Venkannapalem Village, Nellore Dist.

The Directors have pleasure in presenting the Twenty Fourth Annual Report of the Com- pany together with Audited Accounts for the year ended 31st March, 2014

FINANCIAL RESULTS

                                        YEAR ENDED    YEAR ENDED
Particulars                             31-03-2014    31-03-2013
                                       (Rs. In Lacs)  (Rs. InLacs)

Total Income                             14119.42        6019.14

Gross Profit before Interest &             744.27         517.24
Depreciation

Interest                                    47.87           3.42

Depreciation                               302.99         288.02

Profit ( /Loss(-)                          393.41         225.80

Provision for Income tax                    80.10          45.17

Mat Credit Entitlement                     -80.10         -45.17

Deferred tax adjustments                   136.68          74.08

Balance Brought forward                    387.67         235.96

carried forward                         ( )644.40     ( ) 387.67

OPERATING PERFORMANCE: The turnover of the company for the year ended 31st March, 2014 was Rs.14031.45 lakhs against Rs. 5957.92 lakhs in the previous year. During the year the company made sales of Rs. 13451.48 lakhs against Rs.5516.24 lakhs in the previous year Job work receipts of Rs. 415.76 lakhs against Rs. 380.53 lakhs in the previous year and during the year the company has made an operating profit of Rs.393.41 lakhs against Rs. 225.80 lakhs in the previous year.

OPERATIONS; Your directors are confident that the performance of the company will im- prove in the years to come.

FUTURE OUTLOOK; Our product is well received in the international market as well as domestic market. We are hopeful of achieving much better results in the years to come.

DIVIDEND: In order to retain the profits to strengthen the capital base, no dividend has been recommended by the Board for the year under review.

LISTING OF SHARES: The securities of the Company are listed on Bombay Stock Exchange. Annual Listing Fees for the year 2014-2015 has been duly paid to the Mumbai Stock Exchange.

DEPOSITS; Your company has not accepted deposits within the meaning of Section 58A of the Companies Act, 1956 and the Rules made there under.

DIRECTORS; Pursuant to the provisions of section 149 of the Companies Act 2013, Non-executive Independent Directors of the company, Mr. M.B.R. Prasad, Mr. T. Valsaraj and Mr. Veerraju Manda have been recommended to be appointed as Independent Direc- tors of the Company as approved by the nomination and remuneration Committee.

Mr. Sharat Reddy is Director of the company and the Nomination and Remuneration Committee at its meeting held on 05.09.2014 and the Board of Directors at is meeting held on 05.09.2014, have recommended the appointment him as Whole Time Director of the company

AUDITORS: M/s P.A. Reddy & Co., Chartered Accountants, retiring auditors of the Company, being eligible, offer themselves for re-appointment as auditors of the company. They have furnished a certificate of their eligibility U/S143 (3) of the Companies Act, 2013. The members are requested to re-appoint the auditors and authorize the Managing Director to fix their remuneration.

COMMENTS ON AUDITORS REPORT:

In respect of Post Retirement Benefits viz. Gratuity, as per Accounting Standard-15 issued by the Institute of Chartered Accountants of India, the Company should make provision on actuarial basis every year towards liability for future payment of gratuity. However the Company has been following the policy of charging such gratuity payment to Statement of Profit and Loss in the year in which such payments are made. Such accounting treatment is not in accordance with the Accounting Standard referred above. In the'absence of details we are unable to comment on the effect of such non-provision on the profits for the year and net worth of the Company.

The report of the Insurance Company on actuarial liability for gratuity is awaited. We shall make the requisite provision in the current year. We are taking steps to cover all the em- ployees under ESI Scheme in the current year.

In respect of some creditors, trade debtors and advances recoverable, there are neither confirmations of the year-end balances nor reconciliation of the accounts. In the absence of such confirmations / reconciliations, we are unable to comment on the effect of such accounts on the profit of the Company for the year, year-end balances of trade debtors, trade creditors and advances recoverable and on the net worth of the Company.

Confirmation of balances from some of the creditors who are illiterate farmers could not be obtained. However we are following up the matter to obtain the confirmations. We do not foresee any discrepancies in the balances and hence there will not be any effect on the Accounts. ,

In the preceding year, a claim forRs 179.56 lakhs made on the Company by a Contractor has been upheld by the lower court and the Company has challenged the same in A.P. High Court. In our opinion, on the principle of prudence the liability should have been provided for in the books. If such provision had been made the short-term liabilities would be higher by Rs. 179.56 lakhs and the net worth would be lower by Rs. 179.56 lakhs.

The company made an appeal in the Honorable High Court and expecting favourable verdict.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirement under section 217 (2AA) of the Companies Act, 1956 with respect to Directors Responsibility Statement, it is hereby confirmed.

(i) That in the preparation of the accounts for the financial year ended 31st March, 2014; the applicable accounting standards have been followed along with proper explanation relating to material departures.

(ii) That the Directors have 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 of the end of the financial year and of the profit of the company for the year under review.

(iii) That the Directors have taken proper care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) That the Directors have prepared the accounts for the financial year ended 31st March, 2014 on a going concern basis.

MANAGEMENT DISCUSSION AND ANALYSIS: The Directors' comments on Management Discussion and Analysis are restricted to the areas which are relevant to the current scenario of the Company and outlook. A separate section on Management Discussion and Analysis is annexed (Annexure - II)

REPORT ON CORPORATE GOVERNANCE: Your Company is trying to practice principle of good Corporate Governance over the years. The endeavor of the Company is not only to comply with the regulatory requirements but also to practice good Corporate Governance that lays strong emphasis on integrity, transparency and overall accountability. A separate section on Corporate Governance is annexed and forms part of this report. (Annexure - III)

PARTICULARS OF EMPLOYEES; During the year, there were no employees drawing remuneration as per limits specified under Section 217 (2A) of the Companies Act, 1956 INGS & OUTGO - Information as per Section 217 (iWei of the Companies Act. 1956: Par- ticulars regarding conservation of energy, technology absorption, foreign exchange earnings and outgo as required to be disclosed under Companies (Disclosure of particulars in the Report of the Board of Directors) Rules 1988, and Foreign Exchange earn- ings and outgo have been furnished in Annexure -1.

PERSONNEL: The relations between the management and the staff were very cordial throughout the year. Your Directors take this opportunity to record their appreciation for the co-operation and loyal services rendered by the employees.

ACKNOWLEDGEMENTS: Your Directors gratefully acknowledge with thanks the construe- tive guidance and co-operation extended by MPEDA, FEDERAL BANK LIMITED and other Government Agencies. .

                                   BY THE ORDER OF BOARD OF DIRECTORS
                                     For SHARAT INDUSTRIES LIMITED

                                                   {SD}
PLACE: VENKANNAPALEM                        S. PRASAD REDDY
DATE: 05.09.2014                      CHAIRMAN & MANAGING DIRECTOR