TOWELS INDIA EXPORTS LIMITED ANNUAL REPORT 2001-2002 DIRECTORS'REPORT TO THE MEMBERS: 1.0 Your Directors hereby present their Sixteenth Annual Report together with the Audited Balance Sheet & Profit &Loss Account for the year ended on 31st March 2002 on the business and operations of the Company. 2.0 Performance & Finance: 2.1 The turnover for the current year includes income from operations Rs. 760.26 as against Rs.501.42 lacs in the previous year recording increase of 51.62%. This was possible on account of improvement in the Capacity utilization from 17% to 28% resulting into increase in production tonnage and a corresponding increase in sales. 2.2 With the persistent scenario of negative net worth, pressing creditors and non availability of further assistance from Banks, the Company continued its arrangement with the local merchant exporters for the procurement of basic raw material & other services against their sales orders. In this process the Company sacrificed on the percentage of sales margin and managed,to keep its Solapur Unit in operation. 3.0 The Honourable Board for Industrial & Financial Reconstruction (BIFR) vide its order dated 01.04.2002 dismissed Company's' Reference Application declaring Company's net worth is positive. Being aggrieved with this order, the Company preferred on Appeal before the Honourable Appellate Authority for Industrial & Financial Reconstruction (AAIFR) and the matter having heared on 20.06.2002 remains undecided. The Company also filed a fresh Reference Application based on Audited Accounts for the year ended 31.3.2001. However the Hon'ble BIFIR declined to register the same initially because of the pendency of earlier Application & subsequently treating it as a time barring one. The Company is in the process of filing an Appeal before Hon'ble Secretary B.I.F.R. praying for the Registration and the outcome of the case is awaited. 5.0 Prospects: 5.1 The Company is in process of formulating a detailed Rehabilitation Scheme providing inter alia, reliefs in form of waiver of penal interest, reschedulement of term loan, funding of irregularities and Working Capital for future operations. TOWELS INDIA EXPORTS LIMITED 5.2 If the reliefs as suggested in para 5.1 above be made available, the Company expects to achieve optimum utilization of its capacity within a short span of 3 to 4 months from the date of introduction of the reliefs. Company having well established itself in foreign as well as local market, is capable to sell its production in entirety. 5.3 Having successfully completed experiment in developing technology for quality printed towels of international standard, your Company expects to further its production of towels from present sixty five percent to seventy five percent of the total production which will improve sales realisation. 6.0 The industrial relations continued to be cordial. 6.1 The Company's Chiplun unit is not in operation since l.4.1999. The Management is negotiating with the Trade Union representing the workers employed at Chiplun Unit for formulating scheme for the settlement of workers' dues. 7.0 Directors: 7.1 Mr. D.R.Chheda who will be retiring by rotation, being eligible, offers himself for re-appointment. 8.0 Auditors: 8.1 The observation in para 2 (v) of the Auditors' Report find explanation in Schedule 16 of Notes to the Accounts. 8.2 The Company's Auditors M/s K.M.Vasudeva & Co. retire as auditors and are eligible for re-appointment, 9.0 Particular of Exployees. 9.1 The Company has no employee of the category specified under section 217 (2A) of the Companies Act 1956. 10.0 Conservation of Energy: 10.1 The energy consumption per ton of production during the year is marginally improved. However the conservation of energy will be achievable with the higher capacity utilization. 11.0 Research & Development: The Company is constantly working on improvement in the quality of product at every stage of production. 12.0 Acknowledgment: The Directors wish to place on record their appreciation for the support given to the Company by its Employees in these difficult days. They would also like to thank the customers, suppliers, shareholders, institutions, banks and government agencies for the assistance and support given to the Company. For and on Behalf of the Board MUMBAI KULIN H. KOTHARI Date:28th June, 2002 (Chairman & Managing Director)