

IX. Profit before extraordinary items and tax (VII - VIII) 287.39 (309.67)

X. Extraordinary Items - -

XI. Profit before tax (IX - X) 287.39 (309.67)

XII. Tax expense: 2.29

(1) Current tax 57.50 35.57

Less: MAT Credit Entitlement (57.50) (19.92)

- 15.65

(2) Deferred tax 38.41 (541.43)

XIII. Profit(Loss) for the period (XI - XII) 248.98 216.11

XIV. Earning per equity share: (in Rs.) 2.30

(1) Basic (After exceptional item) 18.02 15.64

(2) Diluted (After exceptional item) 18.02 15.64

(3) Basic (Before exceptional item) 18.02 98.68

(4) Diluted (Before exceptional item) 18.02 98.68

Contingent Liabilities 2.18Significant Accounting Policies 1Notes on Account 2 As per our report of even date Sd/- Sd/- for J. N. Mital & Co. (Ujjal Datta) (Azra Banu) Chartered Accountants Chief Finance Manager Director (Finance) Firm Regd. No: 003587N

Sd/- Sd/-( CA R. Mittal ) (Nirmal Sinha)Partner Chairman & Managing Director Membership No: 084470 Place : New Delhi Dated : 27 AUG 2013

31

HHEC

THE HANDICRAFTS AND HANDLOOMS EXPORTS CORPORATION OF INDIA LTD. CASH FLOW STATEMENT FOR THE YEAR ENDED

st stParticulars 31 March, 2013 31 March, 2012

Rs. in Lakhs Rs. in LakhsA. CASH FLOW FROM OPERATING ACTIVITIES

Net Profit / (Loss) before Tax 287.39 (309.67)

Adjustments for:

- Interest Income (237.57) (181.33)

- Interest Expenditure 83.07 2.26

- Profit / Loss on Fixed Assets sold / discarded (Net) 0.99 (4.15)

- Provision for doubtful Debts, Loans & Advances 20.92 4.80

- Provisions for Gratuity & Leave Encashment and Post Retirement Medical 273.63 31.36

- Provisions for Pay Revision & CSR (273.90) 1,162.90

- Provision no Longer Required (11.80) (6.73)

- Depreciation 67.26 52.91

- Deferred Revenue Expenditure written-off during the year - -

- Prior Period Items 22.30 (8.90)

Operating Profit before Working Capital Changes 232.29 743.45

- Decrease / (Increase) in Inventories 7,907.26 (6,422.96)

- Decrease / (Increase) in Trade & Other Receivables* 277,776.44 (101,552.73)

- Increase / (Decrease) in Trade & Other Payables (288,840.94) 106,664.49

Cash generated from operation (2,924.95) (567.75))

- Net Income Tax Paid 3.94 (15.65)

- Miscellaneous Expenditure - -

- Prior Period Items (22.30) 8.90

Net Cash from Operating Activities (2,943.31) (574.50)

B. CASH FLOW FROM INVESTING ACTIVITIES

- Purchase of Fixed Assets and change in Capital Work-in-Progress (90.20) (38.74)

- Proceeds from sale of Fixed Assets 0.36 7.35

- Interest Received 237.57 181.33

Net Cash from Investing Activities 147.73 149.94

C. CASH FLOW FROM FINANCING ACTIVITIES

- Proceeds/(Repayment) of Secured Loans (160.14) 81.87

- Interest paid (83.07) (2.26)

- Dividend paid - -

- Dividend Tax paid - -

- Deferred Govt. Grant-in- aid - -

Net Cash from Financing Activities (243.21) 79.61

Net Increase / (Decrease) in Cash & Cash Equivalents (3,038.79) (344.95)

Cash & Cash Equivalents as at 1st April, 2012 5,758.67 6,103.62

Cash & Cash Equivalents as at 31st March, 2013 2,719.88 5,758.67

Notes to the Cash Flow Statement

Foreign Currency Cash Flows:

Cash and cash equivalents included in the cash flow statement comprise the

following balance sheet amounts:-

a. Cash on hand and balances with banks 1,872.78 4,360.27

b. Fixed Deposits with banks 846.43 1,395.84

c. Cash and Cash Equivalents 2,719.21 5,756.11

d. Effect of exchange rate changes 0.67 2.56

e. Cash and Cash Equivalents restated as at 31st March, 2013 2,719.88 5,758.67

Note: The above cash flow statement has been prepared by using the indirect method as per Accounting Standard - 3 issued by the Institute of

Chartered Accountants of India.

* Includes deposits of Rs.40577.94 Lakhs (Previous year Rs.183975.97 Lakhs) as security given to banks for buyers credit and Loans

For J.N. Mital & Co. sd/- sd/-Chartered Accountants (Ujjal Datta) (Azra Banu)Firm Regd. No: 0003587N Chief Finance Manager Director (Finance)

sd/- sd/-(CA R Mittal) (Nirmal Sinha)

Partner Chairman & Managing DirectorMembership No: 084470Place : New Delhi Dated : 27 AUG 2013

As per our report of even date

32

HHEC

st2. Note on Account for the year ended as on 31 March, 2013

2.1 Share Capital

Particulars As atst st31 March, 2013 31 March, 2012

Rs. in Lakhs Rs. in Lakhs

Authorised

Equity shares, Rs.100/- par value

2,000,000 equity shares 2,000.00 2,000.00

Issued, Subscribed and Paid up

Equity Shares, Rs.100/- par value 1,382.00 1,382.00

1,382,000 equity shares

[ of the above 15,207 equity shares of Rs.100/- each

were alloted for consideration other than cash ]

1,382.00 1,382.00

The Company has only one class of shares referred to as equity shares having a par value of Rs.100/-each. Each Shareholder is

entitled to one vote per share.

The details of Shareholder holding more than 5% shares as at March 31, 2013 is set out below

Name of the Shareholder As at March 31, 2013 As at March 2012

No. of shares % held No. of shares % held

President of India* 1382000 100 1382000 100.00

*includes 1 share held jointly with Nirmal Sinha and 1 share

with Mukta Nidhi Samnotra

The reconciliation of the number of shares outstanding and the amount of share capital as at 31/03/2013 is set out below:

Particulars As at March 31, 2013 As at March 31, 2012

No. of shares Amount No. of shares Amount

Number of shares at the beginning 1382000 1,382.00 1382000 1,382.00

Adjustment during the year - - - -

Number of shares at the end 1382000 1,382.00 1382000 1,382.00

2.2 Reserve & Surplus

Particular As at st st31 March, 2013 31 March, 2012

Rs Rs. in Lakhsn Lakhs Rs. in Lakhs

Surplus

Opening Balance 212.38 (3.73)

Add : Transfer from Profit and Loss Account 248.98 216.11

461.36 212.38

Less : Transfer to CSR fund during the year 11.74 -

Closing Balance 449.62 212.38

CSR Fund

Opening - -

Add: transfer from Reserve & Surplus during the year 11.74 -

Less: Expenses Incurred during the year 11.74 -

Closing Balance - -

449.62 212.38

33

HHEC

2.3 Other Long Term Liabilities



Long Term Trade Payables 50.46 35.42

Others

Advance Received 117.95 106.34

Advance to Staff (cr.) 1.01 0.60

Deffered Govt. Grant in Aid 10.43 10.93

Expenses payable 93.92 205.72

Deposits received 76.93 76.44

Unspent balance of Govt. Grants - -

Misc. other long term liabilities* 6.81 12.13

357.51 447.58

*Misc. other long term liabilities includes Rs.3.41 lakhs (Previous Year Rs. 3.41 lakhs ) payable to Government of India for the sale

proceeds from assets acquired out of Govt. Grants.

2.4 Long Term Provisions



Provisions for Employee Benefits*

- Provision for Gratuity 510.27 318.39

- Provision for Leave Encashment 173.32 116.07

- Provision for Post Retirement Medical Benifits 93.87 70.00

Others

- Provision for Property/Water Tax - 19.27

- Provision for Rent 212.19 86.19

Provision for Pay Revision (Refer to Note no. 2.28) 773.42 -

1,763.07 609.92

* Respective fair value of plan assets for gratuity and leave encashment has been shown under Note no. 2.12

2.5 Short Term Borrowings



Cash Credit

Secured ( by hypothecation of stocks, book debts and

other moveable assets)

State Bank of India 7.30 167.44

7.30 167.44

34

HHEC

2.6 Trade Payables

Particular As at st st31 March, 2013 31 March, 2012Rs. in Lakhs Rs. in Lakhs

Trade Payables - Others 2,866.25 8,255.43

2,866.25 8,255.43

Micro, Small and Medium Enterprises. the Information under MSMED Act. has been disclosed to the extent such vendors have been identified by the company based on the Certificates provided by them the details of amounts outstanding to them based on available information with the Company are as under:


2.7 Other Current Liabilities


Loan from BanksSecured (All loans are secured against Bank Fixed Deposits)Axis Bank - 4,161.76 Development Credit Bank 15.51 3,776.42 Federal Bank 0.14 11,292.08 Industrial Development Bank of India - 1,379.66 Indusind Bank 620.23 8,134.01 Oriental Bank of Commerce 400.00 33,176.00

1,035.88 61,919.93 Buyer's Credit Secured (against Bank Fixed Deposits)Bank of Baroda, Port Loius 1,430.24 -

Bank of Baroda, Manama BH 543.89 - Bank of Baroda, Baharin 3,649.16 14,306.50 Bank of Baroda, Belgium - 4,480.29 Bank of Baroda, Brussels 2,869.26 2,506.67 Bank of Baroda, Dubai 4,610.06 10,990.25 Bank of Baroda, London - 1,670.21 Bank of Baroda, Singapore - 5,482.59 Bank of Baroda, Mahama 543.89 - Bank of India, Belgium - 5,705.31 Bank of India, New York - 15,249.22

Bank of India, Bangkok 2,929.23 -

Bank of India, London 3,072.43 21,496.24

Bank of India, Paris - 2,049.96

I) The principal amount and the interest due thereon remaining unpaid to any supplier

Principal Amount

Interest thereon

ii) The amount of interest paid by the buyer in terms of section 18, along with the amount of the payment made to the supplier beyond the appointed day

iii) The amount of interest due and payable for the year of delay in making payment (which have been paid but beyond the appointed day during the period) but without adding the interest specified under this act

iv) The amount of interest accrued and remaining unpaid

v) The amount of further interest remaining due and payable even in thesucceding years, until such date when the interest dues above are actually paid to the small investors

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

Nil Nil

35

HHEC

Bank of India, SNG 15,135.46 1,954.60

Citi Bank, Singapore - 2,713.88

Doha Bank ,Qatar - 5,386.70

Indian Overseas Bank, Bankok - 511.57

State Bank of India, Behrain 4,418.12 23,049.91

State Bank of India,Qatar Doha - 2,935.93

State Bank of India, New York - 23,286.96

State Bank of India, Los Angeles - 7,265.37

Uco Bank , Singapore 2,658.69 -

41,860.43 151,042.16

Duties & Taxes Payable

Vat Payable 158.03 585.47

PF Payable * 10.39 (0.22)

Sales Tax Payable 4.78 1.87

Service Tax Payable 5.24 0.71

TDS Payable 770.69 2,177.47

Professional Tax payable 0.03 -

949.16 2,765.30

Others

Advance Received * * 2,994.17 5,072.58

Interest accrued but not due 77.72 429.35

Unspent balance of government grant 12.65 9.43

Deffered Govt. grant-in-Aid 0.51 0.52

Amount Payable to Bank 31,529.40 140,780.68

Difference in Exchange (Forex) Payable 0.05 -

Expenses payable 446.98 250.29

Misc. other liabilities 2.64 1.54

35,064.12 146,544.39

78,909.59 362,271.78

* The amount of PF payable - Employees Contribution is Rs. 8.55 lakhs (Previous Year Rs. 6.13 Lakhs), Employer Contribution is Rs. 5.29 Lakhs (Previous Year Rs. 3.37 Lakhs) and advances paid to CPF Trust is 3.45 Lakhs (Previous Year Rs. 9.72 Lakhs)

The net effect of Rs. 10.39 Lakhs (Previous Year Rs. (0.22) Lakhs) is shown above.

** Includes Rs 50 lakhs received from Ministry of External Affairs on 20th March 2013 vide their Sanction order dated: 15th March 2013 towards Proposed Project Development for SAARC Museum of Textile and Handicrafts at Dilli Haat, Pitampura, New Delhi.

2.8 Short Term ProvisionsParticular As at

st st31 March, 2013 31 March, 2012


Provision for Employee Benefits *- Provision for Gratuity 16.52 18.55

- Provision for Leave Encashment 2.54 8.11

- Provision for Post Retitrement Medical 8.23 -

Others

Provision for Property Tax / Water Tax (Refer to Note no. 2.18) (vi) 6.31 -

Provision for Corporate Social Responsibility - 1.00

Provision for Pay Revision (Refer to Note no. 2.28) - 1,147.63

Provision for Taxation 3.94 -

37.54 1,175.29

* Respective fair value of plan assets for gratuity and leave encashment has been shown under Note no. 2.17

36

HHECG

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37

HHEC

2.11 Long Term Loans & Advances


Loans to Staff

- Secured, Considered Good 116.54 124.86

(by way of mortgage / hypothecation of property)

- Unsecured, Considered Good 17.29 22.55

133.83 147.41 Advances to Staff


- Considered Doubtful - 0.13 Less : Provision for doubtful debts - (0.13)

11.80 16.07 Other Advances


- Considered Doubtful 48.60 48.60

Less : Provision for doubtful debts (48.60) (48.60) 20.54 21.80

Sundry Deposits**- Unsecured, Considered Good 167.02 194.42


Less : Provision for doubtful debts (1.13) (1.13) 167.02 194.42

Income Tax Paid (Refer Note No:2.31 viii (a) 297.89 171.63

Insurance claim receivable *

- Unsecured, Considered Good - 18.56

- Considered Doubtful 1.83 1.83 Less : Provision for doubtful advance (1.83) (1.83)

DEPB Receivable

- Unsecured, Considered Good 0.72 3.85 - Considered Doubtful 4.31 4.31

Less : Provision for doubtful advance (4.31) (4.31) 0.72 3.85

2.10 Non Current Investment

Particular As atst st31 March, 2013 31 March, 2012


Investment in Shares - Unquoted

(valued at cost)

All India Handloom Fabrics Marketing Co-Op Society Ltd. 0.06 0.06

6 'C' Class shares of Rs.1,000/- each

Ivory Tower Premises Co-op Society Ltd. - -

5 shares of Rs.50/-each

0.06 0.06

38

HHEC

Duty Drawback Receivable



Less : Provision for doubtful advance (32.26) (31.40)

11.39 2.45

Sales Tax Recoverable

- Unsecured, Considered Good - 0.15


Less : Provision for doubtful advance (3.00) (3.00)

- 0.15

643.19 576.34

** Deposits for the year include amount of Rs. 94.61 Lakhs (Previous Year Rs. 94.61 Lakhs). The corporation has Deposited the

Amount of Mesne profit @ Rs. 37 per sq. ft. per month from 01.03.2001 till December 2010 in the court of Small Causes, Bombay

vide order dated 30.07.2011

2.12 Other Non Current Assets



Others

- Fair value of Plan Assets

- Gratuity 435.18 365.36

- Leave encashment 172.83 135.47

608.01 500.83

( Respective provision for Gratuity and Leave encashment has been shown in Note no. 2.4 )

2.13 Inventories

Particular As atst st31 March, 2013 31 March, 2012Rs. in Lakhs Rs. in Lakhs

(a) Raw Material 4.97 2.10 Stock in Transit - -

4.97 2.10

(b) Stock in Trade (incl. Finished Goods) 2,030.15 9,927.85 Stock in Transit 12.07 22.91

2,042.22 9,950.76

(C) Spare Parts 2.62 2.63

(d) Others (Packing Material) 0.56 2.15 2,050.37 9,957.64

st st 31 March, 2013 31 March, 2012Rs. in Lakhs Rs. in Lakhs

39

HHEC

2.14 Trade Receivables



Outstanding for a period exceeding 6 months from the due date

- Secured, Considered Good 1,268.40 26.16

(against movable / immovable property) -

- Unsecured, Considered Good 34.00 32.43 - Doubtful 470.23 461.84

Less : Provision for doubtful debts (470.23) (461.84)

1,302.40 58.59

Mode of Valuation

a) Handloom / Ready to wear (except at Chennai Branch), Handicrafts and carpets inventories are valued according to specific identification method of accounting - at lower of purchase cost or net realizable value (arrived after mark-down).

In case of Chennai Branch- Handlooms and Ready to Wear inventories are valued according to FIFO method of accounting - at lower of purchase cost or net realizable value (arrived after mark-down).

b) Mark-DownUnless the circumstance in any case demand a higher mark-down, as determined and approved by the Management, inventories are marked down as below:-

Age of Stocks % Mark-downBelow 1 year -

1-2 year 25%2-3 year 50%

Above 3 year 70%

c) Gold & Silver stocks are valued at purchase cost or net realizable value, whichever is less.d) Stock-in-transit (outwards) are valued at CIF/C&F/FOB value of purchase cost, whichever is lesse) Stock-in-transit (inwards) are valued at purchase cost plus custom duty.f) Handlooms fabrics and Ready-to-wear items purchases for sampling and converted into samples are taken at NIL valueg) Damaged stocks are written off.h) Stores, spare parts and packing material are valued at purchase cost.I) Stationery stocks are taken at NIL value.

Other disclosuresa) In pursuance of accounting policy no. 5(a) &(b), the stocks have been valued after mark-down (including additional mark-down) by Rs.133.81 lakhs (Previous Year Rs. 163.43 akhs)

b) The following discripencies were noticed during physical verification of stocks as compared to book records, which have been suitably dealt with in the books of accounts:-

st st31 March, 2013 31 March, 2012Rs. in Lakhs Rs. in Lakhs

Shortages 5.44 2.94Excesses 1.75 1.69Damages 6.69 2.32

c) Balance of stocks held on consignment with agents at book value of Rs.2.53 lakhs (Previous Year Rs.2.53 lakhs) and with others at book value of Rs.2.22 lakhs(Previous Year Rs.2.22 lakhs) have not been confirmed,out of which, stock of Rs.2.31 lakhs (Previous Year Rs.2.31 lakhs) ageing more than 3 years have been marked down 100%.

d) Stocks held by the Corporation on consignments amounts to Rs. 62.50 lakhs (Previous Year Rs. 33.85 lakhs).

e) The stock of Jayakar Volumes and silver articles held by the Corporation out of grants received from Government of India valuing Rs.1.63 lakhs (Previous Year Rs.1.63 lakhs) and Rs.2.82 lakhs (Previous Year Rs.2.82 lakhs) respectively have not been included in the inventory held by the Corporation.

40

HHEC

st st 31 March, 2013 31 March, 2012 Rs. in Lakhs Rs. in Lakhs

2.15 Cash & Cash Equivalants



Cash & Cash Equivalants

Cash in Hand 1.01 1.04

Cheques in Hand - 7.59

Balances with Bank:- - -

- in India in current accounts 1,852.75 4,335.18

- outside India in current accounts 19.69 19.02

Other Bank Balances

- in deposits accounts 846.43 1,395.84

2,719.88 5,758.67

The details of balances as on Balance Sheet date with banks are as follows:-



In current accounts - in India

Axis Bank 275.59 57.59

Bank of Baroda 4.84 1.13

Bank of India - 0.01

Canara Bank 4.65 3.85

Corporation Bank 1.39 2.36

Development Credit Bank Ltd. 213.59 0.44

EEFC A/c - 2.54

Federal Bank 6.38 5.53

HDFC Bank 24.59 23.77

ICICI Bank 0.66 1,098.53

IDBI Bank** 57.50 78.69

Indian Bank 0.13 0.13

Indian Overseas Bank 0.66 27.63

Indusind Bank 29.36

ING Vysya Bank 0.56 58.84

Jammu & Kashmir Bank 0.41 0.41

Oriental Bank of Commerce 38.67 2,726.52

Punjab National Bank 2.70 19.82

Ratnakar Bank 1,047.61

State Bank of India 143.04 227.22

State Bank of Bikaner & Jaipur - -

Union Bank of India 0.36 0.11

Vijaya Bank 0.06 0.06

1,852.75 4,335.18

In current accounts - outside India

Commercial Bank of Kuwait, Kuwait 19.69 19.02

19.69 19.02

Other Debts- Secured, Considered Good 300.00 1,577.10 (against movable/immovable property / assigned FDR) - Unsecured, Considered Good 3,381.20 1,593.13

3,681.20 3,170.234,983.60 3,228.82

41

HHEC

2.16 Short Term Loan & Advances



Loans to Staff

- Secured, Considered Good 14.47 16.40

(by way of mortgage / hypothecation of property)


Advance to Staff


Duty Drawback Receivable


Focus Product License receivable

- Considered Good 69.46 -

Status Holder Incentives


Other Advances


- Considered Doubtful - -

Less : Provision for doubtful advances - -

160.59 291.66

Income Tax Paid - 91.49

MAT Credit Entitlement

77.42 19.92

Sundry Deposits


498.77 473.04

In Deposit Accounts - In India

Corporation Bank 7.00 - Development Credit Bank Ltd. 75.00 -Federal Bank -IDBI Bank 393.40 307.35Indian Bank 85.00 Indusind Bank 258.51 822.49 Indusind Bank - Term Deposit 0.30 - Oriental Bank of Commerce - State Bank of India* 27.22 266.00

846.43 1,395.84

* Out of the deposits of Rs.27.22 Lakhs (Previous year-Rs. 266.00 Lakhs) deposit amounting to Rs.17.22 Lakhs ( Previous year Rs. 15.99 Lakhs) is held under banker's lien as margin money.** Includes Rs. 28.42 lakhs on account of Court Case of 31 workers stated in Note No. 2.18(b)(ii) under Contingent Liability.

st st31 March, 2013 31 March, 2013Rs. in Lakhs Rs. in Lakhs

42

HHEC

Grant Receivable from Government 20.06 9.86 Deposits as security against Buyer's Credit and Loan* 40,577.94 183,975.97 Interest receivable on Fixed Deposits 881.19 13,807.61 Interest receivable on Other 0.24 - Forward Premium Cover Deferred 479.47 1,394.20 Forward cover cancel / early utilisation receivable 41.20 2,054.31 Foreign Currency receivable 30,798.23 151,269.67 MTM Deposit Receivable - 0.14 Fair value of plan assets ** - - - Gratuity - 18.55 - Leave Encashment - 8.11

72,798.33 352,538.42 *Deposits as security against Buyer's Credit and Loan

Axis Bank - 4,600.10 Development Credit Bank Ltd. 23,761.31 13,939.77 Federal Bank - 36,214.36 IDBI Bank 8.16 11,013.47 Indusind Bank 15,243.47 16,406.61 Oriental Bank of Commerce 1,565.00 101,801.66

40,577.94 183,975.97

(** Respective provision for Gratuity and Leave encashment has been shown in Note no. 2.8 )

2.17 Other Current Assets



2.18 Contingent Liabilities

Particulars As at

31st March, 2013 31st March, 2012


Claims against the Corporation not acknowledged as debts (a) 1149.08 1356.58

Guarantee/counter guarantee given to banks (c) 15.99 15.99

1165.07 1372.57

(a) Claims against the Corporation not acknowledged as debts, mainly includes:-

(i) The landlord of Mumbai Nirmal Building Office Premises filed a suit on 20-04-2001 against the Corporation in the Hon’ble Court of small causes (First Bench), Mumbai for vacation of the premises and to pay mesne profits of Rs 3.25 Lakhs per month. The Hon’ble Court of Small Causes allowed the suit and vide order dated 17-06-2003 passed orders for vacation of the premise and enquiry under Order 20 Rule 12 of CPC to dertermine the quantum of mesne profit. The Corporation had filed an appeal on the Hon’ble Court of Small Causes (Second Bench) and the appeal was heard on merits and dismissed vide order dated 09-04-2009. A revision application was filed by the Corporation against the orders dated 17-06-2003 and 09-04-2009 and the same was dismissed by the Appelant Bench of the Hon’ble Court of Small Causes vide order dated 26-08-2010 and granted time till 31-12-2012 to the Corporation to vacate the premises, which has been complied with.

The landlord had moved an application dated 11-06-2007 in the Hon’ble Court of small causes for a decree to be passed against the Corporation for mesne profit at the amount so ascertained for the period from March 2001 till the plaintiff recovers vacant possession of the premises together with interst at 9.00% from the date of application till realization. The said application was decreed in favour of the landlord and it was ordered that the Corporation shall pay mesne profit at Rs 150/- per sq. ft. from March 2001 till handover the premises to the landlord together with simple interest at 6.00% p.a. from the date of the application till recovery of entire dues. The Corporation had filed an appeal on 26-10-2010 in the Appellant Bench of the Court of small causes wherein the Corporation had inter-alia raised the issue that the compensation payable to the landlord shall be at Rs 5.00 per sq. ft. per month as per the tenancy agreement. Evidence was also submitted that other PSU’s in the same floor had been paying Rs 63.50 per sq. ft. per month for similar premises occupied. The Corporation had also shown its readiness to accept mesne profit at Rs 37.00 per sq. ft. per month, based on the valuation report of an architect, and accordingly provisions of Rs 94.61 lakhs including rent paid was made in the Books of Accounts. The appeal was dismissed and the mesne profit was retained at Rs 150.00 per sq. ft. per month.

The Corporation had moved a revision application dated 31-10-2012 in the Hon’ble High Court Mumbai and the grounds of appeal were similar to as in the case of appeal in the Appellant Bench of the Court of small causes. The revision application was dismissed vide order dated 08-03-2013. However, the Hon’ble High Court reduced the mesne profit to Rs 120.00 per sq. ft. per month with direction to make payment within three months.

The Corporation had filed a Special Leave Petition (SLP) in the Hon’ble Supreme Court, Delhi against the orders of the Hon’ble High Court 43

HHEC

Mumbai and the same was listed on 21-08-2013. The grounds of appeal were that there is error apparent on the face of record in as much as the Hon’ble High Court and the Appellant Bench of the Hon’ble Court of small causes had held that the Trial Court has adopted comparable instance menthod for assessing the mesne profit, while the Trial Court had recorded that it has not followed the comparable method for calculating the mesne profit. The other ground of law and facts were that the tenancy Agreement envisaged payment of liquidated damage at the rate of Rs 5.00 per sq. ft. per month in case of delay in vacating the premises after terminatin of the contract and that Statutory provision of inquiry as provided in Order 20 Rule 12 of CPC has not been followed by the Trial Court. The Hon’ble Court has not considered any of the said grounds and dismissed the SLP. The legal consultant has opined that a review of the Order of the Hon’ble Supreme Court should be preferred within one month of the order. The Corporation is in the process of filing a review of the order of the Hon’ble Supreme Court.

Without prejudice to rights and contentions of the Corporation before the Court of Law and as a matter of prudence, provision of mesne profit of Rs 67.76 Lakhs at the rate of Rs 63.50 per sq. ft. per month from March 2001 to December 2010, less provision of Rs 86.19 already made (Previous year Rs 86.19 lakhs) and provision of simple interest of Rs.58.25 Lakhs at 6.00% from March 2001 till March 2013 on the Principal amount outstanding, (Previous year Rs NIL) have been made during the year. Balance mesne profit of Rs.144.47 lakhs and interest of Rs.62.49 lakhs (Previous year mesne profit of Rs.288.95 lakhs and interest of Rs.66.69 lakhs) are considered as contingent liability.

(ii) In regards to the matter relating to the property tax payable on the office building at Jawahar Vyapar Bhawan, New Delhi, where STC, CCIC and HHEC are the co-licensees, the demand raised by NDMC, New Delhi has been disputed by STC. The pro-rata share of HHEC in payment made by STC to NDMC has been paid/provided in the accounts and balance of Rs.126.86 lakhs (Previous Year Rs. 126.86 lakhs) is taken as contingent liability. The Hon'ble High Court of Delhi has decided in favour of NDMC and STC in turn has filed SLP before the Hon'ble Supreme Court of India in March, 2006. The matter is sub-judicise and judgement is awaited.

(iii) M/s Ashok Metal Corporation the company's sales representative in earlier years for sale of imported bullion has preferred an arbitration proceeding against the Corporation for various claims aggregating to Rs.752.04 lakhs (Previous Year Rs. 752.04 lakhs). The Corporation has filed a suit in the Court of law, challenging the juridiction and tenability of the arbitration proceedings and also the claims as the claims are fictious and imaginary and thereby asking for permanent injuction to the arbitration. M/s. Ashok Metal Corporation filed an arbitration application before Mumbai Arbitrator against HHEC. Both the party wise filed their written argument. The matter is reserved for order.

(iv) The Corporation imported Mulbery Raw Silk in 1999 for supply to M/s Overseas Trading Corporation (OTC). There was shortage of 76 bales of raw silk when the goods landed at the port. M/s OTC made full payment to HHEC for import of entire goods as per agreement. Due to shortages, there is still credit of Rs.18.55 lakhs in M/s OTC account with us kept for the purpose of claims lodged with the insurance company. M/s OTC has filed a legal suit against HHEC for their dues along with interest aggregating to Rs.77.34 lakhs. However as per the agreement with the party, the Corporation is not responsible for the loss. The High Court disposed the present suit with direction that HHEC will pay the decretal amount of Rs.33.22 lakhs to the OTC within 30 days of the receipt thereof from Unisilk, In case the said amount is not paid within 30 days of the receipt thereof, HHEC shall be liable to pay the same to the OTC with interest at the rate of 18% p.a. till the date of realization. Since it has been the categorical stand of HHEC that as soon as HHEC recover the amount from M/s. Unisilk, the claim of OTC will be satisfied after deducting the legal expenses. Accordingly HHEC has filed a modification petition to add the sentense “after deducting the expenses” and on 15.03.2013 High Court allowed our modification petition. After receiving the same HHEC will file an execution petition. Hence claim of Rs.33.22 lakhs is taken as contingent liability.

(v) Disputed sales tax liability of Rs.16.92 lakhs being the demands raised by the sales tax department, Chennai for levy of sales tax for branch transfer of mulberry raw silk to the Banglore branch during the years 1985-86, 1986-87, 1989-90 and 1990-91. The sales tax department has treated these branch transfers as local turnover, which has been disputed by the Corporation. The cases pertaining to 1985-86 and 1986-87 are pending in appeal with the Hon'ble High Court, Chennai and the other two cases are pending in appeal with the Tamil Nadu Sales Tax Appellate Tribunal, Chennai. For the disputed tax, the Corporation has furnished bank guarantee for Rs.15.99 lakhs and for the balance, cash deposit of Rs.0.93 lakh has been made.

(vi) Demand notice received from Textile Committee, Coimbatore for payment of cess amount of Rs.6.77 lakhs for the period 2002-03 and 2003-04. The corporation has contested the payment on ground that cess is not payable and filed appeal. On a writ petition filed with Mumbai Court, the court has directed both the parties to go to Textile Committee Appellate Tribunal for contesting in this matter.

(vii) Demands received from Corporation of Chennai and Chennai Metro Water Board towards payment of water tax for the period 1998-1999 to 2011. The Corporation has filed an appeal for reduction of tax and remitted part amounts under protest.

(b) Pending Court cases 35 (Previous Year 38), out of which 8 cases (Previous Year 9 cases) filed by employees / ex-employees of the Corporation for which the amount of contingent liability is indeterminable.

(i) In respect of writ petition filed by six contract workers at Chennai. The Corporation has obtained stay from the Madras High Court against the orders dated 08/11/2005 passed by CGIT-cum-Labour Court, Chennai. The Madras High Court ordered the Corporation to pay wages at Rs.1302.00 per month u/s 17-B wages under Industrial Dispute Act, 1947 with effect from 12.06.2006, from the date of filing writ petition till the case is settled.Total amount of Rs.0.94 lakhs (Previous Year Rs. 0.94 lakhs) has been paid to the six contract workers during the year. As the appeal is pending the amount of liability is indeterminable.

Demand Paid during 2011-12 Balance

Water Tax 12.62 6.31 6.31

Total 12.62 6.31 6.31

Rs. in Lakhs Rs. in Lakhs Rs. in Lakhs

44

HHEC

(ii) The Hon’ble Labour Court, Noida vide order dated 24.03.2011 pronounced the award pertaining to the case of 31 workers vs HHEC in favour of 31 workers. As per the award, the company was to reinstate 31 workers with full back wages and all benefits. Against the order, the Corporation filed an appeal in Hon’ble High Court, Allahabad on 09.05.2011 and The Hon’ble High Court passed an interim order dated 16.05.2011 stating that “If the petitioner pays minimum wages, which are payable to the respondent workmen concerned in future month by month, the operation of the impugned award shall be kept in abeyance till the next date of listing. It shall be open for the petitioner to take work or not from respondent-workmen.” The Corporation has further filed for modification application in the Hon’ble High Court, Allahabad on 30.05.2011. To comply with the interim order of the Hon’ble High Court dated 16.05.2011 the Corporation has opened a separate bank account in IDBI Bank, Noida for the workmen and continuously depositing minimum wage amounting to Rs.17.98 lakhs (Previous year Rs. 16.33 ) pending final decision of this Hon’ble Court. Further, as per the modification application filed on 30.05.2011, the Corporation has made total payment of Rs. 3.26 lakhs @Rs.1,500/- per month per workmen as per last drawn wages, from the abovementioned account to 18 workmen who report for duty. Balance amount of Rs. 28.42 lakhs (previous year Rs.13.69 lakhs) is lying with IDBI Bank, Noida. In absence of material records for the earlier period, which have been destroyed in fire on 02.02.1993, and as the appeal is pending for argument, the amount of liability is indeterminable.

(c) Guarantee/counter guarantee given to banks is Rs. 15.99 lakhs (Previous Year Rs. 15.99 lakhs)

2.19 Revenue from Opereation

Particulars For the year ended



(a) Sale of Products 415,748.90 1,212,627.79

(b) Sale of Service - -

(c) Other Operating Revenue 397.87 192.79

416,146.77 1,212,820.58

Less: Excise Duty 9.11 4.41

416,137.66 1,212,816.17




Sale of products comprises :

Manufacture Goods

Ready to Wear 1,621.51 1,233.96


Handlooms 331.76 954.38

Total - Sale of manufactured goods 2,786.83 3,132.85

Traded goods

Ready to Wear 7.12 -


Handlooms 1,170.61 100.85

Bullion 410,984.98 1,208,805.59

Gold & Silver Jewellery 70.90 102.89

Total - Sale of traded goods 412,962.07 1,209,494.94

Total - Sale of products 415,748.90 1,212,627.79

Other operating revenues comprise:

Duty Drawback 265.98 167.70

Duty Entitlement Pass Book 0.27 0.63

Focus Incentive on Export 108.08 -

Status Holder Incentives 11.70 -

Premium on Import Entitlements - 10.74

Misc. Trade Receipts 7.20 6.16

Trading Profit from MCX 4.64 7.56

Total - Other operating revenues 397.87 192.79

45

HHEC

2.21 Cost of Material Consumed

Particulars For the year endedst st31 March, 2013 31 March, 2012


Handlooms

Opening stock of raw material - -

Add : Purchases 204.35 687.29

Add : Direct Expenses - -

Custom Duty - 0.47

Handling & Freight charges 19.34 28.94

Processing charges 81.66 56.10

Less : Closing stock of raw material - -

305.35 772.80

(b) Other Non Operating Income comprised of :-- Maintenance charges received 41.91 41.75

- Govt. Grants 43.93 109.55

- Difference in Exchange 33.82 61.79

- Forward Cover Premium 7.88 -

- Service Charges - -

- Licence Fee Received 16.37 7.48

- Freight & OTC 7.75 0.69

- Rent Received 309.36 283.99

- Credit Balances Written Back 82.87 11.43

- Profit sharing with NMS - 1.20

- Profit from sale of assets - 4.66

- Provision written back 11.81 6.73

- Township Receipts 1.02 0.47

- Misc. Receipts 35.58 36.39

592.30 566.13

2.20 Other Income




Interest Income (a) 237.57 181.33

Other Non Operating Income (b) 592.30 566.13

Total 829.87 747.46

Interest Income comprised of :-

- On Fixed Deposits* 8,423.16 28,884.63

Less: Interest paid to Associates* 8,297.11 28,826.61

126.05 58.02

- On Staff Advances & others** 111.52 123.31

237.57 181.33

* As per agreement with bullion associates, interest on fixed deposits amounting to Rs.8,297.11 Lakhs (Previous Year Rs.28,826.61

Lakhs) have been transferred to them.

** The Corporation has recognized Rs. 105.70 Lakhs (Net) on account of interest earned on bullion creditors who has discontinue their

business during the financial year 2012-13.

46

HHEC

Handicrafts

Opening stock of raw material - -

Add : Purchases 409.37 597.65Add : Direct Expenses - -

Custom Duty 0.55 5.92


Processing charges 115.09 44.46Less : Closing stock of raw material - -

533.88 669.26

Ready-to-Wear

Opening stock of raw material 2.10 2.94

Add : Purchases 740.72 605.31

Add : Direct Expenses - -

Custom Duty 0.07 0.09


Processing charges 406.06 339.36

Power & Fuel 10.33 10.38

Less : Closing stock of raw material (4.97) (2.10)

1,203.48 993.40

Cost of Material consumed 2,042.71 2,435.46

2.22 Purchase of Traded Goods



Ready-to-Wear Purchases 5.45 - Add : Custom Duty - - Add : Processing charges - - Add : Freight charges - -

5.45 -

Bullion Purchases 385,322.88 1,197,183.89 Add : Custom Duty 17,382.95 16,700.77 Add : Processing charges - - Add : Freight charges 0.95 431.67

402,706.78 1,214,316.33 Handicrafts Purchases 502.47 350.99

Add : Processing charges - 0.05 Add : Freight charges 16.39 13.77

518.86 364.81 Handlooms Purchases 946.78 94.69

Add : Custom Duty 0.06 - Add : Processing charges 77.14 -

Add : Freight charges 50.36 - 1,074.34 94.69

Jewellery Purchase 66.32 135.46 Add : Processing charges 0.86 0.06 Add : Freight charges 0.10 -

67.28 135.52

Total purchase of stock in trade 404,372.71 1,214,911.35

st st31 March, 2013 31 March, 2012ParticularsRs. in Lakhs Rs. in Lakhs

47

HHEC

2.23 Changes in inventories of Stock in Trade



Inventories at the beginning of the year - Finished Goods

Handicrafts 82.40 82.79 Handlooms 62.28 49.82

Ready-to-Wear 62.16 63.05

206.84 195.66 - Stock-in-Trad - Bullion 9,687.94 3,331.79 Jewellery 55.98

Total 9,950.76 3,527.45 Inventories at the end of the year

- Finished Goods Handicrafts 90.17 82.40 Handlooms 161.58 62.28 Ready-to-Wear 61.48 62.16

313.23 206.84 - Stock-in-Trade Bullion 1,720.80 9,687.94 Jewellery 8.19 55.98

1,728.99 9,743.92

Total 2,042.22 9,950.76

Net (increase)/decrease 7,908.54 (6,423.31)

2.25 Financial Cost



Interest

From Banks

Interest on Advance Against FDR 1,631.61 -

Buyer's Credit/LC 1,215.82 12,053.84

Interest Others 7.86 -

Less:Recovered from Associates 2,847.43 12,053.26

7.86 0.58

Others

Interest on Suppliers Credit ( Forex) 10.26 96.85

Interest Others 75.21 -

Less:Recovered from Associates 10.26 95.17 75.21 1.68

83.07 2.26

2.24 Employee Benefit Expenses



Salaries & Allowances 738.47 517.60 Contribution to provident fund & others 66.19 45.35 Staff Welfare 139.95 100.02 Gratuity 66.21 58.15 Benevolent Fund 0.04 0.04

1,010.86 721.16

48

HHEC

2.26 Other Expenses



Rent 112.28 52.71

Rates & Taxes 55.49 73.94

Electricty & Water Charges 75.35 51.33

Travelling & Conveyance 105.16 96.34

Postage, Telegrams, Telephones etc. 83.93 65.34

Printing & Stationery 27.48 23.28

Repairs, Renewal & Maintenance

- Building 78.64 55.20 - Machinery 5.33 1.85

- Others 18.73 102.70 17.43 74.48

Service Vehicle Maintenance 25.45 21.67 Auditors Remuneration 6.73 5.60 Payment to Cost Auditors 1.69 - Magazine & Periodicals 1.95 1.92 Insurance 14.53 13.72 House Keeping & Maintenance 57.20 21.77 Miscellaneous Expenses 77.40 80.58 Filing Fee 0.18 0.19 Donations 0.05 - Loss on Cash 0.10 - Loss on Assets sold/discarded 0.98 0.51 Loss of CPF Trust Recouped - 5.47 Township Expenditure 14.94 8.13 Expenses on Corp. Social Responsibility - 10.00 Software Expenses 1.29 0.57 Advertisement & Publicity 31.01 29.43 Sample & Product Development 78.08 65.12 Sustainable Development 5.34 - Business Promotion 3.77 0.02 Entertainment 20.26 15.35 Exhibition & Fashion Shows 66.28 63.10 Commission to Selling Agents 111.48 107.72 Claims 2.56 10.16 Legal & Professional Charges 65.17 41.25 Exchange Variation - 3.24 Bad Debts & Advances written off 10.46 41.00 Excess provision of Export Incentive Receivable 0.16 - written off Sales Tax paid for earlier years 0.02 0.41 Debit Balance adjusted - - Bank Charges 33.39 27.03 E-Marketing 0.02 0.99 Profit Sharing with Shops 3.49 - Provision for Doubtful Debts, Loans & Advances 20.92 4.80

1,217.29 1,017.17

2.27 Prior Period Items



Income

Sales (8.61) 0.69 Other Income (19.57) 1.17 Other Receipts 77.73 (2.59)

49.55 (0.73)

49

HHEC

Expenditure

Purchases 6.49 0.17 Custom Duty, Freight & other charges 18.50 (0.08)Fabrication Charges - 0.33 Employees Remuneration & Benefits 0.87 2.45 Administration & Selling Expenses 1.39 5.07Depreciation - 0.23

27.25 8.17

Net Prior Period Items (22.30) 8.90

2.28 Exceptional items



- Provision for Pay Revision* Salaries and allowances - 748.41 Contribution to PF - 84.77 Leave Encashment - 136.63Gratuity - 177.82

- 1,147.63

2.29 Tax Expense

(a) Provision for current tax includes tax in respect of earlier years NIL (Previous Year Rs.35.57 Lakh)

(b) For Deferred Tax Assets / Liabilities

Particulars As on 31/03/2013 For the year As on 01/04/2012

Deferred Tax Liabilities

- Related to Fixed Assets 136.99 8.23 128.76

Total 136.99 8.23 128.76

Deferred Tax Assets

- Provision for doubtful debts / advances 173.46 2.82 170.64

- Related to Employees 81.35 (71.60) 152.95

- Related u/s 43B 1.95 (4.01) 5.96

- Related u/s 40(a)(ia) - - -

- Provision for CSR - (0.31) 0.31

- Carried forward business losses 283.13 11.83 271.30

- Unabsorbed Depreciation 100.12 31.09 69.03

Total 640.01 (30.18) 670.19

Net Deferred Tax Asset / (Liabilities) 503.02 (38.41) 541.43

st st31 March, 2013 31 March, 2012 Rs. in Lakhs Rs. in Lakhs

* In Pursuance with the Presidential directive contained in the Office of the DC's Order No.M-11013/18(32)/2011-MSS-IM/62 dated 28th December, 2012, the pay of Board level posts, below board level and unionized staff have been revised w.e.f.1.1.2007. As per the Presidential directive and the Office Orders, the revised scales have been implemented w.e.f.1.4.2011. Arrears prior to 1.4.2011 will be paid in subsequent years whenever affordability and profit before tax in high enough to permit 20% of that amount to be disbursed as arrears. In disbursement of arrears, Unionised staff shall get precedence over Board Level functionaries. Payment of arrears shall be spread over a period if 20% rule does not permit settlement in one year. Accordingly, provision of Rs. 773.42 Lakhs (Previous Year Rs. 1147.62 Lakhs) for the period 1.1.2007 to 31.3.2011 has been retained.

Particulars

50

HHEC

2.30 Basic and Diluted Earnings per share (EPS) computed in accordance with Accounting Standard 20 “Earning per Share”

Particulars Before Exceptional items After Exceptional itemsst st st st31 March, 2013 31 March, 2012 31 March, 2013 31 March, 2013

Rs. in Lakhs Rs. in Lakhs Rs. in Lakhs Rs. in Lakhs

Basic

Profit after Tax as per accounts 248.98 216.11 248.98 216.11 Add : Exceptional Items - 1,147.63 - -

Total (a) 248.98 1363.74 248.98 216.11

Weighted average number of shares outstanding (b) 1382000 1382000 1382000 1382000

Basic EPS (a/b) (in Rs) 18.02 98.68 18.02 15.64

Diluted

Profit after Tax as per accounts 248.98 216.11 248.98 216.11 Add : Exceptional Items - 1,147.63 - -

Total (a) 248.98 1363.74 248.98 216.11

Weighted average number of shares 1382000 1382000 1382000 1382000

outstanding for diluted EPS (b)

Basic EPS (a/b) (in Rs.) 18.02 98.68 18.02 15.64

1. SIGNIFICANT ACCOUNTING POLICIES

I) ACCOUNTING METHODThe Financial Statements are prepared as going concern, on historical cost basis, under double entry system in accordance with generally acceptable / applicable Accounting Principles / Standards in India, on accrual method.

II) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amounts of assets and liabilities on the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Difference between actual results and estimates are recognised in the period in which the results are known / materialized.

III) FIXED ASSETSFixed Assets are stated at cost less accumulated depreciation. Cost includes the purchase price and other directly attributable expenses for bringing the asset to its intended use.

IV) DEPRECIATIONa) Depreciation is provided as per the straight-line method at rates prescribed in Schedule XIV of the Companies Act, 1956, except in the case of Leasehold Land and Plant and Machinery.b) In case of Leasehold Land, the cost is amortized over the period of leasec) In case of Plant and Machinery depreciation is provided as per Straight Line Method at 13.57% per annum on the basis of useful

life of the asset.d) 100% depreciation is provided on fixed assets costing less than Rs. 5000/-.e) In case of Interior design and structures expenses incurred at Retail Shops, the cost is amortized over the period of agreements.f) In case of Software Expenditure, the expenditure incurred below Rs.1.00 lakh will charged to profit & loss account in the year of

expenditure and expenditure above Rs.1.00 lakh is amortized equally over a period of three financial years commencing from the year in which the expenditure is incurred.

g) In case of trade mark, patent, copy right, license fees etc., the cost is amortized over the period of validity of such license.

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V) INVENTORIES

Inventories include Finished (Trading) Goods and Raw material and are valued as under:

a) Handloom / Ready-to-wear (except at Chennai Branch), Handicrafts and Carpet inventories are valued according to specific identification method of accounting – at lower of purchase cost and net realizable value (arrived at after mark-down).

In case of Chennai Branch:

Handlooms and Ready to wear inventories are valued according to FIFO method of accounting – at lower of purchase cost and net realizable value (arrived at after mark down).

b) Mark-down

Unless the circumstances in any case demand a higher mark-down, as determined and approved by the Management, inventories are marked-down as below:

Age of Stocks

Percentage of Mark-down

Below 1 year -

1-2 years 25%

2-3 years 50%

Above 3 years 70%

c) Gold and Silver stocks are valued at lower of landed cost and net realizable value.

d) Stocks-in-transit (outwards) are valued at CIF/C&F/FOB value or purchase cost, whichever is less.

e) Stocks-in-transit (inwards) are valued at purchase cost plus custom duty.

f) Handloom fabrics and Ready-to-wear items purchased for sampling and converted into samples are taken at NIL value.

g) Damaged stocks are written off.

h) Stores, spare parts and packing material are valued at purchase cost. Stationary stocks are taken at NIL value.

VI) SUNDRY DEBTORS, LOANS & ADVANCES

Full provision is made in respect of debit balances (except receivables from Govt. Departments and loans and advances to staff), outstanding for a period exceeding three years. Other debts are reviewed on a case-to-case basis and provided for wherever necessary.

VII) ACCOUNTING FOR FOREIGN CURRENCY TRANSACTIONS

a) Transactions in foreign currency (except those pertaining to fairs and exhibitions) are recorded at the rate of exchange prevailing at the time of the transactions / remittance rate. Any gain or loss on account of exchange differences on settlement is recognized in the Profit & Loss Account.

b) Transactions pertaining to fairs and exhibitions abroad are recorded at the average rate of exhibition dates.

c) Year end balances of Current Assets and Current Liabilities (except for bullion import transactions) in foreign currencies are converted at year-end exchange rates as under:

i) Debtors under collection and other debit balances (except debit balances in EEFC accounts and Doubtful Debtors, Loans & Advances) at the closing bill buying rates.

ii) Debit balances in EEFC accounts at the closing TT buying rates.

iii) Doubtful Debtors, Loans and Advances, or in cases where realisability is uncertain, no exchange variation is provided in the year-end.

iv) Current Liabilities (except Creditors) at the closing TT selling rates.

v) Creditors at the closing Bill selling rates.

vi) Current Assets and Current Liabilities of Bullion Import transactions at RBI reference rate.

Any gain / loss on account of exchange difference arising out of such conversions are recognized in the Profit & Loss Account.

d) Forward Exchange Contracts – The premium or discount on forward exchange contracts is amortized as expenses or income over the life of the contracts. Exchange difference on such forward exchange contracts outstanding as at year end is recognized in the profit and loss account.

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HHEC

VIII) REVENUE RECOGNITION

a) Sales

i) Export sales excluding sales of gold/silver jewellery/items in fairs and exhibitions abroad are recognized at FOB value:

• In case of FOB Contracts, as per the date of airway bill/bill of lading, as the case may be.

• In case of CIF/C&F Contracts, as per the date of negotiation of export documents with the bank.

ii) Export sales of Gold/Silver Jewellery/Other items in fairs and exhibitions abroad are recognized at gross sale value converted into Indian Rupee on the basis of average of rates during the exhibitions period.

iii)Bullion sales:

• To buyers are recognized at CIP cost (Cost, Insurance, Premium), custom duty and pre-determined profit, on performance of the contract.

• Through Commodity Exchanges are recognized at the Delivery Date Rate (DDR) declared by the exchanges. The difference between the contracted rate and the DDR are recognized as marked-to-market (MTM) gain / loss.

iv) Other sales in India and abroad are recognized:

• In case of ex-godown and retail sales, at sales price on performance of the contract.

• In case of sales through agents, at sales price in the year in which sale is effected.

b) Other Income

i) Exports incentive:

• Duty drawback and Duty Entitlement Pass Book are accounted for on accrual basis, on recognition of the export sale.

• License of Market Linked Focus Product Scheme (MLFPS), Focus Market Scheme (FMS) and Status Holder Incentive Scrip (SHIS) are account for on accrual basis based on realizable value as on balance sheet date.

• Insurance and other claims are accounted for when it is reasonably certain that ultimate collection will be made, provided the amount of claim is measurable.

c) Other Receipts

i) Service charges received on export sales of gold/silver/platinum jewellery/items made by the manufacturer associates against supply of gold/silver/platinum by the overseas buyers are recognised at the time of receipt of export documents marked “A/c HHEC”.

ii) Service charges on consignment sales of silver on behalf of Indian Government Mints are recognized at the time of delivery to the customers.

IX) PURCHASES

a) In the case of import contracts (Bullion):

i) On outright basis with fixed price – at purchase price taken as per the rate fixed with the foreign supplier converted at the prevailing exchange rate, on the date of Bill of Entry.

ii) On consignment basis with unfixed price:

• In the cases where prices are fixed upto 15th June, at purchase price taken as per the rate fixed with foreign supplier converted at the prevailing exchange rate on performance of the contract as per terms of the agreement with the foreign supplier.

• In the cases where prices are unfixed upto 15th June, at price taken on the basis of commercial invoice converted at the prevailing exchange rate, on the date of Bill of Entry.

b) In the case of local purchases – at purchase price on inspection and acceptance of the merchandise.

c) In the case of gold/silver jewellery sold in fairs and exhibitions abroad at cost which is invoice value as reduced by the amount of pre-determined margin.

X) RETIREMENT AND OTHER EMPLOYEES BENEFITS

a) Provident Fund is a defined contribution plan. The Company has a Provident Fund Trust to whom provident fund contribution are made as and when the contribution to the fund is due and the same is charged to profit & loss account.

b) Gratuity liability is a defined benefit obligation and is provided for on the basis of an acturial valuation made at the end of the year by Life Insurance Corporation of India (LIC).

c) Leave encashment liability is a defined benefit obligation and is provided for on the basis of acturial valuation made as at year end by Life Insurance Corporation of India (LIC).

d) Post retirement medical benefits are provided for on the basis of an actuarial valuation made at the end of the year.

e) Actuarial gains/losses are immediately taken to the Profit & Loss Account and are not deferred.

f) Long Service award are account for on an actual payments.

g) Claims on accounts of medical, leave travel concession and other fringe benefits not linked to pay and allowances are accounted for in the year of receipt of claim.

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HHEC

XI) ACCOUNTING FOR GRANTS

a) Grants (to the extent of amount actually incurred) are recognised in the year of sanction if there exists reasonable assurance of the compliance of the terms attached with the sanction and that the grants will be received.

b) Capital Grants:

i) Assets acquired out of grants are recognised at cost price.

ii) Grants relating to depreciable assets are taken to Deferred Govt. Grant-in-Aid and recognised as income in the Profit & Loss Account over the useful life of the assets.

c) Revenue Grants:

i) Revenue grants are recognised in the Profit & Loss Account to the extent of amount incurred, in the year in which it is incurred.

ii) Any expenditure incurred in excess of grant sanctioned/received is charged to the Profit and Loss Account, in the year in which it is incurred.

d) Contingencies relating to grants, arising after the grant has been recognised, are treated in accordance with Accounting Standard(AS) 29.

XII) Provisions & Contingent Liabilities

i) Provisions are recognized when a present legal or constructive obligation exists and the payment is probable and can be reliably estimated.

ii) Disputed liabilities and claims against the Corporation including claims raised by fiscal authorities (Sales Tax, Income Tax, etc.) pending in appeal, are treated among contingent liabilities and are not provided for in the Accounts. Contingent Liabilities are disclosed in each case where the amount is above Rs. 5.00 lakhs.

XIII) Impairment of Assets

The carrying amounts of assets are reviewed at the Balance Sheet date and if there is any indication of impairment based on Internal / External factors, an impairment loss is recognized wherever the carrying amount of an asset exceeds the recoverable amount.

XIV) Taxation

a) Provision is made for current income tax liability, which is likely to arise on the results for the year, at the current rate of tax in accordance with the provision of Income Tax Act, 1961.

b) Deferred income tax is provided on all timing difference at the Balance Sheet date between the tax base of Assets and Liability and their carrying amount for financial reporting purposes.

c) Deferred Tax Assets are recognised only to the extent that there is a reasonable certainty of realization. However, in case of unabsorbed depreciation and carry forward of losses under tax laws, deferred tax assets are recognized only to the extent of virtual certainty supported by convincing evidence that sufficient future taxable income will be available for set-off.

d) Deferred Tax Assets and Liability are measured using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date.

For J.N. Mital & Co. sd/- sd/-Chartered Accountants (Ujjal Datta) (Azra Banu)Firm Regd. No: 0003587N Chief Finance Manager Director (Finance)

sd/- sd/-(CA R Mittal) (Nirmal Sinha)

Partner Chairman & Managing DirectorMembership No: 084470Place : New Delhi Dated : 27 AUG 2013

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2.31 Other Disclosures

i) Compliance of the Companies (Accounting Standard) Rules, 2006 has been made. The Company has large number of transactions and diversified activities, which may have put operational constraints in strictly following the said rules. The deviation if any, have been stated in the accounting policies of the Company.

ii) Unspent balances out of Government grants of Rs. 12.65 lakhs shown under short term liabilities (Previous Year Rs. 9.43 lakhs) include Rs. Nil lakhs (Previous year Rs. 9.43 lakhs) towards completed/cancelled projects.

iii) Bullion imports on behalf of Customers.

a) The Corporation being a nominated agency for import of Bullion has imported Gold / Silver during the year on back to back arrangements with the Customers. As per the agreement entered into with customers and business module, the sale proceeds are either placed under fixed deposit for a period mutually decided with the customer and/or repayment of the advance against fixed deposits, if any availed for repayment of the earlier buyers credit/letter of credit/stand by letter of credits. The payments to the foreign supplier are generally made by availing buyer’s credit and/or establishing letter of credit/stand by letter of credits in favour of the foreign supplier. The usance interest paid on the buyer’s credit /letter of credit /stand by letter of credit and the interest paid on the advance against fixed deposits are debited to the customer. Interest earned on fixed deposit is credited to the customers after deduction of TDS. Bank charges, withholding tax, forward cover premium/discount; exchange variation and profit /loss on forward cover cancellation /early utilization are debited/credited to the customers.

b) During the year Interest on Fixed Deposits aggregating to Rs. 8297.11 lakhs (Previous Year Rs 28,826.61 lakhs) credited to the local buyers of bullion as per the terms of agreement.

c) Against the liability on account of Bullion Imports on back to back basis with the Business Associates, the corporation hedges the liability from time to time by taking forward cover contracts with the banks as desired by the Business Associates. Outstanding Forward cover contracts amounting to Rs. 30,798.23 lakhs ($ 566.255 lakhs @ Rs.54.3893 per $) as on 31st March 2013 ( Previous year Rs.151269.77 lakhs ( $ 2957/- @ Rs.51.1565) are revalued as per the closing rate and the difference between the spot rate on the date of the Forward Cover Contract and the closing rate are debited/credited to the Business Associates.

d) The Corporation has availed overdrafts against fixed deposit from the bank, as per agreed terms, on behalf of the customers for repayment of the buyer’s credit/letter of credit. For the banks, the Corporation is a single entity for the fixed deposits made by the Corporation on behalf of the customers. The overdraft interest has been calculated as per the cash flow of each customer at the agreed rate with the banks based on the interest rate on fixed deposit pertaining to each customer. Accordingly an amount of Rs. 1737.31 lakhs (Previous Year Rs. 3411.64 Lakhs) has been charged to the customers and Rs. Nil credited to the customers (Previous year Rs. 576.84 lakhs). Corporation has undertaken a special Audit from External Auditor for re-working of inter-mixing of fund between bullion associates and overdraft interest and accordingly the interest earlier debited/credited to the Associates for the years 2010-11 & 2011-12 was reviewed and corrected. Accordingly interest income of Rs.55.45 lakhs in 2010-11 and Rs.5.54 lakhs in 2011-12 on account of pre-determined profit and Value Added Tax on sales as per agreement were recognized in the Profit and Loss Account.

iv) Other Receipts

During the year, credit balances outstanding for more than three years were reviewed on case to case basis and an amount of Rs. 82.87 Lakhs (Previous Year Rs. 11.43 lakhs) has been written back after ascertaining that there are no claims from the creditors / liability on the Corporation for payment.

v) In case of Gold and Silver trading through the platforms of MCX / NCDEX in association with Business Associates on profit sharing basis, the sales are accounted as per Accounting Policy No. VIII (a) (iii) and the purchases are accounted as per Accounting Policy No. IX (a). Profit sharing is accounted for as stated below:

a) Trading Surplus / (Deficit) is arrived at after adjusting the landed cost of gold / silver including HHEC’s pre-determined profit on import and sale in MCX / NCDEX from the contracted price in MCX / NCDEX and debited / credited to the Associates.

b) Surplus / (Deficit) is arrived at after adjusting bank charges, withholding tax, Interest payable on Supplier’s credit/buyer’s credit / advance against fixed deposits / Marked-to-market deposits and other charges from interest received on fixed deposit and the same is debited / credited to the Associates.

c) In case of hedging on MCX / NCDEX, for the activities of the Corporation, MTM of Rs. 4.64 lakhs received (Previous Year Rs.7.56 lakhs received) has been recognized in the Profit & Loss Account under Note No.2.19.

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HHEC

vi) Corporate Social Responsibility (CSR) Fund.

As per guidelines of DPE on Corporate Social Responsibility (CSR), the Corporation has created CSR Fund during the financial

year 2012-13 by transfer from reserve of Rs. 11.74 lakhs (Previous year Rs. Nil) and the amount expended on CSR projects of

Rs.11.74 lakhs (Previous year Rs.10.00 lakhs).

vii) Changes in Accounting Policies & Estimates

There is a change in Accounting Policies no. IV (e), IV (g), VIII (b) and X (d).

The financial impact of such changes is as under:

- In case of IV (e): Additional depreciation on Furniture and Fixtures amounting to Rs. 12.19 lakhs has been recognized in the

Profit and Loss account for the financial year 2012-13 and the same has been suitably dealt in the fixed assets schedule.

- In case of IV (g): Additional depreciation on Intangible Assets amounting to Rs. 0.02 lakhs has been recognized in the Profit

and Loss account for the financial year 2012-13 and the same has been suitable dealt in fixed assets schedule.

- In case of VIII (b): Income of Rs. 64.75 lakhs has been recognized in the Profit and Loss account for the financial year 2012-13

and Rs.10.31 lakhs as prior period income for the financial year 2012-13 has been recognized.

- In case of X (d): Provision for Post-retirement Medical Benefit amounting to Rs.38.65 lakhs has been recognized in the Profit

and Loss account as per actuarial valuation as against ad-hoc provision of Rs. 25.00 lakhs made last year.

viii) a) Income Tax

Income Tax/Fringe Benefit Tax assessments have been completed up to the assessment year 2004-05 except for the assessment

year 2002-03. The liability, if any, in respect of pending assessments for the assessment years 2005-06 to 2011-12 cannot be

ascertained although tax as per return/revised return has been paid in full.

The appeal filed by the Corporation with the Commissioner of Income Tax (Appeals) for Tax demand of Rs. 34.60 lakhs against

order of the Assessing Officer u/s.143(3) for the Assessment Year 2002-03 has been decided in favour of the Corporation. As a

result, refund of Rs. 34.60 lakhs is due from the Department. The Department has gone to appeal before ITAT against the order of

CIT (A).

The Corporation has received full relief on all the issues from CIT(A) for assessment year 2005-06. As such, refund of Rs. 118.64

lakhs is due. The Department has gone on appeal before ITAT against the order of CIT(A).

For Assessment year 2006-07, refund of Rs. 0.60 lakhs is due since CIT(A) and ITAT decisions are in favour of the Corporation.

For Assessment year 2007-08, refund of Rs. 1.05 lakhs is due since CIT(A) and ITAT decisions are in favour of the Corporation.

For Assessment year 2008-09, refund of Rs. 0.75 lakh is due since CIT(A) and ITAT decisions are in favour of the Corporation..

The appeal filed by the Corporation with the CIT(A) for addition of Rs. 11.41 lakhs as income against the order of the Assessing

Officer u/s 143(3) for the Assessment year 2009-10 has been decided in favour of the Corporation. As a result, refund of Rs. 18.90

lakhs is due.

The Corporation has filed Rs.37.01 lakhs loss return for the Assessment year 2010-11. Scrutiny order has been received with no

addition. Refund of Rs.3.03 lakhs has been received and balance refund of Rs.2.43 lakhs is due.

The Corporation has filed ‘Nil’ income return for the Assessment year 2011-12 after adjustment of brought forward losses to the

extent of Rs. 233.88 lakhs. MAT of Rs. 14.23 lakhs has been paid on book profits. Scrutiny is under progress. Tax Paid/TDS

amounting to Rs. 29.06 lakhs is pending.

The Corporation has filed Rs. 393.48 lakhs loss return for the Assessment year 2012-13. Tax paid /TDS amounting to Rs. 91.49

lakhs and the assessment is pending.

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ix) Additional information pursuant to Schedule VI-Part II of the Companies Act, 1956

a) (i) Auditors Remuneration includes: (Including Branch Auditors Remuneration)

2012-2013 2011-2012Rs. ( Lakhs ) Rs. ( Lakhs )

*Audit fee 4.68 4.27 Tax Audit fee 1.36 1.33 Certification Work 0.69 Nil Total 6.73 5.60

* include provision for increase in fees (inclusive of Service Tax) of Rs.0.21 lakh (Previous Year Rs. 0.28 lakh).

(ii) Cost Audit Fee 0.68 Nil

Certification Work 1.01 Nil

Total 1.69 Nil

b) Expenditure in foreign currency on account of: 2012-2013 2011-2012

(Rs. in Lakhs)

I. Commission to selling Agent 40.19 47.30

ii.Custom duty, freight and other charges 14.03 4.22

iii.Others (Fair & Exhibitions) 6.33 17.19

iv.Foreign Travel 21.87 22.99

v. Interest - Forex* 1,215.82 6,044.73

vi.Bank Charges – Import * 0.86 1.40

Total 1,299.10 6,137.83

*Recovered from customers in Indian Rupees, hence expenditure booked is NIL.

c) Earnings in Foreign Exchange on account of:2012-2013 2011-2012

(Rs. in Lakhs)i. Sales - FOB value of exports 3,579.29 3,065.84

- Domestic sales (in foreign currency) 0.72 5.84

ii. Net Exchange Variation 33.82 61.99Total 3,613.83 3,133.47

d) Value of Imports on CIF basis2012-2013 2011-2012

(Rs. in Lakhs)- Raw Material 18.47 31.01- Traded goods• Gold 3,85,117.91 1160689.54• Silver 204.97 36494.09 Total 3,85,341.35 11,97,214.64

b) Sales Tax Assessment Status:

Year Noida Delhi Chennai Kolkatta Ahemdabad Mumbai

2009-10 - - - Pending - Pending

2010-11 Pending - - Pending - Pending

2011-12 Pending Pending - Pending Pending Pending

2012-13 Pending Pending Pending Pending Pending Pending

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b) Opening stocks, Purchase, Sales & Closing stocks

(Value in Rs. in lakhs and quantity in Kgs)

Items Opening stocks Purchases for the year* Sales/Transfers for the year Closing stocks

(including goods in (including goods in

transit) as at transit) as at

1.4.2012 1.4.2011 2012-2013 2011-2012 2012-2013 2011-2012 31.3.2013 31.3.2012

Handicrafts 82.22 82.77 1026.93 993.35 1562.02 1430.13 90.17 82.22

(incl. Carpets)

Handlooms 62.45 49.82 1309.93 838.12 1502.37 1055.22 161.58 62.45

Ready-to-wear 64.27 66.00 1152.23 944.67 1628.63 1233.96 66.45 64.27

Gold & Silver - - 67.18 135.52 70.90 102.89 - -

Jewellery - - - - - - - -

Gold 9687.93 3320.04 385117.91 1160689.54 410374.60 1168857.31 1720.80 9687.93

Quantity in KG (278.70) (159.00) (13359.00) (40406.00) (13578.70) (40286.300) (59.00) (278.70)

Silver 55.98 11.75 204.97 36494.09 610.38 39948.27 8.19 55.98

Quantity in KG (844.170) - (5174.949) (73618.321) (6019.119) (72774.151) - (844.170)

Gold/Silver Coin - - - - - - - -

Total 9952.85 3530.38 388879.15 1200095.29 415748.90 1212627.78 2047.19 9952.85

* Includes fabrication & processing charges of Rs.680.81 lakhs (Previous year Rs. 440.03 lakhs).

xii) Information on Township

2012-2013 2011-2012

(Rs. in Lakhs)

a) Expenditure 14.94 8.13

b) Income 1.01 0.47

c) Net expenditure 13.93 7.66

x) a) Value of Imported/Indigenous Raw/Packing Material, Stores & Spare Parts consumed:

2012-2013 2011-2012

Value % to Total Value % to Total

(Rs. ) Consumption (Rs. ) Consumption

Raw and Packing Materials:

- Imported at landed cost 18.47 14.75 31.01 31.20

- Indigenously obtained 106.74 85.25 68.36 68.80

Total 125.21 100.00 99.37 100.00

Component & Spare Parts

- Indigenously obtained 3.69 100 1.85 100.00

Total 3.69 100.00 1.85 100.00

in Lakhs in Lakhs

58

Particulars Post Retirement Leave Encashment Gratuity (Funded)Medical Benefits (Funded)

2012-13 2011-12 2012-13 2011-12 2012-13 2011-12

Discount Rate 8% - 8% 8% 8% 8%

a) Mortality Table LIC(1994-95)Ult.

b) Rate of Withdrawal 1% to 3% depending on age

Expected rate of return on plan assets

Salary escalation rate - - 5% 5% 5% 5%

Attrition rate : Rates

Age (Years) - - 1% to 3% 1% to 3% 1% to 3% 1% to 3%depending depending depending depending

on age on age on age on age

Upto 30 years - - - - - -

Upto 44 years - - - - - -

Above 44 years - - - - - -

HHEC

xii) a) “Employee Benefits” as per Accounting Standard (AS-15)

The company has adopted the Accounting Standard AS-15 (revised) Employee Benefits and accordingly the employment benefits

have been valued as per actuarial valuation in accordance with this Standard. The present value of obligation is determined based on

actuarial valuation using the Projected Unit Credit Method, which recognizes each period of service as giving rise to additional unit of

employees benefit entitlement and measures each unit separately to build up the final obligation. The following table summarizes the

component of the various employee benefits and the components of net benefit expenses recognized in the profit and loss account:

(Rupees in Lakhs)Defined Benefit Plan

vi. Benefits Paid - - - - - (2.81)vii. Actuarial (gain) / loss on obligation (Balancing figure) - - 18.28 (31.39) 148.91 (30.78)viii. Present value of obligation as at the end of the period 102.10 - 175.86 124.17 526.78 336.94B Changes in fair value of plan assetsi. Fair Value of plan assets as at the beginning of the period - - 143.57 41.16 383.91 281.87ii. Expected return on plan assets - - 13.95 8.85 36.27 29.84iii. Contributions - - 15.32 93.56 15.00 75.01iv. Benefits paid - - - - - (2.81)v. Actuarial gain / (loss) on obligation - - - - - -vi. Fair value of plan assets as at the end of the period - - 172.84 143.57 435.18 383.91C The amounts to be recognized in the balance sheet.i. The present value of obligation as at the end of the period 102.10 - 175.86 124.17 526.78 336.94ii. Fair Value of plan assets at the end of the period. - - 172.84 143.57 435.18 383.91iii. Difference - - (3.02) 19.40 (91.60) 46.97iv. Net Assets / (liability) recognized in balance sheet. (102.10) - 3.02 (19.40) 91.60 (46.97)D Expenses recognized in the statement of profit and lossi. Current Service Cost - - 23.47 22.29 13.98 12.66ii. Past Service Cost - - - - - -iii. Interest Cost - - 9.93 9.87 26.96 26.51iv. Expected return on plan assets. - - (13.94) (8.85) (36.27) (29.84)v. Curtailment / settlement cost 76.55 - - - - -vi. Net Actuarial (gain) / loss recognized in the period. - - 18.28 (31.39) 148.90 (30.78)vii. Expenses recognized in the statement of profit and loss 38.65 - 37.74 (8.08) 153.57 (21.45)

A Changes in Present Value of Obligation Post Retirement Medical Leave Encashment Gratuity (Funded)

Benefits (Non-Funded) (Funded)

31.03.13 31.03.12 31.03.13 31.03.12 31.03.13 31.03.12

i. Present value of obligation as at the beginning of the period - - 124.18 123.40 336.94 331.36

ii. Interest Cost - - 9.93 9.87 26.96 26.51

iii. Past Service Cost - - - - - -

iv. Current Service Cost 102.10 - 23.47 22.29 13.98 12.66

v. Curtailment / Settlement Cost - - - - - -

The principal assumptions used in determining employee benefits are given below:

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HHEC

The above information is certified by the Actuary.

The estimates of rate of escalation in salary considered in actuarial valuation, take in to account inflation, seniority, promotion and

other relevant factors.

b) Post Retirement Medical Benefit payable is accounted as per Actuarial Valuation and during the year provision of Rs. 38.65

lakhs (previous year 25.00 lakhs) has been made.

xiii) “Related Party Disclosures” as per Accounting Standard (AS) 18

a) Key Management Personnel

Shri Nirmal Sinha, Chairman and Managing Director. ( From 20.07.2010)

Ms. Azra Banu, Director (Finance) (From 11.07.2011 )

Directors. ( Govt. Nominee)

Shri S.S. Gupta, IAS (From 16.12.2011)

Smt. Santha Thampi (From 06.07.2009 to 14.03.2013)

Shri A.K. Sharma (From 14.03.2013)

Independent Directors

Shri Sunil Sethi (From 01.08.2012)

Ms. Ritu Sethi (From 01.08.2012)

b) Details of Transactions with the Related Parties

Nature of Transaction 2012-13 2011-12

(In lakhs)

Remuneration 54.20 24.73

Sales - -

Loans – Disbursements - 0.30

Loans – Recoveries 0.07 0.01

Loans outstanding as on 31st March 0.22 0.29

Other Debit Balance as on 31st March 0.17 Nil

xv) “Leases” as per Accounting Standard (AS) 19

The operating lease payments / (receipts) are recognized as an expense / (income) in the Profit and Loss Account on accrual basis over the lease term.

a) As Lessee

a) The Corporation has taken various offices, godown & residential premises under operating lease. These are generally cancelable and range between 11 month and 3 years and are renewal by mutual consent.

b) Lease payments are recognized in the Profit & Loss Account under the head Rent in Note No.2.26.

The Corporation has paid lease rent of Rs. 14.12 lakh during the year 1995-96 for lease acquired for 60 years effective from October 1995. The balance lease rent as on 31st March 2013 to be absorbed in future years is as under:

2012-13 2011-12

(In lakhs)

Within one year 0.24 0.24

Later than one year and not later than five years 0.94 0.94

Later than five years 8.94 9.17

Total 10.12 10.35

60

HHEC

b) As Lessor

a) Own property given on lease.

Office Building- JVB Factory Shed Office Building -Noida

A) 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12

A Gross carrying amount 156.05 156.05 11.11 11.11 81.12 81.12

B Accumulated Depreciation 17.95 15.23 6.79 6.42 12.27 10.01

C Accumulated impairment losses Nil Nil Nil Nil Nil Nil

i) Depreciation recognized in Profit & Loss account 2.73 2.73 0.37 0.37 1.51 1.73

ii) Impairment losses recognized in Profit & Loss account Nil Nil Nil Nil Nil Nil

iii) Impairment losses reversed in Profit & Loss account Nil Nil Nil Nil Nil Nil

B) Future minimum lease payments under non-cancellation Nil Nil Nil Nil Nil Niloperating lease

i) Not later than one year 220.78 141.53 2.40 2.40 81.75 78.65

ii) Later than one year but not later than five years 80.20 49.12 1.80 1.80 42.92 42.92

iii) Later than five years Nil Nil Nil Nil Nil Nil

C) Total rent recognized at income in the Profit & Loss account 220.78 198.86 2.46 2.40 81.75 78.65

The Company has let out an office space for a period of 3 years w.e.f 01.01.2009 on a monthly rent of Rs. 0.30 lakh per month and the

rent receivable has been properly reflected in the Profit & Loss account of the company. The said office space is held by the company

as a lessee from Kolkata Municipal Corporation for the period of 60 (Sixty) years w.e.f. 13.10.1995. The necessary approval for let out

has been obtained by the company. Rent received during the year Rs. 4.38 lakh (Previous Year Rs. 4.08 lakh) including maintenance

charges.

xvi) “Impairment of Assets” as per Accounting Standard (AS) 28

In accordance with Accounting Standard (AS) 28 on “Impairment of Assets” issued by the Institute of Chartered Accountants of India,

the Management is of the opinion that there were no such internal / external factors or changes in circumstance that indicate any

impairment loss based on the economic value of assets in use / net recoverable amount of the assets. Hence, no provision for

impairment loss is required to be recognized for the year.

xvii) “SEGMENT REPORTING “ as per Accounting Standard (AS) 17

Primary Segment

Business Segment: As per Accounting Standard (AS) 17 on Segment Reporting, issued by the Institute of Chartered Accountant of

India, the Corporation has identified four reportable segments, viz. handicrafts (including carpets), handlooms, jewellery and bullion.

Segments have been identified and reported taking into account the nature of products, the differing risks and returns, and the

internal business reporting systems.

Secondary Segment

Geographical Segment: The analysis of geographical segment is based on geographical location of the customers. The

geographical segments considered for disclosure are as follows:

- Sales within India include sales to customers located in India.

- Sales outside India include sales to customers located outside India.

The Accounting Policies adopted for Segment Reporting are in line with the Accounting Policies of the Corporation with following

additional policies for segment reporting:

a) Expenses and Revenues have been identified to a segment on the basis of relationship to the operating activities of the segment.

b) Expenses and Revenues that can be reasonably allocated to the segments on rational basis are also considered in determining

segment results.

c) Corporate office expenses, general administrative expenses and expenses that arise at the enterprise level but not specifically

related to a segment have been disclosed as “unallocable”.

d) Segment Assets and Liabilities represent assets and liabilities in respective segment. Investment, Tax related Assets and

Liabilities that cannot be allocated to a segment on reasonable basis have been disclosed as “unallocable”.

e) Jointly used Assets and Liabilities are allocated to segments if, and only if, their related Revenues and Expenses are allocated to

these segments.

61

HHEC

Info

rmati

on

ab

ou

t P

rim

ary

Bu

sin

ess S

eg

me

nts

Han

dic

raft

s In

cl.

Han

dlo

om

sJew

ellery

Bu

llio

nR

TW

To

tal

Carp

ets

2012-1

32011

-12

2012-1

32011

-12

2012-1

3

2011

-12

2012-1

3

20

11-1

2

2012-1

3

2011

-12

2012-1

32011

-12

Reven

ue

- E

xtern

al

1,6

29.5

8

1,5

33.6

1

1,7

57.6

4

1,1

31.1

9

79.6

3

111

.50

410,9

93.0

8

1208940.8

0 1

,771.1

6

1330.6

9416231.0

91213047.7

9

- In

ter-

Segm

ent

-

-

-

-

-

-

-

- -

- -

-

To

tal R

even

ue

1,6

29.5

8

1,5

33.6

1

1,7

57.6

4

1,1

31.1

9

79.6

3

111.5

0

410,9

93.0

8

1,2

08,9

40.8

0

1,7

71.1

6

1,3

30.6

9

416,2

31.0

9 1,2

13,0

47.7

9

Resu

lts

Segm

ent R

esu

lt 3

54.6

2

388.3

0

25.8

6

(48.9

5)

3.1

2

16.3

0

255.6

4

944.3

8 2

12.3

1

98.2

3851.5

51398.2

7

(Pro

fit b

efo

re Inte

rest

&Ta

x)

Unallo

cate

d E

xpense

s -

-

-

-

-

-

-

-

-

-

1,2

64.3

1

1059.1

6

Unallo

cate

d Inco

me

-

-

-

-

-

-

-

-

-

-

523.3

6

510.1

4

Op

era

tin

g P

rofi

t -

-

-

-

-

-

-

-

-

-

110.6

0

849.2

5

- In

tere

st E

xpense

s -

-

-

-

-

-

-

-

-

83.0

8

2.9

5

- In

tere

st Inco

me

-

-

-

-

-

-

-

-

-

-

237.5

7

0.5

6

- P

rovi

sion for

Taxa

tion

-

-

-

-

-

-

-

-

-

-

38.4

1 (

525.7

8)

Pro

fit

fro

m o

rdin

ary

activitie

s -

-

-

-

226.6

81372.6

4

- P

rior

Period Ite

ms

-

-

-

-

-

-

-

-

-

-

(22.3

0)

8.9

0

- E

xceptio

nal I

tem

s -

-

-

-

-

-

-

-

-

-

1147.6

3

Net

Pro

fit

-

-

-

-

-

-

-

-

-

-

248.9

8216.1

1

(Rs. in

Lakh

s)

62

HHEC

Han

dic

raft

sH

an

dlo

om

sJew

ellery

Bu

llio

nR

TW

To

tal

Incl. C

arp

ets

2012-1

32011

-12

2012-1

32011

-12

2012-1

3

2011

-12

2012-1

3

2011

-12

2012-1

3

2011

-12

2012-1

32011

-12

Oth

er

Info

rmati

on

Segm

ent A

ssets

440.8

2

319.4

0

565.4

2

335.6

7

25.8

7

20.9

8

78,8

94.0

4

36511

5.6

3292.6

2

309.3

4 8

0,2

18.7

7

366101.0

2

Unallo

cate

d A

ssets

-

-

-

-

-

-

-

-

-

-

5554.1

18420.8

0

To

tal A

ssets

440.8

2

319.4

0

565.4

2

335.6

7

25.8

7

20.9

8

78,8

94.0

4

365,1

15.6

3

292.6

2

309.3

4

85,7

72.8

8

374,5

21.8

2

Segm

ent Lia

bili

ties

232.3

6

122.1

9

39.5

4

53.9

9

5.8

2

6.8

9

80,0

34.3

8

369,1

18.4

8

39.5

8

104.2

9

80,3

51.6

8

369405.8

4

Unallo

cate

d L

iabili

ties

-

-

-

-

-

-

-

-

-

-

3589.5

83521.6

0

To

tal L

iab

ilit

ies

232.3

6

122.1

9

39.5

4

53.9

9

5.8

2

6.8

9

80,0

34.3

8

369,1

18.4

8

39.5

8

104.2

9

83,9

41.2

6

372,9

27.4

4

Capita

l Exp

enditu

re

- A

lloca

ted

-

-

-

-

-

-

-

-

- U

nallo

cate

d

-

-

-

-

-

-

-

-

-

-

90.2

035.6

3

Depre

ciatio

n

- A

lloca

ted

-

-

-

-

-

-

- U

nallo

cate

d -

-

-

-

-

-

-

-

- -

67.2

652.6

8

Non-C

ash

Exp

ense

s

- A

lloca

ted

-

-

-

-

-

-

-

-

-

-

- -

- U

nallo

cate

d-

--

--

--

--

--

-

(Rs. in

Lakh

s)

63

HHEC

b. Geographical Segment

i) Based on location of customers

(Rs. in lakhs)

Sales Revenue by Geographic Market

2012-13 2011-12

I Outside India

- Middle East 3.18 1.53

- USA 689.04 477.99

- Japan 367.97 258.07

- European Countries 2258.83 2182.51

- Others 260.26 146.78

Sub-total 3579.28 3066.88

II Inside India *412160.51 1209556.50

Total 415739.79 1212623.38

*Rs. 9.11 lakhs (Previous year Rs. 4.41 lakhs) is excluded in the above figure as it is Excise duty on sales.

ii) Based on location of Assets

(Rs. in Lakhs)

Carrying Amount of Segment Assets Additions to Fixed Assets

2012-13 2011-12 2012-13 2011-12

Inside India 85753.19 374502.80 90.20 38.75

Outside India 19.69 19.02 - -

Total 85772.88 374521.82 90.20 38.75

xviii)General

a) An Agreement for export of handmade paper products signed between HHEC and M/s. Frontline Paper Pvt. Ltd. (FPPL) on 01.09.2008 and on 01.02.2010. In pursuance of the agreement, FPPL had taken over physical possession of the premises at 92, Okhla Industrial Estate Phase-III, New Delhi consisting of 6714.15 sq. ft. w.e.f. 01.09.2008 and additional area of 1964.90 sq. ft. w.e.f 01.02.2010. As per the terms of the first agreement, FPPL would provide minimum guaranteed margin of 5% on turnover of Rs.2.00

stcrores or Rs.20.00 lakhs for full year, whichever is higher in the 1 year and minimum guaranteed margin of 5% on turnover of Rs. 4.00 crores in the 2nd year onwards. As per the terms of the second agreement, FPPL would provide minimum guaranteed margin of 5% on

stturnover of Rs. 1.00 crore or Rs. 10 lakhs per annum, whichever is higher in the 1 year and minimum guaranteed margin of 5% on ndturnover of Rs. 2.00 crores in the 2 year onwards.

FPPL could not achieve the minimum guaranteed turnover and were also erratic and irregular in making payment of the minimum guaranteed margin of Rs.30.00 lakhs per annum. Corporation has taken initiatives and issued notice to FPPL for payment of outstanding dues and vacation of the premises prior to expiry of the agreement on 31.08.2011. Ministry of Textiles vide their notification dated 18.05.2012 and as per section 3 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 (40 of 1971) appointed Estate Officer in this regard.

Hon’ble Estate Officer has passed final order on 22.02.2013 and gives a direction to FPPL to vacate the premises within 15 days of the date of order and further directed to pay a sum of Rs.154.36 lakhs. In pursuance of the order dt.22.2.2013 HHEC sealed the premises on 26.3.2013. Further Hon’ble Estate Officer has issue a notice on 28.3.2013 for auction of the articles lying in premises. FPPL filed an appeal before Dist. Court, Saket against the said order and also filed various Miscellaneous Petitions in the Dist. Court and in the High Court against the said sealing and auction notice but failed to succeed. The FPPL filed an appeal in Dist. Court which is pending before court.

b) During the year 2011-12 Chennai Corporation had sent demand notice for payment of property tax for the period 1998-1999 up to I half of 2011 amounting Rs. 38,87,625/-. Out of the total amount demanded, an amount of Rs. 12,95,875/-, being 1/3 of such amount, was paid under protest and appeal.

Similar to the property tax, a demand notice was received from M/s. Metropolitan Water Supply and Sewerage Board during FY 2011-2012 for an amount of Rs. 12,61,899/- for the period 1998-1999 to 2011, as against which an amount of Rs. 6,30,950/-, being 50% of the demand was paid under protest and appeal.

However, a final notice was sent by Chennai Corporation during the year 2012-13, demanding for a final amount of Rs. 45,09,644/- for the period from 1998-99 up to 2012-13. In order to go for an appeal to Tribunal, 50% of the total demand after considering and earlier

64

HHEC

payment of Rs. 12,95,875/-, an additional amount of Rs.9,58,947/- was paid under protest and appeal in F.Y.2012-2013 to Chennai Corporation. However, our appeal got accepted by taxation appeals Tribunal, Chennai Corporation and awarded their order explicitly exempting our Corporation from paying Property Tax. Consequently, we have requested Revenue Officer, Zone-13, Chennai Corporation to refund Rs. 22,54,822/- and the same is written back in our accounts for F.Y. 2012-2013.

c) Applications for extension of time / waiver / write-off are being made with the Authorized Dealers (Banks), wherever applicable, in cases where GR-I/SDF forms are pending for realization beyond due date. Liability, if any, will be accounted for in the year in which the order is received.

d) Sales are net off after adjusting sales returns.

e) Purchases are net off after adjusting purchase returns.

f) Bank charges, withholding tax, interest, forward premium / discount, exchange variation and profit/loss on forward cover cancellation/early utilization incurred on bullion imports are arrived at after adjusting the recoveries / credits made from the customers.

g) Letters for confirmation of debit balances and credit balances have been sent with request to confirm or comment by the stipulated date, failing which balance as indicated in the letter would be taken as confirmed. Confirmations have been received in few cases. However, no adverse comments from the parties have been received.

h) In the opinion of the Management, the value of Current Assets, Loans and Advances on realization in the ordinary course of business will not be less than the value at which these are stated in the Balance Sheet.

i) Figures have been rounded off to the nearest multiple of Lakh in the case of Profit & Loss Account, Balance Sheet, Notes on Accounts and Cash Flow Statement.

j) Wherever necessary previous year figures have been rearranged /regrouped to make them comparable with those of the current year.

k) Notes 1 to 2.31 forms an integral part of the accounts and have been duly authenticated.

sd/- sd/-

For J.N. Mital & Co (Ujjal Datta) (Azra Banu)

Chartered Accountants Chief Finance Manager Director (Finance)

Firm Regd. No: 003587N

sd/- sd/-

( CA R. Mittal ) (Nirmal Sinha)

Partner Chairman-cum- Managing Director

Membership No: 084470

Place: New Delhi.

Dated: 27 AUG 2013

65

HHEC

66

HHEC

67

HHEC

MANAGEMENT’S REPLYINDEPENDENT AUDITOR’S REPORTTO

THE MEMBERS OFTHE HANDICRAFTS AND HANDLOOMSEXPORTS CORPORATION OF INDIA LIMITED

Report on the Financial StatementsWe have audited the accompanying financial statements of The Handicrafts & Handlooms Exports Corporation of India Limited, which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

68

HHEC

*Basis for Qualified Opinion

1. The Title Deeds of three properties situated at Delhi costing Rs.212.18 Lakhs have not been executed in favour of Corporation. Hence the amount of liability on account of stamp duty on registration of title deeds cannot be ascertained. (Refer Note No.2.9 – Fixed Assets)

2. As explained to us, the balance of trade receivables, trade payables, deposits & advances are subject to reconciliation / confirmation. Hence, the consequential impact thereof, if any, on the accounts of the Corporation is unascertainable. (Refer Note No. 2.31(xviii)(g))

3. In respect of bullion business, trade receivables for Rs.4345.93 lakhs are appearing in the balance sheet as on 31/03/2013 which is against the policy of Cash and Carry in accordance with the Bullion Agreement which needs to be reconciled.

The matter regarding non-execution of title deed in respect of three properties had been pending for over 17 years despite constant follow-up.

i) Stamp duty along with the lease deed for property at Okhla Industrial Estate, New Delhi has been deposited and being followed up for execution.

ii) The sub-lease agreement in favour of the Corporation for residential flats in S.T.C. Housing Colony, New Delhi is pending due to the non-execution of Lease Agreement between DDA & STC. However, demarcation of property between STC & HHEC has been completed. Action initiated for getting sub-lease in favour of HHEC and is pending due to no due certificate to be released from S.T.C.

iii) The execution of lease deed for the office building at Jawahar Vyapar Bhawan by L & DO in favour of STC is pending. After the execution of the lease, sub lease between HHEC and STC shall be signed. Execution of direct lease agreement between HHEC and L & DO is also being explored.

Request for balance confirmation for trade debit/credit balances have been sent to parties to confirm or comment by stipulated date, failing which it will be treated as confirmed. Confirmation has been received in few cases. However, no adverse comments from parties have been received.

As per the Bullion Agreement there are various module as under:

1. Outright basis.

2. Against Buyer’s Credit

3. Against Usance Documentary Letter of Credit

Cash and Carry Policy falls under purchase against outright basis.

The outstanding Debtors as on 31-03-2013 are on account of purchases of bullion by the associates against Buyers Credit/Letter of credit for which due payment is settled on the valuation date. The debtors have occurred during the course of business and are current in nature. The same is disclosed in our accounts refer notes under 2.14 and 2.31 (iii) (a).

69

HHEC

4. Reference to Note No.2.18 (a) (i), in respect of mesne profit determined by Hon’ble Bombay High Court for Rs.120.00 per sq. ft. p.m. alongwith interest @ 6% p.a.to be paid within 3 months and as upheld against the Corporation by Hon’ble Supreme Court of India, the Corporation has made provision only to the extent of Rs.63.50 per sq. ft. p.m. instead of Rs.120.00 per sq. ft. p.m. alongwith interest @ 6% p.a. without providing TDS which amounts to Rs.212.19 lakhs (including provision for Rs.86.19 lakhs made in previous years and Rs.58.25 lakhs as interest) and the balance amount for Rs. 144.47 lakhs towards mesne profit and Rs.62.49 lakhs towards interest has been shown under contingent liability. Therefore the profit for the year is overstated to the extent of Rs.206.96 lakhs and the provision for rent is understated to that extent.

Further Provision for Rent has been classified as provision others as long term under Notes 2.4 instead of short term provisions and long term provisions under Notes 2.8 are overstated and short terms provisions are understated to that extent.

5. Certain observations in respect of the internal control procedures, as stated in para (iv) of annexure to the main audit report, which may have consequential effect on the accounts for the year (effect not ascertainable)

*Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

As the Corporation is in the process of filing a review petition of the order of the Hon'ble Supreme Court and till date no E.P (Execution Proceedings) has been filed by the landlord. Hence, without prejudice to rights and conditions of the Corporation before the Court of Law and as a matter of prudence, provision of mesne profit has been made at the barest minimum Rs.63.50 per sq.ft. per month along with simple interest @6% p.a. and balance are shown as contingent liability which works out to Rs 126.01 lakhs during 2012-13 and Rs 86.19 lakhs already provided in our accounts.

As the litigation is still pending before Hon'ble Apex Court and the liability of Rs.120 per sq. ft. Per month as determined by Hon'ble High Court is still contested by the Management and as a result TDS liability as well as a charge to respective heads of expenses can only be on final payment to the landlord after prolonged litigation is over. Hence the Corporation neither overstated the profit nor understated the provision of rent.

In this regard we may refer to Judgement of Bombay High Court against Madhusudan Shrikrishna vs. Emkay Exports (2010) 188 Taxman 195 (Bom) regarding TDS deduction is only at the time of payment to Decree Holder.

The Corporation is in the process of filing a review petition and as the litigation is still pending before Hon'ble Apex Court, the provision has been shown under long-term. Hence the Corporation neither overstated the long-term provisions nor understated the short-term provision.

Reply given in para (iv) of Annexure to Auditor's report

70

HHEC

(a) in the case of the Balance Sheet, of the state of affairs of

the Company as at March 31, 2013;

(b) in the case of the Profit and Loss Account, of the profit for

the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows

for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor’s Report)

Order, 2003 issued by the Central Government of India

in terms of sub-section (4A) of section 227 of the Act,

we give in the Annexure a statement on the matters

specified in paragraphs 4 and 5 of the Order.

2. As required by section 227(3) of the Act, we report that:

a. we have obtained all the information and

explanations which to the best of our knowledge

and belief were necessary for the purpose of our

audit;

b. in our opinion proper books of account as required

by law have been kept by the Company so far as

appears from our examination of those books [and

proper returns adequate for the purposes of our

audit have been received from branches not

visited by us];

c. the Balance Sheet, Statement of Profit and Loss,

and Cash Flow Statement dealt with by this Report

are in agreement with the books of account [and

with the returns received from branches not visited

by us;

d. Except for the effects of the matter described in the

Basis for Qualified Opinion paragraph, the Balance

Sheet, Statement of Profit and Loss, and Cash Flow

Statement comply with the Accounting Standards

referred to in subsection (3C) of section 211 of the

Companies Act, 1956;

71

HHEC

e. In terms of Government of India, Ministry of Finance,

Department of Company Affairs Notification No. GSR st829 (E) dated 21 October 2003 Government

Companies is exempt from the applicability of

provisions of Section 274(1) (g) of the Companies Act,

1956.

For J.N. MITAL & CO.

Chartered Accountants

FRNCO3587N

(CA. R.Mittal)

(Partner)

M.No. 084470

Place: New DelhiDated: 27/08/2013

72

HHEC

The Annexure referred to in Report on Other Legal and Regulatory Requirements paragraph of the Independent Auditors Report of even date to the members of The Handicrafts & Handlooms Exports Corporation of India Limited for the year ended 31st March, 2013

(I) In respect of its fixed assets:

(a) The Corporation has maintained proper records showing full particulars including quantitative details and situation of fixed assets but it needs to be improved.

(b) As informed to us, physical verification of fixed assets has been conducted on annual basis by the management of the corporation, which in our opinion is reasonable, having regard to the size of the corporation. According to the information and explanations given to us, no material discrepancies were noticed on such verification.

(c) In our opinion and according to the information and explanations given to us, the Corporation has not made any substantial disposals of fixed assets during the year which may affect the going concern status of the Corporation.

(ii) In respect of its Inventories:

(a) As explained to us, inventories were physically verified by the management of the corporation at the end of the year. In our opinion, the frequency of verification of inventories should be done at regular intervals.

(b) In our opinion and according to the information and explanation 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 corporation and the nature of its business.

(c) In our opinion and according to the information and explanations given to us, the corporation has generally maintaining proper records of inventory. The discrepancies noticed on verification between the physical stocks and book records, which in our opinion were not material, have been properly dealt with in the books of accounts.

(iii) According to the information and explanations given to us, the corporation has, during the year, not taken or granted any loans, secured or unsecured from companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly Paragraphs 4(iii) (a), (b), (c), (d), (e), (f) and (g) of the order are not applicable.

MANAGEMENT'S REPLY

73

HHEC

The Internal control mechanism are generally reviewed from time to time and necessary strengthening of the procedures are done wherever required on a continuous basis, despite the manpower constrain.

Old outstanding debtors, loans and advances, court cases, etc. are reviewed from time to time. Settlement of claims for property tax in Chennai Regional Office is one such example during the year.

Reconciliation of major outstanding balances are continuously carried amount including the process for the reconciliation as stated by audit.

View point of Audit noted for further improvement.

Old income tax/Sales Tax cases etc. are reviewed from time-to-time. Please refer to our note No. 2.31viii (a) appended to the account in this regard.

Staff Training is provided in various areas of law or new departments in various Direct/Indirect Tax. However this will be further strengthened.


(iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Corporation and the nature of its business with regard to the purchase of inventory and fixed assets and for sale of goods. During the course of our audit, we have neither come across nor have information of any instance of any continuing failure to correct major weaknesses in internal controls. However the internal control mechanism needs to be strengthened in the following areas:

• Active and prompt follow up old debts, advances claims, court cases and recoveries etc missing out of execution of decrees /awards in favour of the companies, by respective regional office.

• Confirmation of outstanding balances and its periodic reconciliations in order to ensure the accuracy and completeness of transactions. Integral part of the reconciliation process include identifying and investigating differences, and taking corrective action, when necessary, to resolve differences.

• Routinely spot-check transactions, records, and reconciliations to ensure expectations are met as to timeliness, completeness, segregation of duties, propriety of the transaction, etc.)

• Follow up on unexpected results or unusual transactions. Documentation of reviews of reports and reconciliations by initialing and dating them and briefly indicating the resolution of any follow-up action performed on unexpected results or unusual transactions.

• Expeditions follow up old income tax/Sales Tax cases/appeals pending with courts/appellate Authorities to save on legal costs and interest payable on disputed additional demands.

• The corporation should strengthen its control mechanism, review internal control system as well as providing staff training due to rapid changing of various laws for proper ascertainment of its statutory dues such as sales tax, excise and service tax, TDS for preventing any further litigation an1d interest and penalty.

74

HHEC

The Corporation is mainly in the business of exports of handlooms, garments and handicrafts and certain accumulation of stock is inevitable due to procurement of fabric based on technical estimates for conversion to garments, shade variations and for possible rejections in processing and fabrication stages. Besides, in retail operations and certain level of inventory is to be maintained for generating sales. The markdown of inventory by Rs.133.81 lakhs (Previous year Rs. 163.43 lakhs) is a cumulative figure of more than five years and is very nominal percentage of the volume of turnover in the core group during this period. However, steps are taken from time to time for liquidation of surplus stocks by offerings to existing clients, bulk disposals and periodic clearance sales.


• Action to reduce the piling up of the stock in order

to increase the value of closing stock as per

Accounting Policies No V(b) on Inventories. In

pursuance of accounting policy, stocks have been

valued after mark-down by Rs 133.81 lakhs.

(v) (a) According to the information and explanations given

to us, there are no transactions made in pursuance of

contracts or arrangements entered in registers

maintained under section 301 of the Companies Act,

1956.

(b) Accordingly, the provisions of the Clause v (b) of

Para 4 of the Companies (Auditors’ Report) Order 2003

are not applicable to the corporation.

(vi) According to the information and explanations given to

us, the corporation has not accepted any deposits

within the meaning of section 58A and 58AA of the

Companies Act, 1956.

(vii) The Internal Audit of the Corporation has been

assigned to a firm of Chartered Accountants in respect

of all regional office inclusive of Head Office and

Corporate Office, the scope of which is not

commensurate with the size and nature of the business

of the Corporation and it needs improvement. And the

compliance of Internal Audit Reports also needs to be

improved.

75

HHEC

(viii) We have broadly reviewed the cost records maintained by the Corporation pursuant to the Companies (Cost Accounting Records) Rules, 2011 prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956 and are of the opinion that prima facie the prescribed cost records have been maintained. We have, however, not made a detailed examination of the cost records with a view to determine whether they are accurate or complete.

(ix) According to the information and explanations given to us, in respect of statutory and other dues:

(a) The Corporation has been generally regular in depositing with appropriate authorities undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income tax, Sales tax, Custom duty, Cess and any other statutory dues applicable to it during the year.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of aforesaid were in arrears, as at 31st March, 2013 for a period of more than six months from the date they became payable except in case as mentioned below.

Statement Showing of Disputed dues of Property Tax & Water Tax Due-

S. Name of Nature of Amount Period Due Date of

No. Statute Dues (Rs.in to which Date payment

lakhs) the

Amount

relates

1* Chennai Water 6.31 1998- N.A N.A.

Metro Tax Due 1999 to

Water 2011-

Board 2012

* Representation by the Corporation has been made to reduce the amount of tax therefore not paid.

(b) According to the information and explanations given to us, there are disputed dues of Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty & Excise duties which have not been deposited as given below :

The Corporation is covered under Cost Audit in terms of under section 233-B of the Companies Act 1956. Cost records compliance certificate has also been duly certified by Cost Auditors of the Corporation.

76

HHEC

S. Name of Nature of Amount Period Forum

No. the Statute the Dues ( Rs.in which where

Lakhs) Amount dispute is

relates Pending

1 Central Assessment 1.03 A.Y.1985-1986 Madras

Sales Tax Order High Court

2 Central Assessment 2.14 A.Y.1986-1987 Madras

Sales Tax Order High Court

3 Central Assessment 8.58 A.Y.1989-1990 Tamil Nadu Sales

Sales Tax Order Tax Tribunal

4 Central Assessment 5.17 A.Y.1990-1991 Tamil Nadu Sales

Sales Tax Order Tax Tribunal

5 Textile Cess Order 6.77 2002-2003 and Textile

Committee 2003-2004 Committee

Cess Tribunal Mumbai

6 Income Assessement 34.60 2002-2003 ITAT, Delhi

Tax* Order

7 Income Assessment 103.05 2005-2006 ITAT, Delhi

Tax* Order

Grand

Total

(a + b) 161.34

*The corporation had not produced any documentary evidence except other disclosure viii) and certificate from legal advisor.

The collection of the above demand of Rs.16.92 lakhs at serial no 1 to 4 has been stayed for recovery by Sales Tax Department on furnishing of bank Guarantee of Rs.15.99 lakhs and cash deposits of Rs.0.93 lakhs.

(x) The Corporation has no accumulated losses as on March st31 , 2013. The corporation has not incurred cash losses

during the financial year covered by our audit and immediately preceding financial year.

(xi) Based on our audit procedures and according to the information and explanations given by the management, we are of the opinion that the corporation has not defaulted in the repayment of dues to financial institutions, and banks. There were no Debenture holders at anytime during the year.

(xii) According to the information and explanations given to us, the corporation has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

Statement Showing of Disputed dues of Sales tax, Income tax, Customs duty, Wealth Tax, Excise duty and Cess

77

HHEC

(xiii) In our opinion the Corporation is not a chit fund or a

nidhi/mutual benefit fund/society. Accordingly, the

provisions of clause (xiii) of Para 4 of the Companies

(Auditors’ Report) Order 2003 are not applicable to the

corporation.

(xiv) In our opinion the Corporation is not dealing in or trading

in shares, securities, debentures and other

investments. Accordingly the provision of clause (xiv) of

Para 4 of the Companies (Auditors’ report) Order 2003

are not applicable to the corporation.

(xv) In our opinion and according to the information and

explanations given to us, the Corporation has not given

any guarantee for loans taken by others from banks and

financial institutions.

(xvi) According to the information and explanations given to

us, the corporation has not raised any term loan during

the year and hence, no comment is offered in this

regard.

(xvii) According to the information and explanations given to

us and on an overall examination of the balance sheet

of the corporation, we report that the no funds raised on

short-term basis that have been used for long-term

investment.

(xviii)The corporation has not made any preferential

allotment of shares to parties and companies covered

in the register maintained under Section 301 of the

Companies Act, 1956 during the year.

(xix) According to the information and explanations given to

us, during the period covered by our audit report, the

corporation has not issued any debentures during the

year. Accordingly the provisions of clause (xix) of Para 4

of the Companies (Auditors’ Report) Order 2003 as

amended by the companies (Auditors’ Report)

(Amendment) Order 2004, are not applicable to the

corporation.

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HHEC

(xx) The Corporation has not raised any money through a

public issue during the year. Accordingly the provisions

of clause (xx) of para 4 the Companies (Auditors’

Report) Order 2003 as amended by the companies

(Auditors’ Report) (Amendment) Order 2004, are not

applicable to the corporation.

(xxi) Based on the audit procedures performed for the

purpose of reporting true and fair view of the financial

statements and according to the information and

explanations given to us, no fraud by or on the

corporation has been noticed or reported during the

course of our audit.

For J.N. MITAL & CO.

Chartered Accountants

FRN.003587N

(CA. R.Mittal)

(Partner)

M. No. 084470

Place: New Delhi

Dated: 27/08/2013

79

DILLI HAATINA MarketSri Aurobindo Marg New Delhi-110023Phone 011-24674403Time: 10am to 9pmOpen All Days

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SONA OF INDIARajiv Gandhi Hast Shilp BhawanBaba Kharak Singh Marg New DelhiTime: 10:30 am to 7:00pmWeekly Holiday (Sunday)E-shop at www.hheconline.in

PATNA MUSEUM SHOPBudh Marg, Patna, Bihar 800001Phone: 0612-2200039Time: 10am to 5pm, Weekly Holiday (Monday)

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Documents

HHEC Annual Report English Annual_ Report_English.pdf · Chartered Accountant, New Delhi Mumbai Branch M/s. C.C. Dangi & Associate Chartered Accountants, Mumbai ... Society Ltd.,