Dear Shareholders,

The Directors have the pleasure in presenting the 32nd Annual Report and the Audited Accounts of the Company for the year ended 31st March, 2016.

FINANCIAL HIGHLIGHTS¹

(Rupees in Lac)

Note:

¹ The Hon'ble High Court of Judicature at Bombay had vide its order dated 29th March, 2016 effective from 1st April, 2016, approved the Scheme of Arrangement ("Scheme") between Mandhana Industries Limited ("MIL") and The Mandhana Retail Ventures Limited ("MRVL") and their respective Shareholders and Creditors, pursuant to which the Retail Business of MIL has been demerged and transferred into MRVL from the appointed date viz. 1st April, 2014. Consequent of the demerger, the financial figures of the discontinued Retail Business of MIL is not included for current as well as previous period.

COMPANY PERFORMANCE AND BUSINESS OVERVIEW

During the year under review, the textiles and garments segment grew at a rate of 6.18% and 12.54% respectively, which resulted in your company achieving sales of Rs. 164,660.61 Lac, reflecting a growth of approximately 6.72% over the last fiscal. EBIDTA margin has marginally increased to 14.73% vis-a-vis 14.72%. The net profit for the year has decreased because of the increase in the interest expenses and longer working capital cycle, it has decreased from Rs. 6,272.26 Lac to Rs. 5,713.00 Lac. The margins for both the segments have become more competitive.

The management has taken several measures to ensure better management of working capital, monitoring of project performance on continuous basis and completion of projects as per schedule to avoid cost and time over run.

A detailed discussion of operations for the year ended 31st March, 2016 is provided in the Management Discussion and Analysis Report, which is presented in a separate section forming part of this Annual Report.

SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR 2015-16

During the year under review, the Hon'ble High Court of judicature at Bombay had, vide its order dated 29th March, 2016 sanctioned the Scheme of Arrangement ("Scheme") between Mandhana Industries Limited ("MIL/ Company") and The Mandhana Retail Ventures Limited (formerly Mandhana Retail Ventures Limited) ("MRVL") and their respective shareholders and creditors under Section 391 to 394 read with Sections 100 to 103 of the Companies Act, 1956. Pursuant to the Scheme, the retail business of MIL has been demerged and transferred into MRVL with effect from the Appointed Date i.e. 1st April, 2014.

DIVIDEND

In view of supplication of proposed Strategic Debt Restructuring, the Board of the Directors has rescinded the dividend recommended for the financial year ended 31st March, 2016.

CORPORATE GOVERNANCE

Reports on Corporate Governance and Management Discussion and Analysis, in accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), along with a certificate from Auditors regarding compliance of the Corporate Governance are given separately in this Annual Report.

All Board members and senior management personnel have affirmed compliance with the code of conduct for the year 2015-16. A declaration to this effect signed by the Chairman and Managing Director of the Company is contained in this annual report.

PUBLIC DEPOSIT

Your Company has not accepted any public deposits under Chapter V of Companies Act, 2013.

NON CONVERTIBLE DEBENTURES (NCDs)

An aggregate amount of Rs. 19,00,00,000/- (Rupees Nineteen Crore only) towards Secured Redeemable Non-Convertible Debentures (NCDs) issued by the Company, has been redeemed during the year 2015-16 in accordance with terms of the issue of the NCDs. The details of outstanding NCDs as on 31st March, 2016 are provided in annexure to Note No. 3 on Long Term Liabilities forming part of Financial Statements contained in the Annual Report.

IDBI Trusteeship Services Limited is the Debenture Trustee for the Debenture holders whose details are provided in the Corporate Governance Section of the Annual Report.

The applicable listing fees have been paid to the stock exchanges.

DIRECTORS

In accordance with the provisions of the Companies Act, 2013, Mr. Manish B. Mandhana retires by rotation at the ensuing Annual General Meeting and is eligible for reappointment. The information as required to be disclosed under Regulation 36(3) of Listing Regulations, in case of reappointment of directors, is provided in the notice of the ensuing annual general meeting. The Board of Directors has recommended his reappointment for consideration of the shareholders.

Mr. Biharilal C. Mandhana has resigned as a Director of the Company with effect from 10th June, 2016 on account of his ailing health. The Company places on record the valuable contribution of Mr. Biharilal C. Mandhana during his extensive tenure as Director with the Company.

Mr. Ghyanendra Nath Bajpai, Mr. Khurshed M. Thanawalla, Mr. Dilip G. Karnik and Mr. Prashant Asher have resigned as the Directors of the Company with effect from 25th June, 2016, 7th September, 2016, 27th June, 2016 and 7th September, 2016 respectively. Mr. Khurshed M. Thanawalla resigned as a Director of the Company in view of his decision to reduce his work and his formal business commitments. Mr. Ghyanendra Nath Bajpai, Mr. Dilip G. Karnik and Mr. Prashant Asher has tendered their resignation on account of their pre-occupations and prior commitments. The Company places on record the valuable contribution made by all the aforesaid Directors during their tenure as Directors with the Company.

The Company is in the process of identifying suitable and experienced persons to be appointed for the office of the Independent Directors and is expected to finalize the persons to hold the said offices in the coming days.

For the year 2015-16, the Company has received declarations from all its erstwhile Independent Directors, confirming that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges and relevant provisions of the Listing Regulations.

BOARD EVALUATION

Evaluation of performance of all Directors is undertaken annually. The Company has implemented a system of evaluating performance of the Board of Directors and of its Committees and individual Directors on the basis of a structured questionnaire which comprises evaluation criteria taking into consideration various performance related aspects.

The Board of Directors has expressed their satisfaction with the evaluation process.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the year 4 Board Meetings were convened and held, details of which are given in the Corporate Governance Report section.

VIGIL MECHANISM / WHISTLE BLOWER POLICY FOR DIRECTORS AND EMPLOYEES

The Company has established a Vigil Mechanism, which includes a Whistle Blower Policy, for its Directors and Employees, to provide a framework to facilitate responsible and secure reporting of concerns of unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct & Ethics. The Whistle Blower Policy is posted on the website of the Company and the web-link to the same is http://www.mandhana.com/ investorRelation.php

AUDIT COMMITTEE

The Audit Committee for the Financial Year ended 31st March, 2016 comprised of five members viz. 4 Independent Directors and 1 Executive Director, given as under: *Mr. Ghyanendra Nath Bajpai, Mr. Khurshed M. Thanawalla, Mr. Dilip G. Karnik and Mr. Prashant K. Asher have ceased to be Directors and consequently as members of the Audit Committee with effect from 25th June, 2016, 7th September, 2016,27th June, 2016 & 7th September, 2016, respectively.

Further details on the Audit Committee are provided in the Corporate Governance Section.

NOMINATION AND REMUNERATION POLICIES

The Board of Directors has formulated a Policy which lays down a framework for selection and appointment of Directors and Senior Management and for determining qualifications, positive attributes and independence of Directors.

The Board has also formulated a Policy relating to remuneration of Directors, members of Senior Management and Key Managerial Personnel.

Details of the Nomination and Remuneration Policy are given under Annexure - 'D' to this Report.

RISK MANAGEMENT POLICY

The Company has a robust Risk Management framework to identify, measure and mitigate business risks and threats. This framework seeks to create transparency, minimize adverse impact on the business objective and enhance the Company's competitive advantage. This risk framework thus helps in managing market, credit and operations risks and quantifies exposure and potential impact at a Company level.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

No loans, guarantees or Investments covered under sections 186 of the Companies Act, 2013, have been given or provided during the year.

RELATED PARTY TRANSACTIONS

All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in ordinary course of business and on arm's length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3)(h) of the Companies Act, 2013 in Form AOC 2 is not applicable.

Prior omnibus approval of the Audit Committee has been obtained on an annual basis for transactions with related parties which are of a foreseeable and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all transactions with related parties are placed before the Audit Committee for their review on a periodic basis.

MANAGERIAL REMUNERATION

Remuneration to Directors and Key Managerial Personnel

i. The percentage increase in remuneration of each Director and Company Secretary during FY2015-16, ratio of the remuneration of each Director to the median remuneration of the employees of the Company for FY 2015-16 and the comparison of remuneration of each Key Managerial Personnel (KMP) against the performance of the Company are as under:

*Mr. Ghyanendra Nath Bajpai, Mr. Khurshed M. Thanawalla, Mr. Dilip G. Karnik and Mr. Prashant K. Asher has ceased to be Directors with effect from 25th June, 2016, 7th September, 2016, 27th June, 2016 & 7th September, 2016, respectively.

Note: Remuneration paid to each Whole-Time Director and KMP includes Salary, allowances, company's contribution to provident fund and monetary value of perquisites, if any. The remuneration paid to Non-Executive and/or Independent Directors comprises of sitting fees only.

ii. The median remuneration of employees of the Company for the financial year ended 31st March, 2016 was Rs. 1,13,508/-;

iii. In the financial year under review, there was an increase of 9.67% in the median remuneration of employees;

iv. There were 7,570 permanent employees on the rolls of the Company as on 31st March, 2016;

v. Average percentage decline in the salaries of employees other than the managerial personnel in the last financial year i.e. FY2015-16 was 1.37% as compared to FY 2014-15. No change has happened in the Managerial Remuneration as regards comparison of Managerial Remuneration over the said periods.

vi. I t is hereby affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other Employees.

STATUTORY AUDITORS AND AUDITORS' REPORT

M/s. Vishal H. Shah & Associates, Chartered Accountants stepped down as the Statutory Auditors of the Company w.e.f. 8th September, 2016 on account of their pre-occupation. Subsequently, in accordance with Sec 139 of the Companies Act, 2013, the Board of Directors of the Company in its meeting held on 2nd December, 2016 has recommended M/s. KPND & Co., Chartered Accountants (FRN: 133861W), to act as Statutory Auditors of the Company for a period of 5 years to hold office until the conclusion of the 37th Annual General Meeting of the Company in calendar year 2021. In accordance with the provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013 and of the Companies (Audit and Auditors) Rules, 2014, the appointment of the Statutory Auditors is required to be ratified by the shareholders at every Annual General Meeting during their tenure. M/s. KPND & Co., Chartered Accountants, have confirmed that they are eligible to act as the Statutory Auditors.

With regard to the outstanding Tax liability, the payment got delayed in view of the tax implications involved in contemplation of demerger of Retail Business of the Company to MRVL. Since, the demerger of the retail Business of the Company was approved by the Hon'ble High Court of Judicature at Bombay vide its order dated 29th March, 2016, effective from 1st April, 2016, the said Income Tax Liability was to be segregated and paid based on the respective revised Income Tax Returns of both, the Demerged and Resulting Companies separately. With regard to delay in repayment of dues to the bank, as mentioned in the Auditor's Report, we hereby state that the Bank of Baroda (lead Bank) has accorded its in-principle approval for supplication of Strategic Debt Restructuring (SDR) of the Company and majority of members bank have agreed to such invocation of SDR. The other statements made by the Auditors in their Report are self - explanatory and do not call for any further comments.

COST AUDIT REPORT

M/s. Babulal M. Parihar & Co., Cost Accountants have been duly appointed as Cost Auditors by the Board of Directors for conducting Cost Audit in respect of products manufactured by the Company which are covered under the Cost Audit Rules for current financial year ending 31st March, 2017. They were also the Cost Auditor for the previous financial year ended 31st March, 2016. As required by Section 148 of the Companies Act, 2013, necessary resolution has been included in the Notice convening the Annual General Meeting, seeking ratification by Members to the remuneration proposed to be paid to the Cost Auditors for the financial year 31st March, 2016.

The Company has filed the Cost Audit Report for the year ended 31st March, 2016 with the Central Government within the prescribed time.

SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the Companies Act, 2013, and the Rules made there under, the Company has appointed Mr. Nitin R. Joshi, Practicing Company Secretary (Certificate of Practice No. 1884 and Membership No.FCS-3137) as the Secretarial Auditor of the Company. The Secretarial Audit Report is annexed as Annexure - 'E' and forms an integral part of this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Mr. Purushottam C. Mandhana, Chairman & Managing Director possesses extensive proficiency for financial and risk management operations garnered through his association with the Company from its inception and vast experience in the textile industry. He also heads the Finance Department of the Company and performing required duties and functions of a Chief Financial Officer. CORPORATE SOCIAL RESPONSIBILITY The Annual Report on Corporate Social Responsibility activities for FY 2015-16 is enclosed as Annexure - 'C'

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has no subsidiary, Joint Venture and Associate Company as on 31st March, 2016.

SIGNIFICANT EVENTS AFTER BALANCE SHEET DATE

The Company had entered into global exclusive Brand License Agreement with "Being Human - The Salman Khan Foundation" on 23rd December, 2010 effective from 1st January, 2011 to use trademark & logo of "Being Human" for all clothes range/clothing lines. Post approval of the Scheme, the Company and The Salman Khan Foundation agreed to terminate the erstwhile Brand License Agreement vide Termination Agreement dated 24th August, 2016 and simultaneously MRVL has entered into global exclusive Trademark License Agreement on even date to design, manufacture, retail and distribute men's wear, women's wear and accessories under "Being Human" trademark.

In terms of the Scheme, MRVL were required to issue and allot to each of the eligible members of MIL whose name was recorded as beneficial owners in depositories at the close of working hours on 23rd September, 2016 ("Record Date") and as shareholders in the register of members of MIL as on that date in the ratio of 2 equity shares of MRVL for every 3 equity shares held by the equity shareholder in MIL. Accordingly, the Board of Directors of MRVL had on 27th September, 2016 allotted Equity Shares to those shareholders of MIL whose names appeared in the Register of Members as on the Record Date mentioned herein above.

Majority of the consortium of lenders from whom the Company has raised term loan/working capital have agreed to invoke Strategic Debt Restructuring on 26th October, 2016 considering 24th June, 2016 as a reference date subject to receiving in-principle approval from their respective sanctioning authorities.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS

The Company has adequate internal financial controls in place with reference to financial statements. These are continually reviewed by the Company to strengthen the same wherever required. The internal control systems are supplemented by internal audit carried out by an independent firm of Chartered Accountants and periodical review by management. The Audit Committee of the Board addresses issues raised by both, the Internal Auditors and the Statutory Auditors.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements under sub section (3)(c) and (5) of Section 134 of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that;

i) in the preparation of the annual accounts for the financial year ended 31st March, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii) 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 at the end of the financial year and of the profit of the Company for the year under review;

iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provision of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) the Directors have prepared the annual financial statements on a going concern basis;

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

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

PARTICULARS OF EMPLOYEES

Details of employee remuneration as required under provisions of Section 197 of the Companies Act, 2013 and Rule 5(2) & 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in Annexure - A forming part of this Report. PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE AND OUTGO

Particulars of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as per section 134(3)(2) of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 for the year ended March 31, 2015 are provided under Annexure - 'B' to this report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in Form MGT-9 is provided under Annexure - 'F' forming part of this Report.

OTHERS

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

1. The details relating to deposits, covered under Chapter V of the Act, since neither has the Company accepted deposits during the year under review nor were there any deposits outstanding during the year.

2. Details relating to issue of equity shares including sweat equity shares, stock options, and shares with differential rights as to dividend, voting or otherwise, since there was no such issue of shares.

3. None of the Whole-Time Directors of the Company received any remuneration or commission from any of its subsidiaries.

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

ACKNOWLEDGEMENT

The Directors take this opportunity to thank the Shareholders, Financial Institutions, Banks, Customers, Suppliers, Regulators, Government Authorities - Central and State Government & Local.

The Directors also wish to place on record their appreciation of the employees at all levels for their hard work, dedication and commitment.

For and on behalf of the Board of Directors

PURUSHOTTAM C. MANDHANA

(Chairman and Managing Director)

Place : Mumbai

Dated: 2nd December, 2016